Spotify's Revolutionary Changes in Artist Royalties
November 1, 2023
Introduction
Spotify, the leading music streaming platform, is set to revolutionize its royalty payout model for the year 2024. These forthcoming changes promise to have a significant impact on artists, distributors, and music labels. In this article, we will delve into the key alterations that Spotify plans to implement and discuss their implications.
New Royalty Model Conversations
For weeks now, Spotify has been in discussions with major record labels, including Universal Music Group, Sony Music Entertainment, and Warner Music Group, as well as independent labels and distributors. These conversations are centered around introducing new features to Spotify's existing pro-rata royalty model, aimed at creating a fairer landscape for artists and rights holders.
Key Changes in Spotify's Royalty Model
The key changes proposed by Spotify, as initially reported by Music Business Worldwide, are as follows:
  1. Minimum Annual Stream Threshold: Spotify intends to introduce a minimum annual stream threshold that a track must meet before it can generate royalties. Tracks that previously received only 0.5% of Spotify's royalty pool will be affected by this change. This threshold is designed to ensure that only tracks with a certain level of popularity will be eligible for royalties.
  2. Penalties for Fraud: In a bid to maintain the integrity of the platform, Spotify will impose financial penalties on music distributors and labels if fraudulent activity is detected on tracks they have uploaded to the platform such as botted streams or playlists. This move is expected to discourage any dishonest practices within the industry.
  3. Minimum Play-Time for Non-Music Tracks: Spotify plans to introduce a minimum play-time requirement for non-music noise tracks, such as bird sounds or white noise, before they can generate royalties. This change aims to ensure that royalties are reserved for genuine music content.
The specifics of these changes, including the exact benchmarks and how financial penalties will be calculated, are yet to be fully clarified.
Agreement Necessities
To implement these changes, Spotify will need to negotiate new agreements with most record labels and distributors. However, this does not necessarily entail entirely new licensing renewals. Adjustments can be made to existing agreements to accommodate these alterations. Given that major labels are likely to benefit from these new terms, they are expected to embrace them.
Spotify's Revolutionary Changes in Artist Royalties
Spotify's Official Statement
In response to inquiries about these changes, a Spotify spokesperson offered the following statement: "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."
A Shifting Landscape
This year, the existing pro-rata streaming model has come under intense scrutiny. Universal Music Group CEO Lucian Grainge's call for an "updated model" that prioritizes artists and subscribers has ignited discussions across the music industry. Spotify's upcoming changes appear to align with the vision of an "artist-centric" model, addressing key components highlighted by Grainge.
Other Platforms and Artist-Centric Models
In the pursuit of these goals, Spotify is not alone. Universal Music Group, for instance, has announced partnerships with Tidal, Deezer, and SoundCloud to explore alternative models. These partnerships are aimed at fairly rewarding artists, enhancing fraud detection, and promoting greater engagement between artists and their fans.
Deezer, in particular, has outlined a similar but more stringent model for "artist-centric streaming," involving royalty boosts for professional artists and stricter measures against fraud. Unlike Deezer, Spotify plans to implement these changes in collaboration with major labels and leading independent labels and distributors.
Conclusion
In conclusion, Spotify's proposed changes to its royalty model represent a significant shift in the music streaming landscape. While the full implications of these changes are yet to be revealed, they signal a growing focus on fair compensation for artists and a commitment to maintaining the integrity of the platform. As Spotify continues to evolve, it is clear that the music industry is at the cusp of transformative developments that could benefit both artists and music lovers.
Update
Last month, Music Business Worldwide shared news about major changes coming to Spotify's payment system in early 2024.
The big change? Now, for a song to make money on the platform, it needs at least 1,000 plays in a year.
This info first came from a post by Kristin Graziani, the President of the distribution platform Stem, on November 2.
Later, Music Business Worldwide confirmed with sources close to Spotify that starting from Q1 2024, each song must reach 1,000 streams in a year to earn royalties.
Spotify's explanation to record labels and distributors is that this move is meant to devalue songs that, on average, make less than five cents a month.
To put it in perspective, in the current music scene on Spotify in the US, you'd need about 200 plays to make just five cents in royalties.
As we mentioned before, Spotify thinks this change will devalue a group of songs that currently take up 0.5% of the platform's 'Streamshare'—the way they distribute royalties.
What do you think about this? Is this a good thing or not?
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