Spotify has shaken the industry landscape by announcing its new royalty model that will take effect in early 2024. These changes promise to transform the way in which artists, record labels and distributors interact with and benefit from the platform.
Here are the three main changes that will impact the way in which revenues are distributed and our opinion of each one:
Our opinion on these changes
Change 1: Fines for Artificial Streaming
Starting in January 2024, Spotify will apply monthly fines to artists and labels that benefit from artificial streams, that is, those that were fraudulently acquired or purchased. This measure aims to discourage fraudulent practices in the artificial increase of reproductions.
Distributors will receive notifications in this regard, which is expected to contribute significantly to combating this type of fraud.
Our opinion:
As we have already been working on Random Sounds, these behaviors will not be tolerated and starting in January, distributors will have greater incentives to limit and punish users who buy streams, access playlists through payments or use bots.
Change 2: Minimum of 1000 Streams per Year to Generate Royalties
Songs that generate less than 1000 streams in a year barely produce revenue, less than 1 dollar a year. Because of the minimum limits set by distributors to collect royalties, this money rarely reaches artists or labels.
Spotify reveals that it pays more than $50 million a year for these fractions of revenue, which generally accumulate on the balance sheets of distributors and do not reach content creators. The intention is to redistribute this money more effectively to ensure that those who receive royalties do so more fairly and meaningfully.
Our opinion:
It may sound shocking that some artists who do not achieve 1000 streams in a 12-month period will not receive payment, but it is true that these minimum amounts do not even reach these artists due to the minimum amounts required by distributors to withdraw their money.
We believe that all that money that is “stuck” in the balance of artists in their distributors will be redistributed in a way that will be more used by other artists who have legitimate and quality work.
After all, we will see how it develops over time and if this really happens.
Change 3: Royalty Reduction for Functional Music
Functional music, such as white noise, will experience changes in the way royalties are generated. Normally, it takes 30 seconds of playing a song to count as a valid stream.
However, audios that are not classified as music will need an amount of 2 minutes of playback time to be considered a valid stream. In addition, a decrease in the value of streams of this type of content is expected starting next year.
Our opinion:
At Random Sounds, we have taken a firm stance against the distribution of “functional music” and it is not allowed for distribution on our platform. We believe that because of this, more dedicated artists who enhance their art with passion and effort will be able to benefit.
In conclusion...
We celebrate Spotify's commitment to combating piracy and fraud on digital platforms is a step in the right direction. However, we believe that there is still a lot to do to improve and protect the music ecosystem.
