Music Business Worldwide broke the news last month that major changes were coming to Spotify‘s royalty model in Q1 2024.
Now Spotify has confirmed precisely what those changes are.
The music streaming company has published a new blog post on Spotify for Artists introducing what it calls “new policies to better support those most dependent on streaming revenues as part of their livelihood”.
According to Spotify, “as the royalty pool and catalog” on the platform “have surged,” there are “three particular drains on the royalty pool [that] have now reached a tipping point”.
SPOT says that it is working in close collaboration with industry partners, including distributors, independent labels, major labels, plus artists and their teams to introduce its new set of policies.
Spotify’s new policies aim to tackle three core issues:
(1) To “further deter artificial streaming”
(2) To “better distribute small payments that aren’t reaching artists,” and
(3) “Rein in those attempting to game the system with noise”.
The streaming company claims that by addressing these issues, it will be able to drive “an additional $1 billion in revenue toward emerging and professional artists over the next five years”.
Track Monetization Eligibility
As reported last month, Spotify is introducing a minimum threshold for streams before any track starts generating royalties on the service.
Spotify explained exactly how this will work in its blog post on Tuesday (November 21).
Starting early next year, “tracks must have reached at least 1,000 streams in the previous 12 months in order to generate recorded royalties”.
Spotify stresses that it “will not make additional money under this model” and that “there is no change to the size of the music royalty pool being paid out to rights holders from Spotify”.
“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.”
Spotify
SPOT says in its blog post that “tens of millions” of the 100 million-plus tracks it hosts on its platform “have been streamed between 1 and 1,000 times over the past year and, on average, those tracks generated $0.03 per month.”
The blog post continues: “Because labels and distributors require a minimum amount to withdraw (usually $2-$50 per withdrawal), and banks charge a fee for the transaction (usually $1-$20 per withdrawal), this money often doesn’t reach the uploaders. And these small payments are often forgotten about.”
According to Spotify, in aggregate, these small “disregarded payments” added up to $40 million in 2022 alone, which the company adds “could instead increase the payments to artists who are most dependent on streaming revenue”.
Spotify says that “99.5% of all streams” on its platform “are of tracks that have at least 1,000 annual streams”, and that “each of those tracks will earn more under this policy”.
The company adds: “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.
Charges for Artificial Streaming
One of the new Spotify policies coming into force in Q1 2024 is what SPOT says will be a “deterrent” against artificial streaming.
Beginning in 2024, Spotify will start charging labels and distributors per track when “flagrant artificial streaming” is detected on their content.
“These charges will support our continued efforts to keep the industry and platform free of artificial activity.”
Spotify
Spotify explains in its blog post that it “is able to fight artificial streaming once it occurs on our platform, but the industry would be better off if bad actors were disincentivized from uploading to Spotify and other streaming services in the first place”.
The company adds: “We believe this will meaningfully deter labels and distributors from continuing to distribute the music of known bad actors that attempt to divert money from honest, hardworking artists.
“These charges will support our continued efforts to keep the industry and platform free of artificial activity.”
New Policies for Noise Recordings
Spotify explains in the new blog post that so-called “functional genres” have become popular in the streaming era and points to examples such as white noise, whale sounds, static etc.
The company explains further that “listeners often stream these functional genres for hours at a time in the background”, and claims that “this is sometimes exploited by bad actors who cut their tracks artificially short — with no artistic merit — in order to maximize royalty-bearing streams”.
Spotify continues: “For example, a typical song is a few minutes long. Some bad actors are shortening whale soundtracks to 30 seconds and stacking them consecutively in a playlist without listeners noticing, so that they earn outsized payments.”
In order to combat this nefarious practice, starting next year, Spotify plans to increase the minimum track length of functional noise recordings to two minutes, in order to be eligible to generate royalties.
Additionally, over the coming months, Spotify says that it will “work with licensors to value noise streams at a fraction of the value of music streams”.
“By setting a minimum track length, these tracks will make a fraction of what they were previously earning freeing up that extra money to go back into the royalty pool for honest hard working artists.”
Spotify
Functional genres will include white noise, nature sounds, machine noises, sound effects, non-spoken ASMR, and silence recordings.
Elaborating further about why it plans to enact this policy around noise recordings, Spotify explains that “by setting a minimum track length, these tracks will make a fraction of what they were previously earning (because two minutes of listening to noise recordings would generate one royalty-bearing stream not four), freeing up that extra money to go back into the royalty pool for honest hard working artists”.
Spotify adds: “It also creates a more fair playing field for artists in these functional genres, by eliminating the perverse incentive to cut tracks artificially short with no artistic merit, at the expense of listener experience.”
Music Business Worldwide
