Imagine you go to your favourite restaurant every evening. The food is good, you keep going back, and you bring friends along. The restaurant is doing a roaring trade. Yet the chef barely sees any of the profits. He eats tinned ravioli and instant noodles at home.
That’s pretty much what life is like for many musicians. The restaurant is the streaming service, and the chef is the artist.
The number that explains it all…
… is, for once, not 42, but 0.003. This is because, on average, an artist earns between 0.003 and 0.006 euros per stream on the major platforms.
But what does that mean? Here’s a concrete example: a song needs to be streamed around 250,000 times for an artist to generate 750 euros from it. Not profit — revenue. But before that, they’ve already paid for the recording studio, the mixing and mastering engineer, and had to fork out money just to get their song uploaded to the streaming platforms in the first place, etc. Not to mention the cost of buying instruments, rehearsal room hire and so on.
For an independent musician who produces, markets and releases their own music, that’s a sobering calculation.
How the money is actually distributed
The real problem, however, isn’t just the amount of money involved. It’s the way it’s distributed:
Most streaming services operate on what’s known as the ‘pooling model’: all subscription revenue for a given month is pooled together. This pool is then divided up proportionally, based on an artist’s share of all global streams for that month.
What this means in practice: you listen exclusively to local indie bands from your area. Yet most of your subscription money still goes to the world’s most-streamed artists – or rather, their record labels. Not because you listen to them, but because that’s how the system is designed.
Your listening habits don’t actually determine where your money goes.
Let’s do a quick calculation: of a typical streaming subscription costing 15 euros, around a third goes to the provider itself, for operations, marketing and further development. That leaves about 10 euros for the artists. Of this amount, a further portion then goes directly to the major record labels, simply so that they make their song catalogue available. For the remaining 7 euros – roughly half of your subscription fee – to go entirely to the artists you’ve actually listened to, you’d need to generate around 2,333 streams in a month. Most people stream far fewer tracks. The money flows out regardless.
Note: These are informed estimates — streaming providers keep their contracts and payout structures strictly confidential, so take the exact figures with a grain of salt.
What about artists signed to record labels?
For artists with a record deal, the situation becomes even more complicated.
Record labels often finance production, marketing and tours with advances. These advances must be repaid in full before an artist sees a single penny of their streaming revenue. Only then, and after the record label’s share has been deducted, does the artist actually receive any money. In many contracts, this amounts to 10 to 20 per cent of streaming revenue and physical sales.
10 to 20 per cent of 0.003 cents. With 250,000 streams, that means somewhere between 75 and 150 euros ends up in the artist’s account.
And everything used to be better in the old days?
Not necessarily. But it’s different.
When CDs and vinyl were the main sources of income, there was a direct link between what a fan bought and what the artist received. Anyone who bought an album was supporting a specific artist. Anyone who bought lots of albums was supporting lots of artists.
Streaming has made music more accessible than ever before. That’s a good thing, and we don’t want to downplay it. But at the same time, it has broken that direct link. The 10 to 15 euros a month for a subscription feels like support. In financial terms, for most artists, it’s hardly enough.
No blame — just a gap
This isn’t an indictment of streaming services. It’s a description of a gap that has opened up.
Many people – perhaps you too – feel that they’d like to do more, but don’t know how. Buying CDs feels outdated, and I don’t even have a CD player anymore.
We want to close that gap.
We’ll explain how it works in our next article. Or why not pop over to tipino.app now?
About Tipino
Tipino is a non-profit organisation based in Gossau in the canton of Zurich. We are not a streaming platform; you cannot listen to music on our site. We offer a way to pay for music fairly.