Music royalties explained: recording, publishing, and what reaches you

“Royalties” is one word for two different incomes, and most confusion about streaming money comes from mixing them. A recording earns recording royalties. A composition earns publishing royalties. They are collected by different organisations, on different schedules, from the same stream.

Here is what each one is, how Spotify splits its money, and what is left of a stream by the time it lands in your account.

The two royalty streams

• Recording royalties are owed to the rightsholders of the recording you hear. They reach artists through the party that delivered the music to Spotify, typically a label or a distributor.
• Publishing royalties are owed to the songwriter or the owner of the composition. They are paid to publishers, collecting societies and mechanical agencies, depending on the territory where the music was used.

Spotify states both definitions itself and adds the sentence that decides who pays you: it has no knowledge of the agreements artists sign with labels, publishers or collecting societies, so it pays the rightsholder and the rightsholder pays you.

How Spotify calculates the recording side

Three things are worth understanding properly, because they explain most statements that look wrong.

There is no per-stream rate. Spotify says it plainly: it does not pay artist royalties according to a per-play or per-stream rate. Instead it distributes a share of its net revenue by streamshare, the proportion of all streams in a month that went to a particular rightsholder. Net revenue means what is left after taxes, credit card processing, billing and sales commissions.

The pool is a share of revenue, not a fixed pot. Spotify describes its royalty pool as roughly two thirds of every dollar it earns from music, calculated separately for each of its markets.

A track has to clear a threshold. Since April 2024 a track needs at least 1,000 streams in the previous 12 months to be included in the recorded royalty pool at all, and there is a minimum number of unique listeners that Spotify does not publish. Below the threshold, streams generate no recorded royalties, and they are not paid retroactively for earlier months.

That last rule is why a release can show thousands of streams and a balance of zero. We covered the mechanics and the penalties for artificial streams in Spotify’s rules for artists.

The publishing side, and why it is separate

A composition has its own rightsholders: the people who wrote the music and the lyrics, and any publisher they signed with. Their money does not travel with your distribution contract. On our side that is explicit: memberships in collecting societies such as GEMA are not affected by your Lay contract, and we do not collect royalties for compositions unless we agree it separately. Registering your works is your job.

In Germany the collecting society for composers, lyricists and publishers is GEMA, and membership is personal: each member who writes music or lyrics applies for themselves, a band cannot be a member as a band, and pure performers are not eligible at all. If you only perform and do not write, the relevant society is a different one.

What actually reaches you

Between a stream and your bank account there is a chain, and each step explains an amount that looks too small:

1. The store keeps its deductions. Taxes and levies withheld by the store reduce what it pays out, and so does anything it corrects or reclaims later. We call what arrives, after all of that, the Net Receipts, and your share applies to that figure, not to a gross number.
2. The distributor takes its part. It is either a share or a fee, and the models differ a lot: a share only costs you when the release earns, a yearly fee costs you whether it earns or not.
3. The currency changes. Your share is credited in US dollars on Lay, and revenue reported in other currencies is converted at the rates the stores or our payment providers use.
4. The payout has a floor. On Lay you can request a payout from USD 20.00, processed monthly by PayPal, and the fees PayPal or your bank charge are yours.
5. Taxes on your income stay yours. We may ask for the tax information the stores need, and we do not withhold income tax for you.

A worked example

Take round numbers. A store reports USD 10.00 of net receipts for your release in a month, after its own deductions.

• On Lay Free you keep 70 percent: USD 7.00 is credited to your Lay Credit Account, we keep USD 3.00.
• The balance stays there until it reaches USD 20.00, so three months like that plus a little more are needed before a payout can be requested.
• At the monthly payout run, PayPal sends the money to your account, in euro if that is your PayPal currency, converted at the rate of that day.

The example is arithmetic on our published share and minimum, not a promise of any revenue. What a stream is worth depends on the month, the market and the pool, and no distributor can fix a number per stream.

Three things people get wrong

• “My streams are worth X per stream.” They are not. Streamshare means your share depends on how many streams everyone else had that month, not on a fixed rate.
• “Streams mean money.” Below 1,000 streams in 12 months a track earns no recorded royalties, and a balance under the payout minimum cannot be withdrawn.
• “Publishing comes automatically with distribution.” It does not. Composition royalties are collected by collecting societies and publishers, and the registration is yours.

What to check in any contract

Read four numbers and two clauses before you sign anything:

• The share or the fee, and whether it applies to net or gross receipts.
• The payout minimum and the payout schedule, plus who pays the transfer fees.
• The term and what happens to your releases and your unpaid balance when it ends.
• The currency of your credit and how conversion happens.
• The clause on corrected or reclaimed revenue, and the clause on who collects compositions.

On Lay Free: 70 percent of Net Receipts, no fee, payout from USD 20.00 monthly by PayPal, no minimum term, USD credit, corrections handled by reducing the balance, compositions left to you and your collecting society.

Apply for Free if you want to start there, and read how the plan works in detail before you send the form.