Is it time for independent musicians to dump Spotify?

Submitted by jon on Sat, 11/11/2023 - 06:01

Spotify recently announced controversial changes to how it will calculate royalty payments to artists, especially independent musicians, starting in early 2024.

The streaming giant plans to set a minimum threshold of 1,000 streams per year for a track before the artist gets paid any royalties. Songs that don't meet that threshold will not earn any royalties, and Spotify plans to redistribute the money to more popular artists.

This change has sparked outrage among independent artists and music industry experts. Many argue Spotify is essentially stealing legally earned royalties from smaller artists to funnel more money to major label artists.

The backlash

Critics like distribution platform Stem's president Kristin Graziani and label executive Tony van Veen argue Spotify's new policy takes money from artists who rightfully earned it through their streams. While the amounts per track may be small, it sets a dangerous precedent of redistributing royalties without consent.

Van Veen calls the move "bulls**t" and says it should be illegal. Graziani notes it sends the wrong message to aspiring artists by discouraging them over tiny payments early in their careers.

Does Spotify have the right?

An important question is whether Spotify actually has the legal authority to redirect royalties like this. Artists sign contracts allowing streaming services to license their music, but that may not mean Spotify can arbitrarily decide who gets paid.

Lawmakers are being urged to intervene and outlaw this kind of royalty redirection. Without legislative action, however, independent artists have few options beyond public pressure campaigns and potentially coordinating a boycott.

Songwriters shielded for now

While Spotify's changes will hurt recording artists, songwriters may be shielded for now. Their royalty rates are set by government entities, not direct deals with Spotify. This means publishers and songwriters will still get paid their statutory royalties even on tracks that fall below the 1,000 stream threshold.

However, when royalty rates come up for renegotiation in 2026, publishers may push to model songwriter payouts on the master recording side. This could eventually jeopardize songwriter royalties too.

Diversifying revenue streams

For independent artists impacted by the Spotify changes, diversifying income sources provides a buffer should any single revenue stream like Spotify royalties decrease. Options include:

  • Focusing on physical sales and merchandise
  • Pursuing sync licensing opportunities
  • Building fan club subscription programs
  • Leveraging platforms like Patreon for direct fan funding
  • Collaborating with brands for sponsored content

Songwriters can also diversify by co-writing for established artists and writing material for TV, films, and commercials.

Exploring non-streaming sources of income gives independent musicians more control over their careers. Relying too heavily on one platform like Spotify leaves artists vulnerable to policy changes.

What comes next?

The coming months will determine if independent musicians — Spotify's original core audience — will stand for this treatment. With major labels owning equity stakes in Spotify, the streaming service may continue catering to their interests unless independents push back en masse.

This controversy shows the precarity of royalty systems where middlemen like Spotify control the money flow. For now, independent artists must decide if they're willing to keep supporting a platform that may not be supporting them.