Spotify Will Overhaul Royalty Model To Put Money Back In The Hands Of “Working Artists”

Beginning next year, Spotify will make major changes to its royalty payout model with the intention to redistribute over $1 billion in royalty revenues to “legitimate” artists and rightsholders, according to a new report from Music Business Worldwide (MBW).

The music streaming giant will introduce three new requirements for tracks to earn streaming royalties in an effort to “combat three drains on the royalty pool–all of which are currently stopping money from getting to working artists,” per MBW.

The first of these rules is a minimum annual stream count that will be necessary for a track to earn royalty payments. 

No specific number of streams has been set just yet, but the new rule will reportedly “demonetize a population of tracks that today, on average, earn less than five cents per month.” MBW estimates that the minimum count is likely to be around 17 plays per month, or about 200 each year. 

According to MBW, Spotify says that just 0.5 percent of music on their platform fails to meet this requirement. However, the royalty payments freed up by the new ruling could total $40 million, which would then be distributed to the other 99.5 percent of more popular artists.

Spotify will also introduce monetary fines for music distributors—including labels—who engage in fraudulent playback activity. Earlier this year, Spotify pulled tens of thousands of tracks from its platform due to suspected illegitimate playback which is employed by distributors to boost stream counts, either with AI tools or via human “stream farms.”

Lastly, “non-music noise content” on Spotify will be subject to new stringent regulations. According to the MBW report, non-music tracks like white noise, binaural beats, and nature sounds will need to pass a minimum unit of playback time before being counted as a stream and generating royalties.

This will prohibit a common practice in which individuals upload large playlists consisting of 31-second tracks, each of which is then counted as an individual stream under Spotify’s current policy.

Though there is no confirmation of how long the playback requirement will be, royalty revenues for playlists of this kind are expected to shrink by close to 87 percent under the new rules.

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Written by
Peter Volpe

Journalism student at The Ohio State University who loves beeps and boops!

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