Spotify Revamps Royalty Model, Setting Minimum Annual Stream Threshold

Spotify, the streaming behemoth, has unveiled the most transformative modifications to its royalty model since its inception in 2008. Starting in Q1 2024, the most contentious of these changes will involve Spotify ceasing to monetize tracks that garner fewer than 1000 plays annually.

The streaming titan intends to implement a minimum annual threshold for all songs on its platform. This means that each track must generate 1000 streams before any funds are disbursed to the artists and rights holders behind it. Previously, every song played on Spotify for more than 30 seconds resulted in a royalty payment, a practice that will no longer hold.

According to Music Business Worldwide, Spotify’s goal with this change is to redistribute tens of millions of royalty pool dollars from 99.5% of artists on its platform who receive fewer than 1000 streams annually, to 0.5% of artists whose stream counts surpass the minimum level. Spotify estimates that this decision will redirect $40 million to those above the threshold in 2024 alone.

However, this ignores the very definition of “royalty” being something that is due to artists by law. Not just some artists.

While Spotify’s data shows that of over 100 million tracks, 37.5 million have surpassed 1000 streams total (not annually) since the platform’s launch, how many surpass the 1000 stream total in a given year?

Spotify’s decision to demonetize less popular tracks is a setback for independent artists who already earn minimal from streaming. However, it will directly impact aggregators (and indirectly us artists) because those earning less than $20 annually from streaming payouts would typically not be able to withdraw them from their distributors’ accounts.

Aggregators frequently require a minimum level before they allow indie artists to withdraw the money. We’re talking about tracks [whose royalties] aren’t hitting those minimum levels, leaving their Spotify royalty payouts sitting idle in bank accounts.”

It may be just a matter of time before aggregators choose to increase fees to indie artists in order to offset this loss of interest revenue.

See also Music Radar