Spotify to Start Paying Less in Royalties to less-popular artists

Spotify will increase the minimum number of plays required for royalty payments to 1000 per track.

Spotify is set to make adjustments to its streaming royalty system in early 2024. The changes are expected to impact emerging artists with lower streaming numbers, non-musical tracks, as well as distributors and labels involved in fraudulent activities.

Sources indicate that discussions have been ongoing for weeks involving major record labels such as Universal Music Group, Sony Music Entertainment, and Warner Music Group, along with independent labels and distributors. While keeping the current pro-rata model, the new royalty system plans to introduce additional minimum thresholds, creating more opportunities for established artists and rights holders.

Music Business Worldwide initially reported on Spotify’s updates to its royalty model, which encompass the three following changes in 2024:

1. Introducing a new minimum annual stream threshold for tracks to begin generating royalties. This adjustment aims to reduce the monetization of tracks that previously received 0.5% of Spotify’s royalty pool, as per MBW.

2. Impose financial penalties on music distributors and labels if the platform detects fraudulent activity on tracks they upload.

3. Establishing a minimum playtime requirement for non-musical noise tracks, such as bird sounds or white noise, to qualify for royalty generation.

The company has not specified the exact criteria for these changes and has not outlined the method by which it will determine or enforce financial penalties.

The objective of this initiative is to decrease or eliminate the royalties obtained from deceptive streams, recognizing that even small payments can accumulate over time. This includes streams from “functional tracks” like white noise and popular environmental sounds such as “rain on a rooftop.” Additionally, Spotify’s updated model introduces financial penalties for distributors and labels responsible for uploading tracks with fraudulent activity.

Lastly, Spotify aims to shift funds from certain streams, boosting the royalty pool for musicians and songwriters. Spotify has stated that the new minimum requirements will result in a substantial increase. Some sources estimate an addition of around $46 million annually to the royalty pool. As new artists emerge and time goes on, hopefully, these changes and future deals help artists in the long run.