Estimated reading time: 8 minutes
Earlier this month, Spotify announced some major changes to their royalty accounting policies, and I am pretty upset about one of them — and I’m sure you will be too.
Here’s the deal: Spotify has been under huge pressure from the majors to pay them more money. It’s what the labels call “Artist-Centric” royalties. Sounds pretty good, right? Except, in their Orwellian use of the term, “Artist-Centric” means royalty theft where more money gets paid to major artists and less to you, the independent artist.
Spotify’s new royalty policies
Here are the three ways that Spotify announced they’re going to change their royalty accounting.
1. Minimum lengths for white noise and background noise recordings
You know the recordings of waves crashing on the shore, thunderstorms, or rainfall sounds that many people use to fall asleep to? They will need to be a minimum length for them to monetize.
2. Digital distributors who contribute to fraudulent accounts will be penalized
If an artist gets connected to Spotify via a digital distributor and then uses, for example, a streaming farm to artificially boost their streams, the artist will be booted off the platform and the distributor will face penalties.
I assume these penalties will include reduced service levels for all the artists the distributor distributes, longer wait times before songs go live, suspensions of royalty payments, and even fines for the distributor. What the penalties actually are has not been announced yet.
3. “Low volume” tracks will not get royalty payments
The most egregious new policy change is that any tracks that get fewer than 1,000 streams per year will not get paid to the artists who own the rights to the songs. Instead, those royalty will go into a pool that gets redistributed to every other artist on the platform, proportionate to streams. Which means, those artist royalty revenues will now go to, guess who? The majors.
Minimum song lengths
Let me quickly address the point I actually have no beef with: minimum song lengths for background noise tracks. These tracks are quite popular, and the issue is they’re frequently supplied by content creators, not artists, who optimize their tracks to be 31 seconds long to maximize their royalty collections.
They combine those tracks into long playlists that frequently get played on repeat all night long as a listener sleeps, racking up tons of stream counts and royalties. While I certainly think it’s okay for these tracks to collect royalties, I’m also fine with setting a minimum length for such tracks to prevent royalty hoarding.
Rumor has it that the specified length will be four minutes per track, and I’m perfectly okay with freeing up the excess royalties from some of these content farms and dropping them back in the pool for legitimate artist payments.
Penalizing digital music distributors
As far as the penalties for distributors, no one knows how this will work, but it seems rather challenging. Independent digital music distributors like CD Baby, TuneCore, and Distrokid each deal with hundreds of thousands of artists a year. They deliver millions of tracks and they already have processes to prevent copyright infringement and fraud.
However, penalizing them and all the artists they distribute when a few of their artists commit streaming fraud seems really severe. We’ll have to see how this plays out between the distributors and the digital service providers (DSPs). Grab your popcorn.
Merchants of garbage
The thing that really pisses me off about all of this is the attitude of the music industry players who believe the content these independent distributors deliver to the DSPs is somehow inferior. Recently, Universal Music Chairman Lucian Grainge basically called the likes of DistroKid, TuneCore, and CD Baby merchants of garbage.
Specifically, he put music produced by new artists who have no engagement with fans — yet — in the same category as vacuum cleaner sounds or rain on a pane of glass. And he argued that, and I quote, “those groups who have expressed the concern about ‘Artist-Centric’ are those whose business model is based on being ‘merchants of garbage.'”
Merchants of garbage? Go to hell, Lucian.
I know you and your fellow major-label CEOs are very concerned about the market share erosion the majors are seeing caused by the explosion in popularity and volume of independently distributed music. But let me remind you, that garbage you’re talking about is where some of the most creative and interesting music is being made today. It’s where some of the most loyal and passionate fans listen to music and buy CDs and merch, and it may just be where your next big artist is coming from.
Besides, this independent music in no way gets in the way of music fans discovering your artists’ music — the streaming algorithms will make damn sure of that.
Toxic notions about independent music
The danger in this whole thing, of course, is that this toxic “indie is garbage” mindset will become mainstreamed and, indeed, because the majors are talking about it, it appears Spotify is at least is buying into the argument and is okay with the notion of royalty theft and redistribution.
Perhaps it should not come as a surprise that the majors all own a minority equity stake in that streaming platform. And here’s the truly insidious part: this attitude that small independent artists are inferior to popular acts has led to the Spotify proposal that will really hurt independent artists and which is my major beef with Spotify and the majors today.
Spotify’s royalty theft plan
The announcement was that tracks that have fewer than a thousand stream per year will not get paid their royalties. How does Spotify think they can get away with what amounts to royalty theft by not paying legitimate artist-earned royalties to the artists who earned them?
Instead, the plan is to redistribute royalties owed to indie artists to the most popular artists on the platform? You know what that’s called? Stealing! Sure, you could argue that at that level of streams the royalty owed per track is so low, under $5, that it won’t make any financial difference to you whether you get paid or not, and you would be probably right. But that’s not the point!
There are around 100 million songs on Spotify right now. Last year, 37.5 million of them hit 1,000 plays. That means that, as of next year, close to two-third of the tracks streamed on Spotify will not result in payment to the artists who earned them.
What if you are an artist with an album out and all 10 tracks were streamed 900 times? All of a sudden, we’re talking about $40 of your royalties getting redistributed to the majors. If my old punk rock band’s album from 1987 earns $40 this year — those royalties are mine! Keep your hands off them! What makes my streams any less legit than a Bad Bunny or Taylor Swift stream?
The insidious ploy to stop the majors’ “market erosion”
Spotify says this program will start in the first quarter of 2024, which is right around the corner, and they estimate that in year one they will redirect $40 million in royalties from small DIY artists to the majors. They plan to steal $40 million of your royalties in just the first year of the program. Spotify CEO Daniel Ek has said that he expects they’ll shift $1 billion in royalties over five years.
There’s this really sharp industry consultant named Mark Mulligan who runs the Music Industry Blog. He analyzed the Spotify proposal and came to some interesting conclusions. Here’s a quote. (Note that when he mentions “artist direct artists,” he means artists who directly distribute their content to streaming platforms through digital distributors like CD Baby, TuneCore and DistroKid.)
The majority of artist direct artists will no longer be paid for their contribution to the value of the $11.99 subscription. The circa 10 percent of consumption they will generate will disappear from the streaming revenue map. They will be “othered.” Their revenue becoming a new black box for the biggest artists to share between themselves, which means that, “hey, presto,” all that annoying artist direct market share suddenly gets reallocated to everyone else. Market share erosion, what market share erosion?
This is bullshit — it’s time to fight
Since I’m not as smart as Mark Mulligan, let me add a much less eloquent quote from Tony van Veen: “This is bullshit.”
Congress should make it illegal to take legitimately earned, trackable artist royalties and not pay them to the artists who earned them. There is no way this kind of reverse Robin Hood scheme — stealing from the little guy and giving it to the big guy — should ever be allowed to happen.
So, what do we do about it? For one, I call on the leaders of CD Baby, DistroKid, and TuneCore to band together and join other like-minded music organizations like the Future of Music Coalition to lobby Congress to make it illegal to appropriate any legitimately earned royalties from any artist and redistribute it to a pool that pays the majors, or anybody else. I also call on them to rally their artist bases to help stop these efforts.
I also urge you to message Spotify directly to express your displeasure. Hit their artist support section at artists.spotify.com/contact, tweet at them, tag them in your social posts. Let’s create a tsunami of opposition and outrage at this program of royalty theft in plain daylight.
Finally, I urge you to write your Congressperson and Senators and ask them to intervene. Let’s flat out make it illegal to take away your royalties for the benefit of others who did not earn them. Go to senate.gov or house.gov and click on the link to find your Senator or representative.
This is really important, whether your annual royalties are $5 or $50,000, it’s about the principle. Taking any artist’s legitimately earned royalties and redistributing them to others is wrong, no matter how you slice it. And it’s doubly infuriating when its being paid to artists who are already earning lots more than you are in streaming royalties.
If you have other suggestions for ways independent music artists can fight, leave a comment below. Are you ready to do something about this? Let’s create that tsunami!
Choosing a digital distributor for your music: Part 1
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How to Get Your Music on Spotify
Digital music distribution: It’s not just about streaming
The MLC’s $424 million royalty distribution conundrum