Spotify is set to overhaul how it pays artists, implementing a significant change in its royalty model starting in early 2024.
The core of this change is the introduction of a minimum stream threshold for artist payments. Specifically, tracks will need to achieve at least 1,000 streams within a 12-month period to earn royalties.
This change in Spotify’s payment structure comes amidst ongoing discussions in the music industry about fair compensation for artists from streaming platforms. Historically, Spotify has been considered one of the platforms that pay artists less per stream, offering around $0.0033 per stream, compared to Apple Music’s $0.01 and Tidal’s $0.013 per stream.
Spotify’s updated royalty model is expected to generate significant revenue for artists. It is projected that these changes will generate $1 billion over five years for both new and popular artists. This initiative by Spotify is a part of its broader commitment to ensure fair payment distribution and to address the concerns raised by artists and the music industry regarding streaming revenues.
While the move to set a minimum threshold for royalties might seem restrictive, it is a step towards more equitable payment structures in the streaming industry. By setting this benchmark, Spotify aims to ensure that artists are compensated more fairly for their work, especially those whose music achieves significant streaming numbers.
This update is expected to have a profound impact on the way artists are compensated by Spotify, potentially influencing the broader streaming market as well. The focus on fair compensation aligns with the evolving expectations of artists and stakeholders in the digital music industry.
Finally, as Spotify introduces changes to its royalty model, it’s essential for artists to understand how these adjustments factor into their tax filing processes. The income generated from streaming royalties is considered taxable income, and artists are responsible for reporting it accurately on their tax returns. With the potential for increased revenue under Spotify’s updated payment structure, artists may need to implement a reliable tax filing tool (such as Taxcaster) or consult with a tax professional.
