Spotify announces changes to its Royalty System

Spotify published a post in its blog on November 21, 2023, announcing that is making changes to its Royalty System. Music Business Worldwide had already published an article about this matter last October.

The changes, according to the platform, are aimed at driving ‘an additional $1 Billion toward emerging and professional artists’. That amount is among the $40 billion Spotify pays out. The article does not specify if this value is monthly or yearly though.

This new policy is supposed to fight three problems in the current system:

• artificial streaming;
• distribution of small payments that aren’t reaching artists;
• players attempting to game the system with noise.

Artificial Streaming

To fight artificial streaming, Spotify is betting on two initiatives.

The first is to ‘start charging labels and distributors per track when flagrant artificial streaming is detected on their content’. With this, they hope to disincentivize bad actors from uploading content in the first place.

The second is improved artificial streaming detection technology, implemented earlier this year.

Payments Lost in the System

To defend this line of action, Spotify explains that tens of millions of its more than 100 million tracks have between 1 and 1,000 streams in a year, generating an average of three cents per month for their owners. The company claims that due to minimum payment thresholds and bank fees, these payments get lost and are never received by the uploaders. Aggregated, however, they add up to $40 million per year, a sum that the platform claims would be better used if directed at ‘artists who are most dependent on streaming revenue’.

To address the issue above, in 2024, ‘tracks must have reached at least 1,000 streams in the previous 12 months in order to generate recorded royalties’.

Gaming the System with Noise

Yes, we are talking about actual noise. More specifically, ‘functional’ genres: white noise, whale sounds and other things of this kind. Spotify says that some publishers are cutting their tracks in segments artificially short (like the minimum amount of 30 seconds required to monetize a stream) in order to earn ‘outsized payments’.

Next year, the platform will increase the minimum time for monetization eligibility to two minutes for noise tracks. Noise streams will also be valued at a fraction of music ones.

Our side of the matter

We listened to Spotify’s arguments, and many of them make sense, but they also create issues for small artists like you and me.

The minimum threshold and bank fees are not an issue if small artists wait long enough to withdraw their payouts. That’s what I do. If you think of it, there is no rush to get our hands on this money. Monthly, it will not be enough to buy two draught beers in a bar. But, in a year, it may generate enough to pay, for example, for part of the costs of maintaining a website, which, in turn, helps with the artist’s promotion.

This initiative may help remove the money from the hands of bad actors, but it will not be positive for artists who are in the middle tier. Imagine not being able to receive a few dollars, especially knowing that that money is ending up in the pockets of the mainstream artists, who already make millions of dollars and do not need our five bucks. I spend a lot of hours producing music, and not seeing any return of it is discouraging. Of course, I do not make music for money, but that small amount that is paid is like a little bit of recognition.

This may end up having the opposite effect. Small artists who, until now tried to play the game fairly, may engage in artificial streaming to reach the monthly 1,000 streams per track.

Given the amount of attention and support that Spotify gives to small artists, it is hard to say if these changes to Spotify’s royalty system will benefit artists out of the mainstream like you and me. They are more likely to serve the purposes of large corporations that already make tons of money.