Spotify introduces game-changing royalty system to fight artificial streaming fraud
Spotify is shaking up the music industry with the introduction of a new game-changing royalty model designed to combat artificial streaming fraud.
In response to this challenge, the popular DSP has recently unveiled a series of policies and penalties.
Simultaneously, the music streaming platform is set to inject an extra $1 billion into the pockets of emerging and professional artists with this move.
This revolutionary initiative represents a significant advancement in promoting fairness and providing support within the digital music industry.
Other DSPs like Deezer are following this trend and planning to implement similar practices to crush artificial streaming.
What are the mechanics behind Spotify’s latest anti-fraud policies and royalty model? How are these changes reshaping the digital music landscape? How do these measures affect artists, labels, distributors, and other music industry professionals? What’s SonoSuite’s perspective on this?
Keep reading to find out more.
What’s streaming fraud and how does it impact the digital music industry?
Music streaming fraud, including artificial streaming, is one of the biggest challenges in the digital music industry.
Artificial streaming refers to the practice of artificially inflating play counts on DSPs, resulting in unfair payouts for artists and other rights holders and distorting the integrity of the streaming ecosystem.
For many years, DPS like Spotify, Deezer, YouTube, and many others, as well as labels, distributors, and white-label platforms for catalog distribution like SonoSuite, have been integrating technologies to detect and fight against streaming fraud and artificial streaming and protect the interests of content creators and rights holders.
Spotify’s new royalty system and antifraud measures for 2024
Spotify’s payouts to the music industry continue growing, exceeding $40 billion, but the platform has modified its royalty system to fix issues regarding streaming fraud.
After collaborating with industry stakeholders like distributors, independent labels, and artists, the DSP identified three major challenges and implemented new measures.
Spotify has introduced the following policies:
- Start charging for artificial streaming.
- Reduce payments lost in the system.
- Crackdown on noise track royalties.
#1 – Spotify policy: Start charging for artificial streaming
As part of Spotify’s new business strategy to invest more resources to detect, prevent, and mitigate the impact of artificial streaming on royalty earnings, the platform will charge labels and distributors per track whenever the system detects flagrant artificial streaming on their content.
With this measure, the platform wants to discourage the distribution of music from known bad actors who seek to divert earnings from artists.
#2 – Spotify policy: Reduce payments lost in the system
Nowadays, Spotify has over 100 million tracks in its library and tens of millions of them have garnered between 1 and 1,000 plays over the past year, generating $0.03 per month.
Labels and distributors typically set a minimum withdrawal threshold (usually $2-$50), and banks charge transaction fees (around $1-$20). Consequently, uploaders often miss out on these earnings, which can add up to $40 million per year.
The new policy by Spotify mandates that tracks must reach a minimum of 1,000 streams within the preceding 12 months to be eligible for recorded royalties.
#3 – Spotify policy: Crackdown on noise track royalties
Now, functional noise recordings must be at least two minutes long to qualify for royalties.
This adjustment ensures that listening to these recordings for two minutes will generate one royalty-bearing stream instead of four, leading to a more equitable distribution of funds.
Taking action against streaming fraud: Spotify’s latest policies and SonoSuite’s response
Preventing artificial fraud is crucial for maintaining the integrity of the digital music landscape.
In response to Spotify’s new anti-fraud initiatives and anticipating similar upcoming practices from other DSPs like Deezer, at SonoSuite, as a preferred partner of Spotify, we’re dedicated to maintaining transparency in our partnership with our clients.
Whether they’re independent or established record labels, distributors, startups, or aggregators, our goal is to continue supporting them in scaling their businesses and promoting their artists’ content globally, all while ensuring fairness.
This includes using mechanisms like our Quality Control process to combat fraud effectively and adopting Spotify’s most recent policies to prevent and tackle artificial streaming.
Do you want to deliver your artists’ catalog to DSPs like Spotify, Amazon Music, Deezer, Tidal, YouTube, Pandora, or Apple Music/iTunes with full flexibility and transparency?
