Music streaming service Spotify plans to make changes to its royalties model, which could impact the earnings of artists whose songs do not meet a minimum stream requirement, according to reporting by Music Business Worldwide and Billboard.
The reported changes are intended to increase the amount of money paid out to the labels and artists with the most streams and throttle the earnings of labels and distributors who upload fraudulent or non-music tracks – nature sounds and white noise.
Under Spotify’s pro-rata royalties model, artists are not paid according to the number of streams their songs garner. Instead, artists receive payouts according to the percentage of total streams their songs receive. With the reported changes, an artist will need to cross a minimum-streams-per-song threshold – .5% according to Music Business Worldwide – in order to be eligible to receive payouts.
Spotify’s royalty model has been the target of musician’s rights groups and even proposed congressional legislation, as while established artists on major labels earn vast sums of money from Spotify, the majority of artists tend to earn very little from streaming royalties.
United Musicians and Allied Workers, the organization that took SXSW to task over artist compensation, has called on venues to stop taking merch cuts and long advocated for changes to Spotify’s royalty model, reacted to the news on social media, saying that the music streaming giant has proposed “changes that will enrich the top of the pyramid even more, and make it even more impossible for working musicians to benefit from streaming.”
In July of 2022, after months of working with UMAW, Rep. Rashida Tlaib, Democrat of Michigan, sent a letter to her congressional colleagues encouraging legislation to require Spotify and other streamers to pay a per-stream royalty rate of at least one cent.
“…the current lack of regulation or codified streaming music royalty program has driven a race to the bottom,” Tlaib wrote in her letter. “Streaming music platforms’ payouts per stream are minuscule, and declining each year — leaving working musicians with little of the income generated by these platforms.”
Under Spotify’s current model, an artist whose music garners 10,000-50,000 monthly streams earns $100-600 per month from Spotify, according to estimates by Sound Campaign. However, nearly 80% of the more than 8 million artists with music on Spotify have less than 50 monthly listeners, according to a report by Music Business Worldwide.
When reached for comment about the changes to its royalty structure, a representative for Spotify shared the following statement with Billboard: ”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.”
Meanwhile, in June, Spotify announced it would increase its premium subscription price. Despite collecting money from a reported 220 million paid premium subscriptions, Spotify – which went public in 2018 – lost $100 million last year. After announcing the price increase, the company’s share price dropped 14%.