The way Apple Music and Spotify pay to artists

It always the sensitive question of how artists, especially musicians, get paid. For each person working in the music industry, it is evident that the opportunity to collect six-figure sum is cloudy perspective and for a person who is not much into music field like former military, also a complicated task.

The way streaming companies like Spotify and Apple Music pay artists is simple. All the money they generated from users, likewise advertisement and subscription put in one, then divide between musicians accordingly amount of streams each artist received.

The “pro-rata” system is the way to pay royalties for an artist. A lot of artists prefer “user-centric system, where payments based on
Majority of people in the music industry would prefer another payment system called “user-centric.” Remaining this each user’s payment would be issued regarding an amount they streamed. For example, all revenues will be divided only between artists wich music were played.

If each user spends the same amount of time streaming, the difference between “pro-rata” and “user-centric” won’t exist. Otherwise, the decisions of super users are far more critical under pro-rata. It means the listener that spend 1000 hours a month streaming make more revenues for artists than the individual who spend 100 hours.

The study around streaming royalties discovered that in the particular system, the top 0.4% of artists get approximately 10% of all revenue, but they would get about 5.6% of income under a user-centric system. Small artist not get paid at all, or the amount of reward is negligible. The information provided by Spotify were anonymized so the researchers can’t aren’t able to distinguish trends and make some conclusions valuable for artists. Recently, a French streaming service Deezer announced that it might move to a user-centric system.

Taking into account the amount of money that artists spend on their promotion on streaming platforms, the amount they earn is minimal. That’s good that these days self-promotion taking positions and allow musicians to make money. Streaming carries with it the obligation of diminished distribution costs. Artists could only upload their tracks and start to receive royalties.

The next question is how to make music and artist profile visible.
Organic promotion can reduce an essential piece from promotional funds because fans start to follow organically. And it is all possible thanks to social media. People like to follow adorable and unique profiles, and musicians have to catch the right moment and push their music to potential fans — Artists social media the best source to invest for future promoting. The most exciting part is that musicians now could run their business totally from home. It is starting from music production to promotion and selling, basically leaving their apartments only for live events.

Social media already showed the ability to be an essential element in each possible area. Bering almost three past decades, social media became one of the most important communication and marketing achievements in human history. Already we can see labels decreasing the impact on the overall music industry.

Exiting statistic showed Billboard received from TOP 10 Chart and TOP 100 analysis. Between 2010 and 2018, 91.9% of the Top 10 chart weeks have come from major labels And for hip-hop, it even higher.

Hip-hop is the youngest major genre; currently, it is the most popular genre in North America. It takes more than 90% of all streaming music according to Billboard.

Record label showed their interest in hip-hop when it started to move forward to the mainstream. The absorption of major label contracts during 90s straight corresponds with a growth in the success of hip-hop albums. Since 1997, there were 19 No. 1 hip-hop albums, which was more than the whole 18 years of hip-hop history.

But the 2010s are another. It’s the way more comfortable for artists to push and distribute their music than before. Streams have passed physical and digital sales to become the prime form of intake for the mainstream hip-hop audience. In 2018, 65.2% of the first week sales of every top five hip-hop album came from streaming. It’s not impossible to notice that number rise to 80% by 2022, and higher still after.

But the major labels are still relevant, and we see an increasing amount of thriving career in music in 2019 than recording and uploading music to a streaming service. That means that contracts have to be signed, distribution deals should be done, artists also have to implement their career. They need to sell hard copies and distribute digital once.

Musicians upload to Spotify around 40,000 tracks daily. To be noticed among the enormous amount of content, artists have to put a lot of energy in self-promotion. There is the path for record labels. Dealing with the labels require a bigger budget, but meanwhile, musicians could quit from looking for business contact, paperwork, legal issues, data analysts, and marketing. Instead of that, focus on their art. Record labels provide vital support and pack of resources to mainstream artists.