Spotify Updates Royalty Payout Policy: Addressing ‘Artificial’ Streams, Eliminates Payment for Songs with less than 1k Streams

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Spotify has officially introduced its updated streaming payment policies, which were anticipated and have been circulating in recent weeks. The changes aim to address issues like fraudulent streams, minimum payable track length for “noise” content, and the elimination of payment for songs with fewer than 1,000 streams.

According to Spotify, these updates are projected to redirect approximately $1 billion toward artists. The adjustments involve rerouting payments that were previously allocated to fraudulent streams, noise content, or distributors not meeting a certain royalty distribution threshold. While there has been considerable discussion surrounding the elimination of payment for songs with less than 1,000 streams, it’s worth noting that 1,000 streams typically generate an average of $3 in annual royalties. Additionally, Spotify contends that only 0.5% of all tracks fall below this threshold.

Key excerpts from the announcement, available on Spotify’s blog, highlight the collaboration with industry partners to combat artificial streaming, enhance distribution of small payments to artists, and address issues related to noise in the system.

Spotify’s new royalty payment policy, as officially announced, confirms earlier reports about ceasing payments for songs with less than 1,000 annual streams starting in early 2024. The company also outlines measures to combat fraudulent streams and reduce payouts for “functional noise” content.

Approximately 0.5% of Spotify’s extensive library, comprising “tens of millions” of tracks, falls below the 1,000 annual streams threshold. Spotify plans to withhold royalties for these songs and integrate them into the stream-share pool, now restricted to songs with over 1,000 streams. The changes also target practices deemed fraudulent, including streaming bots and short-form “functional noise” content.

Spotify aims to penalize labels and distributors engaging in “flagrant” artificial streaming and combat the publication of short-form noise tracks that exploit the previous system’s flat royalty rate. The platform intends to increase the minimum length for “functional noise recordings” from 30 seconds to two minutes and work with licensors to value noise streams at a fraction of music streams.

While Spotify did not specify the fraction or criteria for determining functional noise tracks, these policy changes aim to drive additional revenue toward emerging and professional artists over the next five years. For more details, refer to Spotify’s official blog post.

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