Spotify: Spotify may bring major changes to its royalty model, here’s how

Spotify is expected to introduce some notable changes to its royalty model. According to a report by Music Business Worldwide (MBW), these changes are likely to be implemented by early 2024. These changes will help Spotify raise the bar for who gets paid for music streaming on the platform. With these changes, the music streaming platform will also be able to direct more money to major labels and artists.
As per the report, two of the three proposed changes don’t attract any controversies. However, with one of the changes, the company wants to apply a minimum threshold of annual streams for a track before it starts earning royalties. This proposed change has already started garnering criticism. Here are all the details about the changes that Spotify wants to implement on its royalty models.
Spotify’s proposed changes to the royalty model
The report claims that Spotify will charge a penalty on music distributors (including labels) for fraudulent activity detected on their tracks. Streaming fraud is pretty widespread, and this rule will help Spotify crack down on this issue.
With the second change, Spotify will raise the minimum length of play time for noise tracks (background noise like rain, static, etc.) before they start earning royalties. Currently, any track that gets played for more than 30 seconds starts earning royalties. Several noise creators have also fooled the system by breaking the noise up into shorter tracks (even up to 31 seconds short). However, the report did not specify how long the new minimum would be.

Lastly, the controversial change where Spotify will determine the threshold of annual streams for a track before it starts earning royalties. In this situation, with about 200 streams per year, a track will need to earn 5 cents per month to get paid.
The report notes that several indie tracks don’t hit this threshold. So the money these artists would’ve otherwise earned will be diverted to Spotify’s “streamshare” pool. This may seem like a small amount, but when multiplied over the multiple low-play tracks on the streamer, it accounts for tens of millions of dollars. Instead, this money will get distributed to bigger artists, who’ll get a bigger share of the pooled money.
Other streaming platforms revising royalty models
Multiple other streaming platforms have also tried to revise their royalty models and have come up with unique approaches. For example, Soundcloud, which is designed specifically for indie artists introduced a user-centric model. This system distributed payments based on the number of streams rather than an artist’s share of overall listening.
Last month, Deezer made a deal with Universal Music Group to pay out more to popular artists than independent creators. This approach is even more overt than what Spotify is trying. However, Spotify’s decisions carry more weight as it is one of the most popular music streaming platforms in the world,
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