How streaming fits into recorded music income

Most artists put their songs on streaming services, and most of them have questions about what happens next. Who gets paid when someone plays a song? How much is paid? Why do different people on the same song get paid in different ways? This article explains the structure behind streaming income in plain terms, so you know what to expect and what to check on your own releases.

One song, two kinds of rights

A song on a streaming service is really two things. One is the recording, the finished audio that people hear. The other is the composition, the written song underneath it. Each has its own owner and its own royalties.

Spotify's support pages for artists say that music on the service earns recording royalties and publishing royalties. Recording royalties go to the rights holders of the recording. Publishing royalties are "the money owed to songwriter(s) or owner(s) of a composition."

These can belong to different people. An artist who writes and records a song with no label or publisher may own both. A singer who records a song written by someone else owns neither side of the writing. Knowing which rights you hold is the first step in understanding your income.

How recording royalties reach the artist

The streaming service does not usually pay the artist directly. Spotify's artist support page says recording royalties are "paid to artists through the licensor that delivered the music." For most artists, the licensor is a label or a distributor.

Spotify pays rights holders based on their share of streams. Those rights holders then pay artists and songwriters under their own contracts. Spotify says it cannot see those agreements, so it cannot explain the specific amounts an artist receives. The page also says payments often happen monthly, though timing varies.

For an independent artist, this means the terms of your distributor matter. What fee they take, how often they pay and how they report earnings all shape what reaches you.

How publishing royalties reach the songwriter

Publishing money follows a different path. Spotify says publishing payments are issued to publishers, collecting societies and mechanical agencies, based on the territory where the music was used.

In the United States, a large part of this flow goes through the Mechanical Licensing Collective. The MLC is a nonprofit designated by the U.S. Copyright Office under the Music Modernization Act of 2018. It administers blanket mechanical licenses for digital services and pays songwriters, composers, lyricists and music publishers.

The Copyright Office explains the reason for this system. Title I of the Music Modernization Act "replaces the existing song-by-song compulsory licensing structure" with a blanket license. Instead of a streaming service getting permission for each song one at a time, it obtains one license covering the catalog of songs, and the collective collects and distributes the money.

Producers, mixers and engineers

Streaming also affects the people who make the recording. Title III of the Music Modernization Act "allows music producers, mixers, or sound engineers to receive royalties collected for uses of sound recordings," according to the Copyright Office. SoundExchange distributes these royalties under a "letter of direction."

The practical lesson is to settle credits and agreements before a record is released. If a producer or engineer expects a share of royalties, the arrangement should be written down and the letter of direction should be completed. Sorting this out after the fact is harder.

Where streaming sits in the larger picture

Streaming is one source of income among several. Berklee Online's course on music business revenue streams says "live music continues to provide the bulk of revenue for musical artists," and that artists "need to cultivate ancillary income sources just to survive." The same course treats interactive, on-demand streaming as its own topic, alongside royalties, advances and other revenue.

That does not make streaming unimportant. Streaming is how most listeners find and replay a song, and it gives an artist a record of reach. But for many artists it is not the only line of income, and the numbers a streaming service reports do not tell the whole story.

What to check on your own releases

Here are practical points that follow from the structure above.

1. Know who owns your recording and who owns your composition.
2. Confirm which label or distributor delivers your music and what they pay.
3. Make sure your songs are registered so publishing royalties can be collected.
4. Put producer and engineer agreements in writing before release.
5. Read your statements each period and ask questions when something looks wrong.

None of this requires a law degree, but it does require paying attention. A release that is well organized on the business side is easier to track and easier to fix when something goes wrong.

The short version

A stream creates two payment paths. Recording royalties travel from the service to the label or distributor and then to the artist. Publishing royalties travel through publishers, collecting societies and the MLC to songwriters. There is no fixed rate per stream, and contracts decide what each person receives. Understand your own agreements and you will understand your income.

This article is general information about how music licensing works. It is not legal or financial advice.