Spotify confirms royalty changes, predicts $1B more for (some) artists

Spotify has officially confirmed a series of previously reported changes that will eliminate royalties for many small artists, along with renewed efforts to punish streaming bots and reduced royalties for functional noise, ASMR, and white noise tracks.

Spotify says that its new policies will:

• “further deter artificial streaming”
• “better distribute small payments that aren’t reaching artists.”
• “rein in those attempting to game the system with noise”

“While each of these issues only impacts a small percentage of total streams,” said Spotify in a blog post on Friday, “addressing them now means that we can drive approximately an additional $1 billion in revenue toward emerging and professional artists over the next five years.”

Streams below 1000 don’t count

Perhaps the most controversial change will see hundreds of thousands of smaller artists – by some estimates representing as much as three-quarters of the tracks on the platform – cut out of royalties altogether.

Starting in early 2024, tracks must have logged “1,000 streams in the previous 12 months to generate recorded royalties.” Spotify’s use of the term “recorded royalties” is notable because in the US and most countries, songwriters must by law be paid regardless of any streaming threshold.

Spotify says it really won’t matter

Spotify offers a detailed argument as to why this shift will have far less impact on artists than many of the recent headlines imply.

Tens of millions of tracks on Spotify have been streamed between 1 and 1,000 times over the past year and, according to the streamer, on average, those tracks generated $0.03 per month.

Because distributors have a threshold before an artist can withdraw funds and banks charge a $1-$20 transaction fee, many small payments never make it to the artist.

These are the minimum payment thresholds for the three largest D.I.Y. distributors before transaction fees:

• Tunecore withdrawals start at $1
• DistroKid withdrawals start at $2
• CD Baby withdrawals start at $10.

In aggregate, according to Spotify, these small payments have added up to $40 million per year, which will now be divided among all the artists who exceed 1,000 streams in the previous 12 months.

“99.5% of all streams are of tracks that have at least 1,000 annual streams, and each of those tracks will earn more under this policy,” according to Spotify.

$10 per Fake Stream

Streaming bots, stream farms and other methods of fraudulently boosting streams have been a major problem on Spotify since its inception. So early next year, Spotify will start charging labels and distributors per track when flagrant artificial streaming is detected on their content.

Reports put the fines around $10.

Gaming the System with Noise

Functional noise like white noise, nature sounds, and static are popular and often stream for hours at a time.

But some “bad actors” edit their noise tracks to 30 seconds and stack them in a playlist without listeners noticing to earn bigger payments.

Starting next year, Spotify will increase the minimum track length of functional noise recordings to two minutes. Functional genres will include white noise, nature sounds, machine noises, sound effects, non-spoken ASMR, and silence recordings.

Over the coming months, Spotify will also work with licensors to value noise streams at a fraction of the value of music streams. Reports put those new royalties at 20% of current levels.

Bruce Houghton is the Founder and Editor of Hypebot, a Senior Advisor at Bandsintown, President of the Skyline Artists Agency, and a Berklee College Of Music professor.