Spotify plans to roll out a new payment plan with all major labels, independent artist and music distributors worldwide. Recent discussions between the major record labels, including Universal Music Group, Sony Music Entertainment, and Warner Music Group, as well as independent labels and distributors, have led to a revamp of Spotify’s royalty system. While the platform will retain its existing pro-rata model, it is introducing new payment plans to ascertain fairness on how artist get paid.
As first reported by Music Business Worldwide, Here are the key components of changes made to Spotify’s revamped royalty model.
Minimum Annual Stream Threshold: Spotify is setting a minimum annual stream threshold that tracks must meet to begin generating royalties. according to MBW tracks that had previously received 0.5% will no longer be eligible for any royalties unless they meet the minimum royalty requirement.
Penalties for Fraudulent Activity: Spotify is taking a firm stance against fraudulent activity on tracks uploaded by music distributors and labels. Label or indie artists that use streaming farms, will be demonetized, to maintain integrity on the platform. Though the implementation of financial penalties are yet to be fully outlined.
Minimum Play-Time for Non-Music Tracks: To qualify for royalties, non-music tracks, such as nature sounds or white noise, will need to reach a minimum play-time length. This change ensures that only genuine content can receive payment from royalties on the platform.
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Spotify has actively been engaged in discussions with most record labels and distributors to implement these changes. However, These adjustments on how artists will receive royalties don’t necessarily mean entirely new licensing renewals as the major labels are expected to benefit from these new terms.
A Spotify spokesperson, when approached for comment, stated,
“We’re always evaluating how we can best serve artists and regularly discuss with partners ways to further platform integrity. We do not have any news to share at this time.”
This shift in Spotify’s royalty structure reflects an ongoing industry-wide conversation about revamping the existing pro-rata streaming model. Universal Music Group’s CEO, Lucian Grainge, had previously called for an “updated model” that places artists at the center and fair rewards their contributions. Several alternatives, like Deezer and Tidal, have emerged with similar ideas, aiming to bring the focus back to “real artists with real fanbases.”
Spotify’s move aligns with some of these key principles, focusing on:
- Fair Compensation for Real Artists: The platform seeks to reward artists with devoted fan bases for their role in driving platform engagement.
- Stricter Fraud Detection: Spotify aims to ensure that artists are not losing out on royalties due to fraudulent activities.
- Artist with Greater Engagement: The plan also emphasizes promoting real artists through discovery and fan engagement.
While Deezer’s model shares some similarities with Spotify’s changes, Spotify’s approach is unique in that it involves all major labels and leading independent labels and distributors. This shift highlights Spotify’s commitment to staying in tune with the evolving needs of artists, the music industry, and its user base.