If you are an aspiring music artist / entrepreneur, you might have thought to make money through streaming music on platforms like Spotify. But unless your music turns out to be a hit, the dollars earned will be minimal.
According to Spotify, the artist receives a payout somewhere between 6 tenths of a cent up to 8.4 tenths of a cent ($.006 and .0084) per “stream” of that artist’s music.
Spotify just launched a site with information just for music artists containing statistics and charts. The new Spotify Artists site  gives musicians analytics tools to track performance on Spotify, and their earnings.
It turns out, Spotify is paying out a lot of royalty dollars — over $1 billion since its inception, according to the company. And $500 million of that has been during 2013 alone, due to the site’s explosive growth.
But at the rates they pay out per stream, the artists cashing in are likely to be those with giant hits.
Spotify says that it pays out nearly 70% to rights holders and retains 30% of revenues for the company. Rights holders include everyone who has rights in a song. On the Spotify Explained section  of its site, the company says:
Spotify pays royalties for all of the listening that occurs on our service by distributing nearly 70% of all the revenues that we receive back to rights holders. By ‘rights holders,’ we are referring to the owners of the music that is on Spotify: labels, publishers, distributors, and, through certain digital distributors, independent artists themselves.
Some musicians have complained and at least one, Thom Yorke, called for a boycott of Spotify . The new website appears to be part of an effort to better explain to artists how Spotify calculates royalties and to tell its side of the story. In a Wall Street Journal article , Spotify founder Daniel Ek weighed in:
Spotify co-founder Daniel Ek, in an interview this summer, said the complaints from artists ‘saddened’ him…..” Mr. Ek went on to say ‘The focus of the artist ought to be how to maximize the number of streams, because that, in turn, will be better long-term…but that’s hard for people to understand.’ He said ‘all they see is millions of streams and they see, you know, not millions of dollars in the end, but thousands of dollars, and they think that a million streams is compatible to a million downloads, which it obviously isn’t.’
Ek pointed out in the interview how some stars made more than $3 million each in the past year. But clearly, that’s the exception not the norm.
However, according to the Spotify calculations, it’s not such a bad deal, because Spotify pays out more than twice what other sites such as YouTube pay to indie musicians, and much more than terrestrial radio pays.
The chart immediately above is from July 2013. In it, Spotify picked certain music and, without revealing names, showed how much each earned. It’s telling that a niche indie (independent) album made $3,300 for the month. It was only the Spotify Top 10 album or a global hit that earned over $100,000 for the month.
Keep in mind, those numbers are not averages. They are not necessarily even typical. They were examples that Spotify chose, without revealing their actual names.
What’s the bottom line? At a rate of 6 tenths of a cent to 8.4 tenths of a cent per stream, you’d need a huge audience on Spotify before you could quit your day job.
However, think of it this way: Spotify is probably good exposure for most indie musicians. Viewed as a marketing technique, being on Spotify could be worthwhile because it’s a platform to open up new audiences to your music. Just set your revenue expectations appropriately.