Spotify Is Changing Its Royalty Model Over the Next Year: And More News

Spotify's copyright model will get a huge overhaul next year to give "working artists" a bigger slice, according to Music Business Worldwide

by Sededin Dedovic
Spotify Is Changing Its Royalty Model Over the Next Year: And More News
© Jason Davis / Getty Images

In a significant development, Spotify is set to undergo a substantial transformation in its copyright model, aimed at ensuring a more equitable distribution of revenue for "working artists." As reported by Music Business Worldwide, these changes are scheduled to take effect in the first quarter of 2024, encompassing three key modifications designed to address issues on the copyright front.

The first major shift involves the establishment of a minimum annual stream threshold that a song must achieve before it begins generating royalties. This strategic move seeks to address the monetization of songs earning less than 5 cents per month, effectively demonetizing such tracks.

While constituting a small fraction of the platform's extensive music library—99.5 percent of monetized content is expected to remain unaffected—these lower-earning songs collectively cost Spotify tens of millions annually.

Music Business Worldwide's calculations indicate that a track needs to amass 200 plays a year to reach the 5 cents threshold. Consequently, smaller artists may experience a reduction in their already modest earnings, with the aim of redirecting resources to better compensate more popular artists.

Simultaneously, Spotify plans to deploy its fraud detection technology to combat illegal activities, such as the use of AI tools to artificially inflate stream counts. Financial penalties will be imposed on distributors found engaged in such practices, with Spotify hoping that the introduction of per-track penalties will serve as a deterrent against future streaming fraud.

The success of this initiative hinges on the accuracy and effectiveness of the platform's fraud detection technology. The third and final modification targets creators of "non-musical noise content," including white noise and binaural beats.

Currently, short noises, lasting only 31 seconds, populate Spotify due to the platform compensating for every play surpassing the 30-second mark. However, the impending change will mandate a minimum duration for these noise tracks before they qualify for royalty generation.

Although this adjustment may impact the earnings of creators producing such content, it represents a compromise compared to Spotify's initial consideration of removing white noise entirely, potentially boosting its annual gross profit by up to $38 million, according to a previous Bloomberg report.

Spotify remains tight-lipped about these changes, with a spokesperson for Music Business Worldwide stating, "We have no news to share at this time," leaving the music industry eagerly awaiting an official announcement for confirmation and details on the implementation timeline.