**Guest post by Oren Sharon, founder of One Submit, a music promotion platform for independent artists.

 

 

 

"Spotify recently announced it has made serious changes to its royalty model that will affect independent musicians, digital distributors, and eventually the whole music industry.

Below is a summary of the changes made by Spotify, starting on January 1, 2024, and their anticipated impact on Spotify's royalty pool and all the players in the industry.

The three major changes are:

Penalty digital distributors for bot streams

Spotify claims that they are putting a lot of effort into fighting artificial streaming on their service, or bot streaming.

Bot streaming is generated by users, usually artists who are trying to manipulate the system.

So this first change by Spotify makes sense.

Although paying hefty royalties for nothing is something no one enjoys doing, Spotify is shifting part of the burden onto the various distributors under this new arrangement.

They will have to shoulder some of the burden of stopping bot streams; this will require extra work and technological advancements from the distributors, which means a lot of investment in manpower and technology development.

Small-scale music distributors will find it hard to support the adjustment and continue to turn a profit in the long run.

The bigger distributors, such as CDBABY, Ditto Music, or Distrokid, would likely raise their artist fees in order to continue making money while the smaller distributors close their doors as a result of the higher penalties paid to Spotify.
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A new minimum of 1,000 streams

A track needs to have received at least 1,000 music streams in the previous 12 months in order to be eligible for royalties.

Right now, Track immediately begins to earn royalties. This implies that if an artist's song doesn't receive 1,000 plays in the first year after it is released, they won't be compensated with their streaming royalties.

Independent artists mechanical royalties will remain unchanged if they receive 1,000 streams or more.

Why was this modification made?

A small portion of payments made to aggregators by Spoitfy typically never make it to the artists.

There is a minimum payment threshold for each digital distributor; the minimum payout for Cdbaby is $45, the minimum payout for UnitedMastes is $50, and the minimum payout for the remaining aggregators is lower.

From now on, the millions of dollars in small royalties will be parked with Spotify, meaning that the different distrubters will have less money in their bank.

Similar to the previously noted modification, this could lead to the smaller distributors closing their doors, which would lessen competition for the larger ones. Prices typically rise in situations where there is less competition, which impacts the final customer, meaning the artist.
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Sound effects Royalties

A stream is caclulated when a song has been listened to for at least 30 seconds.

Many users have shared a wide range of noise and sound effects recordings, including whale, nature, and quiet sounds. These little sound effect samples have generated tens of millions of streaming royalties for the artists, or in this example, the sound creators.

This was unfair to musicians who had spent months writing their songs.

This is a significant step in the right direction for "real" up-and-coming and established artists.

Beginning in 2024, users will need to listen for two minutes or more in order to receive recorded royalties.

Spotify claims that this change will generate fewer royalties for the noise streams and only effect "white noise" or functional noise recordings; songs or music will not be harmed. Spotify will be keeping more of their profits and won't need to pay white noise sound creators as much in royalties.

This is great news for committed musicians since it will return all of the money that was previously utilized for sound recordings to the royalty pool, which is intended to support professional and up-and-coming musicians. With any luck, the new pool of music royalties will be bigger and genuine artists will receive higher rewards for their hard work, but that’s not guaranteed at all that it will benefit “real” artists in the long run.
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Last words:

Given that Spotify hasn't made much profit in the last ten years, it makes sense that they are making adjustments to boost revenue.

Having said that, Spotify did not indicate in their upcoming reports whether or not their recent adjustments, which would result in paying fewer royalties for streaming, will be restored to the "genuine" hardworking artists."

 

 

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