Spotify’s new royalty system picks winners

It is Hot capsule, The edge’s newsletter about podcasting and the audio industry. Register here for more.

Happy Thanksgiving week! I’ll be out tomorrow cooking twice-baked potatoes, putting together baby holiday outfits (lots of little overalls will be worn!!) and attempting an overnight drive to Long Island without hitting the traffic. Southern state nor arouse the baby’s rage. That is to say, there will be no Hot capsule 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 space-shaking Ben Shapiro/Candace Owens feud conservative podcasts. Appreciate (?)!

I received a lot of news from Spotify today, including confirmation of its new royalty model and a report that it is looking for a new advertising agency. Additionally, Pushkin Industries unionizes after a difficult year.

Spotify makes it official with royalty changes

A few weeks ago, Music Business Worldwide announced that Spotify is revamping its revenue model, which includes demonetizing the least listened to tracks on the platform. Spotify largely confirmed these plans in a blog post published today.

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

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

The first two changes were adopted without much difficulty. Streaming fraud distorts the profit margin, and it makes perfect sense for labels and distributors to take some responsibility by flagging tracks where such fraud is evident. And if there’s anyone who truly believes that the creator of a 31-second clip of a washing machine deserves the same salary as a musical artist, I haven’t met them yet (it might be -be you! #justice4washingmachinenoisecreatorz).

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

Spotify says putting those royalties — which amount to $40 million a year — back into the pool to distribute among top-earning artists is a practical necessity. The company claims that songs played between one and 1,000 times per year generate an average of $0.03 per month. At the high end of this scale, based on the industry understanding that tracks conservatively earn $0.003 per play, tracks earn more like $0.25 per month. But either payment is often too small for artists to get from their distributors.

Last month, I spoke with industry experts about what such a shift means. Concretely, not much: $3 a year makes little financial difference to independent creators, nor, frankly, does the fraction of $40 million that major labels will receive. But it signals a change in how Spotify works and who it works for. It has long been considered the most user-friendly of the big streamers, with a lower barrier to entry than Apple or Amazon. Instead, they now draw a line.

“They decide who is professional and who is not,” said Michael Huppe, CEO of SoundExchange. Hot capsule“that reaches a level where they deserve to jump and swim in the royalty pool.”

Report: Spotify Buys New Ad Agency

Just as Spotify tinkers with its musical model, Business Insider reports that the company is reportedly looking for a new advertising agency as it cuts marketing spending. The streamer has been with UM since 2017 and is considering other agencies, including Publicis.

“Today, UM is Spotify’s agency of record,” Spotify spokesperson Erin Styles said. Hot capsule. “Spotify is constantly evaluating its marketing objectives and broader media trends. »

Spotify’s reduction in marketing spending is a topic that was brought up several times during its latest investor call. CEO Daniel Ek cited the budget cut as an example of the company’s newfound efficiency and insisted this austerity would continue next year. “We started to see revenue hold up and even accelerate with lower marketing spend. And we’ve seen this trend manifest over the past few quarters. At first I was a little skeptical that I would be able to continue. But with recent learnings, it seems very possible that this is the case and that we are simply increasing our learning rate at a steady pace within the marketing team and I think that is a very positive sign for 2024” , did he declare.

How does this affect podcasts? Podcast marketing is notoriously difficult, and marketing was a big point of contention with the Gimlet and Parcast unions. They argued that in addition to being exclusive to the platform, their shows did not have sufficient marketing support to increase or maintain download numbers. I’ll be curious to see how much marketing Spotify puts into the remaining originals and if the strategy ends up being significantly different than before. That is of course if the company ends up hiring a new agency.

Pushkin employees unionize after repeated layoffs

Last week, a group of 10 producers, editors and engineers at Pushkin Industries announced they would unionize with the Writers Guild of America, East (disclosure: Vox Media, which owns The edge And Hot capsule, is also syndicated to the WGAE). Pushkin, co-founded by Revisionist history host Malcolm Gladwell, voluntarily recognized the union.

The move comes after the former industry darling struggled to adapt to the new podcasting economy, leading to three rounds of layoffs this year alone and a major change in management. Last month, Pushkin co-founder Jacob Weisberg stepped down as CEO and Transmitter founder Gretta Cohn, who sold her studio to Pushkin last year, became the new president.

I recommend checking out this piece by Lachlan Cartwright on The daily beastwhich delves into the uncomfortable discussions that took place at a staff meeting over the summer regarding Weisberg’s business decisions, Gladwell’s editorial directions (or lack thereof), and the company’s diversity goals.

That’s all for the moment! Happy Thanksgiving and see you next week.