Spotify Overhauls Royalty Model to Combat Stream Fraud

The Music Business Worldwide is reporting that Spotify plans to make significant changes to its royalty payment model starting in Q1 2024, with the goal of moving approximately US$1 billion in royalty payments to artists over the next five years.

Spotify has been discussing the new royalty model with music rightsholders. According to MBW, the streaming giant is trying to address royalty pools that currently prevent money from reaching independent artists.

The three main changes proposed by Spotify are:

  • A minimum annual stream limit before a track starts generating royalties
  • Penalties for music distributors when fraud is detected
  • A minimum playback duration

This news comes a month after Deezer and Universal Music Group announced an experimental royalty model that will launch in France this month. The two models have similarities, but there are also some key differences, with Deezer’s approach being more artist-centric.

An MBW source says that Spotify has stated that tracks that currently represent 99.5% of the “Streamshare” model will continue to monetize after the changes are implemented.

Of the three changes, the one that could have the biggest impact on the market is the financial issue. Payments often do not reach artists because aggregators require a minimum level in an artist’s account before allowing them to withdraw the money.

Distributors are likely to be unhappy with the proposed change, as it could mean that a lot of money is sitting in their accounts generating interest.

Ultimately, the lobbying that will be done against the change could influence Spotify’s decision not to make the changes. It remains to be seen how the story unfolds.