• by Colin Kirkland , November 21, 2023

By reimagining its royalty model and the distribution of funds to creators utilizing its music streaming platform, Spotify says there will be an additional $1 billion to distribute to new and popular artists over the next five years.

To do so, the company says it plans to deter artificial streaming, better distribute small payments, and crack down on lengthy white-noise tracks.

With half a billion users, Spotify says it is the music industry’s No. 1 revenue generator, paying out artists over $40 billion as of 2022. However, the streaming service has still received widespread criticism for not paying its artists enough money.

In a blog post, Spotify says it currently hosts over 100 million tracks, with tens of millions of them having been streamed between 1 and 1,000 times in the past year. These tracks, on average, generated $0.03 per month. 

“Because labels and distributors require a minimum amount to withdraw (usually $2-$50 per withdrawal), and banks charge a fee for the transaction (usually $1-$20 per withdrawal), this money often doesn't reach the uploaders,” the company says. “And these small payments are often forgotten about.”

Starting in early 2024, Spotify will address this issue by only giving royalties to artists whose tracks have reached at least 1,000 annual streams, which the company says make up 99.5% of all streams on the platform.

Therefore, there will be no change to the size of Spotify's music royalty pool and the company won’t make any additional money under the new model. “We will simply use the tens of millions of dollars annually to increase the payments to all eligible tracks, rather than spreading it out into $0.03 payments,” the company notes.

This strategy, Spotify hopes, will also cut down on artificially made tracks, which some uploaders use to flood the platform to “generate pennies from an extremely high volume of tracks.” The company will soon begin charging labels and distributors per track when artificial streaming is detected on their content.

Spotify also points a finger at uploaders who are shortening white-noise tracks to 30 seconds and placing them in a playlist to earn outsized payments. And because noise tracks are valued the same as music tracks, “the massive growth of the royalty pool has created a revenue opportunity for noise uploaders well beyond their contribution to listeners,” the company states.

To help facilitate more revenue for music artists, Spotify will soon increase the minimum track length of functional noise recordings to two minutes in order to be eligible to generate royalties. The company will also begin lowering the value of noise streams to “a fraction of the value of music streams.”.