I’m not going to sugarcoat it for you, and if you’re asking the question chances are you already suspect the answer may not be a favorable one, so here goes nothing: sure, you can make money on Spotify, but it ain’t easy.
For most artists, payouts from Spotify – at least payouts significant enough to register – tend to remain more theoretical than actual or practical, something to fantasize about rather than hold in your hand in a big sack marked with a dollar sign. That’s not to say it’s impossible, because it’s not; it’s just that the odds are stacked against you, and you’ll need a potent combination of dogged persistence, unusual luck, and/or preternatural talent to bring in anything worth bragging about or that might truly support a music career on its own.
You’ve probably heard discontented murmurings about recent changes to Spotify’s payout structure, so let’s cover that first. To be clear, what we’re talking about here is actual cents and dollars that are directly paid by Spotify to artists on the platform as compensation for users streaming the artists’ songs; there are alternative ways to monetize Spotify (for instance, you can connect a Shopify account in order to sell merchandise), but we’ll save that topic for another day.
To oversimplify the payout formula: an artist will generally receive approximately $0.003 to $0.005 per song streamed. If you want the complicated version, you’ll need to lift up the hood and take a good look at the engine underneath, and while, for our purposes, we don’t need to dig into how the sausage is made (how’s that for mixed metaphors?), the condensed explanation is that the specific payout amount is dependent on a particular song’s percentage share of the overall pool of songs being streamed by users per month, and also on the nature of the rightsholders to the song, as any given recording contains unique, separatable publishing and recording rights.
Three to five cents per song might not seem like very much, particularly compared to the gold rush era when a CD cost a whopping $20 (minus whatever substantial chunk a label might take) or, even more starkly, the post-CD, pre-streaming era when digital sales reigned supreme and artists could pocket most of their sales, and the truth is: it’s not. You’ve got to convince your audience to stream the absolute shit out of your songs if you’re hoping to stack fractions of cents up high enough to create a visible pile.
But here’s the new complication that has set everyone a-murmuring: only tracks that exceed 1,000 streams over the course of a twelve-month period will generate royalty payments at all. In theory, that might sound like a low bar to clear, but in actuality, according to Spotify’s own metrics, as of late 2023, approximately two-thirds of the songs hosted on the platform did not reach that threshold.
The reasoning behind the tweak is a bit convoluted and not really relevant to our question, but the upshot is that to get paid at all, you’ll need to clear some hurdles beyond simply getting your music onto the platform and sending links to friends and family (unless, of course, your friends and family groups are enormous and well-connected in the industry); you’ll need to be accruing some substantial streaming numbers.
Some Fuzzy Math
Still interested? Great. So, how do you get started?
Well, first you pay a distributor to punt your music over to Spotify so that the masses can get at it (some distributors charge an up-front fee and that’s it, some will take a cut of your royalties, and some might even be so bold as to collect on both ends), and then you sit back in your easy chair to wait for the cents to roll in. That part is easy enough (here’s a guide, and the logistics are fairly simple: assuming a song has crossed the 1,000 streams mark, you’ll receive royalty payments through your distributor from Spotify on a monthly basis – usually, payments are for streams two or three months prior, so hold off on rending your garments in frustration if you get off to what seems like a slow start.
Let’s talk turkey, though. To help illustrate, we’ll assume that you’re a particularly charmed new artist who, without any marketing spend, was able to drop a ten-song album to the unsuspecting public that generated 1,000 streams per song during its first month of availability. That’s 10,000 streams in a month; 10,000 individual occasions on which a person made the decision to proactively queue up one of your songs and give it a good, old-fashioned listen. In a way, that already sounds like success, right?
If we check your earnings, though, and we go ahead and assume you’re bringing in that best-case-scenario figure of $0.005 cents per stream, you’ve garnered yourself a cool…$50. Those ten thousand streams, that karmic avalanche of “yes” votes in your favor, are the equivalent of selling five albums for $9.99 on iTunes in 2005, or two-and-a-half CDs in 1998.
If we extrapolate those first-month results to a whole year, we end up with 120,000 streams, a number that at least looks formidable (that’s a lot of zeros!), and one that will surely make the everyday Spotify browser shake their head in amazement, give a low whistle, and say, “Damn, this guy/girl/band has made it.” Again, though, if you do the math, those 120,000 streams only brought you a paltry $600 in revenue. To be sure, $600 is nothing to shake a stick at, but if you treat it like a yearly salary, you’re looking at a $25 bi-weekly paycheck. If you’ve got a day job, you’re probably not quitting it for that sort of paltry windfall.
Is Anyone Actually Succeeding at This?
Alright, so that’s all looking pretty bleak. ]
Surely someone must be wringing enough cash out of Spotify to make a passable career of it, right?
Well, not really, or at least not in the way that you might think. It’s all relative, but you won’t start making “real money” from streams alone until you’re deep into the vaunted “millions of streams” tier; even with five million streams, you’re still only making $25,000, and while that’s starting to look more like an actual salary, it won’t exactly catapult you into the lap of luxury, and five million streams is a lot – elite level, even.
It’s also important to note that, in all of the hypothetical scenarios above, we’ve neglected to include the almost-definitely-relevant cost of the marketing that might potentially generate those streams in the first place. In order for your songs to cut through the glut and find some willing ears, you’ll likely need to pony up some cash up front one way or another.
The nitty-gritty details are beyond the scope of this article, but you won’t go wanting for lack of marketing options: between SubmitHub, Facebook and Instagram ads, playlisting, and even ads internal to the platform offered by Spotify for Artists, there are no shortage of marketing companies willing to take your money in exchange for some kind of visibility boost.
Going back to the ten-song album/120,000 streams for the year scenario: if, to get those streaming numbers, you spent $200 per song on playlisting coupled with $300 per month across all songs on Instagram (these figures are, if anything, conservative and undershooting reality), you’ve racked up a marketing bill of $6,000 for the year. If you net that out from your $600 in earnings, your P&L sheet is looking alarmingly red: you’re $5,400 in the hole, my friend.
Maybe, then, we set aside the idea of streaming alone as a viable source of income. In other words, unless you’re Maroon 5 or Lady Gaga, “making money from Spotify” doesn’t really work at all as a course of action; you have to be doing more. In fact, If you think about it, the Maroon 5s and Ladies Gaga among us might provide a clue as to how to make this all work successfully.
Yes, they’re making substantial money from streams (as of November 2023, “Shallow” by Lady Gaga has an eyewatering 2.6 billion streams for a hypothetical $13 million in revenue), but they are also nationally touring, stadium-sellout artists with robust merchandising and publicity departments bringing in alternative revenue streams (there’s that word again) and making sure they stay firmly plugged into the zeitgeist.
If there’s a lesson there, it’s along the lines of that old adage about rising tides raising all ships. Building your brand, playing shows, getting the word out, and, I don’t know, giving away stickers with your website prominently displayed on them are going to be infinitely more valuable starting out than zeroing in too much on streaming revenue.
As you generate traction, your fan base will grow, and if everything works like it’s supposed to (ie, if you’re attracting fans because they like your music rather than because, say, you’re eating bats on stage like Ozzy Osbourne) those fans will naturally funnel themselves towards your Spotify page to stream your music and generate you some earnings. When you combine those streaming numbers, which will ideally increase over time given consistent effort in those other spaces, with merchandise and gig revenue, you can see how a more realistic aggregate income stream might begin to materialize.
The Middle Ground
Is there some kind of middle ground where streaming does begin to bring in good money?
If so, who gets to occupy that middle ground?
We noted earlier that two-thirds of the songs on Spotify don’t cross the 1,000 streams threshold, but it stands to reason that the remaining one-third can’t possibly be comprised solely of superstar-level jams.
And the answer is yes, there is a middle ground that exists between you and Lady Gaga, but it’s primarily made up of full-time musicians and bands on labels who are doing this music thing full-time, ride-or-die.We can use the band Metric as a random example; you’ve potentially heard of them, they get not infrequent (satellite) radio airplay, and they’re probably playing at a medium-to-extra-medium sized venue near you within the next year or two as part of a tour.
On Spotify, most of the band’s top ten most played songs have accrued streams well into the eight figures, indicating that they are bringing in substantial revenue from streaming royalties. That supposition comes with any number of major caveats, though. To name a few, those streams are over the band’s lifetime on Spotify and spread out across a decade; band revenue is divvied up amongst its members; and some (likely a lot) of that revenue goes to the label for PR, marketing, studio time, booking, etc. In other words, yes, Metric is making money from Spotify, but they’re spending a lot of money too.
The Question is Flawed
Our question, then, was flawed from the beginning.
In the purely literal sense, you can make money from Spotify, but if streams are your primary plan of attack, you’re likely to spend more for the streams than you’ll make back in royalties. And while there’s a tipping point where the money coming in does start to look appealing, it’s way up high and likely out of reach to those musicians just beginning to get their feet wet.
Unless and until Taylor Swift takes another, more successful swing at Spotify on behalf of us lesser artists, it’s probably better in the meantime to treat Spotify as one of the tools in your toolbelt, a place to make your songs readily available to your fans while you work to rally them, rather than a money-maker in itself.