As of April 2024, Spotify has rolled out a significant update to its royalty policy, introducing new requirements for tracks to qualify for monthly royalties. This change aims to streamline the process and ensure fairer compensation for artists. There’s a high chance that you might be affected in one way or the other, read ahead to learn more. If you want to get your music live on Spotify (And other major streaming services) consider joining GenRock
Before the recent updates to Spotify’s royalty policy, the platform operated under a different system that had several key characteristics. Here’s a brief overview of Spotify’s old policy regarding artist royalties:
Overview of Spotify's Old Royalty Policy
Stream-Based Payment: Under the previous policy, Spotify calculated royalties based on the total number of streams across all tracks on the platform. Every stream contributed to a cumulative pool from which royalties were distributed.
No Minimum Stream Requirement: Artists did not need to meet a minimum threshold of streams to start earning royalties. Even tracks with very few streams could generate some income, albeit small amounts.
Pro Rata Payment System: The old system utilized a pro rata model, meaning that Spotify would take a percentage of its total revenue and distribute it to rights holders based on their share of total streams for that period. This led to variability in how much artists were paid per stream, depending on the overall number of streams in a given month.
Lack of Transparency: The exact calculations and distribution processes were often criticized for being opaque. Artists had limited visibility into how their earnings were calculated and what factors influenced their payouts.
Any Stream Counts: Every stream counted towards the artist’s royalties, regardless of the source or listener’s uniqueness. This sometimes allowed for manipulation, where individuals could artificially inflate play counts.
Issues with the Old Policy
The old policy faced criticism from many artists who felt that it did not adequately compensate them for their work, especially for tracks that received lower play counts. The lack of a minimum stream threshold meant that tracks with very few streams could generate negligible royalties, leading to concerns over fairness.
New Eligibility Requirements
Under the updated policy, tracks must meet specific criteria to be included in the royalty pool calculation. Each track needs to accumulate at least 1,000 streams globally over the past year, along with a minimum number of unique listeners. While Spotify has not disclosed the exact number of unique listeners required, this measure is designed to prevent manipulation through fake streams.
That means, your track will need to have a minimum of 1000 streams (through unique listeners) in the past 12 Months to be eligible to make any money.
Track Eligibility is not final
Can tracks go in and out of eligibility?
One notable aspect of this policy is the flexibility of track eligibility. Each month, Spotify will reassess tracks and include those that have met the 1,000-stream threshold. This means that tracks can transition between eligible and ineligible status as their popularity fluctuates over time.
How Royalties Are Calculated
Royalties under the new policy will be calculated monthly based on streamshare. For instance, if a track accounts for 1% of all streams on Spotify in a given month, it will receive 1% of that month’s royalty pool. Previously, all streams contributed to this calculation, but now Spotify will only consider eligible tracks.
In practical terms, a track will start earning royalties from the first month it reaches 1,000 streams. For example, if a track garners 750 streams in its first month and 500 in the second, it will begin to earn royalties in the second month, continuing as long as it meets eligibility criteria.
Unique Listeners: A Key Factor
A critical component of the new policy is the requirement for a minimum number of unique listeners. This rule prevents scenarios where an artist might simply stream their own song thousands of times to reach eligibility. Spotify employs artificial streaming detection systems to identify and remove any artificial streams, ensuring the integrity of the royalty system.
Why the Change?
Spotify has stated that tracks with between 1 and 1,000 annual streams generate an average of just $0.03 per month, representing only 0.5% of total streams and royalties. While this may seem insignificant, the cumulative total amounts to tens of millions of dollars annually. The new policy reallocates this money through streamshare, effectively increasing payments for eligible tracks. In essence, each eligible track on Spotify will receive an additional 0.5% in royalties as a direct result of this change.
Conclusion
Spotify’s updated royalty policy reflects the platform’s commitment to fairer compensation for artists. By establishing clear eligibility criteria and fostering a more equitable distribution of royalties, Spotify aims to support the artists who contribute to its vast catalog. As this policy takes effect, it will be interesting to see how it impacts artists and their revenue streams in the ever-evolving music industry.
For more information and to stay updated on Spotify’s policies, visit their official support page.
