How do artists and musicians make their money in 2024?

While major artists make the majority of their money from touring and live performances, recorded songs remain crucial to boosting both an artist’s brand and income.

There are five major sources of revenue or ‘royalties’ from recorded music — sync, performance rights, physical, downloads and streaming.

The largest of these revenue sources, streaming royalties from digital service providers (DSPs), makes up 67.3 per cent globally of total recorded music revenue. However, the complex process by which royalties are divided among the music industry means the proportion of streaming royalties which reach artists is much lower.

Spotify, the largest of the streaming platforms, makes its money from both subscriber fees and advertising on its free tier. In general it pays out two thirds of every dollar made from music.

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Royalties are split into publishing, for those who wrote the song, and recording royalties, for those who recorded the song. Spotify does not pay these directly to writers or artists, instead it pays the two buckets to different ‘rights holders’, according to their contracts with Spotify.

Rights holders can be anyone from record labels; to distributors, middle men between a record label and a DSP; to a performance rights organisation, which manages and licenses copyrighted works on behalf of their members.

Artists and writers then choose their own rights holders, making a contract with them, which defines the royalty splits they will eventually receive.

Spotify only pays artists with tracks which have at least 1,000 streams in the past year, but for those above that threshold it is estimated that Spotify pays artists, via the rights holders, between $0.003 and $0.005 per stream.

However, due to the complexity of the royalty payment process and other factors, such as the original listener’s geographical location and Spotify subscription type, it is likely that many artists’ royalty income is lower even than this estimate.

Donnie Campbell, 26, a digital producer living in Battersea, south London, is part of the five-piece indie band Waverley, who have 1,227 monthly listeners on Spotify and 16,000 streams of their top song, An Encore (All I Need).

If the band makes even $0.005 per stream, they might expect to make just $80, or around £63 from this song on Spotify. Spotify’s yearly Loud & Clear report says that, on average, Spotify royalties can be multiplied by three to estimate what artists may generate across all streaming services, including Apple Music, YouTube music and more, equating to around £189.

Campbell said, however: “We don’t expect to see any money from streaming. The metrics on streaming are all nice things, they reassure you that it’s going in the right direction, a bit like a pat on the back.”

More important, he said, is the revenue generated by non-recorded music sources, including live performances. Waverley plays about 15 gigs a year which generates enough profit to cover the cost of booking a studio for a recording session.

“Everything we make as a band goes back into the pot, we’re not going to divide each paycheck into five. We’re not making music for profit, we’re making money to keep making music.”

After being signed in June 2023 to Blackhall Records, the group headlined King Tuts Wah Wah Hut in Glasgow and featured on BBC Introducing and BBC 6 Music, all whilst working full-time jobs.

In November last year, the band launched their new EP at The Mash House in Edinburgh via a promotion company. Although they made £1,900 from ticket sales, they were left with £250 after deducting the venue cost, promoter fees, support artist payment and insurance.

“It’s frustrating when you don’t see the money after you play a decent gig but it’s a sacrifice we’re willing to make. For a solo act, it might be different because they’re not splitting the fees, that’s probably why you don’t really see many new bands anymore because it’s not sustainable.”

For the most famous artists and bands, tours are a guaranteed source of revenue, as seen by the success of Taylor Swift’s Eras Tour, which is estimated to have earned her over $2 billion in ticket sales.

A recent study by Pirate Studios found that 72 per cent of artists made no profit from recent tours, with 25 per cent actually operating at a loss.

54 per cent said they were less likely to tour again after making a loss and 36 per cent intended to concentrate on gigs in their home region to ensure ticket sales and cut extra costs.