Spotify has announced an update to its royalty terms but its significance is far more than just money

A new minimum threshold that determines whether an artist gets paid or not

In its inception, streaming was a reactive measure. At the turn of the century and as the ‘00s wore on, digital bootlegging became ultra-ubiquitous, as the internet became a mainstay and pirating sites provided unlimited access to any and every song with a digital presence. As long as it had been recorded and publicly shared or archived on the internet, the public had access to it. As played out in Netflix’s drama miniseries, ‘The Playlist’, the unbridled—albeit slightly buggy—access to bootlegging almost any and mostly all music inspired Daniel Ek to found Spotify, undeniably the leading platform in global music streaming.

With the advent of Spotify, and similar streaming sites and apps, the music industry had to conform to an online piracy problem that was eating into potential profits. Now, streaming has become the primary means of music listening: Any internet-supporting device and a few clicks, and you can listen to millions of recorded music. For the vast majority of the listening public, we’re living an absolute dream; for many artist, it’s relative.

One of the main tensions in the ‘The Playlist’ revolves around artist compensation. In the show, the fictional character Bobbi T takes Ek to task on Spotify’s royalty model, a side of the show that asks questions without giving viewers any clear cut answers even through a time jump into the near future. It’s understandable, because there really isn’t any satisfactory solutions—except scrapping streaming and forcing listeners to go back to buying music, which won’t happen. At the moment, Spotify, as with the several popular streaming platforms around, employs the pro rata system in paying artists, dividing the pool of incoming revenue according to the number of plays songs get. On the face of it, that’s quite uncomplicated.

At the end of every month, the streamer gathers income of subscribing listeners and ad-generated revenue, pulling out operational cuts like taxes and billings, and divides the net revenue amongst rights holders—labels, publishers, distributors—based on the proportion. Basically, a song gets a fraction or percentage of the monthly net revenue in relation to the total amount of streams from listeners in a month. So, if a song by artist Y racks up a million streams, that number is divided by the total streams in a month, and the resulting fraction is factored against the total money to be divided.

Simple math, right?

While this payment model means pay-outs differ on a month-to-month basis, calculations have cited about $0.003 to $0.005 per stream, on average. This means it would take somewhere around 200 plays for a song to earn five cents. Compare that to digitally buying music, where albums sell for around $9.99 and singles sell for around $1.79. So, a song has to be played by a listener about 8,000 times to equal the value of buying the song. I can place a healthy bet that almost everyone who streams music has yet to play a song up to 8,000 times.

Amidst the unending conversations on whether the payment method in streaming needs to be fixed, Spotify has made a momentous announcement: A new minimum threshold for streams before any track starts generating royalties. Starting from Q1 2024, a song will have to be streamed at least 1,000 times before it can start earning money for its creators. According to reports, this new change is one of three to be implemented in order to “combat three drains on the royalty pool.”

The other two: financially penalising distributors when fraudulent activities is noticed on uploaded tracks, and a new minimum length of playing time for non-music “noise” tracks to generate royalties. For the former, it’s a measure to further combat stream farming, while the latter is an attempt to crack down on those who upload ambient tracks in fragmented forms while taking advantage of the 30-second revenue trigger for songs. According to Spotify, all three changes are a way to redirect the drains in the royalty pool to “working artists.”

Of all three measures, the minimum streams threshold for songs is brow-raising, and not exactly for positive reasons. While the details aren’t altogether neatly ironed out, it’s been reported that the Spotify plans to exclude songs that don’t reach the 1,000-minimum annual threshold will have their potential revenue reallocated to more popular stuff. It might seem minuscule, considering that the songs that fall within this category make up about 0.5% of the music on Spotify and a few million dollars in the revenue pool, but it’s a sinister approach in taking from the meagre and giving it to those better off.

Undoubtedly, this impending measure is going to affect independent artists. There are millions and millions of artists and creators on Spotify. There are two opposing ways to look at it: That number is an effect of the low barrier of releasing music in the streaming era, but the oversaturation makes it hard for many artists to gain modest to wide listenership. Sure, there are a lot of artists with gaudy to respectable number of Spotify, spotting millions and thousands of monthly listeners. The numbers their songs rake in are reflective of that. At that, there are also those with few listeners and not that many streams. What this minimum threshold rule threatens to do is determine their art as worthless, simply for not being popular enough.

In an interview with Music Ally back in 2020, Daniel Ek basically told artists to work harder. “Some artists that used to do well in the past may not do well in this future landscape,” Ek said. “You can’t record music once every three to four years and think that’s going to be enough. The artists today that are making it realise that it’s about creating a continuous engagement with their fans. It is about putting the work in, about the storytelling around the album, and about keeping a continuous dialogue with your fans.”

The immediate reactions from many artists to those statements were far from kind, with many citing the paltry compensations they receive from Spotify. The interview and subsequent rejoinders frame the relationship between artists and streaming platforms—not just Spotify. Considering that the Swedish streamer is one of the least paying platforms for music, none of that exchange feels particularly unwarranted. Now, with this minimum threshold measure, Spotify isn’t just dictating the terms of payment, it’s pretty much telling artists that they have to meet a criteria that goes beyond making and dropping music.

From a more parochial standpoint, it could be even more biting. In Nigeria, Spotify’s premium tier is pegged at N900, which means the net revenue pool is significantly less for many nascent (and “unpopular”) artists, especially when you factor in that paid streaming is still a modestly growing phenomenon. Also, without official numbers, it is difficult to know how many listeners are subscribed to Spotify, and in comparison to the earlier entrance of Apple Music and the rapid ubiquity of Audiomack, its presence can’t exactly be qualified as dominant.

For a rising or not-so-popular Nigerian artist who has to promote across streaming platforms, there’s the real possibility that songs might not crack over a thousand plays on Spotify alone, which means losing out on revenue, even if it’s very tiny. I have a new indie rapper friend who dropped an EP a while back, and I remember that he made a joke that he could order a plate of food worth about N3,000 with his quarterly check from streaming. Now, that amount just got smaller, since only one song of his has crossed the thousand stream milestone.

The truth is, making money off streaming isn’t easy—especially when you’re not Drake, Taylor Swift, BTS, and them. For the underground acts and the most unpopular of the unpopular artists, these tiny payments are a form of validation, one that helps the artist keep creating while holding on to a dream. Even for those who might be creating recreationally, it’s still flat out unfair that their work won’t be deemed as having any worth, simply because they’re not playing the popularity game Spotify has inevitably thrust on them and set the rules for.

Many people have already called on Spotify—and other streamers—to adopt a better, ‘artist-centric’ model, which is artists directly earning out of the subscription of listeners who play their music. That will be more complicated than the current pro rata system, and even more aggressive, as seen in the impending partnership between Deezer and Universal Music Group. There’s no ideal fix as far streaming is concerned, but deciding against paying musicians and song creators based on arbitrary number feels unethical. Yes, whatever is popular will and should earn the most, but every stream has a value, and its value should be assigned to its creator.