Since its launch in the US, Spotify has given listeners unprecedented open-access to songs from both independent and major labels.
If you’re an artist or songwriter, you may be wondering how those Spotify streams turn into royalty payments.
There are two different types of publishing royalties that are generated when your song is streamed on Spotify.
Performance royalties are generated when there is a public performance or broadcast of a musical work. These royalties are collected by Performing Rights Organizations. Your songs must be properly registered with a PRO to be paid this royalty. For those new to the music business and have yet to register with a PRO, Songtrust can streamline the process, get you registered, and can maximize your relationship with PRO's globally.
Performance royalties are based on each songwriter’s ownership share of the song. For example, if a song by The Beatles played that was written by Lennon/McCartney, the split would be 50% and 50%. However, the ratio can vary depending on an agreement between songwriters to weight the shares in favor of a primary writer. This is one reason why it is important to document splits (you can download our split sheet here).
Performance royalties are also split and distributed equally between the songwriter(s) and the publisher(s), with each being allocated 50%. Depending on what type of deal you have with your publisher (administration, co-publishing, income participation) you may actually only see a portion of those performance royalties.
Songwriters that handle their publishing rights through Songtrust will see 100% of the publisher's share of performance royalties distributed back to the writer(s).
Mechanical royalties are generated when your songs are reproduced, re-transmitted or re-broadcast. This occurs when outside parties license your songs for physical albums, digital downloads and interactive streams. In the case of Spotify, the Harry Fox Agency (HFA) provides customized administrative services and issues mechanical licenses on behalf of its 45,000+ represented music publishers.
HFA collects the mechanical royalties owed by Spotify to the publishers for the use of their music on the service, and then pays that money to each publisher. Songtrust is able to collect on behalf of songwriters without a publishing company by acting as your publisher - saving you money, time and hassle.
The chart below demonstrates the flow of Spotify royalties.