A complete guide to music streaming royalties

Streaming royalties are the payments music rights holders receive from platforms like Spotify, Apple Music, and Tidal. These royalties are one of the key ways artists and other rights holders make money in the music industry today.

Music industry revenue is expected to double by 2030 as paid streaming usage continues to rise in both popular and emerging markets. Through Royal, anyone can invest in music and earn streaming royalties alongside their favorite artists.

Want to learn more about music streaming royalties and how you can participate in music ownership? Read on to discover:

The different types of royalties

A music royalty is any payment made by a third party to a rights holder for the right to use the copyright. Streaming, digital downloads, radio, and physical sales are all examples of royalty streams that generate revenue for rights holders. When you buy a token on Royal, you own a percentage of the sound recording’s streaming royalty interest.

It’s important to note that there are two separate and distinct copyrights in one song: the composition copyright and the sound recording copyright. The composition copyright is the underlying lyrics and melody of a song. The sound recording copyright is the recording of that composition.

There can be many recordings of one composition. For example, Otis Redding wrote the song “Respect” and was one of the rights holders for the composition copyright. Aretha Franklin recorded “Respect” and was one of the rights holders for the sound recording copyright. Another artist could record “Respect” and be a rights holder of the new sound recording copyright.

There are a wide variety of royalty streams that are generated each time a song plays. These royalties are generated on both the composition (or publishing) side and the sound recording (or master) side. The royalties flow to the applicable rights holders along two separate and distinct paths.

The distinction between composition and sound recording copyrights is key when understanding the many layers of ownership in the music industry and how royalties are accrued. Take Aretha Franklin’s “Respect”: since Otis Redding was a rights holder for the composition copyright but Aretha wasn’t, she never received any royalties for the song’s 7 million+ radio plays.

At Royal, artists are currently selling tokens that represent a portion of their on-demand streaming* and non-interactive streaming** royalties generated by the sound recording. The artists maintain ownership of other sound recording royalty streams such as digital downloads, synchs, and physical sales.

*On-demand streaming — an audio-only stream where the user actively chooses what song to listen to.

**Non-interactive streaming — an audio-only stream where the user passively listens to songs and can’t choose what to listen to, like the radio.

How streaming royalties get distributed

If a platform, like Spotify, wants to host a song on their streaming platform, they must first obtain a license to do so from the record label or distributor that the artist is signed to, as well as the publisher or administrator, and the PRO (Performance Rights Organization) that the songwriter is signed to. The platform must obtain both the sound recording and composition licenses in order to stream one song.

Once a platform obtains permission to host a song, it distributes royalties as the music streams. Check out this music royalties chart to see how the money flows from top streaming platform Spotify to rights holders.

When you buy music rights through Royal, you own a piece of the sound recording copyright and earn streaming royalties alongside the artist. These royalties come from popular platforms such as Spotify, Apple Music, and Tidal.

You get paid when the artist gets paid. Distributors and labels pay artists their royalties on a monthly, quarterly, or semiannual basis. Publishers and administrators also pay songwriters their royalties either on a monthly, quarterly, or semiannual basis.

Why streaming royalties are a growing asset class

Today, more than three-quarters of people listen to music on audio streaming platforms. Streaming makes up 65% of global recorded music revenue and revenue is expected to double over the next seven years.

This growing revenue stream has caught the attention of private equity firms, hedge funds, and other people with wealth. For example, Blackstone and KKR have spent billions of dollars buying song catalogs and streaming rights in recent years.

Here at Royal, we believe everyone should be able to participate in music ownership. For the first time ever, artists can sell a portion of a song or album’s streaming royalties to fans.

Create a free account to get started and we’ll notify you about upcoming drops. You can also buy Royal tokens on secondary marketplaces like OpenSea.

The future of music is one where artists share ownership with the fans who believe in them. We’re excited to build it together.

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