Dear Artists / Labels / Distributors / Content Providers,

As per a report from Music Business Worldwide, In the first quarter of 2024, Spotify intends to implement substantial alterations to its royalty payout system. Spotify wants to make these changes to help artists get more money by fixing three things that are taking money away from them.

In summary, the proposed modifications consist of the following:

• The implementation of a minimum annual streaming threshold, prior to which a track becomes eligible to generate royalties on Spotify. This strategic alteration is anticipated to reduce the earnings of a segment of tracks that had previously accounted for 0.5% of the platform’s overall royalty allocation.

At present, every playback on Spotify lasting more than 30 seconds results in the payment of royalties. However, this practice will undergo a significant transformation in the early part of the upcoming year. Commencing in the first quarter of 2024, as outlined in the digital streaming platform’s revised strategy, each individual track will be required to achieve a specific threshold of annual streams before it becomes eligible to yield royalties. This modification implies that, for such tracks to generate a monthly royalty of $0.05, they must meet this predefined streaming benchmark.

• The imposition of financial penalties on music distributors, including record labels, in cases where fraudulent activities are identified in tracks they have uploaded to Spotify.

Spotify asserts its leadership in employing highly advanced anti-fraud detection technology within the streaming industry, and it is resolute in its utilization. Furthermore, commencing in the first quarter of 2024, Spotify is planning to impose a financial penalty on the distributor responsible for any track engaging in such fraudulent practices. The objective behind this measure is to serve as a discouragement, particularly for music distributors, including record labels, who may have been involved in the dissemination of music from known unscrupulous entities. The impending enforcement penalty will apply to instances of overtly manipulated streaming behavior. Currently, individuals attempting to manipulate Spotify’s system may face consequences such as having their tracks removed without incurring financial penalties.

By introducing penalties at the distribution stage, Spotify aims to create a significant deterrent not only for those perpetrating fraudulent activities but also for the distributors who enable such misconduct.

• The establishment of a minimum duration requirement for non-music audio tracks, which must be met in order to qualify for royalty payments.

Commencing in the first quarter of 2024, Spotify intends to significantly extend the minimum duration requirement for each ‘non-music audio content’ track before triggering a payout. Although ‘noise’ currently constitutes a small fraction of Spotify’s total streams, it has been steadily contributing to the platform’s revenue as the overall royalty pool has expanded into the billions of dollars annually.

According to insider sources, some uploaders have exploited a tactic involving 31-second tracks to manipulate the system. By increasing the required length for ‘noise’ tracks to qualify for monetization, Spotify aims to reduce the prevalence of such short streams, subsequently directing a greater portion of the ‘Streamshare’ system’s revenue back to music content.