Last month Music Business Worldwide broke the news that major changes were coming to Spotify‘s royalty model in Q1 2024. The most controversial of those changes? A new minimum annual threshold for streams before any track starts generating royalties on the service.
At the time of our report, we couldn’t confirm a precise number for this minimum threshold. Now we can: It’s 1,000 plays.
The news was first nodded to by a guest post from the President of the distribution platform Stem, Kristin Graziani, published on Thursday (November 2).
MBW has subsequently confirmed with sources close to conversations between Spotify and music rightsholders that 1,000 streams will indeed be the minimum yearly play-count volume that each track on the service has to hit in order to start generating royalties from Q1 2024.
We’ve also re-confirmed Spotify’s behind-the-scenes line on this to record labels and distributors right now: That the move is “designed to [demonetize] a population of tracks that today, on average, earn less than five cents per month”.
Five cents in recorded music royalties on Spotify in the US today can be generated by around 200 plays.
As we reported last month, Spotify believes that this move will de-monetize a portion of tracks that previously absorbed 0.5% of the service’s ‘Streamshare’ (i.e. ‘pro-rata’-based) royalty pool.
Spotify has told industry players that it expects the new 1,000-play minimum annual threshold will reallocate tens of millions of dollars per year from that 0.5% to the other 99.5% of the royalty pool.
In 2024, Spotify expects this will move $40 million that would have previously been paid to tracks with fewer than 1,000 streams to those with more than 1,000 streams.
One source close to the conversations between Spotify and music rightsholders told us: “This targets those royalty payouts whose value is being destroyed by being turned into fractional payments – pennies or nickels.
“Often, these micro-payments aren’t even reaching human beings; aggregators frequently require a minimum level of [paid-out streaming royalties] before they allow indie artists to withdraw the money.
“We’re talking about tracks [whose royalties] aren’t hitting those minimum levels, leaving their Spotify royalty payouts sitting idle in bank accounts.”
MBW itself nodded to Spotufy’s new 1,000-play threshold in a commentary posted on Thursday entitled: Talking “garbage”: How can Spotify and co. sort the dregs of the music business from the hidden treasures?
In that MBW Reacts article, we referenced comments made by Denis Ladegaillerie, CEO of Believe – parent of TuneCore – made on a recent podcast interview with Music Business Worldwide.
Ladegaillerie specifically expressed disagreement with the idea of a 1,000-stream monetization lower limit on music streaming services.
He said: “Why would you not pay such an artist [for getting less than 1,000 streams]? It doesn’t make any sense.
“What signal as a music industry do you send to aspiring artists if you go in that direction?”
The MBW Reacts article cited the example of Believe-distributed Iñigo Quintero, who recently hit No.1 on Spotify’s global streaming chart with his hit Si No Estás.
We wrote: Had Quintero been monetarily discouraged via a Spotify-style system during [his early career], might he have been downhearted enough to give up?
If we’re only talking about a minimum payout threshold of up to 1,000 streams a year? Probably not.
But if that threshold [moves] upwards in the future, to, say 10,000 streams – or 20,000 streams? Who knows.
Stories like this highlight the importance of the music industry’s leading streaming platforms – especially Spotify – striking the right balance between punishing [so-called] “garbage” while leaving the early green shoots of tomorrow’s “professional artists” unharmed.Music Business Worldwide