Any musician dreams of going professional and making money from their favorite craft. One of the easier ways of making money from music production is to upload your work to popular streaming services. Expanding your reach and increasing listens on these streaming services aside, choosing which ones to invest more is a difficult task on its own.

The reason is that each streaming service has different types of payouts, payment systems, and rates. There’s also the matter of whether you’ll get a cut of the ads, the size of the service’s user base, royalty payment factors, etc. 

Being unaware of these details will heavily affect your earnings as you may release a highly anticipated track or album with your fans buzzing and generating plenty of clicks and listens. Still, at the end of the month, you receive a majorly disappointing paycheck, all because you weren’t aware of the payment structure unique to each streaming service. 

That said, let’s get into how streaming services pay artists, how much they pay, and which factors play the most significant roles.

Streaming Service Payment Systems

Before comparing payment rates of different music streaming services, it’s vital to know which royalty payment system they use and what rate they have. The royalty payment rate is the amount you are paid per stream of your songs.

The two main royalty payment systems are pro-rata and user-centric. The pro-rata system is the most popular method of calculating royalty payment for streaming services; Apple Music, Spotify, and YouTube Music are the services that use this system. This system calculates royalties based on the total amassed streams on the service. 

How it works is that you get a percentage of the overall revenue the streaming service has generated based on the number of streams your music has accumulated divided by the overall streams amassed on the platform multiplied by 100. 

If a platform’s streams are 10 million for a particular month and you’ve got 500,000 streams during that month, you get 5% of the total revenue generated by those 10 million streams.

The user-centric system is based on each user’s subscription fee and who they listen to. Their subscription fee is divided between the artists they listened to that month instead of every subscriber fee being divided between all the artists on the platform. 

This system is considered fairer than the pro-rata system since you don’t need to have as high of a stream count as the other system. When someone listens to your music once, their subscription fee will be divided with you as well; this means you don’t need to have as high of a stream count as you would need to have in the pro-rata system to earn as much.

However, since only a few services like TIDAL and Deezer use this system and are less popular than services like Spotify, the overall number of subscribers is lower, and it’s not easy to make a substantial income through this way.

Different Types Of Music Streaming Payouts

There are three main types of music streaming payouts: mechanical and public performance royalties and payouts to recording owners. 

Mechanical royalty payouts are based on the US Copyright Act. This royalty is paid to songwriters and their producers when a piece is reproduced physically or digitally. As the name suggests, public performance royalties are paid when a piece is played at a public place like the radio, cafes, pubs, or restaurants.

The Organization responsible for this is the Performance Rights Organization (PRO), which collects and pays the royalties based on a streaming service’s total revenue. The amount paid is usually around 6-7% of the revenue. 

Lastly, the highest payout is to the copyright owner, which can be the record label or the artist themselves. Typically, for every dollar the streaming service pays, rights holders earn 73 cents, creators earn 25 cents, and the PRO makes around one cent.

How Much Streaming Services Pay Artists?

With the technicalities of monetizing music production out of the way, let’s talk money. The highest paying streaming service goes to Napster with $0.019 per stream and 53 streams needed to earn one dollar. The lowest royalty payment is for Pandora, with a measly $0.00133 per stream and 752 streams needed to earn one dollar.

Royalty payment rates for each streaming service are as follows:

•  Napster: $0.019 Per Stream, 53 Streams For $1
•  Tidal: $0.01284 Per Stream, 77 Streams For $1
•  Apple Music: $0.00783 Per Stream, 100 Streams For $1
•  Youtube Music: $0.00069 Per Stream, 136 Streams For $1
•  Deezer: $0.0064 Per Stream, 178 Streams For $1
•  Spotify: $0.00437 Per Stream, 228 Streams For $1
•  Amazon Music: $0.00402 Per Stream, 249 Streams For $1
•  Soundcloud: $0.0019 Per Stream, 526 Streams For $1
•  Pandora: $0.00069 Per Stream, 752 Streams For $1

An important point to consider with YouTube Music is that the calculated rate also includes playback on your videos, meaning that music streaming alone has a lower payout.

Final Thoughts On Music Streaming Revenue

The rate a streaming service pays artists matters; however, you should also consider their payment system, popularity, and many other factors. This includes their label/distributor agreement, users’ location and subscription tier, number of subscribers in a location, number of streams in an area per month, and advertising revenue.

Low royalty payment rates don’t necessarily mean a low payout since the streaming service’s user base substantially affects the final payout. The other way around is also true, as a high royalty payment rate may not translate to a big payout if that streaming service has a small user base.

Additionally, subscription rates vary in different countries, with users in underdeveloped countries paying less for premium subscriptions, leading to a lower payout. 

Hopefully, with all this in mind, you can decide which services are worth collaborating with, which aren’t, and which can promote your work better.