Spotify paid over $10B US to the music industry last year. How much actually makes it to the artists?

Spotify announced in late January that it had paid out a record $10 billion US in royalties in 2024, the largest payout to the music industry in a single year. This amounts to a tenfold jump from $1 billion US in 2014. 

The Swedish streaming giant on Wednesday released further details in its Loud & Clear report, saying that nearly 1,500 artists earned over $1 million US in royalties from Spotify last year. The report also highlighted how artist generating royalties have tripled since 2017.

And though Spotify has absolutely changed the game for artists in terms of exposure and helping them build their fanbase, that doesn't always translate to financial stability, according to music publicist Eric Alper.

Spotify doesn't pay artists and songwriters directly and how much they get paid depends on their agreements with rights holders. And after all the pit stops on the revenue chain, he says what makes it into their hands could amount to a very tiny percentage.

The streaming giant's report comes amid the ongoing debate about how much money artists and songwriters actually receive in royalties and whether it is actually fair. Many artists, especially songwriters, struggle to see substantial earnings from streaming, even if their songs rack up millions of plays.

"While Spotify boasts a $10 billion payout in 2024, only a fraction of that ends up in the pockets of those who create the music. A typical signed artist might see only 10 to 20 per cent of their total earnings after their label takes its cut," Alper told CBC News.

"Songwriters have it even worse since mechanical and performance royalties are split among multiple stakeholders. Independent artists fare slightly better, as they avoid label deductions, but they still must navigate distributor fees and publishing splits," he said.

Spotify breaks down how the money flows in its report. The music platform pays the rights holders, which are typically record labels, distributors, aggregators or collecting societies.

Artists and songwriters choose their rights holders and make agreements on their music, including giving them permission to deliver it to Spotify. The streaming giant then pays the rights holders, and they then pay the artists and songwriters.

Spotify has different agreements with each of these rights holders and in general Spotify pays them roughly two-thirds of every dollar made from music. 

"As is the case with other streaming platforms, the payout to music creators and publishers is significantly minimal, especially considering that it is the music itself which initially provided the platform with its value," said Dr. Charlie Wall-Andrews, creative industries professor at Toronto Metropolitan University.

Spotify was hit with a lawsuit last year that accused it of underpaying songwriting royalties for tens of millions of songs.

Several Grammy-nominated songwriters, including Amy Allen and Jessi Alexander, boycotted a Spotify awards event earlier this year after the platform's decision to cut royalty rates for songwriters and publishers on premium-subscription streams last April.

"Spotify continues to announce royalty payout numbers that distort the infinitesimal amount that ends up going to songwriters. To put real Spotify numbers into perspective, in 2024 Daniel Ek cashed out $376 million in stock. In that same period, it is estimated that all songwriters in the U.S. received $320 million from Spotify," National Music Publishers' Association president and CEO David Israelite told CBC News.