Spotify says upcoming royalty model changes could generate $1B for artists over five years

Upcoming changes to Spotify’s royalty model will generate $1 billion over five years for new and popular artists, the streaming service announced Tuesday. As before reportedSpotify has changed its royalty system to direct more money to popular artists and record labels, while raising the minimum payment threshold for streaming music on the platform and tackling streaming fraud.

The company says the new policy will prevent artificial streaming, better distribute small payments that are beyond the reach of artists, and prevent those who try to game the system with noise.

“While each of these issues affects only a small percentage of total streams, addressing them now means we can drive an estimated additional $1 billion in revenue to emerging and professional artists for the next five years,” Spotify wrote in a blog post.

In terms of the new minimum payment threshold, tracks must reach at least 1,000 streams in the last 12 months to generate royalties starting next year. The company says it will not make more money under this model, and that “there will be no change in the size of the music royalty pool paid to rights holders from Spotify; we’ll just use the tens of millions of dollars each year to increase the fees on all eligible tracks, instead of spreading them out over $0.03 fees. “

Spotify says it has more than 100 million tracks and that ten million of them were streamed between 1 and 1,000 times last year and generated $0.03 per month on average.

“Because labels and distributors require a minimum withdrawal amount (typically $2-$50 per withdrawal), and banks charge a transaction fee (typically $1-$20 per withdrawal) , this money often does not reach the uploaders,” says Spotify. “And these small payments are often forgotten. But in total, these small payments that are ignored add up to $ 40 million per year, which can increase the payment of artists who are most dependent on streaming income.

The company says that 99.5% of all streams have tracks with at least 1,000 annual streams, and each of those tracks will get more under this policy.

Spotify believes that because uploaders will no longer be able to “generate pennies from extremely high volumes of tracks,” the policy will eliminate a strategy used to try to game the system or hide the artificial streaming.

To prevent artificial streaming, Spotify will start charging labels and distributors per track if artificial streaming appears in their content starting next year. Although Spotify will be able to fight artificial streaming once it occurs on the platform, it believes that this change will prevent people from uploading such content in the first place.

As for cracking down on those who try to “game the system with noise,” Spotify will increase the minimum track length of functional noise recordings, such as white noise and nature sounds, to two minutes to be eligible to generate royalties. Because users often stream this type of content for hours, Spotify says it’s sometimes exploited by bad actors who cut their tracks artificially short to boost streams. in royalty.

“For example, a typical song is several minutes long,” says Spotify. “Some bad actors shorten whale sound tracks to 30 seconds and stack them in sequence in a playlist without the listeners noticing, so they can get overcharged. More of track length, noise recordings are valued in the same way as music recordings. The massive growth in the royalty pool has created an income opportunity for noise uploaders beyond their audience contribution.

By setting a minimum track length, Spotify believes that this type of content will make a fraction of what they used to earn, which in turn will free up more money to go back into the royalty pool for hardworking artists.

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