Spotify’s New Royalty Processing Changes: Impact and Implications for Artists and Labels
In an effort to address challenges in the royalty pool, Spotify is implementing significant changes to its royalty processing system. These changes include the introduction of a 1000 plays a year threshold for tracks to receive any monetary allocation.
Revamping Royalty Processing
Spotify states that the decision to revamp its royalty processing system stems from the growing payouts to the music industry and the impact of three particular drains on the royalty pool: stream manipulation, functional audio, and the influx of tracks uploaded by non-professional musicians that generate minimal streams.
Targeting the Three “Drains”
The streaming service aims to mitigate these challenges by introducing new rules to curtail the flow of money to artificial streams, functional audio, and music created by non-professional musicians. While the funds will still contribute to the royalty pool shared across the music industry, the new policies are expected to result in increased payments for artists and labels not negatively affected by the changes.
Combatting Stream Manipulation
To combat stream manipulation, Spotify highlights the deployment of improved artificial streaming detection technology and its involvement in the Music Fights Fraud Alliance. The streaming service also reveals plans to charge labels and distributors per track for flagrant artificial streaming detected on their content.
Regulating Functional Audio
In the case of functional audio, tracks will now need to be played for a minimum of two minutes, as opposed to the current 30-second threshold, to be counted as a play. Additionally, content falling under this category will receive lower monetary compensation per play compared to music content.
Controversy Surrounding the 1000 Play Threshold
While many in the music community are expected to support these changes, the implementation of the 1000 play threshold has sparked controversy. This threshold, which prevents grassroots artists from earning any royalties, has raised concerns about its potential impact on emerging musicians.
Justification for the Threshold
Spotify justifies the threshold by citing the thresholds implemented by most distributors, suggesting that artists need to have generated a certain amount of money to facilitate cash transfers to their bank accounts. The streaming service also contends that the money due to artists who do not meet these distributor thresholds is “lost in the system”, amounting to $40 million annually.
Scrutinizing the Changes
As Spotify’s big reforms come into effect, the music industry will closely examine the advantages and drawbacks of each of these proposed changes. This assessment aims to identify the beneficiaries and those at a disadvantage, as well as pose pertinent questions to the music community regarding Spotify’s revamped royalty processing system.
As the music industry navigates these significant changes, artists, labels, and industry stakeholders will need to adapt to the new landscape of royalty distribution on the Spotify platform.