Music Industry

Spotify’s new royalty payment plan is causing some concern among less-popular artists. But there’s an upside.

Spotify has confirmed that it will not pay out any royalties on songs that get less than a thousand streams. On the surface, that sounds callous and cruel. But if you do the math, a thousand Spotify streams is only worth about US$3.00 or $4.00. That’s hardly a make-or-break number for an artists, but you can see why a company worth US$32 billion refusing to pay anything is a bad look.

On Spotify’s side, though, is that there are millions upon millions of songs that barely register with music fans. There’s one estimate that of the 110-120 million songs on Spotify’s servers, about 20% have never been streamed once. (If you have a Spotify account, sign in to Forgotify, a site that plays nothing but neglected Spotify songs.

By setting a minimum threshold for royalty payouts, Spotify–which is still pretty much unprofitable–stands to save a lot of money, four dollars (or less) at a time. According to the company, only 37.5 million songs on the platform were heard more than 1,000 times. That means 80 million-ish–about two-thirds of Spotify’s library–were not.

So what happens to this money? It’s actually not making it to artists in the first place. Distributors hang onto artist royalties until such time they pay it out to the artists.

Spotify also says–and they do have a point here–that they’re trying to eliminate fraudulent streams, tracks that aren’t really tracks like “silent songs.” These files contain no audio at all. Bots are instructed to stream those tracks on repeat. Every time 30 seconds goes by on one of them, Spotify pays out. Not exactly kosher, right? The company is also going to impose financial penalties who post garbage tracks.

The theory is that money that will no longer go to fake tracks and sub-1,000 streams will instead be added to the larger royalty pool, which should increase payouts for songwriters and musicians. This could mean an additional tens of millions of dollars per year to the main royalty pool.

On the other side of the equation, what does this say about how Spotify treats emerging artists? And if Spotify starts with a threshold of 1,000 streams, what’s to stop it from moving that up to 5,000, 10,000, or more?

So…good thing or bad thing? We’ll have to see how this shakes out.

More at Variety and Music Business Worldwide.

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 40+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

Alan Cross has 37406 posts and counting. See all posts by Alan Cross

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