Inside the fight to fix streaming: “It's absolutely, fundamentally broken. Some people are getting paid an awful lot of money, and no one else is getting anything”

The Spotify banner hangs from the New York Stock Exchange on the morning that the music streaming service begins trading shares on April 3, 2018 (Image credit: Getty)

Since Spotify launched in 2006, music streaming has radically transformed a music industry that, when the Swedish business was founded, was in rapid decline.

The advent of digital music at the turn of the millennium had swiftly prompted consumers to abandon physical media such as CDs and vinyl records in their droves, leading many to favour digital downloads or seek out music for free through illegal means.

For several years, it began to seem that recorded music had reached its economic peak in the ‘90s, and was in financial free fall. Between 2001 and 2010, physical music sales dropped by over 60 percent, knocking $14 billion off global annual revenue figures. 

In the meantime, digital music sales were growing, but not nearly fast enough to make up even half the shortfall. It seemed that music’s economic golden age was evaporating before our eyes. But, after hitting its lowest point in decades in 2014, the industry made a striking comeback.

Global recorded music revenues have since risen from $14.2bn in 2014 to $25.9bn in 2021, according to IFPI figures published in 2022. This growth is accelerating exponentially, and 2021 saw a 18.5% increase on the previous year’s figures. 

While these numbers encompass streaming, physical sales, performance rights and synchronization, it’s streaming that has become the primary driver in the industry’s rebound. Streaming accounts for 65% of the IFPI’s total, and their figures show revenues growing by almost 25% in 2021 to $16.9bn. Estimates from Goldman Sachs have predicted that this number could reach $89.3bn by 2030. 

At first glance, these figures paint a rosy picture. An industry threatened by a changing technological landscape reoriented itself and adapted by developing new technologies that made their product cheaper and more convenient to access for consumers, subsequently making a spirited financial recovery. 

A casual observer might look at this story and assume that the financial position of the average music-maker would since have improved - and for some, it has. But the reality for many others, particularly those on the lower rungs of the industry’s ladder, is much bleaker.

In 2021, a report from the UK’s Department for Digital, Culture, Media and Sport committee called for a “complete reset” of music streaming. Although streaming had “brought significant profits to the recorded music industry,“ committee chair Julian Knight said, “the talent behind it – performers, songwriters and composers – are losing out”. 

“The pitiful returns from music streaming impact the entire creative ecosystem,” the report claimed. “Successful, critically acclaimed professional performers are seeing meagre returns from the dominant mode of music consumption.” 

Artists have grown increasingly dissatisfied with the royalties they’re receiving from streaming services, and with live performances, once the backbone of many artists’ incomes, becoming increasingly less viable as a reliable source of revenue, more pressure is being placed on streaming to make up the shortfall. But for the majority of music-makers - even relatively successful ones - streaming simply isn’t bringing in enough money for them to live on. 

"For too long, streaming platforms, record labels, and other internet giants have exploited performers and creators without rewarding them fairly"

These sentiments were echoed by an open letter addressed to the Prime Minister, backed by the Musicians' Union and signed by a host of household names, including Paul McCartney, Brian Eno, Mick Jagger, Kate Bush and Noel Gallagher. “For too long, streaming platforms, record labels, and other internet giants have exploited performers and creators without rewarding them fairly,” the letter reads. “We must put the value of music back where it belongs — in the hands of music-makers.”

The DCMS report, along with pressure from groups like Broken Record, prompted the UK’s competition regulator, the Competition and Markets Authority, to launch a market study into music streaming, the results of which were published in a comprehensive report late last year. 

While the CMA acknowledged that many artists across the UK were struggling to make a decent living from streaming, they ultimately decided that these issues were “not the result of ineffective competition” and their intervention in the market was not required. They did, however, contend that it was the responsibility of the government to drive forward reform and explore whether policy interventions are necessary to support music-makers.

There’s no doubt that streaming has reversed the industry’s decline, but what looks like a remarkable economic turnaround has fuelled sky-high profits for record labels and unbridled growth for streaming services while leaving all but the most successful artists out in the cold.

Musician and activist Tom Gray captures this reality a little more succinctly. “Some people are getting paid an awful lot of fucking money, and no one else is getting anything”, he replies, when asked if the advent of streaming has benefitted musicians. A member of the Mercury Prize-winning band Gomez, chair of the Ivors Academy and founder of the Broken Record campaign, Gray is leading the charge to fix streaming and bring about a more equitable digital music economy in the UK.

"The problem is the way that the money gets shared out within streaming. It's absolutely, fundamentally broken"

Gray points to a 2022 study from UK charity Help Musicians which found that 90% of musicians are concerned about their ability to afford basic necessities like food and rent, prompting the organization’s CEO James Ainscough to remark that “it’s hard to imagine any point since the Second World War when it has been tougher to be a professional musician”.

“The problem is the way that the money gets shared out within streaming,” Gray continues. “It's absolutely, fundamentally broken [...] It does nothing to actually fund the business of making music. This is because it wasn't born out of a system that was built to try and make sure that music could be made. It was built instead by giant global corporations trying to save their own bacon, and make themselves look like an exciting prospect for floating on the stock exchange.”

Will Page is one of the music industry’s leading economic analysts. Best known as Spotify’s former in-house economist, he’s the author of Pivot: Eight Principles for Transforming Your Business in a Time of Disruption. When asked the same question, his response was unequivocal. 

“Music used to be looked at as the sick man of media. Now we're the envy of everyone else,” he tells us. “Now you could stack us next to movies, gaming, and other forms of media content. This is an incredible business with an incredible recovery story.”

While their assessments are markedly dissimilar, Gray and Page agree that there is progress to be made. “I'm not calling for some Marxist revolution of the streaming system,” Gray says. “But there's all kinds of things that can be done - which aren't even big changes - which would revolutionise the way people have to do business.” 

Unlike Gray, Page believes that the current model is fair: “it's been a huge success,” he says. “But could it become fairer? That's where we can't be complacent. We should always be looking to make the distribution of money fairer for artists, songwriters and producers alike.”

"There's all kinds of things that can be done - which aren't even big changes - which would revolutionise the way people have to do business"

Debate around whether the streaming model treats artists fairly has centred on how much money is paid out per stream. Estimates as to exactly how much artists’ make per stream vary and depend on a number of factors. The amounts that each streaming service pay out differ significantly, with Napster and Tidal paying the most, and the most popular services - Spotify, Apple Music and Amazon Music - sitting somewhere in the middle of the rankings. 

It’s important to remember that streaming services don’t pay artists directly. After retaining around a third of total revenues, they split the remainder between intermediaries such as record labels, music publishers, distributors and performance rights organizations, who pay artists based on contractual agreements that vary significantly. 

The royalties an artist receives from streaming will also depend on whether they hold both the recording and publishing rights to their own songs, as these are administered separately, with the recording artist, songwriter, and publisher each taking a cut. However, a rough and generous estimate might place the average payout per stream at about 0.004 pence or 0.005 cents.

Based on those figures, an independent artist would need to rack up north of 5,000,000 streams in a year to earn the national living wage in the United Kingdom: that’s around £20,000. To earn the same as the average (median) British worker, a salary of £31,461, an artist would need to generate close to 8 million streams annually. 

Artists signed to record label contracts would need to triple, or even quadruple, these numbers to bring in the same amounts, as they’ll likely be receiving a cut of anywhere between 10 and 50 percent of the overall royalties generated by their music. 

According to a report from the UK’s Intellectual Property Office, 43% of UK musicians whose income is entirely based on music earn less than £20,0000, the country’s living wage. ONS figures tell us that earnings for musicians in a typical year average £23,000, far below the national average of around £30,000. The majority of these musicians’ incomes will be derived from a number of sources, from live performance to music teaching, and there are very few who manage to make a living from streaming alone.

The kind of streaming counts that pay enough to build a career are out of reach for the majority of artists. The same report tells us that the number of UK music-makers hitting one million streams domestically in the month of October 2020 was tallied at 1723, which is around 0.4% of the country’s estimated 400,000. 

Another central question in the debate surrounding streaming has been the way that services like Spotify should distribute royalties among artists on the platform. Currently, the majority of services operate using a model that’s known as pro rata. 


“What that wonky term means,” Page explains, “is that we pool all of the money that's coming from all the subscribers in Britain this month into a big pot, then pool all the data on what they've consumed into another big pot. We divide one by the other, and then we allocate based on a pro rata share. Meaning that if you get 1% of all the streams that happened in Britain this month, you will see 1% of all the revenue generated in Britain.”

Critics of the pro rata model argue that due to discrepancies in how much music individual users are listening to, the subscription fees of infrequent listeners are unfairly directed towards artists behind songs that frequent listeners are playing. 

“People don't realise that their money goes off into a giant pool and then gets shared out per play in the system [...] The money’s going towards artists who are being listened to by other users, who are hyper-listening somewhere else. These are accounts that are listening to tens of thousands of tracks,” Gray explains. 

These hyper-listeners will often replay playlists put together by streaming services that spotlight popular tracks, rather than seeking out new or lesser-known artists. “That's what's happening across the board - everybody else is subsidising that form of listening,” Gray continues. 

“And that makes no sense, right? Because that kind of listening isn't really the kind of music that we want to focus our funding on. We want to think about what actual interesting tastes are out there in the world, and how we can fund niche interests to create a far richer musical world.”

The most widely touted alternative to the pro rata system is the user-centric model, which divides every listener’s subscription fee equally among the songs they play in a given period, once the streaming service has taken their cut. “User-centric is far more instinctual. Your money goes to what you listen to,” says Gray. “It just seems like the correct moral route for the money to flow.” 

Proponents of user-centric payouts argue that not only is it more ethical, but also enables fans to directly influence the amount that their favourite artists are paid, rather than funding what other streamers are listening to. 

“User-centric is far more instinctual. Your money goes to what you listen to”

A 2018 study from Digital Media Finland analysed data drawn from Finnish subscribers to Spotify’s premium tier, concluding that under the user-centric model, artists with fewer streams would earn more while top-tier artists would earn less. While this inversion of streaming’s top-heavy earnings structure might instinctively seem more equitable, it could have some unintended consequences. 

“In the user-centric world, you might get an artist releasing an album next month who says to their fans, ‘don't stream anyone else next month, just stream my album’”, Page notes. “Then, they see all the revenue. Nobody says that under the pro rata model, because you don't have that level of control.”

Deezer, Tidal and Soundcloud have all explored the adoption of user-centric systems, but the bigger streaming services have remained resistant. However, the tide may be turning, as Universal Music CEO Lucian Grainge has recently called for an industry-wide rethink of streaming’s economic model. 

Stopping short of endorsing user-centric payouts directly, he advocated for “an innovative, ‘artist-centric’ model”, which “values all subscribers and rewards the music they love. A model that will be a win for artists, fans, and labels alike, and, at the same time, also enhances the value proposition of the platforms themselves, accelerating subscriber growth, and better monetising fandom”. 

While Grainge’s broad-mindedness is admirable, the strength of his commitment to an equitable music industry comes into question when we consider that his 2021 earnings topped $300 million, a sum bolstered by several one-off bonuses and a nine-figure payment related to Universal’s flotation on the stock exchange. 

In a comparison that gravely underscores the industry’s financial inequity, The Guardian noted that Grainge’s stratospheric payday means that, in 2021, he's likely to have taken home more than the total amount earned by all UK songwriters from streaming and sales of their music in 2019.

The fact that record label execs are earning more from artists’ work than the artists themselves may not come as news to many. Disparities like these predate the streaming era, but it’s becoming increasingly evident that streaming has deeply entrenched them, driving a financial boom for the major labels that hasn’t trickled down to reach those who write, produce and perform the music they release. 

Three labels generated more than $1.3m in revenue from streaming every single hour in 2021

Last year, statistics from MBW revealed that in 2021, the ‘big three’ major labels (Universal, Sony and Warner) generated more than $20 billion in annual revenues. Just over $12 billion of that came from streaming, meaning that between them, these three labels generated more than $1.3m in revenue from streaming every single hour in 2021. The big three control about three quarters of the UK recording market and release two thirds of all the music consumed in the USA. 

As part of their effort to redirect some of this cash from major labels to music-makers, groups like Broken Record and the Musicians’ Union have called for the introduction of a right to equitable remuneration in streaming payouts. 

Equitable remuneration is a right in UK law that means musical performers must be paid when recordings on which they’ve performed are played on the radio or in a public space, regardless of whether they own the copyright to those recordings. These payouts go straight into the performers' pockets, giving them a guaranteed and separate source of income to royalties paid under a record contract. 

The debate as to whether equitable remuneration should apply to streaming cuts to the philosophical core of what music streaming actually is, asking whether streaming a song on Spotify constitutes a sale (equivalent to the purchase of a record), a rental, a broadcast, or something different altogether that requires separate legal provisions. 

While the current system treats each stream as an individual sale, critics claim that streaming is closer to radio broadcast, especially when it comes to the algorithmically generated playlists that streaming platforms serve to consumers on demand. 

“It's pure communication. It's making the decisions for you. It's playing the tracks,” Gray explains. “You're not involved in the selection anymore, other than the fact that it's listened to your tastes before [...] People are listening to their own personalised radio stations on algorithmic streaming services.” 

If equitable remuneration was applied to streaming, Gray told MPs during the DCMS inquiry, “for the first time in history, money goes directly to [musicians’] pockets on the first stream – irrespective of what awful contract terms an artist has, irrespective of all this historic stuff that is out there. This produces an income from stream one for artists, and an income for our entire music community. It’s a very, very simple solution.” 

"We're offering more and more, and we’re charging less and less, in real terms"

Another oft-contested aspect of the way streaming royalties are dispensed is the exclusion of duration as a contributing factor. Once a listener passes 31 seconds, the duration of their stream doesn’t affect how much an artist is paid. “It's totally bonkers to me that you get paid the same amount for 30 seconds of listening as if someone listened to the whole of your ten-minute track,” Gray tells us. “There's no version of reality where that makes sense.” 

This has incentivised some artists to game the system, packing albums with a greater number of shorter songs, while moving the chorus forward to hook in listeners, in the hopes that they don’t skip before the 30-second mark. Accounting for duration in the way royalties are distributed would mean that the more of a track that gets played, the more an artist gets paid, a model that few would argue is less fair than the current system.

While debate has raged around how streaming services’ subscription fees are shared out, many have questioned whether the fees being charged are high enough in the first place. On the whole, monthly prices for streaming services have remained almost completely static since they were founded. 

Rhapsody, the first streaming service to offer access to a large music library, launched in 2001 with a $9.99 monthly price point. Over two decades later, Spotify’s Premium plan still costs $9.99 a month. “We're offering more and more and we’re charging less and less, in real terms,” Page tells us. “That, for me, has a sustainability question to it.”

"You've got musicians up against multinational corporations, and they've got more money to lobby with, they've got the resources and they’ve got the power"

Considering that due to inflation, $9.99 in 2006 is equivalent to around $15 in 2023, Spotify’s price point has decreased by around a third since the service launched. By keeping their prices stagnant, streaming services are progressively devaluing music. 

Of course, $9.99 in exchange for a month of unlimited access to 100,000,000 songs is a bargain for the consumer, but if that bargain comes at the expense of the artists, songwriters, performers and producers behind the music we're listening to, then it’s not one that’s worth having. 

“It’s because Spotify doesn’t need to make a profit,” Gray explains. “The value of the company is all that matters. So all they have to do is keep showing growth. Of course, what they don't want to do is raise the price, because that might affect user take-up. All of the reasons for that pricing have nothing to do with the product, and everything to do with the company that is engaging in the market. They have absolutely nothing to do with how you make and sell music.”

“We're at the top table. We're having these conversations,” Gray continues, when asked if there’s any hope left in the fight to fix streaming. “These are unbelievable things which shouldn't be understated in terms of political intervention, and milestones in terms of changing people's perception of this issue within the political world. 

“But it's an absolute struggle. You've got musicians up against multinational corporations, and they've got more money to lobby with, they've got the resources and they’ve got the power.”

Matt Mullen
Tech Editor

I'm the Tech Editor for MusicRadar, working across everything from artist interviews to product news to tech tutorials. I love electronic music and I'm endlessly fascinated by the tools we use to make it. When I'm not behind my laptop keyboard, you'll find me behind a MIDI keyboard, carefully crafting the beginnings of another project that I'll ultimately abandon to the creative graveyard that is my overstuffed hard drive.