Spotify have confirmed a new approach to royalty payouts and fraud prevention, with 3 key areas hoped to drive an extra $1b to artists.

Spotify have confirmed that some changes are coming to how they approach royalties. In addition, they will be taking new action to prevent gaming the system, tackling fraud and changing how noise tracks are monetised.

Spotify have outlined three key approaches that they hope will create an extra $1 billion for artists over the next five years. We will outline these 3 new policies in detail below.

Important note: Spotify will continue to pay publishing royalties on tracks that generate less than 1,000 streams.

Artificial Streaming

Spotify have recently improved their ability to detect artificial streaming. Early next year, they will begin charging labels and distributors per track for “flagrant artificial streaming” that they detect on content.

Spotify is able to fight artificial streaming once it occurs on our platform, but the industry would be better off if bad actors were disincentivized from uploading to Spotify and other streaming services in the first place. We believe this will meaningfully deter labels and distributors from continuing to distribute the music of known bad actors that attempt to divert money from honest, hardworking artists. These charges will support our continued efforts to keep the industry and platform free of artificial activity.

Spotify explains this policy

Payments lost in the system

Spotify has over 100 million tracks and a large number of them receive very few streams. Spotify state that tens of millions of tracks have been streamed between 1 and 1,000 times in the past year. Those tracks average earnings of $0.03 a month/$0.36 a year.

Spotify claims that these small payments add up to $40 million a year. They also state that they often don’t reach the artist as they are below thresholds for banks and distributors to pay out.

Their new policy will introduce a 1,000 stream requirement before tracks start earning recorded royalties. Spotify clarify that they won’t make any extra cash from this redirection of royalties. All bonus revenue will be redistributed to the artists

It’s more impactful for these tens of millions of dollars per year to increase payments to those most dependent on streaming revenue — rather than being spread out in tiny payments that typically don’t even reach an artist (as they do not surpass distributors’ minimum payout thresholds). 99.5% of all streams are of tracks that have at least 1,000 annual streams, and each of those tracks will earn more under this policy.

We also believe the policy will eliminate one strategy used to attempt to game the system or hide artificial streaming, as uploaders will no longer be able to generate pennies from an extremely high volume of tracks.

Spotify explains this policy

For more details on this policy, check out the Spotify for Artists help center here.

Gaming the system with noise

Noise tracks are non-musical content, often created to have a calming effect. They include white noise, whale sounds, and static. As they are listened to for mood-enhancing purposes, they can be streamed for hours at a time by one user.

Spotify claim that certain “bad actors” have exploited these listeners by uploading short tracks to maximise royalties from streams. As a track generates a royalty after 30 seconds, Spotify claim some uploaders have created playlists of 30 second noise tracks that seamlessly transition.

To tackle gaming within noise-tracks and to change their value next to musical tracks, Spotify are introducing a minimum track length of two-minutes before they are eligible to generate royalties. This will apply to white noise, nature sounds, machine noises, sound effects, non-spoken ASMR, and silence recordings.

Spotify are working with licensors to lower the value of noise streams compared to music streams.

By setting a minimum track length, these tracks will make a fraction of what they were previously earning (because two minutes of listening to noise recordings would generate one royalty-bearing stream not four), freeing up that extra money to go back into the royalty pool for honest hard working artists.

It also creates a more fair playing field for artists in these functional genres, by eliminating the perverse incentive to cut tracks artificially short with no artistic merit, at the expense of listener experience.

These policies will right-size the revenue opportunity for noise uploaders. Currently, the opportunity is so large that uploaders flood streaming services with undifferentiated noise recordings, hoping to attract enough search traffic to generate royalties.

Spotify explains this policy

We will report any and all future adjustments to Spotify’s royalty pool when they come from Spotify themselves.