A certain type of frustration develops gradually. It doesn’t reveal itself in a single negative instance. Stream by stream, policy update by policy update, it builds up until an independent musician in a home studio in Memphis, Manchester, or Manila discovers that the platform on which they built their fan base has subtly changed the ground beneath their feet.
From the inside, that’s how the Spotify royalty model change feels.
In an attempt to reroute funds from scammers and bot farms to “real” artists, Spotify announced a number of changes to its royalty payment distribution system in late 2023. The reasoning makes sense on paper. No one wants fraudulent streams to deplete the shared revenue that reputable musicians rely on. However, things get complicated during execution, and independent artists’ interests appear to have been neglected.
The 1,000-stream minimum threshold is the most obvious modification. Any song that hasn’t received more than 1,000 streams in the preceding year will no longer be eligible for royalties starting in early 2024. Spotify’s justification was that tens of millions of songs were making about three cents a month, which hardly ever exceeded distributor payout minimums. They contended that it would be preferable to combine that $40 million a year and divide it among already-performing tracks. When you consider what it truly does to an up-and-coming artist releasing their first few singles into an already overly competitive market, it sounds almost generous.
The math is harsh. It takes real work and frequently real money spent on marketing to get a new song to 1,000 streams without the support of a label’s promotional machine, playlist placement, and an existing fan base. In a year, many independent artists fail to reach that milestone. Those streams had some value under the previous model, but it was almost nothing. They have no value at all now. It’s a minor but significant change in the target audience for the platform.
The 1,000-stream rule doesn’t exist in a vacuum, so it’s important to take a step back and consider the bigger picture. The royalty structure of Spotify was already skewed. Because the platform uses a pro-rata model, your portion of the pot is decided by the percentage of all platform streams that your music represents rather than the number of people who streamed it.
The math rarely favors an independent artist when the top 4.4 percent of artists receive the vast majority of listening time. According to reports, Spotify paid out $10 billion in royalties in 2024; the company proudly cited this figure. However, only a tiny percentage of musicians make enough money from streaming alone to even come close to a sustainable income, according to the platform’s own Loud and Clear data.
Another issue that has mostly gone unnoticed outside of the music industry is audiobook bundling. Spotify reduced the mechanical royalty calculation when it started combining music and audiobook access under a single subscription tier. This led to an argument that the subscription price could not be considered pure music revenue. This was done without consulting publishers or songwriters. In the end, the Mechanical Licensing Collective sued Spotify over the change, claiming it cost songwriters an estimated $150 million a year. That number is based on industry groups’ analysis of how the bundling impacted the royalty pool; it is not conjecture. The tactic may be illegal, according to the National Music Publishers’ Association.
The pattern that all of this fits into makes it more difficult to ignore. Spotify has continuously framed itself as a technology platform instead of a music company, and this has serious repercussions. Technology platforms optimize for growth, retention, and engagement. Although music is the content that drives those metrics, it isn’t always considered the main focus. Although CEO Daniel Ek’s remarks from a few years ago, which implied that content creation costs are “close to zero” and that musicians should release music continuously, were heavily criticized, they did reveal something about the underlying philosophy. According to that perspective, music is a replenishable resource. The algorithm that distributes it is more significant than the people who create it.
For its part, the algorithm has an incentive system of its own. In music circles, there has been an increasing amount of discussion about Spotify’s covert preference for songs that are less expensive for the platform to license, such as catalog music, some independent releases, and songs without complicated rights issues. Since Spotify’s recommendation algorithm is private, it is challenging to substantiate that assertion with concrete data. However, it is difficult to completely ignore the pattern that enough musicians have identified.
Many independent artists are adjusting, and they are not helpless in this situation. Some are focusing more on live revenue, Bandcamp sales, Patreon, sync licensing, and direct-to-fan platforms. In an effort to find partners whose payout thresholds genuinely function at smaller scales, some are closely examining their distributors. An increasing number of people are just furious enough to organize and support laws like the Living Wage for Musicians Act, which would create a new streaming royalty that would be paid to performing artists directly. It remains to be seen if that bill actually gains traction.
The structural reality that Spotify is still the default for the majority of listeners is more difficult to overcome. For the majority of independent artists, who must be where the ears are, leaving the platform isn’t really an option. In the hopes that the algorithm will identify them before the threshold does, they remain and navigate a system that was never fully intended with them in mind.
