Spotify’s new royalty model, set to take effect in 2024, poses a challenge for most dancehall and reggae tracks on the platform. That’s because a track must accumulate 1,000 streams within a 12-month period. This information was revealed in an article by Kristin Graziani, the president of music distributor Stem, and confirmed by a knowledgeable source cited by Billboard.
As of 2022, Spotify’s Loud & Clear website reported that 37.5 million tracks had exceeded the 1,000-stream mark. This coincides with many of the reggae and dancehall tracks on the platform that falls below the 1000 steams per year figure since reggae as dancehall are not among platform’s most streamed genres.
Spotify’s total catalog, which stood at 100 million tracks at the end of 2022, according to Spotify’s 2022 annual report.
For those reggae tracks that fall below the threshold it would be as if they are not on the platform.
Beyond reggae and dancehall what this means is that nearly two-thirds of Spotify’s catalog will never met the 12-month stream count requirement to qualify for royalties and even fewer tracks will achieve 1,000 streams within a 12-month window.
While the 1,000-stream threshold affects a substantial number of tracks, its impact on Spotify’s overall royalties to creators and rights holders is relatively minor. It is estimated that implementing this threshold will redirect approximately 0.5% of Spotify’s royalty pool to more popular tracks, amounting to roughly $46 million in royalties for 2022. This is a fraction of the platform’s total cost of sales, which reached $9.27 billion that year, encompassing nearly all royalty payouts.
The new royalty scheme also addresses the issue of fraudulent streams by imposing financial penalties on music distributors and labels responsible for such activity. This approach aims to motivate distributors to proactively detect and remove fraudulent tracks before they can infiltrate streaming platforms.
Estimates suggest that fraudulent tracks make up 3% to 10% of total streams on Spotify and other platforms. In the context of the global streaming market’s $17.5 billion valuation in 2022, as reported by the IFPI, up to $1 billion in streaming royalties worldwide ends up in the wrong hands. By eliminating these fraudulent streams from eligibility, legitimate tracks are expected to receive a larger share of the royalty pool.
