SPOTIFY ARE CHANGING THEIR ROYALTY SYSTEM TO DRIVE AN ADDITIONAL $1
BILLION TOWARDS EMERGING AND PROFESSIONAL ARTISTS
BUT WHAT DOES THIS EXACTLY MEAN?
Starting in early 2024, tracks must have reached at least 1,000 streams in the previous 12 months in order to generate recorded royalties. Spotify will not make additional money under this model. There is no change to the size of the music royalty pool being paid out to rights holders from Spotify; we will simply use the tens of millions of dollars annually to increase the payments to all eligible tracks, rather than spreading it out into $0.03 payments.
Why?
ACCORDING TO SPOTIFY: It’s more impactful for these tens of millions of dollars per year to increase payments to those most dependent on streaming revenue — rather than being spread out in tiny payments that typically don’t even reach an artist (as they do not surpass distributors’ minimum payout thresholds). 99.5% of all streams are of tracks that have at least 1,000 annual streams, and each of those tracks will earn more under this policy. We also believe the policy will eliminate one strategy used to attempt to game the system or hide artificial streaming, as uploaders will no longer be able to generate pennies from an extremely high volume of tracks.
WHAT IS HAPPENING TO THE ROYALTY MONEY?
Be it one stream or one hundred billion streams a month, the total amount Spotify pays for sound recording royalties each month to the distributors and record labels working for artists remains exactly same.
The royalties earned from the streams of these recordings will be taken from these entities and artists and handed disproportionately to the entities that represent a lower percentage of the sound recordings that stream less than 1,000 times, i.e. the three major labels Sony, Universal and Warner.
The data shows that Spotify’s new system will leave DIY distributors with far more “ineligible streams” than majors Universal Music Group, Warner Music Group, and Sony Music Entertainment. The reason is simple: developing and emerging artists are streamed less than major label acts, with many non-major artists struggling to break Spotify’s 1,000-stream annual threshold. (Paul Resnikoff, DMN, 2024)
Charges for Artificial Streaming:
As a new deterrent, beginning early next year we will start charging labels and distributors per track when flagrant artificial streaming is detected on their content. This new deterrent follows improved artificial streaming detection technology we rolled out earlier this year, as well as the establishment of the newly formed Music Fights Fraud Alliance.