Spotify Revenue

The common denominator present in all three of these music streaming services is that all basic features offered are essentially free to music users under certain conditions. The question of artist/songwriter revenue streams has become a pressing issue since music is so easily accessible free of charge via these services. Before going into payment methods the difference between a mechanical royalty and a performance royalty must be defined. A performance royalty is a fee a music user pays when a musical work (melody and lyrics) are performed publicly. Mechanical royalties are royalties paid to a songwriter whenever a copy of their song is streamed on via ‘mechanical’ or interactive site. The Mechanical statutory royalty rate is set by the government …show more content…
Spotify ‘Free’ uses their advertising revenue to pay performance and mechanical royalties to rights holders and creators. According to analyst Glen Peoples of Billboard, on average total revenue per stream on Spotify ‘Free’ is approximately 0.21 cents. Spotify takes a 0.06 cent cut from this amount. The money is then divided and dispersed between Performing Rights Organizations/Publishers who receive 0.026 cents while the owner of the sound recording (usually the record label) receives 0.12 cents. For the Spotify ‘Subscription’ based model, total revenue associated per stream is 1.0 cents. Spotify then takes a 0.3 cent cut from this amount. The Performing Rights Organization/Publisher receives 0.11 cents of this amount while the Record Label (owner of the sound recording) receives 0.59 cents. As stated on the Royalty Exchange Website, Spotify pays about 10% of its revenue to songwriters (split between mechanical and performance royalties) and about 60% to the artists. The mechanical royalties for songwriting are usually paid by the labels or artists to a third party, (traditionally for the major publisher it’s been HFA (the Harry Fox Agency), who pay the …show more content…
Though royalties are not being paid to artists at the rate that they should be, a website like Soundcloud could be very beneficial in connecting with people in the music industry and building some sort of a fan base. It is very interactive and you are able to see how many people are visiting your page and listening to your music. To be on Spotify or Pandora would be a great opportunity strictly for the exposure but both streaming services require artists who are at a larger stage in their