Spotify will reportedly change its royalty payout formula beginning next year in an effort to cut out scammers and more equitably distribute funds among “legitimate artists” and rightsholders. As a result, it is estimated that about $1 billion in royalty payments will be redistributed over the next five years. The streamer is considering setting a minimum number of annual streams to qualify for royalty payments — which is generating controversy — as well as sanctions on distributors and labels determined to be fraudulently manipulating streams, and adding a playtime threshold that targets so called “noise tracks” designed to emulate music.

Spotify is said to be discussing the new royalty model with various stakeholders. Music Business Worldwide reports that “although Spotify will continue with its pro-rata royalty system (aka ‘Streamshare’),” it will make those new adjustments in attempt to thwart those attempting to game the system.

“Today, every play on Spotify over 30 seconds long triggers a royalty payment,” something that will change as a result of the new policies, MBW reports, adding that “Spotify says tracks that [currently] represent 99.5 percent of Streamshare will continue to monetize after these changes.”

Spotify went public in 2018 but is not required to disclose its royalty payment formula, though it has been reported to be about $0.003 per stream for all music.

Although the quantity of streams that will trigger royalty payments wasn’t specified, MBW quotes a source saying the move “is designed to [demonetize] a population of tracks that today, on average, earn less than five cents per month.” At that rate, about 17 plays per month would generate $0.05, translating to an annual minimum of roughly 200 plays per year.

The Verge says “many indie tracks don’t hit this threshold, and so the pennies those artists would otherwise earn will be diverted to Spotify’s ‘streamshare’ pool” and be divvied up among artists that are more popular. While pennies per month doesn’t sound like much, The Verge notes that when added up “it accounts for tens of millions of dollars” annually.

This could be a potential use case for an AI model trained to distinguish “noise” from artisan-crafted indie tracks. Noise disseminators game Spotify’s payment system by uploading tracks sometimes as short as 31 seconds that are titled and formatted in such as way as to trick people and algorithms into selecting and playing them. The plan succeeds enough to have triggered significant backlash.

The other big change “will leverage [Spotify’s] anti-fraud detection technology,” writes Engadget, noting that “if it detects illegal activity, such as the use of AI tools to repeatedly stream tracks and artificially boost their play count, the company will slap their distributors with financial penalties.”

Related:
The New ‘Efficient’ Spotify Has a Very Different Approach to Podcasting, The Verge, 10/25/23
Spotify Posts Third-Quarter Profit, Beats Earnings, Axios, 10/24/23
Spotify CEO Daniel Ek Says He Couldn’t Have Built the Platform if He Came Up with It Today — and He’s Blaming Apple, Fortune, 10/24/23