Spotify is Making Big Changes on Its Royalty Model

Spotify is reportedly making big changes to its royalty payout model in Q1 2024, as per Music Business Worldwide (MBW).

Spotify Plans Three Major Changes

MBW confirmed that Spotify is already discussing its plans for the three specific major details of its model. These changes involve moving almost $1 billion in royalty payments within five years to legitimate artists and rightsholders.

The report showed that Spotify is planning to put a minimum threshold of annual streams per track before it starts earning royalties. This would mean that tracks need to earn 5 cents per month in order to be monetized or an estimated 200 streams per year. The move quickly gained criticism as it would greatly affect indie tracks.

In addition, the company will be financially penalizing music distributors for fraudulent activity. Streaming fraud has been widespread among the community and Spotify thinks it is the right time to fine these labels. Lastly, a minimum length of play-time will be put in for non-music 'noise' tracks before gaining royalties.

Other Streaming Platforms Tried Changes as Well

Other streaming platforms have attempted to put some revisions on their own models as well. For instance, Soundcloud announced its user-centric model which allowed artists to earn according to the number of streams on their tracks. Meanwhile, Deezer also made a deal with Universal Music Group to give more payment to popular artists than independent creators.

Critics are already raising their eyebrows at Spotify's plan, especially with the introduction of the streamshare pool. "Right now, streams and revenue are effectively synonymous, but by this time next year, they will mean very different things," music industry analyst, Mark Mulligan wrote.

As of now, Spotify stated that the company has no news to share but assured that they are always evaluating how they can best serve artists within their platform.