How Do Record Labels Make Money From Streaming

By Tiara Ogabang

Streaming is growing, but at the same time, it's slowing down.

Today, Spotify has over 50 million paid subscribers. This is a great result for the streaming services as they have more than twice as many as Apple Music.

Many top artists have also signed up to Spotify to get more exposure to their fans.

Streaming has become so popular that there is a misconception that it's growing. But at the same time, its growth is not as fast as it was a few years ago.

This is probably because the total number of streaming subscriptions is still only slightly bigger than the number of monthly CDs sold a few decades ago.

With that in mind, it makes sense for artists to sign up for streaming services to make as much money as possible.

Some will argue that this means that streaming services only care about money and ignore artists' intellectual property. But even in that case, streaming services are only collecting royalties on music streaming that are actually played.

In 2017, Spotify paid out over $1.6 billion to the record labels.

That's less than 5% of the streaming revenue they make, which still shows that record labels benefit from the streaming revolution.

Spotify pays out 100% of music licensing fees.

Spotify pays out 100% of music licensing fees.

In March 2017, the European Union ruled that music streaming services were required to pay royalties for the music they use.

The industry had been arguing that the subscription fees Spotify paid weren't sufficient. Still, the decision means that they are now legally obliged to pay music licensing fees to record labels.

Over the last few years, this fee hasn't increased, which means that record labels can also get paid for the new licensing fees. Spotify also announced that they would start paying these royalties every quarter.

Spotify has always said that they are paying the correct royalty rates. The companies they have recently partnered with within Europe have said the same thing: they believe that they are paying the correct royalties to the record labels.

Why do record labels need to license music for streaming services if there's enough revenue from these services?

This is the main reason why record labels license music to streaming services: there's only a certain amount of music that can fit into an 18-minute single track. These services have a strict minimum song length to have content they can show to users, and the shortest song length that Spotify uses is 3 minutes and 10 seconds.

This isn't small, and when you add it up, it ends up being a long time for the labels to wait for payment.

On the other hand, the music labels can get paid for this extra music in a shorter time period.

With more artists now using streaming services, it seems likely that the overall revenue will continue to grow. But there's still a lot of debate over how much this will benefit artists.

The majors and major label artists

The majors and major label artists

With only a few exceptions, record labels are small and independent, with less than a dozen employees and no office space.

All major label artists must be affiliated with a major record label to record and sell their music.

Major label artists usually have an agent whose job is to represent their artist at shows, negotiate music publishing deals, and other business-related to their success as an artist.

Because the record labels may not own or publish the music, their relationships with the artists are contractual.

Thus, the first part of the relationship between the label and its artist is strictly a business one. This allows the label to make money when the artists' albums are purchased, streamed, and downloaded by consumers.

In return for publishing and music publishing contracts, record labels generally offer a certain percentage of earnings to the record label for every track sold and streams (the "royalty split").

While this split has remained mostly the same over the years, the record label's income has also increased as digital downloads and sales have been more lucrative than physical CDs or downloads.

Nevertheless, even though record labels tend to be small and independent, they still have large licensing and royalty deals with the majors.

This means that most major label artists have record labels (or are signed to them) and still see some of their income from sales and music streaming.

Major labels also have their own artists to promote, which means they earn additional revenue from touring and television appearances.

The major record labels

The major record labels

Sony Music Entertainment

Sony Music Entertainment, Inc., an international music company, is one of the world's largest media conglomerates.

Its affiliates include several record labels, such as the Sony Music Entertainment United States, Sony Music Entertainment Germany, Sony Music Entertainment France, Sony Music.

Entertainment Japan, Sony Music Entertainment Italy, Columbia Records, Sony Music Entertainment Canada, a division of Sony Music Entertainment Japan (SMEJ), Columbia Records

Nashville, Sony Music Entertainment Australia, Sony Music Entertainment Malaysia, an arm of Sony Music Entertainment Japan, Sony Music Entertainment Korea, its own record label.

Sony Music Korea, two video game labels, Sony Interactive Entertainment and Sony Pictures Entertainment, and one music video distributor, VEVO.

Sony Music Entertainment, Inc. is an American company. It is headquartered in New York City and owned by the Japanese multinational telecommunications and media corporation Sony.


Sony Music Entertainment is also a division of Sony Music Entertainment.

Motown Records

Motown Records was a recording company founded in 1959 by Berry Gordy, Sr. and his longtime business partner, Gordy Jnr.

The record label was originally named Rufus Thomas Records after Rufus Thomas, a blues singer who signed with Motown in 1959 and whose song, "Money (That's What I Want)" was the first record Motown on the Bubbling Under the Hot 100 chart.

Motown was a high-budget operation during its years of success. In many instances, the label paid its musicians more than its competitors.

Despite Motown's high production and promotion levels, however, the label struggled to attract the same level of critical and commercial attention as other major labels, such as Mercury.


It finally went into receivership in 1983, when Berry Gordy Jr. failed to repay $7 million owed to his creditor.

Despite Motown's struggles, Motown is considered one of the most successful and influential record labels in history.