Streaming, Downloads and Digital Sales

Many artists did not agree to stream their music at first. Many music fans even had to digitalise every CD they had. Some bands and artists even tried to withhold their music from being digitalised, Tool are a prime example, but many quickly realised the new era of music wasn’t something they could easily ignore.

With the introduction of digital music along came whole new ways of getting paid. There are a lot of artists that have rather more revenue from digital sales like Downloads from iTunes than streaming from Spotify. This is because the label (if there is a label), doesn’t have as much of a risk getting music on digital platforms – it costs them less. But, how does this look in terms of royalty splits?

Streaming

In terms of streaming, we are going to use Spotify as an example through this blog post. This is a picture we took from the Spotify website. This provides a much clearer picture of how revenue splits work.

Spotify revenue share

 

This is a really basic view of how Spotify splits their revenue. See the 30% in the grey part of the pie? That is the part Spotify takes to cover their expenses and other costs. And then you have the ‘Right Holders’ in the green part showing 70%.

 

Lets split this a bit deeper with the next image.

Spotify Royalty Formula

This shows you how the revenue actually gets split and how the whole process goes before the money reaches the artist.

You see, by right holders it don’t mean just the artist. It can be so much wider and may also involve the label, publishing company, songwriter or the composer of the song itself.

When you distribute your music, make sure you’re fully prepared and know which rights holders could be owed royalties.

Example:

  • Say that Spotify’s monthly revenue is £1,000.000 (just to make it easier)
  • You multiply that by your total streams (say that you’ll have 500,000 streams)
  • Divide that by the total amount of Spotify streams (say that’s 15,000,000 for this month)
  • From that amount, 70% goes to the right holders. If you’re an artist with a royalty rate of£0.006, your revenue for the month would look like this:

Spotify Revenue example

And this is what the pie would look like. In this example, the artist is signed to a label:

Revenue share chart 1

Publishing

In the case of there being a publisher involved, the publishing company would collect the streaming income for the artist. He’ll keep half of the revenue (as most deals come with a 50 / 50 split) and pay the rest out to the artist and the songwriter.

In this case, the publisher takes the place of the label in the ‘Right Holders’ side.

Revenue share chart 2

Conclusion

At the end of the day, there are many different variables that determine what percentage an artist will receive from their royalties. If they write their own material, they would receive a higher share, just as they would also receive a higher share if they self-released instead of using a label.

Whether or not artists choose a DIY approach or not can be a very personal decision. But either way, it is important to know how royalties are split and how much you can expect to receive.

Artists should know their rights and fight for them and try to keep ownership at every stage.

The digital era is here, we might as well get used to it and use it to our advantage!

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