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Spotify's Royalty Model Changes in 2024: A Summary

Spotify has announced significant changes to its royalty model, set to take effect in the first quarter of 2024. These changes, detailed in a new blog post on Spotify for Artists, aim to better support artists who rely heavily on streaming revenues. Here's a breakdown of the key changes:

  1. Combatting Artificial Streaming: Spotify is introducing measures to deter artificial streaming. From 2024, labels and distributors will be charged for tracks where flagrant artificial streaming is detected. This move is intended to disincentivize bad actors from exploiting the system and ensure a fairer distribution of revenues.

  2. New Track Monetization Eligibility: Starting in early 2024, tracks must have at least 1,000 streams in the previous 12 months to generate recorded royalties. This policy won't change the total size of the music royalty pool but aims to redistribute earnings more effectively. Spotify notes that 99.5% of all streams are of tracks that meet this threshold.

  3. Addressing Small Payments: Many tracks on Spotify have been streamed between 1 and 1,000 times over the past year, often generating minimal revenue that doesn't reach the artists due to withdrawal minimums and transaction fees. These small, often disregarded payments amounted to $40 million in 2022. The new policy aims to redirect these funds to artists more dependent on streaming revenue.

  4. Policies for Noise Recordings: Spotify is tackling the issue of functional genres like white noise and nature sounds, which are sometimes exploited for higher streaming revenues. The company plans to set a minimum track length of two minutes for these genres to be eligible for royalties. Additionally, the value of streams for these genres will be reduced compared to music streams.

  5. Impact on Revenue Distribution: Spotify anticipates that these changes will drive an additional $1 billion in revenue towards emerging and professional artists over the next five years.

In summary, Spotify's 2024 changes are a significant step towards a more equitable and transparent royalty distribution model, aiming to support artists more effectively and deter exploitative practices in the streaming industry.

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