Spotify has revealed an adjustment to its royalty structure, which is expected to result in reduced payouts for less-famous musicians. Under this updated structure, a minimum threshold of streams per song is introduced for artists to qualify for compensation. As reported by Billboard, Spotify intends to “devalue tracks that had previously claimed 0.5% of Spotify’s royalty pool.” This change will affect artists with relatively lower streaming numbers, individuals facing allegations of fraudulent behavior, as well as those who upload content categorized as white noise or nature sounds.
In a recent conversation with Spotify, Music Business Worldwide has uncovered that the minimum threshold for monetization will be set at 1000 plays. According to the publication, this decision aims to “de-monetize tracks that currently, on average, generate less than five cents per month.” It remains unclear how Spotify will distinguish tracks categorized as white noise or nature sounds. In a statement provided to Mixmag Magazine, Spotify stated, “We continuously assess how we can best support artists and engage in ongoing discussions with partners to enhance platform integrity. At this moment, we do not have any updates to share.”
The specific alterations in how Spotify will calculate royalties remain unclear, as the company will need to negotiate new agreements with the majority of record labels and distributors to implement the proposed changes. According to Billboard, major record labels are likely to support this shift as it is expected to increase their revenue. Spotify is currently engaged in discussions with numerous record labels, including Universal Music Group (UMG). As reported by NME, the CEO of UMG announced a “newly expanded agreement” with Spotify, emphasizing an “artist-centric” approach that will benefit “genuine artists with dedicated fanbases.”
The new royalty plan is anticipated to take effect early next year.
