Spotify’s new royalty scheme picks the winners

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Happy Thanksgiving week! I will be out tomorrow making twice baked potatoes, putting together holiday baby outfits (many tiny overalls will be worn!!), and attempting a night drive to Long Island without hitting Southern State traffic or eliciting baby rage. This is to say, there will be no Hot Pod Insider this week and I will return next Tuesday. But if you want to be able to say “Yeah, I heard about that” at your own bipartisan Thanksgiving gathering, I had a piece last week for Insiders diving into the Ben Shapiro / Candace Owens feud roiling the conservative podcast space. Enjoy (?)!

Got a bunch of Spotify news today, including confirmation of its new royalty model and a report that it is shopping for a new ad agency. Plus, Pushkin Industries unionizes after a fraught year.

Spotify makes it official with royalty changes

A few weeks ago, Music Business Worldwide broke the news that Spotify is revamping its revenue model, which includes demonetizing the lowest-played tracks on the platform. Spotify largely confirmed those plans in a blog post published today.

Starting early next year, Spotify will implement the following changes: it will start charging labels and distributors a fee when “flagrant” streaming fraud is detected on their accounts; “noise” tracks, which are entirely composed of non-music audio like static, airplane sounds, and other forms of white / pink / green / whatever noise, will only be monetized after two minutes of listening, rather than 30 seconds for a song; and the company will only monetize tracks that have amassed 1,000 plays in the past 12 months.

“While each of these issues only impacts a small percentage of total streams, addressing them now means that we can drive approximately an additional $1 billion in revenue toward emerging and professional artists over the next five years,” the company blog post says.

The first two of those changes have gone over without much of a fight. Streaming fraud distorts the profit pool, and it makes perfect sense that labels and distributors need to take some responsibility for flagging tracks where such fraud is obvious. And if there is anyone who really believes the creator of a 31-second clip of a washing machine deserves the same payout as a music artist, I have yet to meet them (maybe it’s you! #justice4washingmachinenoisecreatorz). 

But the third change, the payout threshold for songs, has generated a lot of blowback from long-tail creators and those who recognize their place in the industry.

Spotify argues that putting those royalties — which amount to $40 million per year — back into the pool to be distributed among higher-earning artists is a practical…