Spotify paid a record $4 billion to the music industry in 2024, according to its latest earnings report. While the streaming giant’s payouts have grown significantly, many songwriters and smaller artists say they are still struggling to make a living from their work.
The $4 billion in royalties paid out to the owners of rights, such as record companies, publishers, and artists. The payment of these amounts has come under scrutiny, with independent artists and songwriters arguing that they get only a fraction of it.
“Spotify’s payments are a step in the right direction, but the system is still broken,” said one songwriter. “Most of the money ends up at major labels and major artists and the rest of us are left to scrounge around for crumbs.”
The problem is with the way royalties are paid on streams. It is on a pro-rata basis, and royalties are combined and paid out based on an artist’s proportion of total streams. That results in chart-topper artists and big labels taking the lion’s share of payments, leaving low-level creators with little.
For instance, a musician whose song gains 100,000 streams can earn only a few hundred dollars, whereas a popular song that has millions of streams earns great revenue for the artists. Such inequality has necessitated the introduction of a more fair payment model, for example, a user-centric one, where artists receive royalties from per-subscription-per-listener, not total streams.
“Streaming has opened up access to music, but it hasn’t opened up earnings,” a music industry campaigner said. “We need a more equitable system that rewards all creators fairly for their work.”
Spotify has recognized the plight of songwriters and taken measures to tackle the problem. Spotify has launched initiatives such as the Spotify for Artists program, offering resources and tools to assist creators in expanding their fanbases and optimizing their revenues. Spotify has also collaborated with groups to push for improved royalty rates and copyright protections.
But critics say that does not go far enough. “Spotify’s efforts are beneficial but don’t address the underlying issue,” one independent artist said. “We require systemic change to be able to make a living from our work.”
The argument about streaming royalties is timely as the music industry is more dependent on streaming revenue than ever before. While companies like Spotify have made music more accessible than ever, they have also upset conventional revenue streams, including album sales and live performances.
As the business changes, the necessity for a sustainable and fair payment system has never been greater. For the time being, songwriters and lesser artists must keep going through a difficult environment, waiting for changes that will guarantee their work is appreciated and remunerated.
