Spotify pays artists (more like their labels, distributors, and publishers) based on how many times their music was streamed, but other factors come into play as well, such as whether those listeners were premium or free users, where they live in the world, and more. Ultimately, much of the money that Spotify brings in ends up going back out the door. Believe it or not, Spotify actually doesn’t turn a profit. Some publications suggest that the Swedish streaming giant may finally become profitable in 2022, though nothing is certain.
Spotify pays artists so little for many reasons, but the main one is that if they paid more, they would likely shutter. The same can be said for other streaming platforms. Raising subscription prices significantly would likely scare away many users, and while the business model is not ideal, it’s still better than what preceded it. Many labels signed deals with Spotify years ago when the masses were pirating music. At the time, they thought tiny royalties would be better than nothing at all, and while that’s true, the system is now constructed in such a way that it’s toughest on artists.
As more and more people pay for premium subscriptions, Spotify (and its competitors) may be able to raise their payout sums, or government intervention may change things. For now, these rates seem fairly steady.