Spotify has surged to the top among music streaming platforms, by providing uninterrupted music to listeners and an avenue to reach a wider audience for artists. But as part of a major reform, the streaming giant is reshaping its royalty system to address revenue manipulation, a practice that has irked both the industry and Spotify itself. The focus is squarely on functional noise, a genre encompassing ambient sounds like rainfalls, white noise, and other non-musical tracks.
Minimum track length extension
In a blog post released recently, Spotify increased the minimum track length for functional noise recordings to two minutes, in order to counter 'bad actors' exploiting the system. This strategic shift is a direct response to creators shortening their sounds to a mere 30 seconds, the platform's current minimum track length, and then looping playlists to artificially inflate streaming numbers.
Devaluing functional tracks
While Spotify did not disclose the exact percentage of devaluation, industry insiders reported that functional tracks will now be worth only one-fifth of other tracks. The decision challenges the existing model where a 30-second clip of white noise carries the same weight as an artist's original music track. This devaluation aims to rectify a perceived inequity in compensating artists for their work.
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Distinguishing value in a diverse soundscape
The music industry has been grappling with the challenge of equating the value of ambient sounds with intricate musical compositions. Spotify's decision to differentiate the value of functional noise from artistically crafted music reflects a response to ongoing discussions within the industry. Marina Guz, Chief Commercial Officer at Endel, an AI-driven functional music company partnered with Universal Music Group, notes the rising pressure from labels and artists to address this disparity.
Addressing malicious behavior with a two-pronged approach
To further cleanse its platform of fraudulent activities, Spotify is implementing measures against artificial streaming. The platform now plans to charge labels and distributors by track when 'flagrant' artificial streaming is suspected. This move is a clear indication of Spotify's commitment to combating the use of bots for fraudulently increasing stream counts. Moreover, Spotify is adjusting its royalty system to only compensate tracks that generate more than 1000 streams, ensuring that revenue distribution aligns more closely with genuine listener engagement.
Impact on white noise podcasts
While Spotify's reforms primarily target functional noise within music tracks, the platform has also unleashed unintended consequences for white noise podcasts. According to Bloomberg's 2023 report, podcasts featuring ambient sounds alone accounted for three million daily consumption hours. These podcasts, unintentionally boosted by Spotify's algorithm, led to a reported $38 million loss in potential annual profits. Creators of such podcasts could reportedly earn as much as $18,000 a month in ads, highlighting the complexities Spotify faces in managing a diverse content landscape.
A transformative shift
Spotify's decision to revamp its royalty system for functional noise tracks marks a transformative moment in the streaming industry. By extending minimum track lengths, devaluing functional tracks, and implementing measures against malicious behavior, Spotify aims to strike a balance between compensating artists for their creative endeavors and preventing fraudulent revenue generation.
