Spotify's new royalty model, explained | MN2S

Looking ahead to the upcoming year, Spotify is gearing up to introduce a revamped royalties model designed to channel increased revenue toward more prominent artists, record labels, and distributors while also helping to combat streaming fraud.

Outlined in a three-fold strategy, the new model establishes a streaming threshold that tracks must surpass to qualify for royalties, imposes penalties for fraudulent activities, and sets a minimum play-time requirement for so-called ‘functional’ noise tracks to generate revenue. Although Spotify has yet to formally announce this initiative, Billboard has independently verified the details.

Here’s a breakdown of Spotify’s updated royalties model:

  1. Tracks garnering fewer than 1,000 streams within a 12-month period will not be eligible for royalties. Instead, these royalties will be reallocated into the broader royalty pool.
  2. Labels and distributors will incur a 10-euro charge for any track identified with 90% or more of its streams being deemed fraudulent.
  3. Non-music noise tracks must now meet a minimum length of two minutes to qualify for royalties. Each play will contribute one-fifth of a music track’s stream, as per insider sources.

As previously outlined, Spotify’s forthcoming royalty adjustments will impact over two-thirds of its song catalog. However, this stems from the sheer volume of music uploaded to the platform, where a significant portion receives limited listener attention. While tens of millions of songs will fall below the 1,000-stream threshold, a Billboard source notes that this policy shift will only redirect approximately 0.5% of Spotify’s royalty pool to more popular tracks. In 2022, this amounted to about $46 million out of a total payout of $9.27 billion.

MN2S works with over 350 independent labels on supporting their creative vision. Get in touch today to find out more.

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