Spotify looks set to overhaul its royalty model next year
It could implement minimum play thresholds and penalize distributors for streaming fraud.
Spotify's royalty model will get a massive revamp next year to give "working artists" a bigger cut, according to Music Business Worldwide. Starting in the first quarter of 2024, Spotify will reportedly implement three changes meant to "combat three drains on the royalty pool." The first one is establishing a minimum number of annual streams a track must reach before it starts generating royalties, which is supposed to demonetize tracks that earn less than 5 cents a month.
Apparently, while these tracks make up a tiny percentage of music on the platform — 99.5 percent of all monetized content will still be earning money after this change — their royalties still cost Spotify tens of millions of dollars a year. Based on Music Business Worldwide's computations, a track has to generate 200 plays a year to be able to earn 5 cents. As The Verge notes, the company is already getting flak for this particular change, because there are a lot of indie tracks that don't reach that threshold. Smaller artists might see their already meager earnings dwindle so that popular artists could get paid more.
Meanwhile, the second change coming to the platform will leverage its anti-fraud detection technology. If it detects illegal activity, such as the use of AI tools to repeatedly stream tracks and artificially boost their play count, the company will slap their distributors with financial penalties. Spotify is hoping that by enforcing a per-track penalty, it could deter people from committing streaming fraud in the long run. How effective this move is, of course, depends on the accuracy of the company's fraud detection technology.
The third and the last change in the service's royalty model will affect creators of "non-music noise content," such as white noise and binaural beats. At the moment, there are a lot of noise tracks on Spotify that are only 31 seconds long, uploaded that way because the platform pays for every play that's longer than half a minute. With the change that's supposedly coming, though, Spotify will require these noise tracks to meet a minimum length of time before they can generate royalties.
While this move can potentially cut noise creators' earnings significantly, Spotify originally wanted to take even more drastic measures. According to a previous Bloomberg report, the company considered removing white noise content from its platform altogether and prohibiting future uploads in the category, because doing so would raise its annual gross profit by as much as $38 million. Spotify neither confirmed nor denied these changes — "We do not have any news to share at this time," a spokesperson told Music Business Worldwide — so we'll have to wait for its official announcement to know if they're real and when they will be implemented if that's the case.
