Last month, Music Business Worldwide (MBW) reported that Spotify will overhaul its royalty model next year with three new requirements for tracks to earn streaming royalties.
Today, MBW has confirmed that one of these requirements is a minimum annual stream count of 1,000 plays.
This means that any track on the platform will need to reach 1,000 streams before it can begin earning royalties, a count significantly higher than MBW’s initial prediction of about 200.
Spotify contends that this new rule will “demonetize a population of tracks that today, on average, earn less than five cents per month.” As things currently stand, without the new requirement in place, five cents in royalties on Spotify in the U.S. can be generated by about 200 plays, according to MBW.
Spotify has reportedly told industry players that just 0.5 percent of tracks on the platform do not reach this requirement and that the move will reallocate tens of millions of dollars each year to the other 99.5 percent of artists in its “Streamshare” royalty pool. The company expects these reallocated funds to total close to $40 million in 2024.
One source close to Spotify told MBW, “This targets those royalty payouts whose value is being destroyed by being turned into fractional payments–pennies or nickels.”
The new 1,000 play benchmark was confirmed by Kristin Graiziani, the President of music distribution platform Stem, who argued that Spotify’s new royalty model is likely to benefit artists in a guest column on Consequence.
However, some have been critical of the new requirement and its potential impact on rising artists.
In a podcast interview with MBW, the CEO of Believe Music—the parent company of music distributor TuneCore—Denis Ladegaillerie said, “Why would you not pay such an artist for getting less than 1,000 streams? It doesn’t make any sense. What signal as a music industry do you send to aspiring artists if you go in that direction?”
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