Spotify has announced some big changes in their royalty payout model to go into effect early 2024, in an effort to reallocate a total of $1 billion in royalty payments over the next five years to “legitimate” working artists.
According to Music Business Worldwide, the three changes Spotify plans to implement come Q1 2024 are: introducing a threshold of minimum annual streams before a track can earn royalties; cracking down on fraudulent uploads; and introducing a minimum playtime that each non-music “noise” track must reach in order to generate royalties.
While Spotify hasn’t explicitly stated a specific number of annual streams a track must meet to begin making money, once source told Music Business Worldwide that the goal is to demonetize tracks that “earn less than five cents per month” on average. As the royalty model exists now, industry sources seem to agree that each stream in the US generates about $0.003 per month.
So, it’s safe to estimate that under the new model, a song on Spotify would need to garner 17 plays a month, or around 200 plays a year, in order to begin generating revenue. That threshold might seem pretty low, but when there’s over 100,000 new tracks uploaded to DSPs each day, those pennies add up — potentially to tens of millions of dollars annually, MBW reports.
Spotify claims to have the “most sophisticated anti-fraud detection technology” among their competitors, and as the person who used AI to make a fake Drake/The Weeknd song knows, the streamer already removes obviously fraudulent tracks as long as they can find the offenders. However, this alone doesn’t do a lot to deter folks trying to game the system, since at the end of the day, those people can still keep their illegitimate payouts.
But in 2024, Spotify hopes to deter would-be fraudsters with a “per-track enforcement penalty” that involves charging distributors of phony tracks with a monetary penalty. At the time of writing, Spotify has yet to disclose just how much that penalty will be, but they seem adamant that it’ll help them reach that $1 billion mark.
Lastly, Spotify is targeting “non-music noise content” like white noise, binaural beats, or whale song — the type of ambient noise that one might listen to while sleeping, or trying to focus at work. Some uploaders of this type of content have also gamed the system by splitting up their playlists into 31-second tracks — the minimum length a track has to be to earn revenue — while making the same rate per stream as typical musicians. When these 31-second tracks are all compiled into one playlist that a Spotify user might put on for, say, eight hours straight, they have the potential to garner some big bucks.
Under their new royalty model, Spotify plans to significantly elongate the minimum playtime that each “non-music audio content” track has to be in order to make money, although they haven’t confirmed how long that time will be. But for example: Even if that minimum playtime was just a humble four minutes, that would mean that if “noise” creators wanted to keep earning the same amount in royalties, they’d have to re-upload their 31-second “noise” snippets into four-minute tracks, and somehow increase their number of streams eightfold. (There goes Consequence‘s next big business venture. [Kidding!])
It’s worth noting that news arrives just a month after Universal/Deezer announced their own “artist-centric” model, which appears similar in its goal despite slight differences in execution. Under that model, artists who have fewer than 500 unique monthly listeners or fewer than 1,000 streams on Deezer will make less money per stream than other creators, while all “noise” content will be demonetized completely.
But Spotify also hasn’t detailed exactly how they plan to reallocate the $1 billion they aim to garner with these new steps, so time will tell if their model actually centers working artists where they belong.