Spotify’s Shift in Subscription Model Could Mean Lower Payouts for Songwriters

Despite recently hiking its monthly subscription charges by $1, Spotify is estimated to pay songwriters and publishers approximately $150 million less next year, according to a recent report by Billboard.

 

The decrease in payouts is attributed to Spotify’s decision to include access to 15 hours of audiobooks per month for its premium subscribers. This move enables the streaming platform to qualify for a discounted ‘bundle’ rate for premium streams, as it now has to cover licensing costs for both books and music from the same subscription fee. These changes extend to Spotify’s duo and family subscription plans as well.

 

Interestingly, Spotify’s recent increase in premium subscription cost from $9.99 to $10.99 did not translate into higher payout rates for songwriters and publishers. In fact, last month, Spotify demonetized tracks with fewer than 1,000 streams on the service.

 

According to Billboard’s calculations, songwriters stand to earn an estimated $150 million less in US mechanical royalties from Spotify’s premium, duo, and family subscription plans over the first 12 months under the new bundled model, compared to what would have been paid out otherwise.

 

These changes took effect in March 2024, and the projected $150 million decrease in payouts applies to the subsequent 12 months.

 

In response to concerns over reduced payouts, a Spotify spokesperson emphasized that the company remains committed to paying publishers and societies more in 2024 than in 2023. The spokesperson clarified that changes in Spotify’s product portfolio necessitate adjustments in payout mechanisms, based on mutually agreed terms between the streaming service and publishers.

 

The spokesperson also noted that multiple digital service providers have historically paid lower rates for bundled subscriptions compared to standalone music subscriptions, and Spotify’s approach aligns with this industry practice.

 

Despite the potential impact on songwriter earnings, Spotify continues to show steady growth, with a 14% year-on-year increase in premium subscribers and a 20% year-on-year rise in global premium revenue, according to its latest earnings figures.

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