Spotify and Apple Music are the two dominant players in the music-streaming market and they might seem the same to many consumers, with similar features and pricing.
But because of the system by which artists are paid, they can vary wildly in the royalty rates they pay out.
For Iris Stryx, a major music artist, streaming royalties from Spotify, the service she’s most popular on, don’t even cover her family’s health insurance premium.
And although Iris earns more per month from Spotify than Apple Music (because she is streamed most often there), she earns four times more per stream from Apple Music.
From January to September last year, Iris earned $0.012 per stream from Apple Music, and about $0.003 per stream from Spotify after distributor fees. (Those rates vary.)
Why are the rates so different? The answer lies in the payment system favored by almost every service, which can leave some artists like Iris feeling shortchanged.
Iris earned the most per stream from iHeartRadio in 2019, but was streamed significantly more on Spotify
Iris publishes her yearly streaming earnings in an effort to spark conversation about music royalties and help other artists better understand their finances.
“I wanted people to see the difference between all of the services,” Iris said. “Down at the lower levels, no one knows what everyone else makes and no one knows what services pay. How can you make decisions if you don’t know what the numbers are?”
IHeartRadio had the highest pay-per-stream rate for Iris in 2019, at $0.017 per stream, although out of 14 streaming services, Iris was streamed the least on iHeartRadio.
Apple Music, Tidal, and Amazon Music also paid Iris more per stream compared to other services, but she was streamed most often on Spotify and Pandora.
Even though she earned four times more per stream from Apple Music than Spotify, she earned more overall from Spotify because her music was streamed most on that platform. In total, she earned $6,800 from Spotify and $5,800 from Apple Music.
How streaming services determine royalty pay for each artist
Streaming services cut massive checks to hitmakers like Billie Eilish, Taylor Swift, Post Malone, and other frequent chart-toppers each month, but some smaller artists like Iris feel the payment system isn’t fair to them.
Most streaming services pay artists using a system known as pro rata, in which all the money generated from listeners each month is totaled up, then divided proportionally by listening time in order to determine how much each artist on the service should be paid.
“If you’re a popular artist, you’re likely going to get more streams just by virtue of the fact that you’re popular,” said George Howard, a professor of music business at the Berklee College of Music.
In a video Spotify posted to a page of resources for artists, Alan Galbraith of the company’s licensing department says “stream share” determines each artist’s cut of Spotify’s monthly revenue.
“One way to think about it is to think about divvying up a pie,” Galbraith says in the video. “For instance, if there are a million eligible streams in a month, and you have 100,000 streams in that month, then your stream share is 10% of the revenue pool, or pie.”
In other words, if Billie Eilish accounts for 10% of all streams this month, then Eilish gets 10% of the money users paid to Spotify, regardless of which users actually streamed her songs.
But some in the industry prefer a different type of payment system.
One alternative is a user-centric system, which means that if one user pays $9.99 a month for Spotify Premium but only listens to independent cellist Zoë Iris, that user’s $9.99 would be paid exclusively to Iris.
“These companies are taking power away from listeners, because listeners don’t have any say where their money goes,” Iris told Business Insider. “If you only listen to me, I should get all the percentage of the money you spend on music.”