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Spotify's royalty revolution: How the platform aims to generate €917 million in revenue for artists

A man holding a phone with Spotify open
A man holding a phone with Spotify open Copyright Credit: Canva
Copyright Credit: Canva
By Theo Farrant
Published on
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The measures include combating artificial streaming by imposing charges on labels and distributors, setting a 1,000-stream threshold for track monetisation, and introducing new policies for noise recordings.

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In a bold move to address issues impacting its royalty pool, Spotify has announced new measures aimed at supporting emerging and professional artists who depend on streaming revenues. 

With the music streaming giant's payouts to the industry surpassing $40 billion (€36.6 billion), the focus is now on ensuring that these funds benefit the creators for whom the platform was designed.

According to Spotify, their new policies will aim to tackle "three particular drains on the royalty pool": 

(1) To “further deter artificial streaming”

(2) To “better distribute small payments that aren’t reaching artists,” and

(3) “Rein in those attempting to game the system with noise”.

What is artificial streaming and how do Spotify plan to fight it?

A man lying down on bed listening to music through headphones
A man lying down on bed listening to music through headphonesCredit: Canva Images

One of the streaming platform's biggest problems is artificial streaming, which refers to the manipulation of streaming numbers through deceptive practices.

This can involve using automated bots, scripts or other means to play a song repeatedly to inflate its total number of streams and generate more royalties.

Starting from early next year, Spotify will start charging labels and distributors on a per-track basis when blatant artificial streaming is identified. 

The platform is yet to specify what those penalties would be, or how its technology detects such activity.

Payments lost in the system

With over 100 million tracks on Spotify, a significant number generate minimal income, often not reaching the artists due to withdrawal thresholds and transaction fees. 

To address this, starting in early 2024, tracks must have reached at least 1,000 streams in the previous 12 months to generate recorded royalties.

Spotify emphasises that it will not generate extra revenue through this model, and clarifies that this will not affect the size of the music royalty pool.

"Because labels and distributors require a minimum amount to withdraw (usually $2-$50 per withdrawal), and banks charge a fee for the transaction (usually $1-$20 per withdrawal), this money often doesn't reach the uploaders. And these small payments are often forgotten about," explain Spotify. 

"But in aggregate, these small disregarded payments have added up to $40 million per year, which could instead increase the payments to artists who are most dependent on streaming revenue." 

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New policies for noise recordings

Functional content — like whale sound and rain recordings — will be significantly devalued under Spotify's new royalty system.
Functional content — like whale sound and rain recordings — will be significantly devalued under Spotify's new royalty system.Credit: Canva Images

The rise of "functional" genres, such as white noise, rain recordings and nature sounds, which listeners often stream for hours at a time in the background has presented a new problem for Spotify. 

Certain users have started to exploit short "noise" tracks - with no artistic merit - to maximise royalties. 

"For example, a typical song is a few minutes long. Some bad actors are shortening whale sound tracks to 30 seconds and stacking them consecutively in a playlist without listeners noticing, so that they earn outsized payments," explain Spotify.

To address this the music streaming giant is increasing the minimum track length of functional noise recordings to two minutes, and noise streams will be valued at a fraction of the value of music streams. 

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By setting these minimums, Spotify hopes to reduce the revenue opportunity for noise uploaders, redirecting funds back into the royalty pool for true artists. 

These measures are expected to drive an additional $1 billion (€917m) in revenue toward emerging and professional artists over the next five years.

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