Distribution royalties are payments made to artists, record labels, and distributors for the dissemination and accessibility of music through various channels. In the context of streaming, distribution royalties are generated when music is streamed on platforms like Spotify, Apple Music, and Amazon Music.
When a song is streamed, the streaming service pays out royalties for two different things: the sound recording and the composition (the underlying body of work). When streamed, the streaming service collects revenue through subscription fees or advertising. They then distribute a portion of this revenue as royalties to the rights holders of the sound recording, which may include the artist, record label, and distributor. The amount paid per stream is typically determined by complex agreements between the streaming service and rights holders, often based on factors like the number of streams and the service's overall revenue.
These royalties serve as compensation for the use and availability of music on streaming platforms. They contribute to the income of artists and other stakeholders involved in the creation and distribution of music, helping sustain the music industry in the digital age.