Spotify’s new royalty payment plan may not be as bad as it sounds

Spotify has officially established the streaming thresholds for its revamped royalty model, a move that initially sparked concerns when reports emerged last month. These reports suggested that under the streaming platform’s restructuring, less popular tracks might not receive any royalties, despite Spotify’s positive financial reports and subscriber increases.

A recent guest column in Consequence by Kristin Graziani, president of the music distribution platform Stem, confirmed the specifics behind the changes. Graziani’s analysis revealed that the alterations aim to benefit emerging and growing artists, rather than harm established ones.

Spotify plans to implement three key policies in 2024. Initially, all tracks must reach a minimum of 1000 streams within 12 months to qualify for royalty payment. Additionally, there will be penalties for fraudulent streams, with labels and distributors being held accountable. Lastly, functional tracks like white noise or environmental sounds will require a longer minimum playtime to earn royalties compared to music tracks.

Graziani emphasized that these changes are a step in the right direction, predicting that they will have “little to no negative impact on career artists” and will contribute to a larger royalty pool available to them.

Currently, it’s estimated that 1000 streams within a year would only equate to less than $4.00 in earnings. However, this figure is below the threshold at which most distributors permit artists to transfer earnings into their own bank accounts, indicating that the money was previously not reaching the artists directly anyway.

Graziani argued that the financial benefits were largely directed towards distributors, accruing interest in their bank accounts rather than reaching the artists. Redirecting these small payments could significantly boost the royalty pool, potentially increasing it by $40 million annually and growing over time. This means that there will be more money to go around to real artists and not the fraudulent ones.

Graziani concluded that these changes would bring about “new winners, new losers” within the industry and advised artists to stay attentive to the ongoing developments in the following weeks.

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