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.
Table of Contents:
• Spotify’s new royalty policies
• Minimum song lengths
• Penalizing digital music distributors
• Merchants of garbage
• Toxic notions about independent music
• Spotify’s royalty theft plan
• The insidious ploy to stop the majors’ “market erosion”
• This is bullshit — it’s time to fight
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!
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I’m going to check out Tidal
You are overlooking the obvious. Do what it takes to get your music played more than a thousand times. Which you should be doing anyway.
Have fun buying CDs nobody’s going to buy.
Not helpful. I’m sure many of these artists are working very hard to promote their music, but there’s just so much of it. Also, many of us put up music which had been released somewhere else already and Spotify doesn’t really help promote anything that isn’t a new release. That’s kind of shame, because I’m always discovering stuff online that came out years, or even decades ago that’s new to me. Some artists are getting a whole bunch of new fans this way.
The majors are lashing out at various stakeholders: The songwriters got a tiny increase in percentage of streaming, independent content is eroding their market share, and the aggregators are making alot of money on the float for these small-earning accounts.
Maybe independent artists could create their own streaming service? Leave Spotify & together form a digital platform where listeners can make their own playlists with the music they downloaded from the artists’ own streaming pages themselves?!
Tough one… Music fans listen to all sorts of music – major and indie – so any viable streaming site would need to license major content as well. Which is expensive to do. Plus, Bandcamp has something that’s close to this…
I think a better option is to change subscriptions to a site like Tidal which pays 3x what Spotify does.
Could you create a petition? I will sign it stright away!
Anyone can do that at change.org
In the past unsigned musicians had no access to radio and the shelves in big record stores. Yet they have found ways to market and sell their music. Is history about to repeat itself? Time for a renaissance of the underground. That also means time to revive CD Baby with its searchable website for dedicated fans to find what they couldn’t find elsewhere. Think about it!
There already is a better option out there than the CD Baby store: Bandcamp. Make sure to put your music up for sale there!
“Revive CD Baby” ? It chose to destroy itself a long time ago! Band cramp is going downhill too. Remember the original mp3 dot com?
Big media ALWAYS eventually usurps any social media that was designed specifically for the Everyman. I saw it happen to MySpace, YouTube, and Facebook (and TikTok not far behind). They cannot stomach anyone making it in music (especially) without their help and their permission. Spotify is the latest platform to cravenly cow-tow to the industry. They don’t like competition or fresh new sounds. They wish to keep regurgitating “what sells”, and create generic genre-friendly pap, and make that their only offerings; all I the name of maximum profit with minimum (preferably ZERO) risk.
Great read Tony! As always. I am wondering (as a music artist and musician myself of about 35 years),if I start a Change Dot Org petition, if fellows artists would sign it? And if I did, I would hope we would all choose to unite our voices under one petition. So that our voices count in bulk. And also if you, Tony, would share the link to that petition. My last Petition on Change Dot Org, I was able to make go viral and Chnage picked it up as one of their promoted petitions and 28,000 people signed it and I got my insurance to change what they did to me, literally OVERNIGHT! So how about it? Will others join me and promote it and sign it if I start the petition for us?
Many artists have asked about a petition. If you write a good one (I’m happy to look at it before you post it) we would be willing to promote it on our socials to start getting the word out.
I’d definitely sign it and share it up the yin yang!
One simple solution, is for ALL independent artists to LEAVE Spotify ‘en masse’. Then while that happens, the next bit is messy: getting together to organise our own INDEPENDENT streaming service that millions of the listening-public will jump on, knowing that it’s ONLY for NEW music pioneered & produced independently and/or supporters of this new platform.
A way to fund the set up would be a major ‘GoFundMe’ drive over a period of a year to buy the location, hardware, expertise and set up costs, completely FREE of all MAJORs interference and anyone else for that matter but a man who may be interested in backing this kind of a venture could be Elon Musk.
A new streaming service, which I will call for now: AR (all royalties) is the ONLY way to go.
No fight, no corrupt Congress, no legal proceedings. No total waste of time, money & energy. For example, being anti-war has in fact created more war, being anti-drugs has created more drugs, being anti-terrorists has visibly like all the other things, created more terrorists. Why?
That’s how the law of attraction works. Being ‘against’ something gives that very thing more energy, so instead of changing anything, things have noticeably gotten worse. It’s as if everyone has swallowed a nightmare pill.
THE problem with all of this is exactly the same.
Don’t fight Spotify. They only gain. Walk around them.
Be like water, flow around the rock, wear it down.
In this case: Spotify.
Screw Spotify!
I wouldn’t recommend that.
1. Spotify is where most music fans are listening to music. You don’t want to be absent from the platform. You just don’t want to put MONEY in their pockets.
2. An indie-only streaming site would not likely be popular enough to drive the economies of scale needed to be a viable business. Music fans listen to all sorts of music – major and indie – so any viable streaming site would need to license major content as well. Which is expensive to do. Plus, Bandcamp has something that’s close to this…
3. I think a better option is for artists to change their personal streaming subscriptions to a site like Tidal which pays 3x what Spotify does. And stop sharing bullshit Spotify Wrapped links and other links to the site.
4. And, of course, don’t forget about the humble CD to bring your music to market affordably.
I would say this just encourages me to head my physical sales and promote my online store foremost. Streaming services are a great access to new fans but not the main source of revenue.
BOOM! That’s right…
Distrokid is already giving artists a “first warning” about being on bot lists. The artists I know are definitely NOT on bot lists. They are part of a group called New Artist Spotlight (NAS) which support each other and promote each other in many different ways. This seems to me to be Distrokid trying to protect itself and this will lead to legitimate artists being banned from Spotify. THIS is a by-product of this huge theft.
NAS actively opposes bot-lists and runs anti payola campaigns on socials. We are already actively campaigning against this nonsense as well. Here is my post on Instagram:
https://www.instagram.com/reel/Cz0pcWYrqO0/?utm_source=ig_web_copy_link&igshid=MzRlODBiNWFlZA== which I hope people will check out and share. We ALL need to work together on this – It is a serious threat to indie artists.
Spotify claims that, “99.5% OF ALL STREAMS ARE OF TRACKS THAT HAVE AT LEAST 1,000 ANNUAL STREAMS, AND EACH OF THOSE TRACKS WILL EARN MORE UNDER THIS POLICY.”
I find that very, very suspect. I’m pulling all my labels tracks off spotify.
Right. Those tracks would earn NOTHING under the new policy. See my reply to another post above about why I don’t recommend removing your tracks from Spotify.
I’m sick of Spotify in general, and this just pushed me too far. I’m going to remove all my music from only Spotify, and at every show I will be telling my audience what they are doing to artists and encouraging people to drop their subscription and use another platform like Apple Music, (which pays me much higher royalties anyway!) If Spotify wants to rob from the little artists, we should all boycott them and get our fans to do the same.
See my comment to another post above about why you shouldn’t remove your music from Spotify. But you can CERTAINLY change your personal subscription to another service that pays more, and explain this to fans and encourage them to switch.
I contacted Spotify artists support but received no answers to my question about the transfer of royalties from low-earners to high-earners.
“Mae” answered different, generic questions about labels, publishers, and distributors. I suspect that “Mae” is AI.
AI-Mae concluded by telling me to contact CD Baby, then shut down the chat. I will contact CD Baby, then politicians, and then begin to move to a different streamer.
The support link given here won’t help you, and I haven’t found any other way to contact them on the site. I’m sure they disregard all complaints on this topic.
Hi Tony,
Point taken. So as an Independent Artist in the UK. What can I do to help lobby againt Spotify?
Kind regards,
Pete.
I don’t know if they are doing this in the UK too. If so, watch the video and read the blog for some suggestions.
As always the rich get richer and the poor get poorer !
I posted to facebook it looks like it got hidden or blocked I posted twice I didn’t see it. I messaged my senator, heard nothing, other a thank you 4 reaching out to him, he dosen’t hv my vote if he does nothing
I’ve already contacted several people I know as well as my representatives. I’m not happy about this at all – I don’t make anything from Spotify but the principle of the thing is important. It should be considered theft to take anything “due” another person and give it to someone else. And, as I’ve said before, streaming music is a failing model. We’ll keep running into nonsense like this until someone figures out a stable way to make something LIKE streaming work.
If you are an artist releasing music, write to your aggregator, distributor, or label to let them know you would not only want your music taken down if this policy goes into effect, but that you would also encourage them to take down ALL tracks from ALL artists that they have submitted to Spotify, and stop submitting any new music to Spotify at all. Aggregators and distributors represent thousands of artists. If they all go away at once, it would have far more impact than a few artists here and there taking down their catalogs. In order to force a change in policy, it takes collective action.
If you are a listener, write to your favorite artists (independent or major) and encourage them to boycott Spotify.
Tell all your friends, coworkers, and family members about the policy and encourage them to switch their subscription to a different DSP. (Deezer, Pandora, Apple Music, etc.)
Thank for this important information!