How to Collect Spotify Royalties
Discover who gets paid and how they get paid
Hello, and welcome to this week’s edition of this newsletter:
How to Collect Spotify Royalties
If you're working in the music industry—as a catalog buyer, attorney, or new executive—you need to know how Spotify royalties actually flow. Misunderstanding this can lead to bad deals, missed revenue, and poor advice.
In this issue, you will learn the fundamentals in plain language:
Who gets paid
How they get paid
What every industry pro needs to understand to operate with confidence.
The Problem
There is major confusion about Spotify royalties. Even high-level professionals repeat myths.
In one interview, Karol G's producer claimed:
"Songwriters don’t earn from Spotify. They only make money from radio or live shows. Spotify only pays the master."
That's 100% false.
These kinds of claims are not just wrong—they're dangerous when used to structure deals or value rights.
How Spotify Royalties Work
Spotify income comes mainly from ads and subscriptions. It keeps about 30% and pays out the other 70%:
55% to sound recordings (masters)
15% to musical compositions (lyrics and melody)
In short:
80% of royalties go to the sound recording
20% go to the composition
Sound Recording Royalties
Typically paid to:
Labels (major)
Distributors or aggregators (for indie labels and self-released artists)
Composition Royalties
Split into two streams:
Performance royalties go to performing rights organizations or PROs (ASCAP, BMI, SESAC, GMR, AllTrack)
Mechanical royalties go to mechanical rights organizations or MROs. In the U.S., the Mechanical Licensing Collective (MLC).
Outside the U.S., these usually go to the local collective management organization (CMO).
Who Gets Paid
Sound Recording
Three typical cases:
A – Artist signed to a major label with a Spotify deal
Spotify pays the label
Label pays artist per their deal
B – Self-released artist
Spotify pays distributor
Distributor pays artist directly
C – Artist signed to a label without a Spotify deal
Spotify pays the label's distributor
Distributor pays the label, then the label pays the artist
In all three scenarios, producer points (overrides) usually come from the artist's share.
Musical Composition
Two typical songwriter types:
A – Signed to a publisher or administrator
PRO pays the writer share
Publisher or administrator collects and pays out the publisher share and mechanicals
B – Self-administered
PRO pays performance royalties
MLC pays mechanicals directly to songwriter
How to Collect Royalties
To ensure no revenue is missed:
Sound Recording:
Labels must track and distribute artist shares
Distributors must accurately pay self-released artists
Composition:
Songwriters must be registered with a PRO and the MLC
Publishers must ensure correct metadata and splits
Summary
Final Thoughts
If you work in music deals, rights management, or catalog acquisition, you need to understand Spotify royalties clearly.
This is foundational knowledge that protects investments and helps avoid poor valuations or incorrect assumptions.
Thanks for reading.
Want help with catalog acquisition due diligence?
Reach out at alexiomar@xiola.co
Until next time,
Alexiomar