The music industry is making more money than ever. With more creators, listeners and songs entering the market, revenue continues to grow, yet many artists still struggle to get paid fairly. What lies behind this shift?
How streaming changed the music industry
Before the digital distribution of music streaming, major labels basically had a monopoly of the music market. They could decide which artists to sign and how the pay split was going to be structured. Toward the end of the last millennium, almost all of the music was “physical”. But with digitalization came the ability to distribute music yourself. This caused a major disruption in the music industry. Songs were now being sold for just a fraction of what they once were in physical form. Apple made digital singles and albums substantially cheaper than they were just years earlier in physical form.
Then came Spotify, a revolutionized idea based on a “freemium” streaming model and algorithm-based listening. Users could access a massive catalogue of music for a low monthly cost. Spotify grew quickly and had 20 million active users in the year of 2012. Now, Spotify has over 761 million active users in 184 markets and accounts for around 32 % of the global music streaming market.
Why streaming pays artists so little today
Through the years, Spotify has received major backlash for their payout model. Their pro-rata model is built on paying around 70 % of its revenue to rights holders, including artists, songwriters, labels and collecting societies while keeping around 30 % for operating costs. Various Sources estimate a payout rate between $0.003 and $0.005 per stream. This means that it takes around 25000 streams to get $100. For this reason along with other critique, artists like Thom Yorke, Prince and Taylor Swift temporarily removed their music from the platform although many returned later. Thom Yorke even famously called Spotify “the last desperate fart of a dying corpse”.
Why more artists means less money per artist
As more songs and artists enter the system, the same royalty pool has to be split among more creators. According to Deezer, a major streaming platform, 150 000 new songs are uploaded on a daily basis. That means more music can now be uploaded in a single day than released in an entire year a few decades ago. In 2024, music business economist Will Page said “more music is being released today than was released in the calendar year of 1989”.
And the numbers are expected to increase heavily every year. A new report from MIDiA (Media Insights & Decisions in Action) predicted that the number of music creators could reach nearly 200 million by 2030, compared to just 75.9 million in 2022. The streaming-centred music business is expected to nearly double in the same time period.
So what does this mean for artists? As the number of creators rises, the pay has to be split among more people. With more creators earning royalties, the average creator is earning less and less.
As the current streaming model pays so little per stream, major labels often offer big advances upfront. The Financial Times has reported that most artists signed to the three major music labels get to keep 20-25 % of streaming royalties, depending on the contract. It’s an effective way to attract small artists to sign. But the deals are almost always structured in such a way that all earnings from streams first go to pay back any advance.
This means that if an artist receives $10 000 advance and has a 20 % royalty rate, they must generate $50 000 in royalties before reaching break even. DIY distribution services like DistroKid and Amuse have grown in popularity because they allow artists to release music without going through a traditional label. Going “independent” has become a trend among emerging artists.
In 2024, Spotify announced a new minimum threshold for streams in which it would start generating royalties. It stated that tracks must have reached a threshold of at least 1,000 streams in the previous 12 months to be included in the recorded music royalty pool calculation. It also stated that there was a new minimum number of unique listeners required for a track to become eligible for the royalty pool. It was introduced so that users can’t game the system by streaming the track hundreds of times in order to qualify. Spotify has not publicly disclosed the exact number of unique listeners required in order to prevent manipulation.
Conclusion
The global music industry is growing rapidly, but still struggles to provide fair payouts to artists. Streaming has made music more accessible than ever, but also made it harder for artists to earn a sustainable living. With royalties and record deals structured differently today, many artists now turn to touring or merchandise sales to make a living. Unless the payout structures evolve or new revenue models emerge, the gap between industry success and artist sustainability is likely to widen, leaving the majority of creators fighting for a shrinking share of an expanding pie.