Can You Actually Live Off Music Streaming Revenue?
In 2018, Spotify CEO Daniel Ek told investors part of the platform’s core mission statement was “to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art.” Most people reasonably concluded that means Spotify wants at least one million artists to make enough money from their music streaming revenue to pay the bills and continue exploring their creativity.
But nearly four years later, can you actually live off music streaming revenue? Better yet — are one million artists close to hitting that threshold?
As music streaming continues to grow, Spotify’s mission statement remains largely the same, only slightly evolving to include reaching billions of users, presumably as a continuing effort to open up affordable access to music across the globe. Or as Spotify puts it, they want users to have the “opportunity to enjoy and be inspired by” the art those one million creators are creating.
The belief is, ultimately, that if enough people use Spotify, the revenues generated from premium subscriptions and ad sales will support one million people earning at least a living wage. Not to get ahead of ourselves, but Spotify is much closer to having a billion users than it is to paying out living wages to one million creators.
Music Streaming Revenue Is Just One Of Many Variables
Answering how reasonable it is to make a “living” off streaming revenue alone is very difficult — much less figuring out when one million artists might reach that threshold. (Spoiler alert: by Spotify’s own estimation, we’re nowhere near that).
But Spotify has, to their credit, launched a website that at least provides some data.
In 2020, only 13,400 artists made $50,000 or more from their Spotify streaming revenue. The good news is that number is up 80% from 2017–2020 and growing every year. The bad news is that’s a sliver of a sliver of the total number of artists on the platform and nowhere near Spotify’s stated one million mark.
But there are a lot of variables even to this number. For starters, this is the number paid to “rights holders” for both the recording and the publishing. If you don’t own all of your recording or publishing rights (or didn’t write the songs), you’re not making all or potentially any of this money.
What if you do own all the rights but use a distributor that takes anywhere from 10 to 30 percent in exchange for distributing? That’s a sizable cut if you’re trying to live off this income.
And of course, there’s the issue of how much it costs to create music and live in general. That revenue is just revenue — it doesn’t account for production, marketing, or distribution costs. And $50,000 for a solo creator in Indianapolis is certainly livable. But $50,000 for a four-piece band in Los Angeles is barely side hustle money.
What Does 100,000 Monthly Listeners Really Mean?
Spotify revealed that in 2020, more than 60,000 artists topped 100,000 monthly listeners at some point in the year. Of course, that number becomes a lot more austere when you realize that means that roughly one in five artists who hits that six figure monthly listener mark makes $50,000 a year from it.
That means essentially the entire city of Wichita Falls, Texas could be listening to you at least once every month — and you still only have a 20% chance of earning enough money to make around the median household income in Wichita Falls.
It’s also worth noting that in 2020, about 57,000 artists accounted for 90 percent of the total streams on Spotify. Which means despite there being 8 million artists on Spotify, the pool of oft-consumed artists is much smaller. Not to mention some artists get paid more than others for the exact same stream due to infamous old agreements between Spotify and major labels. That also means you could have eclipsed 100,000 monthly listeners and still not have been one of those 57,000 artists making up the 90 percent of streams.
That said, the numbers are growing. In fact, that 57,000 figure is four times as many as it was in 2015. Spotify may be nowhere near that one million mark, but the company is trending in the right direction.
But the revenue still largely tilts in favor of a select few. Just over 800 artists accounted for 20% of the revenue from Spotify.
So while 100,000 monthly listeners sounds like a nice milestone, it might not mean what you think it does financially.
What About Music Streaming Revenue From Other Platforms?
We have to mention that success on Spotify is rarely in a vacuum — unless all of your streams are coming from playlists. But for a typical artist, it’s not uncommon to see Spotify make up roughly two-thirds of your streaming revenue. So you could reasonably assume an average artist making $50,000 from Spotify might be making $75,000 from music streaming overall. (Again, please take this figure with a grain of salt).
Apple Music is much more clandestine about how many artists earn how much money from their platform, but they did raise eyebrows when they claimed the average pay rate to artists is $.01 per stream and that they pay all labels the same.
Just a reminder that you need to be really careful with the “average per stream rate” conversation. But if we were to assume the average independent artist makes $.0035 per Spotify stream and $.01 per Apple Music stream, they could, in theory, reach $50,000 a year from their streaming revenue with one third of the listeners.
Knowing that music streaming revenue from Spotify is just a piece of the overall streaming puzzle makes things a little more rosy for the artists hitting that payment threshold on Spotify. But it doesn’t necessarily significantly increase the chances of an artist earning a living wage from music streaming revenue.
So It’s Hopeless?
Look, we’re not going to beat around the bush here. Making a living only from music streaming revenue is incredibly rare. And if you’re reading this as a completely independent artist, you’re fortunate in that you likely earn a higher percentage of that revenue than anybody signed to any deal — but the odds of making enough from streaming alone are not in your favor, even excepting for millions of hobbyists on the platform.
And it kind of seems like Spotify is starting to acknowledge this. The platform is slowly working on rolling out features that may allow artists to monetize Spotify listeners beyond just the streaming revenue. Things like accepting donations and listing Shopify merch are a start — though the actual impact on that overall “one million artists” goal remains to be seen.
But if Spotify truly wants to help that many artists earn a living wage from their streaming revenue, the current status quo won’t be nearly enough. The platform will have to get serious about potential options such as increasing subscription fees and adopting a new payout scheme that compensates independent and smaller artists more fairly. Models like a user’s subscription fee only going to the artists they listen to would potentially shift the balance and help smaller acts earn more.
The More Proactive Way To Think
Thinking about your streaming income as a revenue leader is unrealistic. Many artists hitting the $50,000 threshold from their Spotify revenue likely have a lot more going on, from merchandise to fan clubs to livestreams to live performances.
For the majority of artists making a sincere attempt at creating a living out of their art, music streaming revenue is not their biggest source of income. Not to split hairs, but the idea that Spotify could empower one million people to live off their streaming revenue is kind of backwards thinking in the first place. We know it takes a significant volume of streams to make a living wage, and if you’re getting those kinds of streams, you’re probably also doing things that earn you more money than streaming does anyways — meaning you don’t rely on that income to live.
But if you’re able to, you should consider streaming revenue a source of operating income. Earning $150 a month from streaming revenue feels hopeless when you’re thinking about how far you have to go to turn that into enough money to pay rent. But thinking of it as $150 towards the costs of turning fans into recurring customers can be a much more proactive line of thinking.
With that mentality, your $150 from streaming revenue could turn into an ad budget that generates $450 in merch sales. And before long, you’re building a business where your music is a low-cost product that leads to even more impactful revenue.
This, of course, is not to detract pressure away from the streaming companies making necessary changes to compensate artists (especially independent ones) more fairly. But it is an actionable way to think about creating a business from your art that does pay a living wage.
Originally published at https://www.rootnote.co on December 2, 2021.