Major changes are on the horizon for Spotify’s royalty model, and the music industry is buzzing with discussions and debates about the potential impacts of these modifications. In some recent reports, we learned that Spotify intends to revamp its payment system, introducing several new rules and requirements that could significantly alter how artists are compensated on the platform. While the changes are not yet confirmed by Spotify, they raise important questions about the future of music streaming and the livelihood of both emerging and established artists.
Combatting fraud and noise tracks
The first change, which most in the industry seem to support, involves combatting fraudulent activity and noise tracks. Spotify plans to fine music distributors for fraudulent activity detected on their tracks, which is a long-overdue effort to address widespread streaming fraud. Additionally, the minimum length of playtime required for noise tracks (such as rain sounds or static) before they start earning royalties will be extended. Currently, any track played for more than 30 seconds earns royalties, but the new minimum duration has not been specified.
Minimum annual stream threshold
The second change is the most contentious and is already generating criticism from artists and music industry professionals. Spotify intends to establish a minimum threshold of annual streams for a track before it starts earning royalties. Under this proposal, a track must earn at least 5 cents per month, equivalent to around 200 streams per year, to receive payment. Tracks that fail to meet this threshold will contribute their potential earnings to Spotify’s “streamshare” pool, which will be distributed to more popular artists and major labels.
Spotify’s argument and criticisms
Spotify’s rationale for this new royalty model is to address the issue of micropayments that often get lost in the distribution pipeline, meaning that small artists see very little revenue from their streams. However, critics argue that this approach could be seen as a “reverse Robin Hood” strategy, as it takes money from independent and smaller artists and redistributes it to already successful, bigger players.
Music industry analyst Mark Mulligan has predicted that smaller artists will be marginalized in this new system, with their revenue effectively becoming a “black box” for more prominent artists to share among themselves. Moreover, the proposed changes could have a significant impact on the entire industry, affecting platforms that cater to DIY artists and the promises of payment for their creative work.
Comparison with other streaming services
While other streaming platforms like SoundCloud and Deezer have attempted to revise their royalty models recently, Spotify’s decisions carry more weight due to its status as the most popular music streaming platform globally. SoundCloud introduced a user-centric model, distributing payments based on the number of streams, while Deezer made a deal with Universal Music Group that explicitly favors popular artists over independent creators. Spotify’s approach is distinct, as it places importance on track-specific stream thresholds.
The road ahead
Although Spotify has not yet confirmed these changes, it’s clear that they have sparked significant conversations within the music industry. These proposals challenge the traditional model of streaming royalties, raising questions about the future of music streaming and artists’ earnings. It remains to be seen how the industry and artists will respond, and whether Spotify’s vision for its royalty model will be realized in early 2024.
The potential changes to Spotify’s royalty model reflect a significant shift in the music streaming landscape. As artists, labels, and streaming platforms adapt to these new developments, the ultimate goal should be to ensure that artists are fairly compensated for their creative work. While Spotify’s efforts to combat fraud and noise tracks are commendable, the introduction of a minimum annual stream threshold is a contentious issue that could impact both independent and established artists. As the industry continues to evolve, the relationship between artists and streaming platforms will remain a topic of great interest and debate in the coming years.