Spotify has announced its new rules for royalty payments. One of the main changes concerns songs that have been played only a few times. The platform will no longer pay artists for songs that have fewer than 1,000 plays in a 12-month window.
In addition, the streaming service has changed the way it remunerates so-called “functional” genres, such as white noise, nature sounds, and sound effects, among others. Now, these tracks will need to be at least two minutes long to generate royalties.
Spotify also intends to combat artificial streaming, when robots put songs to play with the sole purpose of generating money for companies.
The company says the changes will free up $1 billion in royalties over the next five years for both famous and new artists.
Little-played songs generated pennies
The change that drew the most attention is the end of remuneration for unpopular songs. According to Spotify, the impact should be minimal for artists.
The company says a track with fewer than 1,000 plays generates a mere $0.03 per month on average. Only 0.5% of streams are on songs like this.
Since record labels usually require a minimum of $2 to $50 for withdrawal, and bank fees can range between $1 and $20, this money ends up forgotten. On the other hand, these small amounts add up to $40 million per year.
Spotify says it won’t pocket this money. With the change, the pennies that were intended for songs with less than 1,000 plays will be reallocated to the royalty pool. In other words: those who have songs above this limit should earn a little more.
Combating “functional” sounds
Another change will be for Spotify not to give too much money to the “functional” genres: white noise, rain noise, ASMR, machine sounds, and the like.
In recent years, many malicious actors have taken advantage of the platform to make money from it. They would upload several 30-second “functional” tracks (minimum to earn royalties) and create hour-long playlists with these tracks.
Thus, a user would give hundreds of streams without realizing it, and the money would end up in the pockets of those who made very little effort.
Starting in 2024, Spotify will only pay royalties for functional tracks that are at least two minutes long. In addition, the company promises to pay a lower amount than what it pays for songs.
With this, the platform wants to save on payments for this type of production and redirect the money to real artists.
Fraud Detection
Finally, the third change in Spotify’s royalty payment scheme is that the company will charge record labels and distributors per track when artificial streaming is detected.
“Spotify is able to combat artificial streaming as soon as it happens on our platform,” it reads, “but it’s better for the industry if bad actors are discouraged from uploading.”
Competition Made Different
The changes made by Spotify have been welcomed by independent distributors and labels. Two big names in the industry, however, did not speak out in the announcement made by the platform: Universal Music Group and Warner Music Group.
Coincidentally or not, both have worked with Deezer on a new royalty payment model, called “artist-centric,” which has important differences to what Spotify has done.
Under the new rules, Deezer will pay double royalties to artists with up to 1,000 monthly streams, as long as they come from 500 different listeners.
The company will also double the royalties of tracks with active audience engagement — those that the user types in the search to listen, for example.
Finally, Deezer took a radical stance against “functional” tracks: it removed all this type of content and put in its own sounds. Thus, it is not necessary to pay royalties.
