October 26

Is Spotify Bad for Artists? The Streaming Discussion Revisited (2020)


Millions of streams but less than a minimum wage – is Spotify bad for artists? In this episode, we‘re going to discuss the reality of music streaming for artists these days. I‘m going to walk you through the downsides but also the potential upsides of streaming services like Spotify, Apple Music, YouTube Music, and many more.

Are streaming services good or bad for artists? It‘s not as easy as you think

Let‘s be honest: Streaming has a notoriously bad reputation among musicians of all kinds. Low payouts, lack of transparency, and shady deals with major labels while putting pressure on independent record labels. 

That being said, the music industry as a whole has finally recovered from almost a decade of suffering from the death of the CD (still remember what that was?). Thanks to the revenue generated by streaming services, the global recorded music industry is on its way to new record heights (see graph below).

Music streaming is way more important than physical sales these days. A few years ago, that would have sounded like a crazy dream. But what does that mean for you? Is Spotify bad for artists or is it, together with other players on the market, saving the music industry including independent artists And labels?

Let‘s break down the discussion and take a look at both camps and their most important arguments.

Top 3 arguments why streaming services are bad for artists

The negative voices clearly dominate the discussion so let‘s start with what‘s clearly wrong about the way Spotify, Apple Music, YouTube, and others operate. 

1. Spotify, YouTube, Apple Music, and others don‘t pay out enough to artists

What do artists make on Spotify, YouTube, Apple Music, and other streaming platforms? It‘s not that easy to answer this question. Streaming services make money in two ways: Ad revenue that comes from their free plans, and subscription revenue that comes from paying subscribers. 

Part of that revenue goes to payment services and credit card provides, another part goes to the streaming services themselves, and the so called „stream share“ is the part that goes to you, the creator. Well, at least in theory, because even that stream share gets split up again Between record labels and distribution services, artists, songwriters, and publishers.

Here‘s a video by Spotify on how artists get paid. While they‘re doing a great job with positioning their brand as artist-friendly as they can, this video is a great example why streaming services get criticized for their lack of transparency. 

„Why“, you‘re asking? Because that video doesn‘t even show real numbers.


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How much do artists make on Spotify and other streaming platforms?

Okay, if the streaming services themselves don‘t want to publish exact numbers, let‘s dig one level deeper and find other sources that tell us how much artists truly earn from streaming. Thankfully, Digitalmusicnews, The Trichordist, and Soundcharts have collected data on streaming payouts and found surprisingly high differences between the platforms (see chart below).

Money from streaming

Source: Soundcharts (with additional data from Digitalmusicnews and The Trichordist)

Bear in mind that these numbers might change slightly, from year to year. Also, I‘ve seen differences from one data source to another. Still, we can see a clear pattern: Some streaming services pay out much more than others. 

So here is your stream share (that then get‘s split up again between labels, distributors, publishers, artists, and songwriters). But what does that mean for the reality of a music producer these days?

Let‘s take a look at an example:

Musicgateway‘s Streaming Royalty Calculator gives you a good estimate based on your number of expected streams. The difference between streaming services is shocking. 

Here’s roughly how much you can expect to earn from 1.000.000 streams on four of the major platforms:

Apple Music5.000$
Source: Streaming Royalty Calculator by Musicgateway

Bear in mind that depending on your label and publishing deal, the actual amount of money in your bank account might be much less (which is why starting your own label can be a good idea).

All in all, the amount that streaming platforms pay out to artists is too small to make a difference on the bottom line of a typical underground music producer. If you have less than 100.000 streams per month, the money is peanuts compared to what you have to invest in your music career.

2. Streaming platforms favor boring background-playlist music

Some people argue that playlists on Spotify and other streaming services can make or break the success of a song. If this argument was true, writing songs specifically to be featured on high-profile playlists would be a clever strategy. Besides the personally curated playlists, there are also algorithmically created ones, with personalized recommendations based on the listener‘s preferences.

One thing I‘ve noticed is that we‘re seeing more and more „background music“ playlists. From „smooth electronica“ to „study beats“ and „dinner jazz“. If you listen closely, you notice that many of these playlists feature songs that barely reach the two minute mark. Why is that? Because the whole playlist is optimized to provide as much variety as possible while still maintaining the same vibe. Plus, the more songs you stuff into a playlist, the more payouts the artists and labels get. 

The consequence of this is that more and more music producers start to adjust their songs in ways that don‘t serve an artistic goal or the end listener. If trying to bribe the algorithm becomes the new normal, we have a problem. 

Overall, it looks like this isn‘t a major problem yet. Roughly about 30% of Spotify streams come from curated playlists and algorithmic recommendations. The other 70% are direct plays of tracks that music fans actively chose to listen to.

3. Only major labels benefit from music streaming

The third argument why streaming services are bad for artists is a tricky one. Since the three major labels (Universal, Sony, and Warner), have the most market power, they are the ones who make the rules and negotiate deals with streaming platforms. According to industry studies, they‘re close to generating $1 million per hour from streaming, and that number still keeps growing.

Independent labels and artists don‘t have a strong lobby and therefore, their voices aren‘t even heard by platforms like Spotify, YouTube Music, Apple Music, and others.

It‘s true that most high-level negotiations take place between major labels and streaming services. Merlin, the organization that represents independent labels worldwide, tries to negotiate with streaming platforms as well but let‘s be honest here: They don‘t have nearly as much influence as the majors.

What many people don‘t know: The major labels not only earn money from streams, they‘re heavily invested in the streaming platforms themselves with a large amount of stocks (even if they‘ve sold a good portion already). Merlin also holds some stocks, but its share is tiny compared to the major labels. This further strengthens the power of major labels in the streaming discussion.

Top 3 arguments why streaming services are good for artists

Now that you‘ve heard the most important arguments why streaming services are bad for artists, let‘s take a look at why Spotify, YouTube Music, Apple Music, and other platforms might actually be good for artists.

1. The financial recovery of the music industry benefits smaller artists and labels as well

Streaming has put a lot of money into the music industry as a whole. While it‘s fair to say that music creators, being the last part of the food chain, don‘t earn as much as they deserve, they still benefit indirectly from the new flood of money. 

Labels finally start to invest in artist development again because they know that it can pay out in the long run. If the big „engine“, that drives the music industry, is finally running again after almost a decade of desperation, it means that there is a viable business model that makes it worth to take a risk and invest in someone you believe in (this can also be yourself, of course).

Super small underground artists and labels don‘t benefit from this trend as much,, simply because their streaming numbers are so small that they don‘t generate a significant income from it. Still, some DIY-artists are making quite good money, because there are less gatekeepers involved. Using so-called „aggregator“-distribution platforms like TuneCore and Distrokid allows you to earn much more compared to signing with a big label.

2. It‘s easier than ever to be discovered by the perfect audience

With all the criticism that comes with algorithm-based playlists, and the „death of crate digging“, people tend to forget that there‘s huge potential for upcoming artists to be discovered by the perfect audience. If the algorithm is the new gatekeeper, it might level the playing field a bit. Instead of a massive PR-campaign, all you need is a great song and some fast interaction of your organic, existing audience of true fans to trigger the algorithms of streaming platforms.

On the one hand, being selected by an actual human being, feels more „true“. An experienced curator hand-selects artists and exposes them to a bigger audience. How charming, right? 

But the reality looks like this: That person who selects music for playlists, radio stations, blogs, and magazines, is highly influenced by trends, hypes, peer pressure, and sometimes even money. Yes, money. If a big label wants to have their artist featured in a certain blog or magazine, of course they‘re paying to get on the front page and have in-depth interview together with the review of the release.

So in a way, upcoming artists benefit from game that is a bit more fair than it used to be before. Remember, we‘re still just at the beginning of the streaming era.

3. Streaming generates passive income that cumulates over time

One aspect that is often overlooked in the streaming discussion is that artists can grow an interesting catalog of music over the course of their career. Even if you don‘t land a massive hit in your genre, these songs still produce passive income for as long as they‘re on the streaming platforms. 

Back in the CD & Vinyl era, it was different: You produced an album, you sold it, and after an initial burst of attention, your sales declined rapidly. The fans who bought your album paid once, no matter how often they listened to it. 

The great thing about the streaming era is that your music simply doesn‘t stop generating income for you. And you don‘t have to do anything about it. Well, it certainly helps to stay relevant as an artist, of course. 

So if you‘re clever as an artist, you work on producing a massive catalog that keeps producing more and more streaming payouts with every song you add.

Conclusion: Streaming can be great for artists if you use it to your advantage

Here‘s my opinion on whether streaming is good or bad for artists: I believe that you have a massive opportunity to grow a meaningful artist career with no need to obey the rules of any gatekeepers. It‘s the age of the DIY artist and things will get better and better for them. 

The potential to reach exactly the type of listeners you aspire to find online is massive. I don‘t say this because I‘m a desperate optimist. I‘m making this statement because I‘ve seen it work in exactly that way. One of the artists I work with in my studio has gained a following of around 50.000 regular streaming listeners within just one year. No label backing, no big promo-campaign. Simply good music and a well-thought-out artist brand

That being said, you have to be clever and use the new opportunities to your advantage. Yes, it makes sense to build relationships with playlist curators. Yes, it‘s important to engage your organic audience very early on so they stream your songs, add them to favorites, etc., so algorithms start to pick up your tunes. But doing some sort of promo-work has always been important with music, so it‘s not something unusual to do.

It‘s still important to fight for a fair share of the pie as an independent artist or label

Now, I don’t want to pretend everything’s going well with streaming. In fact, I believe independent creators and labels have to stand up and fight to be heard. We can’t accept that only major artists and labels negotiate deals behind closed doors. 

Moreover, I think we need to critically look at what the algorithm-based playlists serve us. Some findings suggestthat we’re essentially being served the same type of music again and again, by the same type of people. There seems to be an enormous gender and race-bias, even though streaming services neglect that. 

Contrary to many streaming-critics, I don’t think we should try to educate music consumers to seek out alternatives to streaming. Tech companies have figured out a way to serve the demand of music fans and created a business model around that. In essence, that’s a good development. Now let’s make it better. 

Throughout all genres, I’ve seen examples of artists who managed to open up interesting new revenue streams. From limited edition artworks to creative merchandise and unique fan-experiences. I believe that there are many ways to build a sustainable artist career. Streaming might not be your only source of income, but it can definitely become a relevant one in the overall mix.

Putting it into action: Making the best out of the streaming era

Now that we’ve discussed the pros and cons of music streaming for artists, let’s talk about what you can do with that information. As always, I’m giving you three action steps that you can implement right away.

1. Don’t blindly fight innovation, instead, try to shape it

  • Streaming isn’t the death of underground music. In fact, it offers a lot of potential for you to be discovered by a global audience.
  • Still, you have stay engaged in the discussion and make sure the voices of independent artists and labels gets heard.
  • Start thinking about creative new ways to monetize your music as streaming might only make up a small portion of your income as an artist.

2. Educate yourself on how music streaming works and how you can benefit from it

  • Knowledge is power, so go arm yourself! If you don’t have any clue of how streaming money gets distributed, what types of royalties you can claim, and how you can get on Spotify playlists, you definitely need to educate yourself on this stuff.
  • As soon as you understand the context and relationship of all these aspects, you will start to see more opportunities than threats.

3. For your next release, try to use your new knowledge to your advantage

  • Submit your songs to curated Spotify playlists, engage your true fans in the process of promoting your release, and try to get as much momentum in the first week as possible.
  • After that, analyze if your release strategy has had a positive impact on your growth.

Alright, that’s it for this week’s episode. Now I’d love to hear from you: Do you think Spotify and other streaming services are bad for upcoming artists?

Let me know in the comments, I read everything.


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