How successful are independent music artists

CHAPTER 2: HOW DO I MAKE MONEY WITH SPOTIFY?

To understand how to make money on Spotify, you first need to understand how income is paid out in the music industry. To roughly break it down, there are two sources of income available to you through Spotify:

  • Royalty from the rights to your recordings in the form of income from streams. If you publish independently of a label, this income will be forwarded directly to your digital music distributor.
  • Revenue from mechanical reproduction- and performance rights paid to the composer, lyricist and publisher of each song. This happens either through a collecting society - e.g. GEMA (DE) or SUISA (CH) - or through a publisher who collects the income for you (if you have a publisher). In the past, this income came mainly from the sale of physical recordings such as CDs and records. Today, however, private streams are also included. If you're not sure which collecting societies operate in your country, check out this list.

And how do I now know what is what? A good example is certainly Whitney Houston's "I Will Always Love You". Whitney recorded the song with Sony Music - their label at the time. Sony Music accordingly owns the master rights of the song and therefore receives the royalties for the streams. At the same time, however, Dolly Parton, who is the composer and lyricist of the title, receives the royalties for mechanical and public performances through her collecting society or her publisher.

If you publish and write your material yourself, you are both a label and a songwriter. This means that you have both the mastering rights and the mechanical reproduction and performance rights. Accordingly, you will receive royalties from both sources. If you are in a band, you should definitely clarify the distribution of rights before the release so that there are no legal disputes afterwards.

If your music was released by a record company, it may also hold the master rights and therefore receive the royalties you earn on Spotify, Apple Music, Amazon, and any other platform. If you are the composer and / or lyricist, you will usually receive the income from mechanical reproduction and performances from your collecting society.

In some countries, platforms like Spotify have to be part of their Income directly to the collecting societiessuch as GEMA in Germany or SUISA in Switzerland.

But what happens to the fees collected by the collecting society? Together with other income, e.g. from radio and TV plays, these end up in the account of the respective company and wait there to be picked up. Please note that the collecting societies charge fees that are deducted from your income.

As already mentioned, collecting societies differentiate between two types of income:

  • Performance fees
  • Mechanical Duplication Fees

Performance fees include all income from the public use of music. This includes playing the song on a radio station, restaurant, or bar. And of course organizers also have to pay fees to SUISA and GEMA for live performances.

Whether membership in a collecting society makes sense or not depends largely on the expected income. As a member of some collecting societies you have to pay an annual membership fee. A membership is especially worthwhile if you expect a lot of streams or radio plays, your music video is shown on television or if you have some live performances to do.

How much the composer, lyricist or music publisher receives per minute and stream varies from country to country. Some collecting societies, such as STIM in Sweden for example, offer relatively detailed information on this.