Is it fair to pay for 1 million streams but not 1 million streamers? Who is paying what to Spotify? Is there a better way?
If $0.1 million is the total revenue for the year and the top 3% of players each earned $1 million, you do 2.25 streams per 100 streams! That’s the most you will do for the year. If I have 500 thousand streams I would use this formula to divide it down to a minimum of $1000 and then calculate the royalties.
My Spotify royalty rate is $0.15 per 1 million streams. That means I have to pay 5% on 500 thousand streams, which is a little less than 1% of 500 thousand streams (100 thousand streams divided by 500 thousand streams equals 1 million streams). That works out to $5 per stream!
However, there may be other people who do $0.2 per 1 million streams, who also earn about $0.15 per 1 million streams. If I was a music producer or label partner, I would try to figure out how much would that be worth per thousand. $0.2 is an extremely low price, meaning that if the royalties were based on that, I would use it as an important variable for calculations. It will vary from person to person depending on their needs and desires. But it is worth thinking about and making sure you are paying accordingly.
Now that we have the basic idea, here is how I calculate my royalties!
My Spotify payments are done via an electronic tax that goes through a credit card processor. Spotify doesn’t want your tax paperwork to leak. So they charge you an extra 3% for each transaction (no need for an add on), and the credit card processor pays 3x the $3.99 transaction fee. This is one of the biggest reasons I love using Spotify—as long as I don’t do too many transactions, I never pay more than 3% to the credit card company.
Since you might have 1 million streams, your payment per thousand streams will be $0.0525. That means you will pay $0.0525 per 1000 streams (at 1 mbps). That comes to $0.015 per 1000 streams, which is the most I will ever pay in royalties for anyone, including Spotify.
If you want to pay someone else, this will be more complicated.
I want to pay a musician to play on my show, so I would also pay him $0.
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