Apple Music pays double per stream than what Spotify currently pays out, according to a new report. However, this per-stream metric isn't always the most helpful way to assess how music streaming services compensate artists. Spotify has nearly twice the amount of subscribers that Apple does, meaning it contributes more to the music industry overall. In addition, neither subscription service directly pays artists and musicians on a per-stream basis.
As Spotify disclosed with the launch of the Loud And Clear website, the service actually pays the right holders who own the music, not the artists themselves. To determine how much these rights holders are given, Spotify calculates the total number of streams in a market, and compensates based on the percentage of those streams that they make up. All told, Spotify reportedly pays two-thirds of every dollar to rights holders, and portions of those payouts then go to the actual labels and artists.
Apple, meanwhile, reportedly pays 52-percent of its subscription revenue out to record labels. According to a letter obtained to the Wall Street Journal, the figure equates to 52 cents of every dollar and nearly a penny per stream. That per-stream figure is far greater than Spotify's, which comes out to between one-third and one-half of a penny per stream. However, as the report points out, average monthly streams per user are generally a much better metric to focus on. While Spotify may have a lower per-stream payout, that's partly due to the fact that the larger user base streams more often than Apple Music's on a monthly basis.
Overall, the two companies pay a similar percentage of every dollar they make to music labels, since the Wall Street Journal reports that between 50-53 cents per dollar of what Spotify makes go to labels, after accounting for the percentage that stays with rights holders. Spotify just makes more dollars in general due to its high volume of monthly streams from its massive user base, creating more money overall for the music industry.
Aside from the sheer discrepancy in the number of subscriptions, Spotify also partly pays out more as a result of its free, ad-supported tier. Essentially, Spotify takes the total number of streams in a month - subscription, free, or otherwise - and determines its payouts based on those numbers. As this strategy pools together streamers using Spotify for free with paying subscribers, it can accurately count the total amount of streams and compensate rights holders accordingly.
As Apple Music relies on subscription revenue, Spotify's pay structure is likely to be better for artists. Every Spotify stream, whether it is by a paid or free subscriber, is counted towards the compensation that will eventually makes its way back to the artist. Each individual stream may technically count less than Apple Music's metric, but there are far more streams being counted by Spotify. In other words, users don't necessarily need to pay for a Spotify subscription to make their listening sessions profitable for the artists they want to support, and that makes a difference.
Source: Apple
