In a move that has stirred controversy within the music industry, streaming giant Spotify is reportedly set to further reduce its already low royalty rates for artists who do not generate substantial streams. The company is said to be revamping its royalty system, specifically targeting tracks that previously received 0.5% of Spotify's royalty pool. While this adjustment may be positioned as a response to combat fraud and limit payments to ambient-noise generators, it is expected to significantly impact Spotify's standing in the independent music community.

According to Music Business Worldwide, Spotify has been engaged in discussions with Universal Music Group (UMG), one of the major labels in the industry. UMG has also been in royalty-related talks with other platforms such as SoundCloud and Deezer. Billboard reports that Spotify has been conversing with both major labels and independent labels and distributors, with plans to implement the new royalty model in early 2022. The revised system will favor established artists and labels, requiring a track to reach a minimum number of annual streams before it starts generating royalties.

Additionally, Spotify intends to impose financial penalties on distributors and labels if it detects any "fraud" in uploaded tracks. The exact definition of "fraud" remains unclear, stirring speculation on whether it includes uncleared samples. Non-music tracks, such as white noise and ambient sounds, will also need to meet a minimum play-time length to qualify for royalties. Although specifics regarding the benchmarks for royalties have yet to be disclosed, major labels are expected to embrace these changes as they stand to profit more from the new system.

However, concerns have emerged regarding the smaller independent labels and artists who are unlikely to reach the 0.5% threshold. This leads to questions about whether they will find it worthwhile to continue streaming their music on Spotify. Streaming services, including Spotify, have faced criticism for favoring already popular music, and this latest restructuring may exacerbate the income disparity between big-name artists and emerging acts. The potential widening of the income gap raises concerns about the viability of smaller artists in the digital music landscape.

As the industry waits for further details on Spotify's updated royalty model, the future implications for less-popular artists and independent labels remain uncertain. Musicians and industry stakeholders will be closely observing the impact of these changes and exploring alternative avenues to support emerging talent within the streaming ecosystem.