Spotify has announced change to its royalty payout calculation, limiting royalty eligibility to tracks which exceed 1,000 streams per 12-month period. In the past, sub-1,000 tracks longer than 30 seconds earned royalties (if negligible); now those tracks will be taken out of the calculation entirely. The new plan will be implemented in 2024.
This change will create meaningful results:
- Nearly two-thirds of Spotify’s enormous catalog will become royalty-ineligible.
- Though many tracks are affected, the amount of money shifted away from them is much less significant: About 0.5% of Spotify’s royalty pool.
- The dollar amount of this shift is estimated to be $46-million, out of approximately $9-billion representing the entire royalty pool.
The points above come from the venerable Glenn Peoples writing in Billboard.
No artist or band which has jumped through distribution hoops to be in Spotify is going to be delighted with this change, which feels insulting in addition to causing financial loss.
But as Kristin Graziani (President of music distribution company Stem) observes in a detailed commentary, ultra-low payouts to musicians with under-performing streams often don’t even reach those musicians today:
“1,000 streams in a 12-month period accounts for, at most, $3.00 in earnings. $3.00 is well below the threshold at which almost every distributor allows artists to transfer earnings into their own bank accounts. In other words, this is money that isn’t currently making it to artists in the first place.” — Kristin Graziani, President, Stem Disintermedia Inc.
To put an exclamation mark on that quote, Graziani says it’s the distributors who benefit from the hundreds of thousands of dollars sitting in their bank accounts earning interest. She notes that the money will be put to more productive use in the new plan: “Redirecting those tiny payments can immediately increase the royalty pool by $40 million dollars each year, and that number can grow over time.”
