SPOTIFY PLANS CHANGES TO MODEL: REPORT

Spotify is planning to make "significant changes" to its royalties-payout model in Q1 2024. Per a report in Music Business Worldwide, the streaming giant intends to move $1b in royalty payments to "legitimate" artists and rightsholders over the next five years.

According to MBW, Spotify has been discussing the details with various rightsholders in recent weeks. The publication's sources say the company will continue its pro rata royalty system (Streamshare) but with the following changes:

• Introducing a threshold of minimum annual streams before a track starts generating royalties on Spotify. This is expected to de-monetize a portion of tracks that previously absorbed 0.5% of the service’s royalty pool. Each track on Spotify will have to reach a minimum number of annual streams before it starts generating royalties.
  
  
• Financially penalizing distributors of music—labels included—when fraudulent activity is detected on tracks they’ve uploaded to Spotify. Whenever Spotify detects a track with a play-count boosted by what it identifies as streaming fraud, it will remove said track from its catalog, just as it does today. But beginning in Q1 2024, it will fine the distributor.
  
  
• Introducing a minimum duration of play time that each non-music "noise" track must reach to generate royalties. Spotify is planning to significantly elongate the minimum unit of time each track of "non-music audio content" must meet before a payout is triggered.

With these changes, Spotify's focus will be to "combat drains on the royalty pool—all of which are currently stopping money from getting to working artists," as one of MBW's sources noted.

It seems that Spotify's approach aligns with the "artist-centric" methodology being touted by UMG and Deezer. Stay tuned for updates.