Spotify, the popular music streaming platform, is reportedly making significant changes to its royalty model. According to a report from Music Business Worldwide, artists will now have to reach a minimum number of streams before they start getting paid. These changes, expected to be implemented in early 2024, will not only raise the bar for who gets paid but also direct more money to major labels and artists.
While two of the proposed changes are relatively uncontroversial, the third one has stirred up some debate. Firstly, Spotify will now fine music distributors, including labels, for any fraudulent activity detected on their tracks. This move aims to crack down on the widespread issue of streaming fraud, which has been plaguing the industry for a long time.
The second change focuses on noise tracks, such as background noise like rain or static. Currently, any track that is played for more than 30 seconds starts earning royalties. However, many noise creators have been gaming the system by breaking up the noise into short tracks, as short as 31 seconds, to maximize their earnings. To address this issue, the new changes will raise the minimum length of playtime for noise tracks before they start earning royalties. Although the report did not specify the exact duration of the new minimum, it is expected to deter this practice and ensure fair compensation for all artists.
One of the biggest reported changes is the introduction of a minimum threshold of annual streams for a track before it starts earning royalties. Under this new system, a track would have to earn 5 cents per month or about 200 streams per year in order to be paid. Many indie tracks don’t hit this threshold, which means that the pennies those artists would otherwise earn will be diverted to Spotify’s ‘streamshare’ pool.
This change has already garnered criticism from the music community. While 5 cents per month may not sound like a lot of money, when multiplied over the many low-play tracks on the platform, it accounts for tens of millions of dollars. Instead of going to smaller artists, this money would be distributed to larger artists, who would receive a bigger share of the pooled money.
Other music streaming platforms have also made changes to their royalty models recently, but with different approaches. SoundCloud, which caters specifically to indie artists, introduced a user-centric model that distributes payments based on the number of streams rather than an artist’s share of overall listening. Deezer, on the other hand, made a deal with Universal Music Group to pay out more to popular artists than independent creators.
As the most popular music streaming platform in the world, Spotify’s decisions carry significant weight. The argument for Spotify’s strategy is that a significant portion of these micropayments gets lost in the distribution pipeline and rarely reaches the pockets of artists anyway. Spotify also wouldn’t be the first platform to implement a minimum threshold for monetization. YouTube creators, for example, can only start making money through ads once they amass 1,000 subscribers and 4,000 hours watched over the course of a year.
However, critics argue that Spotify’s move is akin to a reverse Robin Hood, taking from humbler indie artists and giving their earnings to the bigger players. Music industry analyst Mark Mulligan suggests that in this new system, smaller artists will be marginalized, and their revenue will become a new black box for the biggest artists to share among themselves.
There is also concern about the impact of Spotify’s changes on the DIY artist industry. Platforms like Tunecore, DistroKid, and CD Baby, which cater to independent artists, may face challenges in convincing artists to distribute their music if the number one music streamer in the world raises the bar on who gets paid.
Spotify has not yet confirmed these plans. A spokesperson for the company stated, ‘We’re always evaluating how we can best serve artists, and regularly discuss with partners ways to further platform integrity. We do not have any news to share at this time.’
