An Unsigned Artist Makes 4X More from Streaming Than a Major Label Artist

Streaming Surprise!
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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.

Royalty Payouts
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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.

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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.

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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!


22 Responses

  1. Unsigned

    I don’t understand why a distributer like TuneCore or any other would take a 10% cut when an unsigned artist owns the 100% rughts to the content, i thought they only had the rights to dustribute on our behave. Thats shady i guess i got to start inquiring about that…bless

  2. Anonymous

    Otherwise you can say, when a major label is providing you more then 4 times more streams, then you can do it by yourself, you have more money in the end.

  3. IYI Bashar

    This article is almost a tautology. Sell 85% of your recording revenue stream to a label (otherwise known as a record deal) and you get only a fraction of your revenue. I don’t fault the writer, society wide we no longer try to understand even modestly complex issues.

    • Paul Resnikoff

      I’m glad you’ve been vocabulary building. But I think you still need a little practice with ‘tautology’.

      Yes, a major takes a big cut, in exchange for the possible (and I emphasize, possible) result of dramatically growing the bigger pie. If you’re never signed, maybe you’ll always be taking a but cut on a crumb.

      But what if you’re already enjoying a sizable fanbase? That’s when these calculations really come in handy. It’s a guide, and greatly depends on what level of success an artist has already built.

      Got a big fanbase that loves you? And will support you? Not sure a major makes sense. Take the bigger cut.

  4. Seth Keller

    As a manager with a client signed to a major and having managed completely independent artists, I see the difference in net streaming revenues firsthand.

    That being said, “it’s definitely not worth signing to a major label!” if an artist already has fans, is pretty simplistic advice.

    Depending on the type of music an artist makes, signing to a major could be very beneficial to his or her career. If you’re a rock artist starting today, a major probably doesn’t help and probably wouldn’t sign you anyway. If you’re pop, hip-hop, dance or alt rock, you may benefit financially from the relationships at radio and streaming services that majors have and get branding opportunities independent artists probably won’t. That financial benefit may far eclipse the streaming revenue advantage you have as an indie artist by generating more and bigger revenue streams particularly in touring and merchandise.

    Also, as streaming becomes the default recorded music consumption platform, major label contracts will change to make the artist’s royalty percentage much bigger. I also believe that–at least in the US–laws will be enacted to give publishers a bigger slice of streaming revenue, which will be passed on to artists who write their own songs regardless of their label affiliation.

    • Unsigned

      Only when the majors bring that 15/16% up to like 35/40% then signing would make much of a difference until then….stay away

      • Seth Keller

        It’s interesting you mention 35-40%. I just spoke to an attorney for a client I represent yesterday, and he told me recent contracts he’s negotiating are at or moving toward that percentage. He feels, as do I based on my conversations with major label execs, that the labels recognize the percentage must change for streaming. My gut tells me that star artists have already negotiated that sort of change in their agreements that were signed well before streaming became the label’s biggest source of income.

        • Unsigned

          I doubt they are getting that change of 35/40% because most label contracts are design to keep you in debt as a way of keeping u in the factory lol I’m undie an i wouldn’t change it for the world… Major labels pump your image because they want most of the profit when the public latch on to that image…

  5. GGG

    I mean, sure…but the DIY artist isn’t also getting a big advance to record music with someone else’s money, tour support, marketing, etc.

    Obviously major label deals can be soul and money sucking endeavors, but this whole article is sort of a non-issue, because..well, no shit your better off in terms of rev percentages.

    • Bo

      Join us on Dec. 20th for the 2016 Duh Awards.

      Resnikoff is nominated 12 times in 6 catagories. Sweep!

      • Paul Resnikoff

        I’m also be bringing your girlfriend to the awards ceremony.

  6. Nicky Knight

    Signing to a major label is a huge risk.. because you need someone at the label who has major influence on promotion/marketing budgets, A-list priorities and willingness to push you into radio playlists, allocate viable video budgets, provide financial support for cross country travel & accommodation and so much else.. What can happen (and often does) is that the person who gets you signed to the major label is all of a sudden no longer working for the company and all of a sudden you’re no longer of interest to them and certainly no longer a priority.. but you’re still bound by an exclusive contract.. That’s why a key-person clause can be vital..

    Then there’s the whole cross-collateralization aspect in contracts that mean even if you do have a “right out of the box hit” you may still not see a cent by the time the deduct all their different “expenses”.

    It’s when everything is working in your favor and you have the major label machine working at full capacity behind you that you can really benefit from being signed..

    If the major label can’t hear a Hit and are not particularly enthused and driven with your “product” then as Mike Chapman once said .. (to paraphrase) “you may as well get out and go chop meat somewhere..”

  7. Scott

    Is the 12-13% figure the secret PRO statutory rate that songwriters are complaining about? Because they are not even receiving 1/10th of that amount according the majority of the articles on this subject. My understanding of this PRO statutory rate is that it is a secret, but songwriters are not getting anywhere near that percentage on streaming revenue.

  8. Nicky Knight

    Songwriters only really make money on “airplay” hits..
    mechanicals don’t bring in much at all nowadays.. but if you get a hit that’s played
    on high rating commercial radio stations and state music stations then you can make
    a few million on a song..

    Performance royalties are the big earner, if they weren’t there then many songwriters would probably give up the biz and go for a job in the local food court or call center.

  9. Shlomo

    Isn’t the big point being over shadowed- someone correct me here but don’t major labels negotiate huge upfront catalog licensing agreements ( not share with artists) and at the same time negotiate low streaming royalties for their artists making i harder for them them to recoup. Can someone provide more insight into this phenomenon

  10. Dinah Perez

    I am speaking at the Hawaii Songwriting Festival this week. I’m wondering if I might have permission to reprint and distribute your article on streaming royalties? Approximately 200 people will be attending.