How Do Spotify’s 2024 Changes in Royalty Rates Affect Independent Artists?

How Do Spotify’s Changes in Royalty Rates Affect Independent Artists?

Time for some more royalty payment news! Most independent musicians releasing music today understand that the music industry itself is fundamentally flawed in its use of archaic business practices in today’s digital age. We agree to the industry’s terms and conditions every time that we release new music on streaming platforms. 

With Spotify’s proposed changes to artist royalties to take effect in 2024, independent artists are questioning whether enough is enough. But how can independent artists navigate the music industry when it seems as if everything is stacked against them?

What Are Spotify’s Proposed Changes in Royalty Payout?

What Are Spotify’s Proposed Changes in Royalty Payout?

In November 2023, Spotify announced that they would be making considerable changes to the model in which they pay artists for music streaming royalties to combat bot plays. Since its inception, Spotify has continually adjusted its royalty rate, but its latest announcement carries consequences for artists with smaller audiences.

For an artist to receive streaming royalties for 1 individual song, that song must generate at least 1000 plays throughout the year. Every song in the artist’s catalog will fall under this requirement, and the count restarts every year.

In other words, generating at least 1000 plays in a year does not guarantee royalty payments for that song in the following years. Instead, that song will need to continually generate at least 1000 plays each year.

Noise tracks deemed “non-music” also take a hit, with the platform requiring these tracks to be at least 2 minutes long. In addition, Spotify will only pay out 20% of the entire going royalty rate for each play.

Are you wondering where that money is going if you aren’t getting paid your dues? It probably comes as no surprise, but that money will go to the major label artists who arguably drive the most traffic to the platform. 

How Do These Changes to Spotify’s Royalty Payouts Affect Music Distributors?

Artists with small audiences (and noise groups) aren’t the only ones taking a hit here. Spotify will charge a €10 fee to all labels and distributors who are found to be releasing songs that have been deemed bot-listed for fraudulent high play counts, or those tracks specified as being “non-musical noise”.

As you might imagine, distributing companies have already made changes to their service fees. Such changes might make you think twice about the way you release your music as an independent artist from here on out.

CD Baby has been renowned for nearly 2 decades for its seamless distribution process, praised for its 1-time fee and royalty collection service (which is included in its premium program). This premium program is now roughly $40 for both singles and/or multi-song albums. 

Yes, you read that right. If you want CD Baby to collect royalties on your new single, it will be about $40. Wouldn’t it then make the most economic sense to release an album? 

On the one hand, CD Baby’s updated program will broker your music for sync licensing opportunities, which could net more revenue should a song be chosen. This, of course, does come with its own 40% fee, taken from the royalty payments directly. 

YouTube music marketing “gurus” have somehow brainwashed the industry into thinking that releasing a steady stream of singles (sometimes 1 per week) is the way to success. CD Baby’s changes are just 1 small example of something that could carry with it significant consequences as a byproduct.

For starters, we might just very well enter an age where we begin to value quality over quantity again. It may soon become too expensive for smaller artists to not be discerning about what should be released in a collection of songs.

CD Baby used to register songs with PRO organizations such as ASCAP and BMI, but no longer does. Now, their new program primarily registers songs with 2 different organizations (which artists can do on their own), including:

  • SoundExchange
  • Mechanical Licensing Collective (MLC)

Granted, CD Baby isn’t the only music distribution service in the industry. Only time will tell whether other distribution platforms will follow suit in a similar matter. 

Nevertheless, it’s not too early to begin thinking about how you (as an artist) can navigate through this. 

What Can Artists Do In Response To Spotify’s Royalty Rate Changes?

In a perfect world, an artist like Taylor Swift (who recently surpassed a net worth of $1 Billion, and has been known to weaponize her fanbase for the common good) would speak out against these unfair and unequal practices. She could easily explain to her fans that streaming music on these platforms doesn’t necessarily support the artists in the way they might otherwise think. 

But, considering that she and other artists of the same caliber of popularity are directly benefitting from this, it’s highly unlikely we’ll see this happen.

Sure, artists have spoken out in the past, with many having removed their catalogs out of protest. Neil Young is one of the most obvious examples of this with his development of the short-lived Pono. 

So, what can artists do in response to such proposed changes?

Stage a Mass Boycott

At the far end of the extreme, artists can unite together to boycott Spotify and other streaming platforms to demand change. Of course, everyone is gung-ho about such ideas until it becomes time to actually execute the plan.

With something like this, artists would need to detach themselves from the play count and their popularity on the platform itself as they go to their distributor to have it removed from the streaming platform. And, let’s be real, it’s going to take a fairly sizable group of people to start doing this to make it the trend for others to follow.

Think about it, some people need that extra reassurance that other people are also taking action for a cause. If enough people take action, those who choose to remain on the platform might be seen in an entirely different light in the aftermath.

2023 saw instances of unions in both the automotive industry and the entertainment industries (including writers and actors) going on strike for fair wages. What is stopping musicians from doing the same thing?

For such a plan to be realistic, every music artist needs to educate their audience on how best to support their favorite musicians. Alienating our audience and making it difficult for them to access our music only happens if those who listen to our music are unaware of why we are taking such actions.

Along with that, artists would need to collectively decide on a day to begin such a mass exodus. Of course, taking such actions can make anyone wonder what they should do with their music in the meantime.

Release Your Music On Your Website

We’ve all heard that physical media is dead, but vinyl records, CDs, and even cassette tapes are purchased regularly by music fans who value physical ownership over their media while directly supporting their favorite artists. 

In 2024, it’s perhaps even more important than ever to have a website for your music project. Not only is it a place where your fans can congregate to catch up on news, but you can also release and sell your music directly from the website.

In a way, this is not all that unlike what the band Wilco did when they released their legendary album, Yankee Hotel Foxtrot. Before release, their record label issued the ultimatum to make changes to the album or get dropped from the label entirely (spoiler: they chose to keep their art intact).

There are many different platforms you can use to build such a website. Bandzoogle is a reputable website-building platform aimed at allowing musicians to sell their music and merchandise to their fans.

Release Your Music On Your Website

The process of hosting your music on a website platform like this is incredibly easy. In many instances, you can allow your fans to stream your music for free directly from the website itself, with the option to pay for a download should they choose. 

Having some worthwhile and quality merchandise on your website at the same time only encourages fans to go the extra mile in their support of your music. 

Release Your Music On Your Website

Doesn’t Streaming Pay More Money?

If you’re not entirely convinced, let’s do some simple math. While these numbers may not directly apply to each person individually, they help to illustrate the benefit of taking power into your own hands.

Spotify’s current royalty rate is about $0.0024 per 1 song stream. If 1 song generates 1,000,000 plays in a year, the artist will gain $2400 for that 1 song (not including any fees related to distribution or record labels, which cuts into profit).

Now, let’s say that we sell the same song on our own website for $0.99 just like the golden days of the iPod when MP3s were widely available for purchase. Generating 1,000,000 purchases of that same song at $0.99 would equate to $990,000 (not including any associated fees). 

Sure, it’s quite a bit more difficult to get someone to pay $1 for something when they could listen to it for “free”. 

But that’s where smaller artists need to spend more time demonstrating the value and benefit of a music fan actually being able to own the music they listen to (as opposed to paying a recurring subscription fee to listen to the track without being pummeled with advertisements). 

Doesn’t Streaming Pay More Money?

People love to follow trends, and artists can easily make MP3 players trendy once again. Chances are, you have fans who have a 20-year-old iPod hanging out in a desk drawer, praying for the day it sees the light of day again.

In a world where quality suffers in the name of profits, we can choose to be the beacon of change. We can provide an example to follow to show that we do not have to blindly accept things as they are.

What Does The Future of the Music Industry Look Like? 

If you read any books about the state of the music industry in the early 2000s, they almost all agreed that music would go digital. Of course, while they were “predicting” the future, the truth is that they were describing what was already happening in the wake of torrenting services.

We could all likely make predictions but the truth of the matter is that some things will always remain the same: artists are going to write, record, and perform their own music. 

The last 20 years have proven that artists do not necessarily need to be tied up with a major record label to make a significant impact. Like cable television networks, record labels seem to be hanging by a thread but continue to find ways to churn a consistent profit. 

Until something better comes along, streaming platforms will likely always be a thing. These services provide a point of convenience for both artists and fans to be able to connect through music.

With that being said, it’s perhaps more important than ever to be able to drive traffic to your own website as opposed to a streaming platform. Spotify can still be used to a certain degree, but we are all doing ourselves a massive disservice by spending all of our time and energy pointing our fans to consume our music there rather than our own website domain. 

Like most things, there’s not a black-and-white answer that can readily solve this problem, as it’s riddled with complexities that affect different people to varying degrees. 

What is more likely is that we will need to continue to utilize every avenue that we can if we want to reach the most people possible. After all, the internet is quite a large place, and there is not 1 specific location where everyone in the world congregates to discover music. 

But, at the same time, we as artists (no matter how big or small in success) need to take it upon ourselves to shift the industry in our favor. Even if this is done in silence without making a big show out of it. 

We can take our power back without needing to rely on the royalty payments that come from streaming services (but which will go to other artists if you don’t meet a threshold). That way, the industry can continue to report record losses in profit as they wonder why their business model keeps failing. 

And then, perhaps as a byproduct of quality over quantity, we can shift the collective mindset more towards appreciation as opposed to the mindless consumption that has infected the global community at large. 

The funny thing is that creativity is never held to the same degree as other professions. Yet, almost everyone of all professions relies on something made by creativity (TV, films, literature, and yes, music) to help them get through each day, entertaining themselves to unload the day’s stresses and forget about the world’s problems for just a brief moment in time. 

What Is The Value of Music?

If music is such a valuable commodity to almost every living individual on the planet, why then is it devalued to almost meaninglessness? Streaming platforms and other periphery services are almost akin to gas and oil suppliers, who would make no money without the resources they rely on. 

If we are to call music a commodity and compare it to anything else that is bought and sold with money, one has to assume that music, too, is subject to the confines of supply and demand.

However, if we are to compare it to oil, the answer isn’t exactly cut and dry when it comes to cost. As 2020 illustrated during the height of the COVID pandemic, there can be an abundance of oil supply with low demand, and prices might only barely reflect such changes in the marketplace. 

While the price of oil is dictated by the open market, those who produce the oil do have operating costs that are then passed onto those who supply the resource. Where does music fall in this equation?

In a way, it seems as if it’s the musicians who should be setting a base-level price based on operating costs. Unfortunately, it’s hard to justify this when some artists spend $50,000 recording an album in a studio, and others record their album on their own in a bedroom with $100 gear. 

Yet, ironically enough, sometimes it's those DIY albums that end up becoming the landmark albums of the decade, while expensive productions can become financial disasters. 

At the same time, the industry currently has a low barrier of entry, allowing anyone with a few dollars and the inclination to release music with the potential of reaching a global audience.

Has this over-saturated the market? Quite possibly, but again, this isn’t exactly clear cut either, as in past decades, musicians were recording and releasing albums to their local communities regardless of whether they had a contract with a major record label.

What used to be region-locked is now widely available for anyone who knows the proper words to enter into the search bar. Yet, we can all probably agree that widespread success isn’t exactly any closer than the “pipe dream” days of the pre-internet era. 

If anything, the internet has made it more of a possibility to find people who have a particular taste for your specific musical niche. Aside from having a catalog of worthwhile music, the barrier to success is primarily finding a way to be able to reach those people, which in a way, is not any different than how it’s always been.

Where Do We Go From Here?

Where Do We Go From Here?

At the end of the day, it’s important to remember that we’ve always had a choice in the matter. Spotify and other streaming platforms are just tools that we can use to reach a wider audience and to make things more convenient for people who listen to music.

But, like those oil production companies, we can choose to sell our music at our own designated prices, choosing not to grant access to those “suppliers” who will not pay an agreeable rate.

This could seem like a scary decision, primarily because the market will dictate what is worth $1 or $10. And, unfortunately, some people will simply fail to find your music that valuable, and outside of quality control, that is something you have no control over. 

Some people are willing to spend 6 figures for a banana taped to a wall. Others won’t see the point in paying for something of Bach-level composition. 

Still, the fact that Spotify has the gall to label noise as non-musical is a bit excessive. Would, then, Sonic Youth’s noise catalog be considered non-musical, or would bands of such nature be immune simply for the sake of intrinsic artistic value?

Perhaps, like one’s taste in art, Spotify is simply exercising its own “personal” tastes.

Regardless, it doesn’t make things any simpler for those who are considering a music career and are, for example, thinking of buying their first guitar and wondering where to take lessons in hopes of one day being a music star. What are the upcoming artists of the future generations supposed to do?

The answer is quite simple: do what the artists before them have done, which is primarily, writing, recording, and performing music. Playing the music is the only thing of true importance; everything else is just an accessory to this.

Nobody can predict what the music industry will look like in 30 years. Artists in the future are likely going to continue to battle with similar topics, which have seemingly always been an issue since the dawn of the recording industry. 

Technology will continue to advance and the music industry will likely always suffer from a lag in catching up, but it’s ultimately up to the artists to decide what is worth their time and effort.

The people who genuinely enjoy and care about your music will go where you lead them, which ultimately defines the tools that are worthwhile for musicians and fans alike.

Spotify Royalty Rate Changes, Final Thoughts

There is a chance that nothing will change in the wake of these shifts in the industry. How involved you are in this change directly correlates to how much you feel you are being taken advantage of as an artist. 

Ultimately, what every artist needs to decide is how much they are willing to allow something like Spotify to dictate their success as an artist. The industry shouldn’t be at the complete will and whimsy of 1 player in the game. 

P.S. Remember though, none of what you've learned will matter if you don't know how to get your music out there and earn from it. Want to learn how to do that? Then get our free ‘5 Steps To Profitable Youtube Music Career' ebook emailed directly to you!

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