Music streaming has become the main source of income for many people in the music industry. Music streaming has become especially relevant during the global pandemic, when most people were forced to stay at home due to quarantine restrictions.
The value of a Spotify stream is not fixed. It depends on many factors:
• Total revenue streaming service for a certain period of time;
• A percentage of the profits that will be paid to artists by decision of the meeting of the founders of the streaming platform;
• The region that had the most streams of this song. The cost of subscribing to Spotify in different countries differs markedly, depending on the average income of its residents. For example, the cost of a subscription in India is an order of magnitude different from the cost of a subscription in the United States of America;
• Percentage of paid service subscribers who listened to a musical composition.
Spotify was paying an average of $0.00348 per stream in 2021, which meant that a song had to be played almost 290 times for the rights holding company to earn $1. However, this amount varies from year to year.
In addition to these annual variations, it’s also important to understand that these numbers may vary in each of the countries where Spotify operates, as they are calculated by dividing the platform’s total licensed fund by the number of song plays per month.
It is through this account that the “stream value” is achieved, the baseline that Spotify uses to later calculate how much it should pay artists. Since the average cost of a stream has already been estimated, it’s now easier to calculate when Spotify pays per artist. More precisely, for each copyright holder, since all of the platform’s royalties (the amount paid for the use and sale of the song) actually go to the copyright holders of the song.
Rightsholders are companies that have the right to commercialize music, ranging from record companies and distributors when we’re dealing with recording royalties, to publishers, management companies and agencies when we’re talking about song royalties. Either way, the company has its own contract with the artist, with specific clauses stating how much they will take home for their Spotify performance.
This means that we can know how and how much Spotify pays royalties to copyright holders, but on the other hand, we have no way of knowing the final cost that each professional receives from these companies. To arrive at this final payment amount, the platform divides the number of streams the owner received during that month by the platform’s total number of plays, thus calculating the fraction of everything owned by that company. Based on this calculation, all owners working with Spotify receive a monthly payment and then pay their artists on the dates and amounts specified in the contract.
Currently, Spotify is making money on two fronts: First, it’s a premium plan subscription. Secondly, it is advertising in a free tariff plan, which gives a very significant profit.
Precisely because these are the sources of revenue for the platform, the cost of a Spotify stream can have a different average in each country as the subscription to the service changes in each of them, consistent with competitive market values.