Spotify to Allow Artists' Enhanced Algorithm Placement in Exchange for Royalties
On Nov. 2, Spotify launched its new “Discovery Mode” program, which will allow artists to receive algorithmic boosts in exchange for reduced royalty payments. The program will affect Spotify’s personalized autoplay and radio feeds, which account for a large portion of new artist discovery on the platform. The program is optional for artists, who can select any number of their tracks to boost and opt out of the program at any time.
To anyone concerned about fair compensation for musicians and the ethics of streaming, this new policy is likely to raise concerns of being a pay-for-play program. Spotify claims that since artists do not have to pay anything upfront for the increased exposure, the program is accessible to artists with fewer resources. However, because artists receive lower payouts for songs they select for the program, it’s possible that smaller independent artists who need more immediate streaming money (especially now as a pandemic has eliminated touring and reduced many fans’ disposable income) may be less likely to opt in to the program, making them fall behind bigger, label-backed artists who can afford to eat the short-term loss. It also seems likely that artists and labels will increasingly feel pressure to opt in to stay competitive, effectively eliminating “choice” to opt in.
Because Spotify is not releasing details about how much lower these royalty payments will be, the extent to which the program will actually make artists sacrifice revenue for publicity is unclear. Although they have no plans to make this information public, it is likely to leak shortly after payouts from the program are received. Spotify claims that many artists may see a “positive return on investment” in the program, as boosted songs could receive enough extra streams, and consequently revenue, to outweigh their reduced payout per stream.
Currently, Spotify pays royalties using a “pro rata” system, where total revenue is pooled and then, after Spotify takes an approximately 30 percent cut, paid out to song rights holders based on the percentage of Spotify’s total streams that artist accounted for. For example (using made up numbers), if Spotify raises $100 million in one year, and Ariana Grande accounts for 10 percent of Spotify’s total streams, then Ariana (or her label) would take home about $7 million from Spotify that year. Using this model, there is no set payment per-stream rate, although according to Sound Charts, Spotify paid $0.0032 per stream in 2018.
Even without implementing Discovery Mode, Spotify is already a strikingly inequitable platform. According to data from Rolling Stone, over 90 percent of streams on Spotify go to the top 1 percent of artists. While this number seems staggering, it makes sense considering the music discovery process that Spotify promotes. While taking into account several factors, Spotify’s algorithm is principally designed to recommend songs and artists that are playlisted by users with similar tastes and thus has an inherent popularity bias. This cycle will likely only be reinforced with Discovery Mode as more popular artists are more likely to have enough resources, enabling them to afford royalty cuts.
Despite Spotify’s insistence that many artists will see a positive return on investment with Discovery Mode, this claim seems unpromising given that Spotify has a financial incentive to keep as much of their revenue as possible. Furthermore, as more artists feel pressure to enter the program, streaming boosts could cancel out, resulting in lower royalty payments for artists across the board. Within their current model, the only way for Spotify to increase artist payment would be to either increase their total revenue pool through gaining new subscribers or increasing the price of subscriptions.
Some, such as the Union of Musicians and Allied Workers, have urged Spotify to switch to a “user centric” model, where Spotify would distribute each subscriber’s monthly fees proportionately only to the artists they listen to, rather than being pooled together then distributed. Although this would affect each individual artist differently, a comparative study done by the Finnish Music Publishers Association found that that “tracks with a smaller number of streams will earn relatively more in the user centric model than in the current pro rata model.”
Spotify also claims that Discovery Mode will empower artists by allowing them to choose which releases they would like to prioritize promoting. Spotify, with its complex algorithms, has been able to curate highly personalized playlists and artist recommendations for each user based on their own listening activity. While not abandoning this approach, they argue that Discovery Mode will help give artists more agency in the discovery process, balancing their desires with automated programming. “[Discovery Mode] allows our algorithms to account for what’s important to the artist — perhaps a song they’re particularly excited about, an album anniversary they’re celebrating, a viral cultural moment they’re experiencing, or other factors they care about,” Spotify explained in a blog post.
While artists having the option to amplify “a song they’re particularly excited about” doesn’t seem objectionable, this dynamic will certainly be complicated by artists’ relationships with record labels. Would a label be able to select songs for Discovery Mode without an artist’s consent (or the reverse)? What if an artist is “particularly excited” about a song, yet their label doesn’t want to risk losing revenue by boosting it? This conflict will be exacerbated in situations where artists’ contracts do not offer them a high percentage of royalties. If an artist only makes a small percentage of their income through royalties and profits more from things like merchandise and touring, Discovery Mode may benefit them by exposing them to more fans who can support them outside of Spotify, while their label would likely be more interested in profiting immediately from streaming.
Mostly Everything, an independent pop and hip-hop artist from upstate New York with 25,000 monthly Spotify listeners, tells me he sees Discovery Mode as a way for Spotify to “[offer] less than what is already practically nothing” to artists. He added that the program is similar to how labels provide artists with “recoupable advances” and said that it won’t necessarily create a divide between signed and unsigned artists, but more simply between “artists with a budget and artists without.” Rhakim Ali, another independent upcoming rapper, said that he is not too concerned with the decision now as he does not yet make a sizable amount of money from streaming, but he thinks the decision could impact him more down the road. “I feel like it’ll definitely give an advantage to signed artists,” he said.
Even if Discovery Mode does “amplify artist input,” will the program be a good thing for consumers? One Amherst student I spoke with told me he feels Spotify already does a good job at recommending him new artists similar to ones he listens to, and he particularly enjoys Spotify’s personalized “Daily Mix” and “Discover Weekly” playlists, a sentiment that I have seen repeated often online. If Discovery Mode was expanded to impact these features, would it play more promoted music at the expense of songs the listener is sure to enjoy?
Furthermore, while it seems that most Spotify users are satisfied with the artists they already discover, this trend of consumption raises my concern about how much we are starting to rely on algorithms to curate our tastes, rather than discovering artists organically through personal research and word-of-mouth advertising. Spotify certainly does an accurate job of predicting its users’ tastes. However, if we as listeners can take a more active role in consumption rather than relying on algorithms to feed us what we may like, this could reduce streaming platforms’ overall influence while allowing us to discover more artists overlooked by the algorithms.
While Spotify is upholding their new Discovery Mode as an important tool to empower artists, the actual effects of their self-described “experiment” remain to be seen. Though only affecting autoplay and radio feeds for now, if the program benefits Spotify, it likely will be expanded to features like Spotify’s “Made For You” playlists and further increase concerns about labels paying to boost their signees’ listeners and improve their market share. Still, even as it exists now, I expect Discovery Mode to primarily benefit Spotify, then record labels, at the expense of both signed and independent artists.