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Even if Spotify’s new royalty model won’t pay artists’ whose tracks don’t hit 1,000 streams in a year, songwriters will still earn money from those plays — for now, at least.
As Billboard reported last month, Spotify is planning to implement three changes to its royalty model early next year that would affect the lowest-streaming acts, non-music noise tracks and distributors and labels committing fraud. Under this new scheme, more than two-thirds of the tracks uploaded to that platform will be eligible to receive royalties — but that, notably, that will only impact about 0.5% of the royalty pool.
Nevertheless, this has sparked debate around the music community, with some questioning the ethics of not paying artists for whatever streams they garnered simply because they were not popular enough. Others supported the plan, citing the paltry sums an artist would be making for under 1,000 annual streams anyway (which amounts to about five cents). Many also believe this new rule could provide alleviate the issue of the royalty pool being divided among the exponentially-growing number of songs on Spotify’s platform, which likely dilutes the amount of money flowing to career artists.
But this change to Spotify’s royalty model does not affect songwriters and publishers payments at all, a source close to the company confirmed to Billboard. It just affects those who are involved in the master recording copyright.
For the uninitiated, there are two copyrights associated with every song released: the underlying musical work (often also called the “composition” or “song”) copyright, which protects the lyrics and melodies written by songwriters, and the master recording (also called the “sound recording”) copyright, which protects the artists’ one specific recording of that musical work.
In the United States, the royalty rates that songwriters and publishers can charge for the composition side of things are controlled by a government entity known as the Copyright Royalty Board. Every five years, the statutory rate structure for songwriters and publishers is renegotiated with the National Music Publishers’ Association (NMPA) as well as Nashville Songwriters Association International (NSAI) and other groups and individuals who represent the music industry’s fight to raise rates. (Other territories often base their publishing royalty rates off of those set in the U.S.)
Not everyone agrees on what specific rate structure they want, which has led to some infighting, but they all unite behind one principle: songwriters should earn more money. In fact, publishing earns just a fraction what the recorded music side does on streaming overall, the rates are far from equal. Many in the music business wish the current Copyright Royalty Board system could be abolished, freeing songwriters and publishers to negotiate rates in a free market without government interference, but this is unlikely to change, given it would require an act of Congress to overhaul an over one hundred year old law and services, many of which are owned by some of the world’s largest technology companies, would certainly lobby against it.
Those whose interests lie on the recording side, like record labels, get to negotiate directly with streaming services to set their royalty structure. This is why the streaming payment system can be experimented with in the ways seen now through Spotify’s recent changes, as well as Deezer’s new “artist-centric” payment plan, created with UMG. Overall, the publishing side of the business is handcuffed to whatever the current ruling says.
The system of streaming royalty payments for publishers and songwriters for 2023-2027 (also known as “phonorecords IV” “phono IV” or “CRB IV”), the current five year period, has already been set. National Music Publishers’ Association president and CEO David Israelite says it is possible that the next five year period, phono V, could be reconfigured to more closely mirror what is happening on the master recording side but that determination process won’t begin until about early 2026.
“We will have the benefit of watching how this plays out for a while before we ever have to address it, but it’s way too early to speculate what we might do,” says Israelite. Still, he adds, “it is horrible that we are locked in the statutory rate structure where we have no flexibility other than these five year windows but that is our situation… It’s a very different conversation than one company sitting down with another company and agreeing what they want to do [like it happens on the master side]. We are asking a court through litigation or an agreement to set a structure that applies to everyone and to build consensus around that. It’s much harder to change.”
Amazon started cutting jobs in the company’s music division this week, according to Reuters.
“We have been closely monitoring our organizational needs and prioritizing what matters most to customers and the long-term health of our businesses,” an Amazon spokesperson told Billboard in a statement. “Some roles have been eliminated on the Amazon Music team. We will continue to invest in Amazon Music, and spend our resources on the products and services that matter most to customers, creators, and artists.”
The rep did not provide any information on the extent of the cuts.
The latest wave of cuts adds to a brutal period for tech — and a rough one for the music industry. In the last 18-ish months, the tech behemoths, from Google to Meta to X (formerly Twitter) to Microsoft, have all laid off tens of thousands of workers.
Amazon has also gone through waves of big cuts already, first eliminating 18,000 jobs, and then cutting another 9,000. “The overriding tenet of our annual planning this year was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences that we believe can meaningfully improve customers’ lives and Amazon as a whole,” Amazon CEO Andy Jassy told employees in March.
In July, the site layoffs.fyi, which tracks the tech industry, estimated that more than 386,000 tech workers had been fired around the world since the beginning of 2022.
In music, Downtown Music Holdings, Warner Music Group, Spotify, Motown Records, Soundcloud, BMI, and more have laid off employees. (Downtown and SoundCloud have both done two rounds of cuts.) The language music executives have used in their layoff announcements has echoed messages from the tech world, often relying on buzzwords — think “efficiency” and “evolution” — and emphasizing the importance of “future success” as if that suddenly became an organizational priority.
It’s widely believed around the music industry that there are more layoffs to come.
Starting Wednesday (Nov. 8), Spotify subscribers in the United States can effortless transition from Britney Spears’ music to her recently released audiobiography, The Woman in Me, thanks to the launch of its previously announced offering of 15 hours of free audiobook streaming per month in Spotify Premium.
The Spotify Premium audiobook catalog includes more than 200,000 titles, over 70% of them bestselling titles from all five major book publishers (Hachette, HarperCollins Publishers, Macmillan, Penguin Random House, Simon & Schuster and RB Media) as well as independent publishers such as Bolinda, Dreamscape and Pushkin. Although Spotify has offered audiobooks since Sept. 2022, the user experience has been less than optimal. Users could listen to audiobooks in the Spotify app but, because Spotify wants to avoid costly in-app fees, users must purchase titles at its website.
Spotify announced its audiobook strategy on Oct. 3 and initially gave access to the company’s audiobook catalog only to subscribers in the United Kingdom and Australia. Rolling out audiobook streaming in its largest market will allow Spotify to better capture the expected benefits of offering free listening to a segment of its 226 million subscribers. “This greatly improves our offering, which will increase engagement on Spotify, which will then, of course, reduce churn,” explained CEO Daniel Ek at an Oct. 3 event.
Listeners who exceed the 15-hour monthly allotment can purchase additional listening time. In the early days of the audiobook offering in the United Kingdom and Australia, Spotify has “already seen consumers doing that in ways we probably wouldn’t have imagined, where some consumers are heavily upgrading and being really heavy audiobook listeners [from] day one,” Ek said during the company’s Oct. 24 earnings call.
To help listeners find audiobooks, Spotify offers an audiobook button on the search page and offers an editorially curated selection of popular titles at its audiobooks hub. Listeners can search by category — such as mystery & thriller or self-help — and scroll through lists such as “From book to screen” and “As seen on social media.”
The impetus for audiobook streaming harkens back to Spotify’s origins as a friction-less substitute for digital piracy that had decimated record label revenues by the time Spotify was founded in 2006. “We looked at the world and we thought the only way to beat piracy was to offer a much better experience,” said Ek during the Oct. 3 event. In 2018, Spotify applied the lessons it learned in music to a new format, podcasts, and, Ek claimed, added more than 100 million to podcast listeners to the ecosystem. “This created a win-win,” he explained. “The more people listened to podcasts, the more music grew. And the more people listened to music, the more podcasting grew as well.”
Now, Spotify sees audiobooks as the next opportunity to revitalize an underserved ecosystem with a single dominant player — Amazon-owned Audible in this case. “And just like in music and podcasting,” said Ek, “we’re really excited to be able to bring all the amazing tools that we built for creators and consumers alike to enable more discovery of these amazing audiobooks to the world.”
Most tracks on Spotify will not be eligible to receive royalties based on the company’s proposed royalty scheme that will go into effect in 2024. That’s because a track must reach a threshold of 1,000 streams within 12 months to receive royalty payouts, according to an article this week written by Kristin Graziani, president of music distributor Stem. A source with knowledge of the plan confirmed the details to Billboard.
According to Spotify’s Loud & Clear website, 37.5 million tracks had surpassed 1,000 all-time streams as of 2022. That’s out of a catalog of 100 million tracks at the end of 2022, per Spotify’s 2022 annual report. In other words, almost two-thirds of Spotify’s catalog has never reached the 12-month minimum stream count to be eligible to receive royalties. Given that’s all-time streams since the company launched in 2008, it stands to reason that fewer yet will reach 1,000 streams within a 12-month period.
While this 1,000-stream threshold affects a large number of tracks, it doesn’t impact much of Spotify’s royalties to creators and rights holders. Implementing the threshold will shift about 0.5% of Spotify’s royalty pool to more popular tracks, a source tells Billboard. That was equal to about $46 million in royalties in 2022, based on Spotify’s $9.27 billion cost of sales that year, which represents virtually all royalty payouts.
Tackling fraudulent streams could have a larger impact than a minimum threshold. Spotify’s new royalty scheme also imposes financial penalties for music distributors and labels when fraudulent activity has been detected on tracks they uploaded. That should incentivize distributors to locate and remove fraudulent tracks before they can get to streaming platforms.
Various estimates put fraudulent tracks’ share of listening — at Spotify and elsewhere — at 3% to 10% of total streams. With the 2022 global streaming market valued at $17.5 billion, according to the IFPI, up to $1 billion worth of streaming royalties globally is ending up in the wrong hands. Removing those fraudulent streams from eligibility means all other tracks will receive a greater share of the royalty pool.
French music company Believe would get a “significant double-digit” percentage growth in its market share at Deezer under the company’s new artist-centric royalty scheme, Believe CEO Denis Ladegaillerie said during the company’s Oct. 24 earnings call. The bulk of that impact comes from fighting streaming fraud and abuse, said Ladegaillerie, adding that Deezer has a “much higher” level of streaming fraud and abuse than Spotify and Apple Music. In contrast, he added, changing how royalties are allocated to artists would impact an “extremely marginal” amount of royalties.
A cleaner, easier way to improve all artists’ royalties — one resisted by streaming services until recently — is to raise subscription prices. Every time a streaming service raises fees by 10% — such as Spotify going from $9.99 to $10.99 per month in the U.S. in July — the royalties earned from those subscribers increase a commensurate amount. Deezer has raised its price twice in less than two years. Amazon Music, Apple Music and YouTube Music have also raised prices in the last year.
In the TikTok era, homemade remixes of songs — typically single tracks that have been sped up or slowed down, or two tracks mashed together — have become ever more popular. Increasingly, they are driving viral trends on the platform and garnering streams off of it.
Just how popular? In April, Larry Mills, senior vp of sales at the digital rights tech company Pex, wrote that Pex’s tech found “hundreds of millions of modified audio tracks distributed from July 2021 to March 2023,” which appeared on TikTok, SoundCloud, Audiomack, YouTube, Instagram and more.
On Wednesday (Nov. 1), Mills shared the results of a new Pex analysis — expanded to include streaming services like Spotify, Apple Music, Deezer, and Tidal — estimating that “at least 1% of all songs on [streaming platforms] are modified audio.”
“We’re talking more than 1 million unlicensed, manipulated songs that are diverting revenue away from rightsholders this very minute,” Mills wrote, pointing to homemade re-works of tracks by Halsey or One Republic that have amassed millions of plays. “These can generate millions in cumulative revenue for the uploaders instead of the correct rightsholders.”
Labels try to execute a tricky balancing act with user-generated remixes. They usually strike down the most popular unauthorized reworks on streaming services and move to release their own official versions in an attempt to pull those plays in-house. But they also find ways to encourage fan remixing, because it remains an effective form of music marketing at a time when most promotional strategies have proved toothless. “Rights holders understand that this process is inevitable, and it’s one of the best ways to bring new life to tracks,” Meng Ru Kuok, CEO of music technology company BandLab, said to Billboard earlier this year.
Mills argues that the industry needs a better system for tracking user-generated remixes and making sure royalties are going into the right pockets. “While these hyper-speed remixes may make songs go viral,” he wrote in April, “they’re also capable of diverting royalty payments away from rights holders and into the hands of other creators.”
Since Pex sells technology for identifying all this modified audio, it’s not exactly an unbiased party. But it’s notable that streaming services and distributors don’t have the best track record when it comes to keeping unauthorized content of any kind off their platforms.
It hasn’t been unusual to find leaked songs — especially from rappers with impassioned fan bases like Playboi Carti and Lil Uzi Vert — on Spotify, where leaked tracks can often be found climbing the viral chart, or TikTok. An unreleased Pink Pantheress song sampling Michael Jackson’s classic “Off the Wall” is currently hiding in plain sight on Spotify, masquerading as a podcast.
“Historically, streaming services don’t have an economic incentive to actually care about that,” Deezer CEO Jeronimo Folgueira told Billboard earlier this year. “We don’t care whether you listen to the original Drake, fake Drake, or a recording of the rain. We just want you to pay $10.99.” Folgueira called that incentive structure “actually a bad thing for the industry.”
In addition, many of the distribution companies that act as middlemen between artists and labels and the streaming services operate on a volume model — the more content they upload, the more money they make — which means it’s not in their financial interest to look closely at what they send along to streaming services.
However, the drive to improve this system has taken on new urgency this year. Rights holders and streaming services are going back and forth over how streaming payments should work and whether “an Ed Sheeran stream is worth exactly the same as a stream of rain falling on the roof,” as Warner Music Group CEO Robert Kyncl told financial analysts in May. As the industry starts to move to a system where all streams are no longer created equal, it becomes increasingly important to know exactly what’s on these platforms so it can sort different streams into different buckets.
In addition, the advance of artificial intelligence-driven technology has allowed for easily accessible and accurate-sounding voice-cloning, which has alarmed some executives and artists in a way that sped-up remixes have not. “In our conversations with the labels, we heard that some artists are really pissed about this stuff,” says Geraldo Ramos, co-founder/CEO of the music-tech company Moises. “They’re calling their label to say, ‘Hey, it isn’t acceptable, my voice is everywhere.’”
This presents new challenges, but also perhaps means new opportunities for digital fingerprint technology companies, whether that’s stalwarts like Audible Magic or newer players like Pex. “With AI, just think how much the creation of derivative works is going to exponentially grow — how many covers are going to get created, how many remixes are gonna get created,” Audible Magic CEO Kuni Takahashi told Billboard this summer. “The scale of what we’re trying to identify and the pace of change is going to keep getting faster.”
Jung Kook’s solo career is breaking records. The BTS superstar’s “Seven” featuring Latto became the fastest song to reach 1 billion streams in Spotify history, the streaming platform announced on Monday (Oct. 30). Explore See latest videos, charts and news See latest videos, charts and news It’s been 108 days since the song was first released, […]
As part of our continuing efforts to serve the music industry and its creators, Billboard now features a royalty calculator for Spotify and Apple Music for readers. Explore Explore See latest videos, charts and news See latest videos, charts and news Created by Manatt, Phelps & Phillips, a legal and consulting firm that specializes in […]
As part of our continuing efforts to serve the music industry and its creators, Billboard now features a royalty calculator for Spotify and Apple Music for readers. The calculator below was created by Manatt, Phelps & Phillips, a legal and consulting firm that specializes in music industry law; and is based on the firm’s analysis […]
Taylor Swift has done it again. The pop star’s re-recorded 1989 album has made Spotify history in its first 24 hours of release. Spotify announced on Saturday (Oct. 28) that 1989 (Taylor’s Version), Swift’s 21-track album that arrived on Friday, is officially the most-streamed album in a single day in the streaming service’s history. But […]
On Tuesday (Oct. 24), Iñigo Quintero’s “Si No Estás” garnered more than 5.7 million plays in just one day, an impressive amount that pushed it to the top of Spotify‘s global chart. It’s the first time a solo Spanish artist has achieved this milestone (previously Canary Islander Quevedo accomplished the feat alongside Argentina’s Bizarrap with “Bzrp Music Sessions, Vol. 52”), and it’s all the more shocking because, at least outside of Spain, Quintero was until recently a total unknown.
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The song also reached the coveted top 10 on Billboard‘s global charts, peaking at No. 4 on Billboard Global Excl. U.S. and No. 10 on Billboard Global 200. And with daily plays surpassing such popular tracks as Miley Cyrus’ “Flowers,” Taylor Swift’s “Cruel Summer” or Young Miko’s “Wiggy,” the meteoric rise is also enigmatic in that it has occurred without any traditional promotion, publicity, press releases or information about the artist behind the sensation. (Billboard Español requested an interview with Quintero’s representative and the response was that he is not currently talking to the company).
With verses like “Esto es una alucinación/ Quiero ver tu otra mitad/ Alejarme de esta ciudad/ Y contagiarme de tu forma de pensar” (“This is a delusion/ I want to see your other half/ Get away from this city/ And immerse in your way of thinking.”) “Si No Estás” is a piano-pop ballad that alludes to an intense obsession and longing for someone who is far away, and the anguish and pain that result from that separation — a song of unusual depth for a 2023 pop hit.
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“Clearly, Iñigo’s songs are connecting with the people,” says Esteve Lombarte, founder of the Acqustic label, who represents the artist. “I think for a long time we’ve had more superficial songs focused on lives of great luxury — of cars, wealth and houses — and nowadays, there are a lot more connecting with day-to-day problems that talk about love, friendship and other issues related to people’s concerns.”
What is certain is the power of the song and its meaning, which has generated a great deal of debate on social networks. “Si No Estás” has been interpreted in different ways, from a song dedicated to God, to a reflection on a romantic breakup.
Lombarte explains that the song began to go viral organically through TikTok, and immediately connected with listeners. “From that initial boost we decided to amplify [the song],” he says. Quintero connected with the label through his other artist Besmaya, and in March 2023 they signed him.
“The truth is that the success of ‘Si No Estás’ is an unprecedented triumph in the industry, but we believe that what is behind this song is a very talented artist,” Lombarte points out. “And the rest of the songs are really doing very well too. The proof of that is that ‘Sobredosis’ is already in the top 100 in Spain, and there will be more and more songs, and we will get to know more of the artist little by little.”
He continues: “The clearest proof is that countries like France, Germany, Holland, Luxembourg, Switzerland — non-Spanish-speaking countries — have also connected with the artist beyond the lyrics. It is part of the magic of this art.”
Other projects that Aqcustic manages are Malmö 040, Besmaya, Ciao Marina, Maren, Yarea, Inazio and Hey Kid. “After this great success, what we will do is to continue working and preparing songs. The important thing is to sit down, compose and work to release music that connect as well as ‘Si No Estás’ has connected,” adds Lombarte.
Additional reporting by Franchesca Guim.