“Spotify’s New Royalty Model: Battling Streaming Fraud and Supporting ‘Working Artists’ with $1 Billion Shift”
Spotify is making significant changes to its royalty payout model, aiming to direct $1 billion in royalties to legitimate artists and rights holders over the next five years. Some of the changes include setting a minimum annual stream threshold to reduce the number of tracks receiving royalties, imposing financial penalties on distributors for fraudulent activity, and introducing a minimum playtime for non-music tracks to generate royalties. For more details, check our blog post. Stay informed about these industry updates to understand how your streaming royalties are calculated. If you have any questions or concerns, feel free to reach out to us.
Spotify has unveiled significant changes to its royalty payout model, set to be implemented in Q1 2024. The goal is to redistribute $1 billion in royalty payments over the next five years towards what it deems as “legitimate” artists and rights holders. The changes include:
- Minimum Annual Stream Threshold: Under the new model, tracks on Spotify will need to achieve a minimum number of annual streams before they start generating royalties. While the exact stream threshold is unspecified, it is intended to target tracks earning less than five cents per month on average. Spotify claims this change will affect just 0.5% of tracks that previously absorbed a significant portion of royalty payments.
- Financial Penalties for Distributors: Spotify will impose financial penalties on music distributors, including labels, when fraudulent activity is detected on tracks they’ve uploaded to the platform. This is designed to deter those who use artificial streaming methods to manipulate stream counts and illegitimately collect royalties.
- Minimum Length for Non-Music ‘Noise’ Tracks: Spotify plans to introduce a minimum length of time for non-music ‘noise’ tracks to generate royalties. Previously, makers of such content could exploit the system by splitting tracks into 31-second intervals, allowing for more frequent royalty payouts. This change will reduce the frequency of payouts for these types of tracks.
Spotify’s strategy aims to combat streaming fraud and reallocate royalties towards more popular tracks and genuine artists. While these changes are designed to ensure that artists receive their fair share, they may also affect distributors who benefit from the existing system. The modifications are set to impact the distribution of royalties but won’t alter the total payout to creators and rightsholders.
These changes follow similar moves by Deezer and Universal Music Group towards an “artist-centric” royalty model, though each platform’s approach has unique features. Spotify aims to deter streaming fraud and allocate royalties more effectively, promoting fair compensation for working artists.