Spotify is drastically changing their royalty model

Author

Andrew Southworth
November 20, 2023

Hey friends!

Today we’re going to talk about how Spotify is drastically changing their royalty model

This newsletter is also available as a podcast, listen on your favorite podcast platform here.

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Actionable music marketing advice every Monday. Narrated by Andrew Southworth.

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Increasing Royalties

As you might know, Spotify is a relatively fixed income output model…

  • People pay for subscriptions or watch ads

  • People generate streams

  • Spotify takes a 30% cut

  • Spotify divides everything left and pays artists

This means to raise royalty payments you either need more money coming into the system, or less streams happening in the system. However, Spotify’s idea for 2024 is to reallocate how that money is paid out.

There are 3 main changes that are happening on Spotify starting in 2024:

  1. Songs will now require 1,000 streams per year before they start paying royalties

  2. Songs that receive 90% of more streams from fraudulent sources will receive a fine of $10 to the distributor or record label

  3. Audio that falls into ‘non-music noise content’ will require more than 30 seconds to count as a stream

Spotify estimates these 3 changes will add $1 Billion to the royalty pool over the next 5 years.

Meaning, artists unaffected by these changes get a pay raise.

Why this sucks

We’ll cover the good things in a second, but first lets talk about why this sucks.

  • It feels like Spotify is stealing from the poor to give to the rich

  • A $10 fine for fraudulent streams isn’t enough to deter major record labels

  • Do we trust Spotify enough to let them classify who makes ‘real music’ and who makes ‘noise’?

  • Indie artists just starting will feel less motivated to push forward because it will take them a little while to make any money.

  • What if they keep raising this threshold over time?

These are all valid concerns.

Do we really want a multi-billion dollar company deciding who gets paid and who doesn’t? Are they just going to keep this money instead of giving it to artists?

Why this is good

There are some good things about this change.

  • Serious artists will now make more money, and not just major artists but anyone that gets over 1,000 streams per song per year

  • Spotify is taking the fight against bots and click farms more seriously

  • Most noise music is designed to extract money from Spotify and isn’t actually art

  • The artists getting demonized are only missing out on a couple of $’s per year, nothing that they’re living on

  • 1,000 streams per year per song is a fairly low bar to hit, and it doesn’t take long for indie artists to get there

  • Perhaps this causes artists to be more intentional with their releases and put out better music with a better marketing plan

People have brought up some crazy scenarios like ‘what if someone has 100 songs with 999 streams per year, they’ll be missing out on like $300+ per year’.

While that is true, this hypothetical person has much bigger problems in this case. Nobody taking this seriously should have 100 songs getting less than 1,000 streams per year. If they do, they messed up or are just treating this like a hobby.

How should you feel about it?

I’m not sure I have an answer for you here. I ran a poll on my YouTube channel and about 1/3rd of people hated it, 1/3rd of people loved it and 1/3rd of people were indifferent to it.

I would have much preferred a user-centric royalty model because it is much more fair.

There is precedence for Spotify creating a threshold considering that these platforms have some type of threshold as well:

  • YouTube

  • Instagram Content

  • Facebook Content

  • TikTok Content

  • Soundcloud

  • Audiomack

Either way, pending mass protests or legal action it is what it is. We have to accept it or pull our music from Spotify before the end of the year.

If you’re looking for help hitting 1,000 streams on your music there are a few things you can do:

New Content

If you want to see my video on the exact topic of today’s newsletter, check this out:

TikTok just added a new feature where users can save songs in TikTok videos directly to Spotify, Apple Music or Amazon:

I spoke with Cassie Petrey, founder of Crowd Surf, who has worked on marketing campaigns for Backstreet Boys, Camila Cabello, Paramore and more!

Did you know you can listen to my music industry interviews on podcast platforms? Click here to listen to the Modern Music Marketing podcast.

News

Here are some music industry news highlights from the past week.

  • YouTube launches AI vocal clones of superstars on YouTube shorts

  • YouTube clearly marking all AI created content

  • TikTok launched it’s new ‘add to music app’ feature to easily save music to your Spotify, Apple Music or Amazon Music account

  • Nepal bans TikTok

  • Taylor Swift is Apple Music’s artist of the year for 2023

  • Sirius XM launches a $9.99 per month Spotify challenger

Quote of the Week

❝

Life is too short not to create something with every breath we draw.

Maynard James Keenan

Whenever you’re ready, there are 4 ways I can help you:

  1. My courses. Spotify Growth Machine teaches you how to use Facebook ads to promote your music on Spotify. YouTube Growth Machine teaches you how to grow a YouTube channel organically and how to use YouTube ads. Fan Growth Machine teaches you how to build a website, online store and grow your email list.

  2. My ad agency. Forbid Media specializes in running Facebook conversion ads to promote your music on Spotify.

  3. Website / Store / Funnels. MusicFunnels is the best all-in-one platform for music artists to make a website, online store, sales funnels and build their mailing list.

  4. 1-on-1 consulting. You can book 1-hour calls with myself or Alex Bochel here.

My Links:

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