Streaming Monetization: Ultimate Guide to Music Monetization

Streaming

Streaming is the premier monetization model. It offers artists immediate monetization with minimal consumer buy-in. A stream only has to last 30 seconds to be monetized. Artists don’t need anyone to be in love with them or their music to make money. All an artist has to do is get people to listen, and the price people often pay to listen is ZERO! It’s a dream scenario. So, what’s the problem?

The problem with music streaming and monetization is the payment distribution model. The royalty pie is split between all rights holders based on their percentage of the total number of streams. The bar of a 30-second stream strips away the need for consumer buy-in. Listeners don’t have to love, or even like, a song, just stream it for at least 30 seconds. It’s like paying car salesmen per sales pitch rather than per sale. Imagine a dealership pools its sales revenue and pays commissions based on that system.

You’d have workers making shorter, less effective pitches. The system could easily be gamed by having family and friends stop by, pretending to be interested in buying, maybe even paying people to stop by, depending on the ROI.

Now we have artists making 1-minute songs because they earn 3 streams, in the time it would take a listener to get through a 3-minute song that would earn 1 stream. We see programs that automate streaming to artificially inflate artists’ stream counts and their share of the revenue pie. This results in artists earning less for legitimate streams.

The second problem is that the revenue paid to rights-holders is capped. If there’s $1,000 paid by Spotify to rights holders. The most anyone can earn is 100% of $1,000, no matter how many streams are generated, because the revenue doesn't increase with streaming activity. Users aren’t charged based on consumption. They pay a flat fee for all they can eat. 

It’s not a situation where more streams necessarily equal more money. Since the revenue pool is fixed, more streams can mean smaller slices for everyone. The value of a stream declines if the size of the pie doesn’t grow at a comparable rate to the number of mouths eating it.

$1,000 / 1,000 streams = $1 per stream

$1,000 / 10,000 stream = $0.10 per stream

$1,000 / 100,000 streams = $0.01 per stream

$1,000 / 1,000,000 = $0.001 per stream

Monetization Thresholds & Restrictions

Streaming platforms cannot force more people to subscribe and grow the pie. But the major record companies with the catalogs they depend on are concerned about their shrinking share of it. While they can’t control how many people subscribe, they can control the number of rights holders they have to pay. So, what they’ve chosen to do is eliminate mouths.

Coerced by Universal Music Group to adopt their “Artist-Centric” model, DSPs like Deezer, Amazon Music, and Spotify now have - or plan to implement - monetization thresholds. DIY digital distributors like Distrokid now have to pay $10 for each song that’s flagged for streaming fraud. What classifies as streaming fraud is at the discretion of the DSP. Some distributors have highlighted a sudden spike in streaming activity as streaming fraud. Music designed to help listeners focus, meditate, or sleep has been reclassified as “functional” music, demonetized, and replaced with non-revenue-earning, platform-created music designed for the same purpose.

The point of the threshold is to ensure that revenue is driven to the artists who add the most value. Streams don’t generate revenue; subscriptions do. The artists with the greatest value are those who drive subscriptions.

It’s like a concert where you have a headliner and an unknown opening act. The headliner gets paid because they’re the reason people buy tickets, not necessarily because people love their performance. The opening act could outshine the headliner, but nobody paid to see them. This is the logic behind Artist-centric.

It’s not about what fans choose to stream, it’s about what drives them to subscribe. Every artist can upload music to platforms and receive streams, but not all streams are equal. Royalties have a clear destination and rules change to ensure they get where they’re “supposed” to go. That’s into the pockets of major record companies and labels.

Thresholds

Under Spotify’s threshold, each song that generates fewer than 1,000 streams every 12 months gets demonetized. Additionally, the streams must come from an undisclosed number of listeners, kept secret by Spotify due to their claim that it leads to manipulation. Every song in an artist’s catalog with fewer than 84 streams each month earns nothing. Even songs that qualify will lose all revenue from their first 1,000 streams, depending on how many months it takes to reach the total.

A song could surpass the required number of streams but fail to reach the listener threshold. Due to only being paid for streams acquired during the month the threshold is reached, an artist would be paid for 84 streams if it took them 12 months to earn 1,000 streams. So 916 streams of every song that follows this pattern would be disqualified from monetization.

Deezer has a separate threshold model. Amazon Music hasn’t disclosed what its threshold will be.

Apple Music

Apple Music has also adopted Artist-centric, but in an alternate way that isn’t as restrictive as Spotify’s. Instead of demonetized songs, Apple Music rewards songs mixed in Spatial Audio, which is a new high-quality audio format offered on the platform. Technically, anyone with engineering expertise can take advantage, but without that, most indie artists may find themselves priced out. Billboard magazine stated:

“The average cost for mixing a song for spatial audio, like Dolby Atmos, can range from $500 to $5,000 per album, with some experts citing costs as high as $15,000. More affordable options are available online, but Apple discourages those that don't meet their standards.”

Spatial Audio pays 10% more, and under the shared revenue model, if a group gets 10% more, everyone else gets 10% less.

Deezer

Artist-Centric on Deezer takes the form of a threshold of 1,000 streams per month from a minimum of 500 listeners. Technically, it’s not a threshold because songs aren’t being demonetized; instead, boosts are being applied to songs that reach certain milestones. Earning 1,000 streams from 500 listeners results in a double boost, where each stream would count as two. Having songs sought out through search and added to non-algorithmic playlists would result in a quadruple boost, where each stream would count as four. Under a shared revenue model, these boosts effectively demonetize songs that don’t qualify for them by draining the revenue pool. That’s what makes it a threshold.

Deezer has fewer than 20 million subscribers as opposed to Spotify, which has over 230 million. A song that gets 1,000 streams every 12 months on Spotify would likely earn just 87 streams over the same period on Deezer. An artist would have to drive at least 150K streams on Spotify to be in the range of monetization on Deezer.

Amazon Music

Amazon Music has also announced that it plans to implement the Artist-centric model, but hasn’t provided any details on how.

Staying monetized

Spotify has an advertising tool called Showcase. Artists can use the Showcase tool to promote old releases to old and new audiences. Showcase ads are shown to both users on the premium and ad-supported tiers. Songs that no longer qualify for monetization can be advertised to meet the threshold. What it comes down to is the cost.

Monetization Beyond a Stream

Event Promoters, investors, and just about everybody with the ability to make anything happen for an artist are moved by Spotify numbers. The stream counts are publicly visible and provide instant insight into an artist’s value.

The numbers, on their own, don’t do much for an artist unless they chart, but for artists with relationships, a lot can happen. If an artist is in contact with talent bookers, they make for an easier pitch and higher pay. If they’re in contact with investors, they work to justify greater investment.

Catalog sales & advances 

Companies are buying the rights to the streaming royalties of Indie artists. An artist may not be able to make a living off $3K annually, but a catalog acquisition might pay $30K upfront based on its value over the next 10 years. Streams are an asset because they’re guaranteed cash flow, even if it’s not a major amount.

Thriving on Streaming

The streaming monetization model isn’t one size fits all. It’s for music that works for mass consumption. We’re talking about easy listening-style songs that can play on loop in department stores and what I call “high-usage music” like workout songs, songs for studying, and meditation, that fit into users’ daily routines. If you want to find success on streaming, your music needs to fit into one or multiple of these categories, or you need a hit record.

What if you get a hit? It doesn’t have to be a major hit, it could be a hit within your niche genre. Maximizing revenue from streaming is a game of quantity. To maximize the revenue of a hit, artists should create cover song and remix contests to crowdsource as many renditions as possible. Through Publishing rights and rights to the master, they’d have an equity stake in each creation and an endless stream of digital assets.

Takeaway

Spotify and other major DSPs have become hostile territory for DIY artists releasing through distributors like Distrokid. Spotify, in particular, is a platform controlled by major labels and partly owned by one, with UMG having an actual equity stake. Once upon a time, artists could earn by committee, releasing lots of songs that could collectively allow them to at least recoup what they spent on distribution. Spotify has now declared that a form of gaming the system. Here’s a quote from them on the topic.

“We also believe the policy will eliminate one strategy used to attempt to game the system or hide artificial streaming, as uploaders will no longer be able to generate pennies from an extremely high volume of tracks.” 

Spotify routinely puts its thumb on the scale in favor of major label releases. A stark example came in 2018, when the platform placed Drake on the cover of nearly every editorial playlist, even ones where his music wasn’t a natural fit. This kind of exposure, both editorial and algorithmic, acts like a turbo boost for mainstream artists. Compounding the issue, Spotify doesn’t allow users to dislike a song or ban an artist from recommendations, making it difficult to signal genuine listening preferences. Multiple plays - even accidental or passive ones - trigger more recommendations, creating a feedback loop that floods listeners with major label content.

For independent artists, it’s not a level playing field. Spotify’s editorial strategy and opaque recommendation systems often suppress the discovery of emerging or DIY talent. Artists must decide whether it’s worth the increasing trouble of navigating a platform whose rules, thresholds, and tactics seem designed to push them out of the game.