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First-Ever Public Disclosure: Spotify Unveils Payments and Contributions to Japan’s Music Industry in Annual Report

2024.5.30

#MUSIC

Understanding the Purpose of the New Royalty System Policy

Meanwhile, Spotify has implemented a new policy regarding its royalty system starting April 2024. Only tracks that meet the requirements, such as more than 1,000 plays in the past 12 months, are now eligible for royalty accrual.

From April 2024 onwards, only tracks that have reached a threshold of 1,000 streams or more within the past 12 months will be included in the calculation of the royalty pool for recorded music.
Furthermore, to qualify, a minimum number of unique listeners is required for each track, preventing users from artificially inflating play counts to gain eligibility. The specifics of the required minimum number are not disclosed to prevent further manipulation by malicious actors.
Spotify aims to ensure transparency in its policies, allowing artists to accurately understand the mechanisms and timing of royalty generation on the platform as much as possible.

Songs eligible for monetization – from Spotify

As background, the explanation includes the fact that many artists are not receiving royalties because they cannot exceed the minimum withdrawal amounts set by their labels/distributors (typically ranging from $2 to $50 per withdrawal) or the withdrawal fees at banks (usually ranging from $1 to $20 per withdrawal). Additionally, it’s noted that many artists are not receiving their royalties because the amounts are too small to remember. Royalties generated by tracks with fewer than 1,000 streams per year average $0.03 per month, but this amounts to a total of $40 million annually. The purpose of the policy change is to redistribute this sum by reallocating it to tracks with over 1,000 streams per year, increasing the amount reaching artists.

It’s stated that tracks meeting the aforementioned criteria on Spotify account for 99.5% of the total streams. Furthermore, since this policy change functions to redistribute royalties to artists who haven’t been paid previously, the total amount paid by Spotify to artists remains unchanged.

The new policy also addresses manipulated streaming and fraudulent revenue systems using noise tracks (including natural sounds, mechanical sounds, sound effects, silence, etc.). For the former, charges are billed to the content provider, while for the latter, criteria such as a track length of over 2 minutes are provided as royalty standards for noise track genres.

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