Reggae- Dancehall, Afrobeats artists and other music rights holders may soon see less royalties from Spotify as the platform roll out a new payment model starting 2024. For artists with a strong streaming presence and a dedicated fan base, they may not be significantly affected but if they represent less popular or shorter tracks, there could be a reduction in royalties due to these changes.
MBW has reported that Spotify is set to make substantial changes to its royalty payout model in Q1 2024, aiming to shift $1 billion in royalty payments over the next five years to “legitimate” artists and rightsholders. Spotify has been in discussions with various music rightsholders to outline its blueprint for the new royalty model.
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In short, the three significant changes are:
- Introducing a threshold of minimum annual streams before a track starts generating royalties on Spotify. This move is expected to de-monetize tracks that currently earn less than five cents per month.
- Implementing financial penalties for distributors of music, including labels, when fraudulent activity is detected on tracks they’ve uploaded to Spotify.
- Introducing a minimum length of play-time for non-music ‘noise’ tracks to generate royalties.
Deezer and Universal Music Group recently announced their “artist-centric” royalty model, which shares some similarities but also notable differences with Spotify’s changes.
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Here’s what Spotify’s three planned changes are:
- INTRODUCING A THRESHOLD OF MINIMUM STREAMS BEFORE A TRACK STARTS GENERATING ROYALTIES ON SPOTIFY
Starting in Q1 2024, each track on Spotify will need to reach a minimum number of annual streams before it begins generating royalties, targeting tracks with very low popularity and revenue.
- FINANCIALLY PENALIZING DISTRIBUTORS OF MUSIC WHEN FRAUDULENT ACTIVITY IS DETECTED
Spotify plans to fine distributors for tracks with artificially boosted play counts, aiming to deter bad actors and protect honest artists and rightsholders.
- INTRODUCING A MINIMUM LENGTH OF TIME FOR NON-MUSIC ‘NOISE’ TRACKS TO GENERATE ROYALTIES
Spotify intends to extend the minimum unit of time for ‘non-music noise content’ to qualify for monetization, reducing payouts for short tracks and encouraging longer ‘noise’ content.
Spotify’s three-pronged approach aims to shift $1 billion in royalties away from fraudulent activity and very unpopular tracks towards “real working artists” over the next five years. This approach doesn’t change the total royalty pool but reallocates funds to reduce payments to less popular music and combat fraudulent practices.
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While not all music rightsholders and distributors may fully align with these changes, significant ones view Spotify’s Q1 2024 proposal as a step in the right direction. Spotify commented, “We’re always evaluating how we can best serve artists and regularly discuss with partners ways to further platform integrity.”
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