You've probably heard the complaints a thousand times: "Artists don't make money from streaming." Initially the numbers don't look great on a per-stream basis, I'll admit. But unfortunately, most artists don't actually understand how royalties are calculated. There is this vague idea that streaming services throw some money at artists every month, but the actual mechanism? That's a mystery. Let me clear that up, because once you understand it, you can start making smarter decisions about where your music goes and what you can realistically expect to earn.
By the way, I'm not blaming artists for not knowing this! Unfortunately much of the music industry is a mysterious black box and somehow artists put music in, and money comes out. Our mission is to open this box, and show you how the industry works. Education is vital in helping artists grow and protect their careers.
The Revenue Pool Model: Percentage-Based Payouts
First off, get this straight: there's no fixed rate per stream. Spotify doesn't sit down and decide "we'll pay $0.004 per stream" as a fixed fee. That's not how it works, and that's where most misunderstandings come from.
Here's what actually happens. Every month, streaming platforms collect money from subscriptions and ads. Then they set aside a percentage of that revenue for artists and rights holders. For the most part, they are required to allocate about 70% of its total revenue into the royalty pool (the money that gets paid to license holders).
Then comes the split. That entire pool gets divided among every single artist who was streamed that month, based on what percentage of total streams they got. If you got 1 million streams out of 100 billion total streams on the platform, you get roughly 1/100,000th of the royalty pool for that month.
This is called the pro-rata model, and it's the industry standard. The formula looks like this: your streams divided by total streams, multiplied by the total revenue pool. Sounds straightforward until you realise it means your actual earnings per stream are constantly fluctuating based on what everyone else on the platform is doing.
Geography Changes Everything
Here's where it gets complicated. The royalty pool isn't global. Instead, it's divided by country. Services have separate royalty pools for the United States, United Kingdom, India, Brazil, and every other market they operate in.
This matters because not all countries have the same subscription prices or ad revenue. The US and UK have high subscription costs and strong advertising markets, so the royalty pool is bigger, which means each stream is worth more. India and Brazil? Lower subscription prices, lower ad revenue, smaller pool. A stream from a listener in New York is genuinely worth more money than a stream from someone in Mumbai.
To put numbers on it: Apple Music pays approximately $0.01 per stream in the United States, but payouts in emerging markets are typically lower due to lower subscription pricing and advertising revenue. On Spotify, the difference is even more dramatic. Premium listeners in wealthy countries generate higher payouts because they're part of a bigger subscription revenue pool.
This means where your audience lives directly impacts your earnings. If you're getting streamed mostly in lower-income regions, you're going to earn less per stream, full stop. It's not personal. It's just how the economics work.
Bundled Products Are Quietly Cutting Your Royalties
This one's particularly annoying because it's been happening largely behind the scenes. When a streaming service bundles music with other content - like Spotify bundling music with audiobooks - the royalty rates drop for everyone.
Here's how it works. In the US, the Copyright Royalty Board sets rates for something called "mechanical royalties," which are payments to songwriters and publishers. These rates are different depending on whether someone's paying for music alone or for a bundle.
Spotify did exactly this in 2024. They started offering audiobooks as part of their premium subscription and reclassified their main plans as bundles. Publishers and songwriters immediately started getting paid less because the calculation now treats the $10.99 subscription fee as split between music and audiobooks. Instead of all that money going into the music royalty pool, it gets split between two content types.
Estimates suggest this cost songwriters and publishers around $150 million in reduced mechanical royalties in the first year alone. Recording artists took a hit too because it changes the overall royalty pool calculation.
The reason? Platforms argue they have to pay licensing costs for both the music and the audiobooks from that same subscription fee, so the rate per service has to be lower. It's technically defensible but practically annoying. When you're browsing distribution deals or wondering why your per-stream rate dropped slightly, bundled offerings might be part of the reason.
Total Stream Count Affects Your Slice
Remember that pro-rata pool? The total number of streams on the platform directly influences how much each individual stream is worth to you.
If a platform has 100 million streams total and generates $1 million in royalties that month, each stream is worth roughly $0.01. But if the platform has 500 million streams total and generates the same $1 million, each stream is now worth $0.002. The pool didn't grow, but it got divided into much smaller pieces.
This is why bigger platforms like Spotify pay less per stream than smaller ones like Tidal. Spotify has billions of streams every month because it's the largest platform. Tidal, meanwhile, pays around $0.0125 per stream because it's smaller and all of its subscribers are paying (no free tier draining the pool with non-revenue-generating listens).
What this means practically: your placement in the global streaming landscape matters. The more music gets streamed overall, the less valuable each individual stream becomes. Artists with songs on major, trend-driving platforms get buried in the sheer volume. That's part of why independent artists sometimes do better on smaller platforms – there's less competition for the royalty pool.
The Premium vs Free Tier Distinction
One more factor worth understanding: not all streams are equal. Premium subscriber streams bring in more money because those listeners are paying for the service. Free-tier listeners with ads generate much less revenue.
Spotify's free tier makes up about 58% of their user base but only contributes about 10% of total revenue. That means you're getting streams that are worth pennies from a massive chunk of the user base. On the other hand, someone with a Premium subscription generates significantly more revenue per stream because Spotify collects their monthly fee.
This is why getting playlisted on popular editorial playlists can be deceptive. Lots of streams from free-tier users might look impressive in your analytics but won't translate to meaningful earnings. You're better off with fewer premium listeners who are actually paying for the service.
Making Sense of It All
So here's what you need to actually do with this information. If you're an independent artist, your earnings depend on where your listeners are, how much they're paying, how many other artists are competing for the royalty pool that month, and what percentage of streams are from premium versus ad-supported users.
You can't control most of that. But you can focus on building listeners in higher-paying markets, and you can understand that these seemingly random fluctuations in your monthly royalties aren't random at all – they're just the system working exactly as designed.
And those per-stream rates you see quoted everywhere? They're averages and guesses. Your actual rate is determined by all these factors combined, recalculated every single month. Once you stop thinking of streaming as a fixed rate and start thinking of it as a percentage of a shared pool that's constantly shifting, the whole model suddenly makes sense.
It won't make you rich (unless you're getting millions of streams, of course) but at least you'll understand where your money's actually coming from.
