Music royalties are a complex topic, but understanding how they are calculated on different streaming platforms is crucial for artists and songwriters. Each platform has its own unique way of calculating royalties, but there are some general principles that apply across the board.
Understanding Music Royalty
First, it's important to understand that there are two main types of royalties: mechanical royalties and performance royalties. Mechanical royalties are earned every time your music is sold or streamed, while performance royalties are earned every time your music is played in public, such as on the radio, in a bar, or on a streaming platform.
Breakdown for each Platform
Now, let's take a look at how royalties are calculated on some of the most popular streaming platforms:
Spotify pays out royalties based on a pro-rata model. This means that each artist's share of revenue is based on the proportion of total streams they receive on the platform. The total revenue generated by Spotify is divided among all the artists on the platform, based on the percentage of total streams their music receives.
Like Spotify, Apple Music pays out royalties based on a pro-rata model. However, Apple Music does not offer a free tier, which means that all streams on the platform are monetized.
Amazon Music uses a similar pro-rata model to Spotify and Apple Music. However, Amazon Music also offers a "per-stream" payout option for some artists, which guarantees a certain amount of money per stream.
Tidal is known for its high-quality audio, and it also pays out higher royalties to artists than other streaming platforms. Tidal uses a pro-rata model to calculate royalties, but the platform also offers a "user-centric" model in some countries. In this model, royalties are paid out based on each user's individual streaming habits, rather than being divided among all the artists on the platform.
YouTube Music pays out royalties based on a combination of advertising revenue and subscription revenue. The platform uses a pro-rata model to distribute the revenue among all the artists on the platform.
In addition to these streaming platforms, there are also other factors that can affect how music royalties are calculated, such as the artist's record label, publishing rights, and the specific terms of their distribution agreement.
It's important for artists and songwriters to understand how music royalties are calculated on different streaming platforms, so they can make informed decisions about where to distribute their music and how to maximize their revenue streams.