If you’ve actually purchased music lately, it’s often for the collectible experience rather than pure function. The vinyl revival has continued, with LP sales rising and vinyl leading U.S. physical music revenue as buying music steadily increasing. But Jaleel told us, CDs still aren’t the primary way most people listen, and why buy a digital album when you can stream on demand? Today, the a majority of today’s music revenue comes from streaming subscriptions and ads, which means artist income depends on how streaming royalties are split rather than on unit sales alone.
But we learned a few things while reviewing Spotify’s music streaming service. We’re going to break down how money is made in the music streaming system as of 2025, the current state of the industry, and how you can support your favorite artists.
First, we should untangle a key term — royalties. Royalties are basically the amount paid to any rights-holders when a song (or any creation) is sold, distributed, used in other media (like a commercial or movie), or monetized in any way. Each song is split into two separate copyrights: composition (lyrics, melody) and sound recording owned by the record label and recording artists. In the U.S., streaming mechanicals for compositions are administered via The MLC under the Music Modernization Act.
- Composition copyrights: Owned by songwriters and publishers
- Sound recording copyrights: Owned by the record label and recording artists
The royalties are split among all these people, at various rates negotiated amongst record labels and agencies. There is no single “per-stream rate” — services pool revenue and allocate it by share of listening, and U.S. songwriter mechanicals follow CRB’s current (Phonorecords IV) framework administered by The MLC. Citi GPS: Global Perspectives & Solutions’ research team created a handy chart that illustrates the flows of licensing and revenue for music rights.
There’s Not Much Money to Make from Streaming
To earn revenue, music streaming services are either advertisement-supported or subscription-based. They pool music revenue each month and allocate most of it to rightsholders; Spotify indicates nearly 70% of its revenue is paid out to music rights before label and publisher splits. Effective payouts vary by listener country and plan type.
The amount that makes it to the artist will vary by streaming service, but it’s generally modest and highly variable. Digital Music News reported “per-stream” charts in past years, but platforms explicitly reject a fixed price per play. Instead, pro‑rata pools, eligibility thresholds, and anti‑fraud policies determine how money flows — and artist take‑home then depends on their label/distributor and publishing deals.
To look at it another way, Business Insider and others have historically quoted “cents per stream,” but Spotify emphasizes there is no single rate and that payouts depend on geography, plan mix, and overall consumption. The most popular artists can generate meaningful income at massive scale, but, as The Economist reported, gross streaming revenue is split among labels/distributors and publishers before the artist’s share. Recent platform rules also matter: Spotify generally requires a track to reach about 1,000 streams in a 12‑month window to accrue recorded‑music royalties; Apple Music applies a 10% royalty uplift to eligible Spatial Audio plays; Deezer boosts qualifying “professional” artists and active engagement; SoundCloud uses fan‑powered (user‑centric) royalties; and YouTube/YouTube Music earnings vary across subscriptions, ads, and Shorts.
But not every artist is that popular — the nonprofit Music Industry Research Association (along with Princeton University and MusiCares) conducted a survey of 1,277 U.S. musicians in years past and found many musicians rely on multiple income streams; a significant share reported that music-related income alone didn’t cover living expenses. That remains directionally true today even as streaming revenue has grown.
Even the big names in music have a complicated relationship with streaming. High‑profile catalog moves, windowing, and exclusives come and go, but headline payout mechanics haven’t fundamentally shifted; instead, platforms have focused on curbing “noise” content, tightening fraud enforcement, and updating eligibility thresholds. In short: streaming’s reach keeps growing, while pay outcomes still depend on model rules and the artist’s own deals.
The Industry is Still Navigating the Streaming Movement
Earlier this year, the Copyright Royalty Board (CRB) rate-setting process continued to loom large: the U.S. streaming mechanical framework now in effect for 2023–2027 (often called Phonorecords IV) sets percentage‑of‑revenue formulas and floors for publishing mechanicals. Prior disputes and appeals reported by Music Business Worldwide and Billboard show how contested these determinations can be.
The government is getting behind songwriters too, with the Music Modernization Act (MMA) now fully implemented. It created The Mechanical Licensing Collective (The MLC) and a blanket U.S. streaming mechanical license; since launching operations in 2021, The MLC reports distributing over $2 billion and matching the vast majority of historical “unmatched” royalties. In 2024, The MLC also sued Spotify over how bundles are treated under the rules — a reminder that definitions still drive outcomes.
- The Musical Works Modernization Act: established a blanket mechanical license for reproduction and distribution of musical works via downloading and interactive streaming services. A nonprofit entity (The MLC) administers the license, runs a public works database, conducts monthly royalty distributions, and works to match historical unmatched royalties.
- The Classics Protection and Access Act: ensures that legacy artists’ recordings made prior to 1972 receive digital performance royalties when played on eligible digital radio services (administered via SoundExchange).
- The Allocation for Music Producers Act: formalizes a legal process for music professionals (producers, mixers, engineers, etc.) to receive a share of digital performance royalties for sound recordings via SoundExchange.
As these measures have taken hold, artists and writers benefit from greater transparency and faster payments — but the fine print on rates, bundles, and fraud mitigation continues to shape who gets paid and how much.
Streaming is Great for Artists Anyways
Regardless of the pay-per-stream myths, Spotify and other streaming services remain invaluable tools for discovery and promotion — much like radio once was, now amplified by playlists and short‑form video. When we spoke with Michael Stover, owner of MTS Management Group/MTS Records, he recommended we think of streaming to work like the radio once did. “Streaming sites like Spotify and Youtube are there for music discovery, promotion, and a way for artists to have their music heard by an audience that wouldn’t normally listen. Is someone going to buy your music when they’ve never heard of you before? Most likely, no. But with streaming, and especially getting on playlists, the opportunity to get discovered by new listeners, and essentially, customers, opens the doors to an audience you wouldn’t have otherwise had.”
Independent and up-and-coming artists can connect to fans easier than ever before. Uploading your tracks to a streaming service is far cheaper than manufacturing physical media, and playlisting plus social/short‑form video can accelerate discovery. Fan‑powered/user‑centric models and superfan tools are also creating new pathways to revenue beyond pure stream counts.
World-tour-headliner Odesza rapidly earned their fanbase just by posting their music for free on Soundcloud and Spotify. When we interviewed hip-hop artist Jaleel Koth, he raved about the opportunities new artists can capture with streaming, “Streaming has opened up a new door for undiscovered talent to build their legacy independently.” Artists can begin to earn money and build an audience base before they’ve signed with a record label and without investing in a tour. Today, artists can also layer in direct-to-fan sales, memberships, merch, and sync to build sustainable income alongside streaming.
How to Support Artists in the Streaming Age
Simply streaming your favorite artist, and even encouraging your friends to do so, is no guarantee they’ll receive any money from your listening. While CD and album sales (both physical and digital) directly influence an artist’s revenue, streaming payouts are more complicated.
Let’s say Spotify earns $1 million from ads and subscribers in one month: After overhead and taxes, whatever portion of that money that goes to artists is divided up by their percentage of that month’s streams. They take the total number of streams in one month, then calculate what proportion of that was each artist’s music. So if there are a million streams in one month, and Ariana Grande’s discography was streamed 10,000 times in that month, then Grande is paid 1% of that month’s revenue pool (divided between anyone who has royalty rights on that music). There is no fixed per‑stream price, and pay is further split among labels/distributors and publishers; additionally, under Spotify’s current policy, tracks generally must reach about 1,000 streams in a 12‑month window to accrue recorded‑music royalties. So, even if you’ve never listened to Ariana Grande before, a portion of your premium plan subscription is going to her.
While streaming your favorite band’s music is certainly going to help them get a slightly bigger piece of the pie, it’s not as direct as music listening used to be. A British band called While She Sleeps highlighted this by selling a T-shirt reminding fans that band merchandise is one of the most direct ways to support an artist. Buying vinyl and other physical formats, joining fan clubs/memberships, and tipping at shows all help more immediately than streams alone.
If you’re listening to your music for free nowadays, consider supporting the artists that soundtrack your life by going to their concerts and buying an always-in-style band tee — and, when you can, picking up vinyl, joining memberships, or buying direct downloads.
What’s Next?
- Check out our full review of music streaming services to start listening to your favorite artists.
- We took a closer look at Spotify’s music streaming service and Apple Music service, features, interface, and playlist curation.
- Curious about full review of music streaming services? We examined whether it’s worth the upgrade.
