Spotify’s Shake-Up To Royalty System Could Spell Danger For Smaller Artists

Spotify is reportedly making some major changes to the way it distributes royalty payments, which if successful, could mean popular artists will earn a bit more than they currently are – but it also means smaller, independent artists could suffer.

As reported by Music Business Worldwide (MBW), Spotify is eying a reconfigured royalty scheme – due to begin in the first quarter of 2024 – that will move $1billion USD (just shy of $1.6billion AUD) in royalties to “legitimate” artists and rightsholders.

The report claims that Spotify will not dismantle their current pro-rata royalty model (dubbed Streamshare), but instead overhaul some key areas of it, reportedly in an effort to – as one unnamed source told MBW – “combat three drains on the royalty pool – all of which are currently stopping money from getting to working artists”.

The changes would primarily involve enacting a threshold that a song would need to cross in order to become profitable, racking up a predetermined number of minimum annual streams before it starts generating revenue; MBW says this would likely demonetise a suite of tracks that account for some 0.5 percent of Spotify’s royalty pool.

In addition, it’s reported that distributors (including labels) found to engage in fraudulent activities in uploading content to Spotify – such as tracks generated by AI – will be financially penalised by the company. And in order for non-musical “noise” tracks (such as white noise and binaural beats) to become eligible for royalty sharing, they’ll need to achieve a minimum length of play-time.

According to one source reached by MBW, the changes will affect “a population of tracks that today, on average, earn less than five cents [USD] per month”. Based on the average stream earning an artist around $0.003 USD per month, this would require tracks to hit a threshold of 17 plays a month, or some 200 a year. It’s unclear, though, exactly how Spotify plans to introduce these changes; at the time of writing, the company is yet to formally announce them.

In a statement shared with TheMusic.com.au, a Spotify representative said, “We’re always evaluating how we can best serve artists, and regularly discuss with partners ways to further platform integrity. We do not have any news to share at this time.”