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Welcome, artists & builders.
Each week, we navigate music’s future together. As some major news dropped on changes coming to Spotify’s payout system, I’m changing the format & focusing there today.
Inside Issue #22
Spotify’s new payout rules
Before & after Spotify royalty calculator
Spotify’s new payout model
Spotify launched in 2008 and - with it - the streaming royalty system we’ve had ever since.
Image: Ampled, with my edits
→ Everything goes in one big pot.
→ Divide it up based on your share of streams.
15 years later, it’s outdated & broken.
(Hell, it’s even laundered.)
But, changes are coming.
In Q1 2024, Spotify will install the 1st updates to streaming royalties in since inception.
Let’s get into it:
3 major changes to Spotify's payout system:
1. Minimum Annual Stream Threshold
Any song that doesn't hit it receives $0.
→ Expected to de-monetize 0.5% of songs
→ Targeting tracks that earn <$0.05/mo
→ Exact number TBA, but likely ~200
Each track is tiny, but with 120k dropped per day it's projected to total $40M next year.
2. Fraud Penalties for Distributors
Not just a takedown, a crackdown.
→ Song is shown to be associated with fraud
→ Track gets taken down
→ Distro & label get hit with fees
😬 The self-service distro model for $10/year might have a problem. These platforms are inherently relationship-less with artists. How do you know to trust random uploaders?
3. Higher Playtime Requirement for Non-Artist Noise Tracks
Before→ Every song needs :30 to receive royalties.
Soon → Noise tracks require longer play times.
Maybe as long as 4 mins.
These songs can still get paid, but can less effectively game the system by cramming 10 hours of 31 second rain sounds for sleeping onto a single playlist.
Note: this is only for noise tracks NOT associated with true artist profiles.
Why is Spotify making these changes?
100 million tracks
120k added per day
30 seconds to earn a royalty
Up to 10% of streams are frauds
AI only makes this harder.
The system is outdated & has been gamed - real artists pay the price.
How will this change your payouts?
Here’s my back of the napkin, based on available info.
I put together a calculator for anyone to use.
Keep in mind all numbers are not official & subject to change.
If your song gets above ~200 streams per year, it will likely earn ~7% more than it would have otherwise.
If your song gets under ~200 streams per year, it will earn $0 instead of up to $0.60.
*You can see how I came up with these numbers at the calculator.
Premium vs. User-Generated-Music
We’re on pace for 40 million tracks uploaded to Spotify this year.
What happens when 1 billion people are creating AI-assisted songs inside a half dozen apps & hitting the “send to Spotify” button?
Death by a billion user-generated cuts.
Democratization at that level has the potential to turn every artist into a hobbyist.
Or…
This next level of participation - where the lines between creator & consumer get very blurry - can create a much more active experience, grow the pot and benefit working artists.
It’s probably a system that looks nothing like this.
User-generated music is going to explode.
If it doesn’t have a home at Spotify…
It will somewhere.
— Rob
PS: This week’s newsletter was supposed to be ‘10 Bold Predictions for the next 5 Years of Music’, until this news dropped. Included were the number of songs being released, resulting in streamers/majors squashing it & more tightly controlling free-for-all distributors. I guess it wasn’t so bold.
PPS: Predictions coming next week.
Thanks for reading.
- Rob