Streaming Music: Who Gets Paid and How?

Recently on instagram I spoke with Gospel Music Artist James Fortune, who asked his followers to download his latest song "Never Let Me Down". I explained to his followers how important downloading was compared to just streaming. But first it's important to understand how music artists are paid.

Supporting your favorite music artist is not the same as it used to be when there were CD’s and vinyl records to purchase. In fact, according to the recording Industry Association of America (RIAA), since 2020, digital downloads have also seen a 22% drop in quarterly sales due to the global domination of music streaming services which grew to $4.8 billion in 2020. (Friedlander, 2020)

How Our Songwriters & Composers Paid?

With very few physical albums selling, one may be wondering how songwriters and composers paid? If you want to support your favorite band or musician, there’s no way you can buy live concert tickets year after year right? Or continually purchase a digital download that may sell once for a small fee. Below I will explain how artists are paid continually through streaming music services.

Types of Artist Royalties Streaming Platforms Use

Subscriptions

Nowadays, the paid subscription based model is the world leader in artist royalty where some streaming services like Tidal pay their artists a portion of the monthly subscription dubbed The Direct Artist Payout Program. If subscribers are looking for a better way to support their favorite artists, this is an innovative method. (TIDAL, 2022)

Up to 10% of the monthly subscription is paid to the most streamed artist for that month. The company is also looking to find more innovative ways to pay artists directly through their payment processing systems. With a 12% growth in sales, this payout method could become standard.

Mechanical Royalties

A mechanical royalty can be generated every time a song is either digitally or physically reproduced. Believe it or not, but a digital reproduction happens every time a streaming user presses the play button. In essence, every time the song is played an artist gets paid.

According to the Copyright Act, a song that's under five minutes gets a 9.1 cent royalty compared to a song that's longer than five minutes with a 1.75 cent payout. (Copyright Royalty Board, 2009)

Public Performance Royalties

Public performance royalties are paid to the songwriter, artist, or music publisher of the music catalog being played at restaurants, bars, supermarkets, and radio stations. The performance royalties are administered by Performance Rights Organizations (PRO) such as Better Music Incorporated (BMI) and The American Society of Composers, Authors and Publishers (ASCAP) who collect licensed music royalties from the streaming platforms. (Yonata, 2022)

The amount of the royalty is negotiated between the PRO and music streaming service which usually pays about 6-7% of the “Royalty Pool” or music platform's revenue.

Music Publisher Royalties

Music publishing royalties are the total sum money paid to the music publisher or owner of the copyrighted song from all sources, whether it’s the producer, songwriter, singer or record label acting as the music publisher.

According to SoundExchange, the only company in the United States that collects digital performance royalties according to the Section 114 Sound Recording License, the royalty percentages are as follows: 45% to featured artists, 5% to non-featured artists, & 50% to the music publisher. (Yonata, 2022)

Depending on the music publishing deal negotiated, an artist can be from 45-100% of the royalty. For example: The song “Who Do You Love” streamed almost 3.6 million times on YouTube lets say at $0.091 cents per play. That would generate about $327,600 which would be paid to the label then distributed to the three writers of the song, Leonard White, Bernard Wright, James Smith based on their roles during the songwriting session. (White et al., 2007)

Conclusion

Music artists are not paid well from streaming services which is why it's important for us to support them by downloading the entire album.