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Spotify’s New Royalty Model to Pay Songwriters $150 Million Less During First Year: Report

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Spotify’s upcoming changes to its subscription tiers will allow the streaming service to use a new royalty model that drastically impacts songwriter payouts. In a new Billboard report, music publishing reporter Kristin Robinson estimates songwriters will be paid about $150 million less during the first 12 months of its implementation in comparison to the previous model.

As Bloomberg reported last month, Spotify will raise the prices by $1 per month for individual plans and $2 per month for shared plans. These price increases will help subsidize the cost of bundling 15 hours of audiobooks per month as part of paid plans.

Instead of raising royalty rates, however, Spotify will pay a so-called “bundle” rate to songwriters for streams from premium subscribers to further offset the cost of book licensing. Per Billboard, this allows the streamer to value music at about “52% of the total bundle, or around $5.70 per subscriber” for the current $10.99 plan including audiobooks.

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According to Robinson’s calculations, “songwriters and publishers will earn an estimated $150 million less in US mechanical royalties from premium, duo, and family plans for the first 12 months that this is in effect, compared to what they would have earned if these three subscriptions were never bundled.”

This estimate is based on projections gleaned from the Mechanical Licensing Collective’s Spotify rate sheets for 2023 and factors in the average 1.1% monthly growth in music service revenue from last year. The new payout model won’t impact the first two months of 2024.

In response to the report, a Spotify spokesperson has issued a statement saying the company “is on track to pay publishers and societies more in 2024 than in 2023. As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers. Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.”

Read the full report at Billboard for the full breakdown.

The change to royalty payouts comes after Spotify announced in October 2023 that it would require artists to hit a minimum threshold of 1,000 streams before receiving compensation as part of an effort to crack down on fraudulent and “non-music audio content.”

Editor’s Note: This article has been updated with a statement from Spotify.

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