Pull out your phone, open up Pandora or Spotify, and play a song.  How much did the artist earn just now from you doing that?

The truth is, no one really knows because it depends on which app you used, whether you used the ad-supported or paid version of the app, the country you are in when you stream the song, how many other songs are streamed this month your country, and the total amount of subscriber and advertising revenue that will be generated in your country this month by the streaming service. Huh?

Artists are paid on a “streamshare” basis, not a per-stream rate

When you buy an album or pay to download a song from iTunes or Amazon, the artist earns a percentage of what you paid for the music.  But the business of streaming music is quite different.  Streaming services don’t negotiate with artists or pay them a set rate each time one of their songs is streamed.  Rather, the artist receives a share of the streaming service’s monthly revenue in the country where the listener streamed the song based on the artist’s share of the total number of songs streamed that month in that country, called the “streamshare.”

Example: Streaming a song in Canada vs. the United States

Take an example of a Spotify subscriber in Canada listening to Walker Hayes’s song Fancy Like (“Yeah, we fancy like Applebee’s on a date night, got that Bourbon Street steak with the Oreo shake…”).  The amount Walker will be paid from that single stream will be based on how many times all of his songs are streamed in Canada divided by the total number of songs streamed in Canada this month on Spotify.  

This percentage is then applied to the total amount of money set aside for royalty payments in Spotify’s Canadian market, which is roughly 2/3 of the revenue it generates in Canada from subscribers and advertisers. 

So if one in every 10,000 streams on Spotify this month in Canada is a Walker Hayes song, then he should expect to receive one of every $10,000 that Spotify sets aside in Canada this month to pay music royalties.  That same stream in the U.S. will earn a different amount, because the U.S. market has more streams, more subscribers, and a larger royalty pool.

Just tell me the answer...

While it's incredibly difficult to determine the per-stream rate for a given song, industry experts estimate that Spotify pays an average of 1/3 to 1/2 of a penny per stream to the artist. Pandora reportedly pays much less, about 1/8 of a penny. But Apple Music pays about a full penny per streamed song.

How does that compare to radio?

At least it’s better than radio.  In the U.S., recording artists don’t receive any royalties when their music is played on the radio (though the songwriters and music publishers get paid). This is because radio airtime in the U.S. is considered to be promotional marketing for the artist (i.e. free advertising for the artist) that drives fans to purchase songs, albums, and concert tickets.