There have always been unanswered questions regarding Spotify’s payouts to artists and how streams are calculated for royalty payment. Finally, Spotify have launched their new website ‘Loud & Clear’ which provides more clarity and transparency on the streaming economy. Artists have been put into certain categories to show each groups collective revenue share and Spotify have also created a tool that can test the number of streams or monthly listeners an artist gets in comparison to all of the other artists on the platform. I strongly recommend that all artists check out their new site and familiarize themselves with the information they have published. I have compiled the key findings from the launch that I believe are the most important to report.
Streaming Economy Explained 👇
How are royalties calculated?
Royalties in each country that Spotify operates in are calculated by using a tool called ‘Streamshare’. The tool calculates the amount of times a song is streamed and then it is divided by the number of overall streams in that market. It is important to note that the royalty payout differs in each market depending on the subscription fee and advertising revenue.
Spotify has broken down their professional musicians on their platform into 8 artists categories which consist of established, DIY, market movers, chart toppers, specialist, heritage, breakthrough, and songwriters and producers. There are statistics available for each of these categories to show the streaming data and trends for these artists.
These artists are established professionals with large fan bases and have successful catalogs of music. There are 34,000 established artists in total on Spotify. The statistics show that this artist group generated on average $94,000 in royalties and 608,000 average monthly listeners in 2020, while also accounting for 90% of all streams on Spotify.
This artist group consists of innovative musicians who create their own music and record from their homes, bedrooms or even garages. There are 286,000 DIY artists in total and they generated on average $4100 in royalties and 34,700 average monthly listeners in 2020.
This artist group is experiencing massive growth locally while also moving into new markets and expanding their fan base. You belong to this category if your audience expanded to the following 7 markets in 2019; Argentina, Brazil, India, Mexico, Russia, Spain and Turkey. It has been reported by Spotify that there are 17,000 market movers in total. The statistics show that this artist group generated on average $22,900 in royalties and 280,000 average monthly listeners in 2020.
The chart toppers are global superstars who have had major success and would be considered high profile artists. It has been reported by Spotify that there are 500 chart topper artists in total. The statistics show that this artist group generated on average $3.7 million in royalties and 17.3 million average monthly listeners in 2020.
These artists and composers are innovative and entrepreneurial creators with niche audiences. They produce sounds that are in high demand in the streaming era such as sleep sounds and meditation. The number of specialist artists on Spotify are 4300 and they generated on average $36,900 in royalties and 214,100 average monthly listeners in 2020.
These artists have been around for decades and have produced many albums. Their catalogs and legacies live on in the streaming world. Spotify reports that there are a total of 2600 heritage artists and that this category has generated on average $407,000 million in royalties and 2.4 million average monthly listeners in 2020.
This group are up and coming artists who are being discovered through Spotify’s playlists and discovery features. The statistics show that there are 6900 artists in this category and they generated on average $31,000 in royalties and 282,000 average monthly listeners in 2020.
Songwriters and Producers
This group includes creative songwriters and producers who write their own music for themselves or artists. Artists who write their own music also fall under this category. Songwriters and producers own the copyrights to the music and Spotify has reported that they had a total global revenue of 1.7 billion in 2017, 2.6 billion in 2018, and 3.4 billion in 2019.
It is great to see Spotify finally give some clarity on the streaming economics and provided transparency for artists. The new launch of the website has been incredibly resourceful and beneficial to all performers. It is important for musicians to keep up to date and informed with industry news – so check out these additional resources below that were recommended by Spotify 👇