Music Business

Not everyone will like Spotify’s new Royalty Structure

Major changes are coming yo to Spotify’s royalty system which will excite some and disappoint others. Here’s what you need to know…

by Bobby Owsinski of Music 3.0

It’s been rumored for quite some time that music streaming services would change how they pay artist royalties, and it looks like Spotify will be one of the first to do so. A report from Music Business Worldwide says that there will be upcoming changes to the existing streaming royalty structure that will have some massive ramifications.

The report cited three major changes. It will:

  1. Introduce a threshold of minimum annual streams before a track starts generating royalties on Spotify
  2. Penalize music distributors when they’ve uploaded tracks responsible for fraudulent activity, and 
  3. Introduce a minimum length of play-time that each non-music ‘noise’ track must reach in order to generate royalties.

Artist Royalties

Change #1 is the one that will affect most artists. What it means is that you won’t receive royalties until your song reaches a certain minimum threshold of plays. There’s no word on what that minimum would be, but it’s said that it will only affect about .5% of the royalty pool on the service. It could also mean that you can have a song on Spotify that will never make a penny in royalties if it doesn’t hit the minimum number of plays per year.

This doesn’t mean that Spotify will be keeping this money, which will likely add up over the billions of plays in its catalog. In fact, that money will instead be shifted back into the royalty pool so that it will end up going to artists that are receiving royalties that month. In other words, the rich get richer.

Getting Rid Of Scams

Change #2 is welcome in that it will now tighten up the entry point for songs that are actually stealing from worthy artists. That means that record labels and distributors like Tunecore and CD Baby will have to get tougher on the songs they upload or end up paying for it financially with a reduction in royalties.

Change #3 is also a good thing in that currently you could create a hundred tracks of white noise that are each 31 seconds long, upload them to Spotify, and get paid when someone plays them during a “Relaxation” playlist. No word on the details of this change, but it will also be welcome.

Understand that these royalty structure changes have not yet been officially announced and we’re only going on the reporting of one publication. That said, MBW has excellent sources and rarely gets things like this wrong. We look forward to the official announcement, and hopefully it will contain all the missing details.

Bobby Owsinski is a producer/engineer, author, blogger, podcaster, and coach. He has authored 24 books on recording, music, the music business and social media.

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