How to Make Money on Spotify: The Ultimate Guide

The primary way to earn money on Spotify is through music royalties, generated when listeners stream your music. While many believe (or perhaps hope for) that streaming platforms were designed to allow musicians to live off their craft (as stated in Spotify’s mission), in reality, relying solely on royalties can be pretty challenging. This is because, as you probably know, the payouts per stream are incredibly small.

Generally, when it comes to getting paid from streams, the play count is the key factor. And in this case, the more streams, the more revenue. However, the royalty payout system isn’t as simple and straightforward as it might seem.

Before diving into Spotify royalty payouts to artists, it’s essential to understand how the streaming platform itself generates revenue. There are three primary sources from which Spotify earns money:

1. Premium subscriptions. As we know, Spotify operates on a freemium revenue model that offers a basic, limited, ad-supported service for free, and an unlimited premium subscription service for a subscription fee. These subscription fees for ad-free listening and other benefits form a major revenue stream.

2. Advertisements. Free-tier users have their listening experience interrupted by ads, generating revenue for the platform through Spotify’s Ad-Supported Services, including ads on music and podcast content.

3. Sponsored links. Spotify substantially integrates outbound links within its mobile apps and web platform, promoting ticket sales and merchandise. When purchases are made using these links, Spotify gets a percentage of the earnings generated.

In simple terms, Spotify collects all the net revenue from subscription fees, ads, and commissions. From this, they deduct the money they collect but don’t get to keep, including taxes, credit card processing fees, billing, sales commissions, and more (aka costs). Reportedly, a percentage of the remaining revenue (some sources suggest 75%) is then allocated to a so-called payout pool.

From this pool, the rightsholder’s share of net revenue is determined by the streamshare, meaning the royalties are proportionally divided among all the artists based on their respective streaming percentages of the total streams in a given month. This payout system is supposed to ensure that artist royalties are directly linked to their streaming performance and fan engagement.

However, it’s worth noting that not all the money in the payout pool goes directly to recording artists. It also goes to record labels, publishers, songwriters (if separate from the recording artist), corporate partners, and Spotify itself. Additionally, the payout pool can fluctuate each month depending on a variety of factors, like Spotify’s revenue, the total number of streams generated by all artists on the platform, and an artist’s share of those streams. For that reason, an artist’s earnings vary from month to month.

Spotify also clarifies that its payout system proves that, contrary to popular belief, it doesn’t pay artists royalties according to a per-play or per-stream rate. However, the platform’s average payout typically falls between $0.003 and $0.005 per stream.

Here are some additional factors affecting Spotify royalties:

• The more streams a track receives relative to others, the higher its royalty share.

• Premium streams typically generate higher payouts than ad-supported streams.

• The higher subscription fees, based on the country, the higher the royalties. This means that your earnings can vary by country, depending on your listeners’ locations.

A reminder from us: One “stream” is counted when a track is listened to for 30 seconds or longer. Everything below this time is not counted.

To understand how to make money on Spotify, it is fundamental to understand the different types of royalties generated on the platform and how Spotify distributes them. Music on Spotify earns two primary types of royalties: recording and publishing. While music rights and royalties can be a complex topic, we will break it down as simply as possible.

Recording royalties (further divided into master recordings royalties and digital performance royalties) represent the money owed to rights holders of the master recordings streamed on Spotify. Just to make it clear, master rights cover the reproduction and distribution of the original recording of audio performances. Typically, master rights holders are the recording artist(s), record label, and/or recording studio. Recording artists receive recording royalties directly through the licensor that delivers the music— this could be a record label (for signed artists) or a distributor (for independent artists who self-release).

Publishing royalties (further split into mechanical royalties and public performance royalties) are the money paid to owners of a composition, most often songwriter(s), composer(s), lyricist(s), and publishers. A composition is a musical work (harmony, melody, etc.) that may or may not include accompanying lyrics. These publishing royalties are issued by Spotify to publishers, collecting societies, such as BMI (US), ASCAP (US), PRS (UK), or GEMA (DE), and mechanical agencies based on the territory of usage, which then pass them on to the respective right holders.

How do you know what is what? Take the example of Whitney Houston’s version of “I Will Always Love You.” Whitney recorded the song with Sony Music, her label, which owns the mastering rights and, therefore, receives the royalties for streams of the hit song. Likewise, Dolly Parton, the songwriter and lyricist on the track, receives mechanical and public performance royalties via her collection society or publisher.

If you self-release and write your material, you are the label and the songwriter in one. That means you own master rights (earning recording royalties) and mechanical and performance rights (earning publishing royalties). Of course, if you’re in a band, you should ideally sort out the splits before you release. If a record label previously released your music, they might own the master rights and collect the recording royalties you earn on platforms like Spotify, Apple Music, Amazon, and any other platform. However, as the songwriter, composer, or lyricist, you’ll still receive publishing royalties from your collection society.

In some countries, platforms like Spotify must allocate a portion of their revenues directly to collecting societies, such as SACEM in France or GEMA in Germany. These societies distribute royalties after deducting processing costs, combining income from streaming, radio, TV plays, and other sources.

Typically, Spotify pays out revenue shares once a month or on a quarterly basis. However, the exact timing might depend on the agreement between Spotify and the respective rights holder or the intermediaries, like distributors, labels, publishers, etc.

For independent artists using music distributors, Spotify transfers earnings to the distributor approximately 3-4 months after the streams have occurred. You can then view your earnings through your distributor’s dashboard and request a payout to your bank account or PayPal.

Just as musicians use the service of a digital music distributor to publish their music on Spotify, payments are also handled through them. At iMusician, you can request a payout of your money at any point without a minimum amount. Just keep in mind that sales revenue for a release is only made available by the shops, including Spotify, 4 months after the sales are made.

You should never try to cheat with your streams. Many have tried, and many have failed. Artificial streaming is considered a type of fraud, prosecutable with large fines, withholding associated royalties, and music takedowns. In simple terms, fake streams are streams that don’t represent genuine user listening intent. These typically involve automated processes, such as bots or scripts, that manipulate streaming numbers.

Of course, if you play your album a few times a day, you won’t have a problem. Most commonly, however, creators who want to cheat use third-party services that advertise or ‘sell’ (illegitimate) streams in return for payment. You pay them, and then they stream your tracks via a computer program or robot, usually 31 seconds per track. Purchasing streams from third-party services is a serious violation of Spotify’s terms & conditions (T&Cs).

Since Spotify is one of the largest tech companies in the world, it has the resources and intelligence to immediately notice any strange inconsistencies. It is safe to say that you will eventually be caught. In fact, Spotify conducts daily monitoring and cleaning to detect artificial streaming and ensure that such illegitimate streams are removed from public numbers in the Spotify app.

If Spotify notices unusual or random waves of streams, they may pause or delete any releases they consider suspicious. If you’re found to be in violation of its rules, Spotify may freeze your earnings, remove releases, negatively impact your algorithms and organic streams, and even ban you from future uploads—not a great look for an aspiring artist.

Furthermore, if Spotify detects fraudulent activity in one or more of your tracks, it will also impose penalties. Such penalties will consequently appear as “Spotify (fraud fee)" deductions in your sales report from your distributor. Keep in mind that digital distributors like iMusician are also legally and ethically required to identify and, most importantly, rightfully address any fraudulent activity violating respective streaming platforms’ T&Cs. If they detect suspicious behavior, they will delete your tracks and potentially suspend your account.

Before you start loading up the van and hitting the road, you need to know that a successful tour involves many things: planning, promotion, and a strong strategy. Thankfully, booking a tour is becoming easier to pull off with the help of Spotify analytics. You can use this data like a roadmap, planning your route through the cities where you see your music being listened to.

If you look in your audience tab, you can see a breakdown of top countries and top cities. Fans in São Paulo, Rio, and Fortaleza? Book a tour through Brazil. Lots of fans in France, Italy, and Spain? Looks like a European tour is in your future!

Demographic insights and identifying your target audience can also be incredibly useful for other things, like your marketing efforts. This allows you to promote your music where it is listened to the most. You can even consider creating music for a clearly defined target audience if you see potential in it to increase your earnings.

Now that you’ve planned your tour, it’s time to get the word out. Those same listeners who inspired you to book your tour are the same folks you want to know that you’ll be coming to their city—why not reach them via Spotify?

Spotify allows artists to sell concert tickets directly through the platform by partnering with various concert and festival ticketing companies worldwide, including Ticketmaster, Songkick, Eventbrite, and AXS. To automatically show your event(s) on Spotify, simply list them on one of the partnering ticketing sites. Once Spotify receives your event from the partner, it will display all your upcoming gigs under the “Events” tab, where fans can buy tickets.

Spotify also promotes shows by sending recommendations to fans based on their location and listening habits (aka, who they follow and who they listen to).

Spotify is great for selling not only concert tickets but also merch. To enable you to offer your merch through the network, Spotify has partnered with Shopify, an e-commerce platform for online stores and retail systems. As an artist, you must sign up for Shopify and connect your account to your Spotify for Artists profile to kick off your merchandise business.

Once the two platforms are connected, you can easily manage how your merchandise is featured on different surfaces within Spotify—under the Merch tab, at the top of the Music tab, in the Now Playing view, or tagged with one or more releases.

Your earnings don’t have to come solely from music streams. You can also promote paid services that are unrelated to your music skills. Perhaps you’re a music critic or have a background in marketing and communication and could offer consultations on Spotify promotion. Whatever you feel can be helpful and you could monetize, you can include it in your Spotify profile description or even your artist bio.

Podcasts have undoubtedly become one of the most popular content formats over the years. According to ListNotes, there are around 3.5 million podcasts out there, while PodcastIndex.org estimates over 4.4 million podcasts in total. Seeing these numbers may make you feel that creating your own podcast is redundant, but knowing it is a lucrative way to earn money on Spotify might change your mind—that is, of course, if podcasting is something you’d be interested in.

While Spotify doesn’t offer royalties for podcast episodes, it grants substantial monetization benefits for podcasting through fan-support tools and integrated ad programs. In fact, podcasting often offers a much clearer path to financial success on Spotify than music streams do. There are multiple ways to monetize your podcast content, such as selling ads or opting for sponsorships.