Spotify is Changing its Membership Models, Resulting in $150 Million Less for Artists

Spotify is raising the price of its Premium membership from $9.99 to $10.99, which should mean a windfall for artists and creators. However, with the addition of 15 hours of audiobooks, songwriters and performers aren’t getting nearly the amount of royalties that they should be. Here’s what’s going on with Spotify.

Higher Premium Price + Audiobooks = Less Money for Artists

Spotify is raising its membership prices, yes, but with the addition of audiobooks, the platform is creating a “bundle” rate to pay songwriters and artists, which is significantly less than usual. The company now has to pay licensing fees for both music and books, all on a measly one dollar more than before. The platform is using this as an opportunity to pay artists less.

According to a report from Billboard, songwriters and artists will receive a whopping $150 million less than before in U.S. mechanical royalties through streams for the first 12 months that the new bundle is in effect. While this reportedly didn’t affect the first two months of 2024, it’s estimated that the bundle went into effect in March this year. That means for the following 12 months since then, artists will receive less royalty money in their payouts.

For Premium streaming specifically, Billboard estimated Spotify would be paying between $80 million and $100 million less in the first 12 months than what the platform initially reported. That’s a large margin, but the outlet stated that $80 million is a lowball number, and the real loss is closer to $100 million.

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As Spotify Keeps Growing, the Distance Between Artists and Adequate Payment Grows As Well

According to a report from Music Business Worldwide in April, Spotify is planning a music-only tier of their memberships. This could potentially work to close the gap between artists and adequate payment, as the payouts will work similarly to how they did before the memberships were bundled. However, there are some drawbacks to this as well—first, this feature has not yet been released, and all current users have been renewed with the bundled Premium, Family, or Duo memberships.

Second, the initial payout model wasn’t that great to begin with. Artists reported receiving as little as $12 for their music, such as Weird Al Yankovic who called out Spotify in his Wrapped video last year. Additionally, the platform initially introduced a royalty model where songs needed to be played a minimum of 1,000 times before they started earning. Great for established artists; not so helpful for those who are just emerging.

When Billboard asked Spotify for comment, the representative referred back to the platform’s previous statement. “Spotify is on track to pay publishers and societies more in 2024 than in 2023,” the statement reads. “As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers. Multiple [Digital Streaming Platforms] have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.”

Featured Image by Rick Kern/Getty Images for Spotify