Spotify’s Royalty System: Fair Or Unfair? Let’s Break It Down

Spotify has completely changed how we listen to music. Before streaming, people had to buy CDs or download songs to own them. But now, we can listen to any song anytime, anywhere, just by clicking a button. It has also helped musicians reach millions of fans worldwide without needing a big record label. But there’s a big question: do artists make good money from Spotify? Some say it’s getting better, while others feel they are being underpaid and exploited. Let’s look at this debate and try to understand both sides. Spotify Says: “We Are Paying More Than Ever.” [caption id="attachment_7600" align="alignnone" width="800"] Spotify says its payouts[/caption] Spotify recently released its "Loud & Clear" report, showing that it paid a record-breaking $10 billion to the music industry in 2024 alone. Since its launch, it has paid nearly $60 billion to artists, record labels, and songwriters. The company argues that streaming has enabled more musicians to earn money, even if they are not global superstars. Here are some key points from their report: More than 1,500 artists earned over $1 million in 2024. The number of artists making between $1,000 and $10 million per year has tripled since 2017. The 10,000th most popular artist on Spotify earned $131,000 last year. That’s a big jump from $34,000 ten years ago. Over 50% of artists earning at least $1,000 make most of their money from international listeners. Songs in 17 different languages crossed the $1 million royalty mark, showing that non-English music is growing on Spotify. Spotify believes this proves that streaming is good for musicians and that more artists are making money now than ever before. Artists Say: “The System Is Unfair” [caption id="attachment_7598" align="alignnone" width="800"] Spotify says its payouts[/caption] Even though Spotify’s numbers sound impressive, many musicians argue that most artists make very little money. Spotify itself says there are around 225,000 professional or emerging artists on the platform, but: Only 0.6% of them made at least $1 million in royalties. Just 4.4% made $131,000 or more—which may sound like a lot, but for a band with multiple members, it’s not enough to split between everyone. Many artists believe Spotify’s payment system is unfair. It uses a model called "streamshare," where an artist gets paid based on how many total streams they get compared to all other artists. This means big artists like Taylor Swift and Drake take a huge share of the money, while smaller, independent musicians struggle to make even a few dollars. For example, if a new artist’s song gets 100,000 streams, they might only earn a few hundred dollars—which is nowhere near enough to live on. Also Read: Why Section 230 is the Backbone of a Free and Innovative Internet Google Play Update: Effortlessly Find Android Apps with Widgets Songwriters: The Ones Who Get Paid the Least [caption id="attachment_7601" align="alignnone" width="800"] Spotify says its payouts[/caption] If you think artists are struggling, songwriters have it even worse. Whenever a song is streamed, the money is divided like this: 56% goes to the record label and artist. 30% goes to Spotify. 14% goes to songwriters, publishers, and rights organizations. Now, out of that 14%, songwriters get only 68%, and if there are multiple songwriters, the amount is split between them. This means that even if a songwriter creates a viral hit, they still might not earn enough to pay their bills. Many songwriters have complained that they make almost nothing from streaming, even when their music is played millions of times. Legal Issues & Complaints Against Spotify Spotify has also faced legal trouble over the way it pays artists and songwriters. In 2024, a group called Mechanical Licensing Collective (MLC) sued Spotify, saying the company was underpaying songwriters. The problem started when Spotify reclassified premium subscriptions (because of audiobooks), which lowered how much money went to songwriters. Even though the lawsuit was dismissed, it raised concerns about how transparent Spotify is when it comes to paying musicians. Another big issue is how much Spotify’s top executives are making. CEO Daniel Ek has sold $700 million worth of his Spotify shares since 2023. Co-founder Martin Lorentzon sold $556.8 million worth of stock in 2024. While these executives are making hundreds of millions, most musicians on the platform struggle to survive. Many artists feel that Spotify cares more about its investors than the people who create the music. What Needs to Change? Spotify is paying more than before, but the money is not being shared fairly. The top 0.6% of artists are making millions, while most others earn very little. Organizations like the Union of Musicians and Allied Workers (UMAW) are fighting for fairer pay. They want Spotify to increase payments per stream and introduce a minimum rate of $0.01 per stream. Right now, one stream on Spotify earns an artist around $0.004 (less than half a cent). If Spotify doubled or tripled this amount, it would help more musicians earn a livable income. Final Thoughts: Can Spotify Do Better? Spotify has completely changed the music industry, and there’s no doubt that streaming is here to stay. But at the same time, the payment system needs improvement. Many independent artists believe Spotify should pay them more fairly instead of giving most of the money to the biggest artists and executives. At the end of the day, Spotify is a business, and businesses focus on profit. But if it wants to keep artists happy, it might need to change how it shares its money. What do you think? Should Spotify increase artist payments, or is the current system fair? Let’s discuss it!