How Streaming Royalties Actually Work: A No-BS Breakdown

TL;DR

Streaming royalties are split between recording rights and publishing rights, calculated via a pro-rata pool system, and vary massively by platform. Here's exactly how the money flows from listener to artist.

Why This Matters

If you're an artist, producer, or songwriter in 2024, streaming revenue is probably your largest single income source. And yet, almost nobody actually understands how it works.

That's partly because the system is genuinely complex. And it's partly because the platforms and labels have very little incentive to make it transparent. An artist who doesn't understand the system can't challenge the system.

So let's fix that. Here's how streaming royalties actually work, stripped of industry jargon and corporate spin.

The Two Types of Rights

Every recorded song generates two separate sets of royalties, because two separate copyrights exist.

The master recording right covers the specific recording — the actual audio file. This is typically owned by the label (if you're signed) or the artist (if you're independent). When a stream is played, the master right holder gets paid.

The publishing right (also called the composition right) covers the underlying song — the melody, lyrics, and chord structure. This is owned by the songwriter(s) and their publisher. When a stream is played, the composition right holder also gets paid.

These two rights are tracked, collected, and paid out through completely separate systems. This is where most of the confusion begins.

The Pro-Rata Model: How Platforms Calculate Payments

Spotify, Apple Music, Amazon Music, and most major platforms use a pro-rata payment model. Here's how it works.

Each month, the platform takes its total revenue (subscriptions + advertising). It keeps its cut (typically 30–35%). The remaining 65–70% goes into a royalty pool.

That pool is then divided based on total streams. If your song accounted for 0.001% of all streams on the platform that month, you get 0.001% of the royalty pool.

This means your per-stream rate is not fixed. It fluctuates monthly based on total platform revenue and total platform streams. When more people subscribe (holiday season, for example), rates go up. When a massive release drives billions of streams (like a new Taylor Swift album), your share of the pool shrinks even if your stream count stays the same.

The average per-stream rate on Spotify in 2024 hovers around £0.003–0.004. Apple Music pays slightly more (£0.006–0.008). Amazon and YouTube Music fall somewhere in between.

User-Centric vs Pro-Rata: The Debate

The pro-rata model has a fundamental problem: a listener who only plays your music all month contributes the same to the pool as a listener who plays 10,000 different songs. Your superfan's subscription fee gets redistributed to artists they never listen to.

The alternative is user-centric payment, where each subscriber's fee is divided only among the artists they actually listened to. Under this model, if a subscriber only listens to your music, their entire subscription payment (minus the platform's cut) goes to you.

Deezer adopted user-centric payment in 2024. SoundCloud has experimented with it. Spotify has repeatedly studied it but hasn't switched, partly because the pro-rata model disproportionately benefits major labels (who control the most-streamed catalogues) and those labels have significant leverage over platform economics.

For independent artists with dedicated fanbases, user-centric payment would almost certainly mean higher earnings. For superstar artists with casual listeners, it might mean lower earnings. The politics are exactly as complicated as you'd expect.

Where the Money Actually Goes

Let's trace a single stream on Spotify through the entire payment chain.

Spotify collects the revenue and keeps approximately 30%. The remaining 70% enters the royalty pool. Of that pool, roughly 75% goes to master recording rights holders and 25% goes to publishing/composition rights holders.

The master recording payment goes to your distributor (if independent) or label. Your distributor takes their cut (typically 10–20% for services like DistroKid, TuneCore, or AWAL). The remainder reaches you.

The publishing payment is split further. It flows through your publisher (if you have one) and your PRO (PRS in the UK). Mechanical royalties go via your publisher or a mechanical rights organisation. Performance royalties go via your PRO. Each takes their commission.

By the time a £0.004 stream reaches the artist and songwriter, multiple intermediaries have taken their cuts. For a signed artist on a traditional deal, the actual amount received can be as low as £0.0005 per stream. For a fully independent artist who owns everything, it might be £0.003.

How to Maximise Your Streaming Revenue

First: own your masters. The single biggest factor in streaming income is whether you control your master recordings. Independent artists keep 80–100% of the master royalty. Signed artists on traditional deals might keep 15–20%.

Second: register everything properly. Make sure your songs are registered with your PRO, your mechanical rights organisation, and your distributor. Unregistered works don't get paid. It's estimated that billions in streaming royalties go uncollected every year because of missing or incorrect registrations.

Third: understand your distributor's terms. Some distributors take a percentage of revenue. Some charge a flat annual fee. Some take no cut but monetise your data. Compare the maths based on your actual stream counts.

Fourth: don't ignore YouTube. YouTube's Content ID system generates significant revenue for rights holders, but only if your music is registered. Make sure your distributor opts you into Content ID.

Fifth: think about catalogue depth. In a pool-based system, more songs means more chances to capture streams. An artist with 50 songs on Spotify will almost always out-earn an artist with 5, all else being equal. Release consistently.