Spotify, one of the world’s leading music streaming platforms, is set to introduce substantial modifications to its royalty payout model in the first quarter of 2024.
The company’s aim is to redirect $1 billion in royalty payments over the next five years towards “legitimate” artists and rightsholders.
These changes are in response to what they see as “three drains on the royalty pool,” impeding funds from reaching working artists.
The specifics of Spotify’s blueprint for the new royalty model have been under discussion with various music rightsholders in recent weeks.
As confirmed by sources familiar with these negotiations, Spotify intends to retain its pro-rata royalty system, often referred to as ‘Streamshare.’ However, it plans to make three significant alterations to the model.
- Minimum Annual Stream Threshold: Spotify will introduce a minimum annual stream threshold that tracks must surpass before they start generating royalties. This adjustment is expected to de-monetize a segment of tracks that previously absorbed 0.5% of the service’s royalty pool.
- Penalties for Fraudulent Activity: Music distributors, including record labels, will face financial penalties when fraudulent activity is detected on tracks they have uploaded to Spotify.
- Minimum Play-Time Requirement: Spotify will introduce a minimum length of play-time that each non-music ‘noise’ track must achieve to qualify for royalty generation.
These changes by Spotify follow a recent announcement by Deezer and Universal Music Group regarding their experimental “artist-centric” royalty model. It is set to be rolled out for UMG artists in France this month.
Also Read: Rema And Davido Triumph At 2023 Trace Awards In Kigali
While there are certain similarities between Deezer’s “artist-centric” approach and Spotify’s impending changes, there are also notable differences.
The debate over which model is superior or whether one has influenced the other is a topic for another discussion. For now, the focus remains on the details of Spotify’s proposed alterations and their implications for the music industry.
By Kahawa Tungu
