How do streaming royalties work?

Platform revenue is divided into two areas: the master side and the composition side. Learn more about this in our guide about music rights. The royalties you receive through Make Waves are royalties from the master side.

Platform revenue is the most important factor in determining royalty earnings. The more money a DSP generates, the larger the royalty pool available to distribute to rights holders. How that pool is divided depends heavily on the amount of streams you are generating.

Most platforms allocate revenue based on the percentage of total streams an artist accounts for within a given period. If your tracks account for 0.001% of all streams on Spotify in a given month, you receive 0.001% of that month’s royalty pool. This means that artists who generate a high share of streams will receive a larger portion of the overall royalty pool than artists with less streams. This means your per-stream rate isn’t fixed, it fluctuates month to month depending on how much revenue the platform generated and how many total streams there were across all artists. A platform that grows its subscriber base will generally produce a larger pool, benefiting everyone.

The location of the listener is one of the most significant factors in streaming royalties. Streams from countries like the United Kingdom, United States, Germany, or Australia typically pay considerably more than streams from regions with lower subscription prices, such as parts of Southeast Asia, Latin America, or Africa.

This is because higher subscription prices lead to a larger overall royalty pool, increasing the value of each individual stream. A Spotify Premium subscriber from the UK pays around £11.99 a month, while the same subscription in India costs a fraction of that.

Another key factor is the subscription type of the listener. Streams from premium subscribers are generally worth more than streams from freemium subscribers. Therefore, streams for premium subscribers contribute more to a higher royalty pool than streams from freemium subscribers. Causing royalties from streams from these premium subscribers to be higher than streams from the freemium ones.

In-app promotion tools also influence royalty payouts. Many DSP’s allow artists to pay for promotional features that increase visibility within the platform. For example, Spotify offers Discovery Mode, which can push songs into algorithmic recommendations such as autoplay or personalised playlists. Streams generated through these promotional tools are valued less than streams that are generated organically.

Artificial streaming is another important factor. Streams that are flagged as artificial, whether intentional or not, are ineligible for royalty payouts.These streams may still appear in your analytics dashboard but won’t generate any income. Learn more about artificial streaming here.

On user generated content platforms such as TikTok and Meta, royalties work completely differently. Royalties are generated per video that uses a song, rather than based on the number of views each individual video containing a song receives. This means a track used in 10,000 TikToks with low views can generate significantly more royalties than a track featured in a handful of videos with a lot of views.

The rates on UGC platforms are generally lower per use than per-stream rates on other DSPs, but the sheer volume of content created daily means a widely adopted track can generate meaningful royalty income. 

Due to all of these factors, an artist who receives 100,000 streams on one platform may earn considerably more than from the same number of streams on another. For example, 100,000 streams on Apple Music could generate significantly higher revenue than 100,000 streams on YouTube Music, even though the play count is identical.

Let’s look at an example of how this works. Imagine your release receives around 100,000 streams in one month. At first look, this might look like a single number, but in reality it is a combination of many different types of streams from different platforms, countries, and subscription tiers.

Let’s say half of these streams come from Spotify. Around 15,000 of these streams are streamed by premium users in Norway. These streams might generate approximately €0.0045 per stream, resulting in around €68 in royalties from these 15,000 streams. Another 10,000 streams come from Spotify users with a free subscription. These streams might generate around €0.0014 each, making these 10,000 freemium streams worth approximately €14.

Now, let’s say the track also performs well in India and generates 20,000 streams from premium Spotify users. However, subscription prices in India are significantly lower, which results in lower royalty rates. These streams might generate around €0.00055 each, resulting in only €11 from those 20,000 streams. An additional 15,000 freemium streams from India could add around €3. This means that one premium stream from Norway can be worth more than twenty freemium streams from India.

Let’s say you also receive 25,000 streams on Apple Music. Since Apple Music does not offer a free tier, all of these streams come from paying subscribers. Around 15,000 streams come from users in the US, generating approximately €0.0065 per stream and resulting in around €98 in royalties. Another 10,000 streams come from Brazil and contribute around €18.

Your final 10,000 streams come from TikTok. However, TikTok does not pay per stream; instead, royalties are based on usage in videos. If your track is used in 400 clips, and each use generates approximately €0.018, this would result in around €7.20 in royalties.

The number of streams you generate is important, but even more important is who is listening, where they are listening from, and how they are listening to your music. Please note that these averages are Illustrative and that the real rates fluctuate from month to month.

Find more information on our pricing model here.

Want to learn about royalties and music rights? Check out our guide about music rights here

Please contact [email protected] if you have got more questions about this.