Spotify to potentially eliminate royalties for lowest-streamed tracks
In a set of new changes implemented to their royalty rate paid out to artists, streaming service Spotify is now considering eliminating royalty payouts to songs that appear at the bottom range of the service’s streaming threshold.
According to a report from Music Business Worldwide, Spotify will implement a new payment model that includes demonetising songs that have received 0.5% of Spotify’s royalty pool. If the plan is introduced, songs would need to meet a certain minimum of annual streams to be qualified for royalty payments.
The streaming giant hopes new rules will combat fraud on the service, specifically the AI-generated songs and the rise of fake artists that are allegedly profiting off the current model. As it sits, the current payout-per-stream sits around $0.003 and $0.005 per stream.
Additional new elements for the potential change in royalty payouts include financial penalties to artists, distributors, and record labels who engage in purposefully fraudulent activity and a change to the minimum play-time length that non-musical tracks on Spotify must reach to generate royalties.
The exact nature of how Spotify would implement these changes and how they would enforce these new criteria remains unclear. Billboard received a reply from a Spotify spokesperson with regard to the potential new changes. “We’re always evaluating how we can best serve artists, and regularly discuss with partners ways to further platform integrity,” the spokesperson claimed in a statement. “We do not have any news to share at this time.”
The new payment model could negatively affect independent artists and those who already struggle to make money off their music on the platform. Although Spotify is reportedly in talks with established independent labels regarding the changes to the royalty model.
Specifically, the new royalty model would benefit artists whose music is already popular on the streaming service and potentially would discourage newer or lesser-known artists from adding their material to the service due to a lack of any monetary payout.
The new payment model is coming as a response to music industry figures who have been pushing for the service to favour established artists. In a note to the staff that was made public earlier this year, Universal Music Group chairman and CEO Lucian Grainge claimed the true victims of Spotify’s current payment model were the biggest artists.
“Platforms naturally exploit the music of those artists who have large and passionate fan bases,” Grainge wrote. “But then, once those fans have subscribed, consumers are often guided by algorithms to generic music that lacks a meaningful artistic context, is less expensive for the platform to license or, in some cases, has been commissioned directly by the platform.”
According to the Music Business Worldwide report, a study by Midia Research regarding a similar “Artist-centric” model implemented by SoundCloud in 2021 led to 56% of its artists receiving higher streaming revenues while 44% received smaller revenues. The news also comes as Spotify has reported a profit in earnings for the third quarter of 2023.
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