According to Music Business Worldwide Spotify is set to make three significant changes to its royalty model, the intention of which is to move around $1 billion in royalty payments to “legitimate” artists and rightsholders. But here’s the thing, while it may do that, it’ll also trample on a huge number of smaller independent artists in the process.
From reading into this way too much, my main takeaway here is that all of these new changes come at the hand of major labels who have been kicking up a fuss over “non-music” and “ambient noise” that, because of Spotify’s “Streamshare” remuneration process, means these are taking a larger slice of the pie compared to say, Drake, The Weeknd, Taylor Swift, etc.
For a while now, major labels have commented on how ambient noise tracks, such as rain sounds, white noise, and binaural beats, for example, shouldn’t be earning the same royalties as the latest major hit, which is fair, at the end of the day these “non-music” tracks are by and large being listened to by people sleeping or to soothe babies, or to help with overstimulation, so why should they earn the same as a song created by an actual musical artist?
Here’s why: lofi beats.
It’s no secret that the genre of lofi is mostly passively listened to, whether that’s to relax, study, or sleep. But before I get into this, let me share my two cents about the other reported changes:
A minimum annual stream threshold before a track starts to earn money.
Update following the reports, MBW has confirmed that in 2024, music on Spotify will require a minimum of 1000 streams before it begins earning money. This further increases the barrier to entry for all independent artists who may not have the knowledge, toolset, or time that other artists might have to market and promote their music. This also begs the question, when majors kick up a stink once more, who’s to say that threshold isn’t raised?
This, in my opinion, sets an already high barrier even higher for artists across the entire musical spectrum and will likely push away anyone who has even the slightest doubt about whether distributing their music to DSPs is worth it.
Look at it this way. As it stands right now, the basic package on DistroKid costs £18 per year. That’s an £18 per year investment an artist has to make before they can even see whether their music will generate any income from Spotify, let alone all of the other DSPs. If they do decide to make that investment and get only 200 streams in a year, that’s $0.05 on average. It absolutely won’t pay the bills but as this money is slowly trickling in, that artist may be able to buy a coffee from that money one day. Little wins, right?
Spotify’s changes intend to take that trickle away completely, meaning that money may never reach the hands of that artist.
So what’s the point? If they’re never going to earn anything, why should they bother? This is the mindset that a lot of emerging artists may feel with these new changes, and it sucks.
Penalising labels and distributors when fraudulent activity is detected.
According to a recent report, Spotify is being used for money laundering. How? AI-generated tracks that are then being played by bot farms. This isn’t the first time AI and botted music has been in the headlines, but essentially streaming fraud is an issue that Spotify wants to tackle at the source.
This for me is the only positive new change, however, this depends entirely on how Spotify and distributors handle detecting and dealing with potential fraud.
As much as I don’t want to admit it, it’s likely fraud detection will become an automated process and may lead to errors in detection. There’s already a major issue on Spotify from playlists being erroneously reported to temporarily take them down. This is an automated process with no real human to talk to when this is made in error.
Fraud detection will likely have a similar non-human process behind it.
In addition, we’ll likely see distributors take a zero-tolerance policy on any form of artificial streaming fraud, too. As a label owner myself, I’ve seen first-hand the monthly reports Spotify issues to distributors regarding fraudulent streams and you’d be surprised to see just how much fraud is on this platform.
While this may temporarily fix the problem, much like with the boom in AI music, we could see distributors become walled gardens that only those deemed genuine enough can enter.
A minimum length of play time is needed for “non-music” and “noise” tracks to generate royalties.
Now back to my point regarding lofi beats. This particular reported change could potentially have a huge impact on the lofi beats genre simply because of its passive listening nature. Right now it seems to be tailored to “non-music” I.E. white noise, rain sounds, storm sounds, etc., but there’s every chance it could be expanded.
For reference, the current minimum time needed to generate royalties is 0:30. This has, of course, caused Spotify and other platforms to be flooded by hundreds if not thousands of tracks that are 0:31 to trigger the royalty payout, effectively “gaming” the system. One of the major contributors to this, and something MBW addressed directly, is Lofi Fruits.
In this podcast, owner of Lofi Fruits, Stef van Vugt, is quoted saying:
“Normally when somebody shows [an industry/company] that something is broken – that the system is broken within the guidelines of the industry, because we were not doing anything illegal – [they are] rewarded for it. ‘Hey, we showed this [problem] at scale; we took an enormous risk [on] something that shouldn’t exist.’
With this one, I feel like once the genie’s out of the bottle, it brings up a larger conversation in the music industry where there are certain gatekeepers protecting their own interest. I’m not referring there to just the majors; it’s larger organizations that work with them and others that are also involved.
I feel like, when [someone] highlights something that is broken, you should fix it, or you should look at, ‘Okay, how can we make it different so that it does work?’”
Yep, he claims that by gaming the system, he was only highlighting a problem. Not at all benefiting from it, oh no.
Anyway, it’s currently speculated that Spotify will raise this threshold to 4:00.
Now, back to how this applies to lofi beats. I believe this arbitrary rule and catch-all descriptor will soon encompass all passive music. Certain major label heads have made it very clear that they consider lofi music as ‘fanless’ music, and I absolutely would not be surprised if they start to slowly fold other background music into this.
Why would that matter? The majority of lofi beats are no longer than 2 minutes long. So not only would lofi hip-hop artists need to start making tracks longer than 4 minutes, they’d need to somehow manage to generate 200 streams per year on a 4-minute track to get ANY money from Spotify.
Major labels having a strop.
At the end of the day, the reason all of this is coming into play is simply because majors like UMG, Warner, and Sony are all throwing their dummies out of the pram because music they consider has no worth is taking money out of their pockets.
They’re stamping their feet because music consumption has changed and they’re being left behind. Their slice of the pie is getting smaller and they’re not happy, so rather than making change, they’d simply just cry about it and force platforms to change their rules to benefit artists who are already raking in millions of dollars.
At the end of the day this is set to free up $1 billion that’ll be redistributed to “legitimate” artists. And with Spotify’s current ‘Streamshare’ remuneration which sees the pot being dished out to artists with more listeners first, that means the bigger slices of the pie are only going to get bigger.
These changes come with several unanswered questions, too. Such as, when a track hits its streaming threshold, is everything earned up until that point then paid out, or is it only then that the track starts earning money?
What about if a track falls below the threshold, does it stop earning money completely?
Only time will tell, I guess. I’m very much a pessimistic person so this position comes with a healthy dose of doom and gloom. I’d like to hope that this all comes into play and we simply don’t notice.
But that’s unlikely.