Spotify is changing how they pay artists

The streaming giant has unveiled a new way to pay out royalties to artists on their platform in an effort to prevent streaming fraud and divide payouts towards “working artists” over the next five years.  The new model will begin in Q1 2024.

Spotify is finally addressing the long-awaited debate (and potentially has just made it even longer) on how the platform will divvy out royalty payments.  While it’s been in the works for a while, the platform will implement three major changes;

  1. Introducing a threshold of minimum annual streams before a track starts generating royalties on Spotify – in a move expected to de-monetize a portion of tracks that previously absorbed 0.5% of the service’s royalty pool. 

Currently, every audio file uploaded to Spotify that is longer than 30 seconds sets off a royalty payment.  That current payment is $.003 per stream, meaning, in order to get $1 you’d need 229 streams – that is until the label takes its share of that dollar (another topic for another day).  In Spotify’s new model, they will be creating a threshold where each track needs to hit a minimum number of annual streams in order to receive said payment.  While that number has not yet been specified, sources according to MBW state the new system is “designed to [demonetize] a population of tracks that today, on average, earn less than five cents per month.”

This seems counterintuitive for smaller artists, however, Spotify states that on a wider scale, the amount of hundreds of thousands of tracks generating a few cents ends up accumulating to a bigger “pot” where there is no real impact for any artist.  Under the new plan, the lumpsum payout is to be split amongst the companies ‘Streamshare’, where it will go to more “favorable” artists.

2. Financially penalizing distributors of music (labels included) when fraudulent activity is detected on tracks that they’ve uploaded to Spotify

Spotify prides itself on having one of the most robust fraud-detection systems to date when it comes to audio uploads.  Just back in May, Spotify pulled tens of thousands of tracks from its library due to fraud detection caused by either AI tools or “stream farming”.  Interestingly enough, many artists (and some labels) have turned to such methods as a way to garner more streams.  As the terms stand currently, the uploader gets flagged and their track is removed.  However (and here’s where things can get interesting), according to Spotify’s new model, not only will the tracks be removed and flagged, but the uploader will get charged a penalty.

3. Introducing a minimum length of play-time that each non-music ‘noise’ track must reach in order to generate royalties.

As people try to find ways to game the streaming royalties system, many have resorted to uploads of “noise” that tend to garner a ton of streams for the minimum amount of seconds it takes to receive a royalty payment.  For example, an uploader with a 40-second “white noise” or “rain sound” track receives the same split as a Taylor Swift song. Spotify is planning to crack down on this by defining a new set amount of time that will trigger a payment by “significantly elongating the minimum unit of time” that each track is “non-music”.  Despite this, many might argue that “music” is essentially “noise” (another topic for a different day).

While this new rollout might not be for everyone, it’s certainly going to get the ball rolling in the right direction for artists and creators alike.

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