Ever wonder how artists are able to make money through Spotify? Are you confident that 100% of your royalties is being collected? Well, here’s a transparent breakdown of how it works! First, let’s dissect terms like “royalties” and “performance rights organizations” and establish a common understanding of these terms that will be used later:
- Artist- an artist is someone who records sound recordings
- Songwriter- someone who writes a song
- Royalty- simply put, it’s a paid sum of money
- Public Performance –when music is played on services like Spotify, or in a restaurant, or on the radio
- Harry Fox Agency (HFA)- hired by companies like Spotify to collect and pay out mechanical royalties
- Non-interactive stream- Like Pandora and iHeart Radio pays $0.0022 per stream
- Administration publishing company- collects royalties for usages of musical compositions
- Performance rights organization- represents publishers and songwriters, collects performance royalties on their behalf
- ASCAP- American Society of Composers, Authors and Publishers; popular performance rights org rep artists like Drake, Beyoncé and Enrique Iglesias
- BMI- performance rights org similar to ASCAP
Okay, now let’s get down to the business of it! If you’re an artist and you want to earn money on Spotify, first, you must sign up with an aggregator (like Symphonic). Even if you’re an unsigned indie artist, we can deliver your music to Spotify. We establish your artist page, and let marketing efforts and fans do the rest. Once you begin to generate streams, it’s time to collect royalties.
There are two types of streams: non-interactive and on-demand. As we established earlier, non-interactive streams come from stores like Pandora pay $0.0022 per stream from paid subscribers and $0.0017 for the free tier.
However, this isn’t the final figure that you would get per stream: it’s closer to a quarter of a penny, but it takes a complicated formula to derive this number. This is also known as a mechanical royalty, and it is considerably higher than the amount you earn from non-interactive streaming. Mechanical royalties are earned anytime a song is streamed, downloaded, or recorded. Obviously, the more streams your music receives, the higher the royalty payout.
Now, you’re probably wondering how to collect these royalties. Put simply, mechanical royalties are paid to your aggregator, or admin publishing company. With Symphonic, you can collect up to 100% of royalties, which is not true for all aggregators/labels. Symphonic acts as publishing admin, collects from HFA, then distributes royalties to the artist.
The other way of earning money through Spotify is through public performance royalties span . If your music is “performed in public,” you’re owed a royalty collection by the music user. This includes live performances, streaming your music online, radio broadcasts, as well as cable, film, and internet radio. To collect you would have to be signed up to a performing rights organization like BMI or ASCAP. In our case, Symphonic would act as the publishing administrator to collect on your behalf.