Signing to a major label used to be the only way to succeed. Now, in a world dominated by streaming music, it can cost an artist dearly.
Perhaps the number one question we get from artists is the following: ‘what do streaming services actually pay?’ At first, we had no idea, and none of the streaming services would tell us.
Then, we started asking artists to send us their streaming statements. Since that point, we’ve gone through scores of streaming statements and millions of streams, trying to answer that question. Most of the time, the statements were provided confidentially by the artists or labels themselves, and never from streaming services or major labels.
We’ve tried our best to cobble together some numbers from all of the data. In the end, we landed at estimates of what different streaming services pay artists. Here’s one of our latest breakdowns.
These are per-stream royalty figures, which offer some guide on what artists can expect to receive from services like Spotify. But that assumes the artist is collecting those royalties directly. What about artists signed to major labels, like Warner Music Group?
How much are they getting paid in the end?
According to to new calculations released by Manatt, Phelps & Phillips, LLP, signing to a major label can cost an artist dearly when it come to streaming royalties. Specifically, an unsigned artist can expect to receive nearly four times the royalty from streaming than an artist signed to a major label.
Here’s a quick breakdown of what a major label artist can receive from every dollar of streaming revenue. This assumes that the artist wrote 100% of the music, and is the sole performing artist.
In the end, the major label artist received 18.4 cents out of every $1 of streaming revenue.
A few clarification points. The 58.25 cents is the amount that a service like Spotify pays the recording label, with another 12-13 cents for the publisher (oftentimes it’s all the same company). As you can see, publishing is split into a performance license (for the playback) and a mechanicals license (the right to ‘reproduce’ and use that recording digitally).
As you can also see, the major label and publisher take a huge percentage of all those streams, leaving the artist with a 16% overall cut.
Let’s compare that to the unsigned artist.
By extremely sharp contrast, the unsigned artist gets a far greater cut. In fact, according to Manatt, the unsigned artist can expect 64.18 cents out of every streaming dollar. Which is nearly four times greater than the payout from a major label.
Take a look.
A few details on this one. The research assumes a 10% cut from a digital distributor like Tunecore, with a PRO collecting the income. So there are still middlemen, but nothing nearly as large as a major label.
The last point is this: a major label does take a bigger cut, but they could end up spending a huge amount of money to make an artist into a superstar. That could be all the difference in a career, but if an artist already has fans, it’s definitely not worth signing to a major label!