Spotify is planning to pay small artists on its platform less for their streams, according to Music Business Worldwide. Its royalty payout model is reportedly getting a makeover with three major changes the digital music giant is planning to roll out for the first quarter in 2024.
First, Spotify (SPOT) -) is allegedly planning to enforce a minimum threshold of annual streams that artists have to hit before their song earns royalties on the platform, but what the minimum will be is currently unspecified. Spotify's goal with this move is to demonetize a portion of tracks that absorb 0.5% of its royalty pool.
Related: Spotify Close to Sealing Licensing Deals with Major Record Labels
Currently, Spotify generally pays artists an average of $0.003 – $0.005 per stream. If an artist hits 500 streams in a month, for example, they are estimated to receive around $2.00 in royalties from the platform. Also, 70% of revenue goes to the artist and 30% goes to Spotify. With a minimum on the number of streams imposed on artists in order to generate royalties, smaller artists would get the short end of the stick.
Other changes that Spotify allegedly plans to make include enforcing a minimum on the amount of play-time each non-music track, such as ambient background tracks, receives in order to gain royalties. Also, the platform plans to start punishing record labels and other music distributors for fraud that’s detected in their music.
Some independent artists have already reacted negatively to the news of the upcoming changes, with some even floating the idea of starting a strike similar to Hollywood’s actors and writers strikes.
Or maybe @Spotify could just just pay us better royalties so independent artists could actually make a living. 🤷🏻♂️ https://t.co/seQ0k0TuHf
— synthdaddy™ (@robtswthrayguns) October 25, 2023
this is a terrible time for me to start thinking about releasing music again. i was gonna start using spotify but now they’re not gonna pay out unless you have a particular amount of streams. i fear for bandcamps future. things aren’t looking good.
— poog (@trentsinclaire) October 25, 2023
So we about to lead a union for musicians to boycott Spotify like they just did with the writers strike or roll over and take another pay cut?
— ♫ BrightsideMovement ♫ (@BadRobotBass) October 26, 2023
The move from Spotify comes after it raised prices in July, charging $10.99 monthly for its Premium Individual plan, which is $1 more than its previous price, and also raising their family and student monthly plans by an extra $1 as well.
In a third-quarter earnings call on Oct. 24, Spotify CEO Daniel Ek said that the July price hikes haven't hurt Spotify’s subscriber count.
“We walked into 2023 thinking we would do just over 20 million in net subscriber adds for the full year, but we're actually on track to deliver 30 million, which is a significant beat from where we thought we would be,” he said. “In fact, this will be the second biggest full year gain in net subs additions since going public.”
Spotify’s third-quarter earnings show that the company is doing well financially. Its monthly active users grew by 26% from last year’s third quarter. It also generated an 11% increase in revenue and a 16% increase in Premium subscribers year over year, exceeding guidance.
