Spotify’s upcoming plan changes will allow the streaming service to use a new royalty model that drastically impacts songwriter payouts. In a new Billboard report, music publishing reporter Kristin Robinson estimates songwriters will be paid about $150 million less during the first 12 months of its implementation in comparison to the previous model.
As Bloomberg reported last month, Spotify will raise the prices by $1 per month for individual plans and $2 per month for shared plans. These price increases will help subsidize the cost of bundling 15 hours of audiobooks per month as part of paid plans.
Instead of raising royalty rates, however, Spotify will pay a so-called “bundle” rate to songwriters for streams from premium subscribers to further offset the cost of book licensing. This allows the streamer to value music at about “52% of the total bundle, or around $5.70 per subscriber” for the current $10.99 plan including audiobooks.
According to Billboard’s calculations, “songwriters and publishers will earn an estimated $150 million less in US mechanical royalties from premium, duo, and family plans for the first 12 months that this is in effect, compared to what they would have earned if these three subscriptions were never bundled.”
This estimate is based on projections gleaned from the Mechanical Licensing Collective’s Spotify rate sheets for 2023 and factors in the average 1.1% monthly growth in music service revenue from last year. The new payout model won’t impact the first two months of 2024.
Read the full report at Billboard for the full breakdown.
The change to royalty payouts comes after Spotify announced in October 2023 that it would require artists to hit a minimum threshold of 1,000 streams before receiving compensation as part of an effort to crack down on fraudulent and “non-music audio content.”