Spotify has revealed upcoming changes to its royalty model, projecting a substantial $1 billion in additional revenue for both emerging and popular artists over the next five years. The alterations aim to direct more funds to favored artists and record labels, counteract streaming fraud, and address issues like artificial streaming.
In a blog post, Spotify explained that by tackling these issues now, it can contribute approximately $1 billion more to emerging and professional artists in the coming five years. The new minimum payment threshold dictates that tracks must achieve a minimum of 1,000 streams in the past 12 months to generate royalties starting next year. Spotify clarified that it won’t generate extra revenue under this model but will use existing funds more effectively to boost payments to eligible tracks, rather than dispersing it in $0.03 increments.
Spotify, boasting over 100 million tracks, highlighted that many of them, ranging in the tens of millions, have been streamed between 1 and 1,000 times over the past year, earning an average of $0.03 per month. The platform emphasized that these small payments, often overlooked due to withdrawal minimums and transaction fees, accumulate to $40 million annually. The revised policy seeks to redirect this money to artists who heavily rely on streaming revenue.
Under the new approach, 99.5% of all streams will be tracks with at least 1,000 annual streams, and each of these tracks will experience increased earnings. By eliminating the ability to “generate pennies from an extremely high volume of tracks,” Spotify aims to eliminate a strategy used to manipulate the system or engage in artificial streaming.
To combat artificial streaming, Spotify will charge labels and distributors per track when detected, starting next year. This proactive approach is intended to discourage the uploading of such content in the first place. Additionally, to address attempts to “game the system with noise,” Spotify will extend the minimum track length for functional noise recordings to two minutes, ensuring eligibility for generating royalties. This measure is designed to counteract bad actors who artificially shorten tracks to maximize royalty-bearing streams.
By implementing these changes, Spotify aims to create a fairer distribution of funds, deter fraudulent activities, and contribute significantly to the earnings of both emerging and established artists in the music industry.
