Last year, Spotify paid more than 10B of the U.S. music industry to the music industry. How many are there for artists in fact?

Spotify announced in late January that it paid a record $10 billion on royalties in 2024, the largest payment in the music industry in the year. This is equivalent to a tenfold increase in the US $1 billion in 2014.

The Swedish streaming giant released more details in its loud and clear report Wednesday, saying nearly 1,500 artists received more than $1 million in U.S. royalties from Spotify last year. The report also highlights the threefold production of artists since 2017.

Music PR Eric Alper said that while Spotify definitely changed the artist’s game in terms of exposure and helped them build a fan base, that didn’t always translate into financial stability.

Spotify does not pay directly to artists and songwriters, and how much payment they get depends on their agreement with the rights holder. After all the pit stops on the revenue chain, he said the reason for taking it in their hands could be a small part.

The streaming giant’s report is in an ongoing debate about how much artists and songwriters actually receive in royalties and whether it’s truly fair. Many artists, especially songwriters, have a hard time earning a huge amount of money from streaming even if their songs accumulate millions of plays.

“While Spotify has $10 billion in spending in 2024, only a small percentage of that ends up in the pockets of the people who make music. A typical signature artist may only see 10 to 20% of the total revenue after its record label cuts,” Alper told CBC News.

“The songwriter’s mechanical and performance royalties are distributed among multiple stakeholders. Independent artists perform much better because they avoid label deductions, but they still have to browse the distributor’s fees and release allocations,” he said.

How money flows

Spotify breaks down how funds flow in the report. Music platforms pay rights holders to rights holders that are usually recorded tags, distributors, aggregators or collecting social rights holders.

Artists and songwriters choose rights holders and reach agreements on their music, including allowing them to deliver them to Spotify. The streaming giant then paid for the rights holders, and they then paid to the artist and songwriter.

Spotify has a different agreement with every right holder, and in general, Spotify pays them about two-thirds of the money they make from music per dollar.

“As with other streaming platforms, spending on music creators and publishers is very small, especially given that the music itself initially provided value to the platform,” said Dr. Charlie Wall-Andrews, a professor of creative industries at Metropolitan University in Toronto.

Spotify was attacked last year in a lawsuit accusing it of songwriting royalties for less than tens of millions of songs.

Several Grammy-nominated songwriters, including Amy Allen and Jessi Alexander, boycotted the Spotify awards after the platform decided to lower songwriters and publishers on the Premium-Sublisscript stream last April.

“Spotify continues to announce royalty payout numbers that distort the infinitesimal amount that ends up going to songwriters. To put real Spotify numbers into perspective, in 2024 Daniel Ek cashed out $376 million in stock. In that same period, it is estimated that all songwriters in the US received $320 million from Spotify,” National Music Publishers’ Association president and CEO David Israelite told CBC News.

“To increase the insult to harm, just last year, Spotify developed a bundling plan that further cuts the money they paid for by composers who unilaterally combine their quality music services with audiobooks. We continue to oppose these efforts to seek these solutions to find creators, thus providing creators with a huge number of value.”

CBC News reached out to comment to Spotify but didn’t hear it immediately outside office hours.

Penny per stream

The loud and transparent report also shows that spending on music publishing has exceeded $4.5 billion for songwriters and copyright holders over the past two years, with double-digit growth from 2023 to 2024 alone.

“These numbers are crazy – making $1 million from Spotify in 2024, while 100,000 artists generated at least $6,000. That sounds great, but the game is shocking when you realize that there are over 12 million uploaders.”

He added: “The vast majority of artists are still making money per stream and you may not be out of your day job anytime soon unless you are at the highest number of people who are in the color stream.”

Alper explained that major tag artists with a lot of streaming numbers can make a lot of money, but streaming revenue is often unsustainable for intermediate and emerging artists.

“The industry’s shift to streaming has expanded access to distribution but has also devalued the individual streams,” he said.

Spotify runs on the Pro-RATA model, which is aggregated and splits according to streams, while smaller artists are often lost in the system.

Alper would rather see the fee based on the actual playback of each listener and increase the payment per stream.

He explained that if Spotify and other platforms move to a user-centric fan-driven model, subscription funds are handed directly to the artist you actually listen to, and this model alone can greatly increase the income of independent and niche artists.

“Spotify is not an enemy, but the system needs to be adjusted to ensure that more artists, especially songwriters, can thrive,” Alper said.