Spotify’s Royalty Model Tries To Keep Up With The Rapid Rise Of New Music

October 30

  Spotify, the leading streaming music platform, is revamping its royalty model to keep up with the rapid increase in new music releases. These changes include introducing a minimum threshold for royalty qualification, penalties for streaming fraud, and restrictions on short "noise" tracks. The music industry is witnessing a seismic shift as technology-driven innovations, such as generative AI, contribute to an unprecedented surge in music production.

The sheer volume of music being uploaded daily poses challenges for both artists and the streaming service. Despite the growing audience, the proportion of new music consumption is shrinking, affecting the visibility of emerging artists. With over 120,000 new tracks uploaded daily, the streaming service is becoming saturated, making it harder for fans to discover new music.

Spotify's decision to implement a minimum play threshold for royalty payments aims to reduce the influx of bulk-generated and amateur-produced tracks, decreasing its data management costs. The platform also plans to address streaming fraud, which has become a significant concern, as it dilutes royalty pools for legitimate artists and labels. Another issue is the proliferation of short "noise" tracks that inflate royalty payments, prompting Spotify to consider imposing stricter guidelines for such content.

In response to these challenges, major record labels are advocating for artist-centric royalties, rewarding artists based on individual user subscriptions rather than a collective pool. However, the transition to this model poses technical and financial challenges for streaming services. Only a few platforms, such as Deezer and SoundCloud, have adopted artist-centric royalties.

As the music landscape continues to evolve, major streaming services may consider limiting their repertoire or exploring alternative royalty schemes. While these changes are necessary, they are likely to spark debates and may not fully satisfy all stakeholders. Such transformations are expected to define the future of music distribution.