Spotify announced its plans to try to prioritize artists and labels in return for lower royalty payouts on Monday, November 2, 2020. The platform is introducing a new feature called, “Discovery Mode,” which will be appearing in Spotify’s Radio and Autoplay features upon launch.
Discovery Mode has become controversial across the community though because it will allow artists and record labels to influence the songs that are selected by its algorithm for personalized recommendations. How this will work is artists and labels won’t be required to pay anything up front, but by opting in to the Discovery Mode, they will agree to get paid a lower recording royalty rate for streams in those personalized sessions both in playlist radio stations and autoplayed songs after listeners songs, albums, and playlists end.
Artists and labels who opt out of the Discovery Mode will continue to have their tracks play in radio and autoplay, but their tracks will no longer be prioritized in radio and autoplay. They will continue to get the standard recording royalty rate for those streams. This is why Discovery Mode is controversial. Artists and labels will no longer be on the same playing field. Inorder to get a better chance of being heard by new audiences they are forced to accept less pay from Spotify.
According to an article written about Spotify and their profit margins earlier this year by NYS Music, “Spotify has a market value of about $21 billion in 2019 and Daniel Ek himself has an estimated net worth of nearly $2 billion. According to a Business of Apps article, “Estimates vary on how much a Spotify stream is worth to artist: from $0.006-0.0084 to as low as $0.00318/stream. At a pay rate of $0.006-0.0084 a stream it would take a million streams for an artist to make $7,000.”
It is still unsure what the new royalty payouts will be for artists and labels who opt into Discovery Mode. With already shallow payouts to artists and labels it won’t help anyone. Unless, that artist ends up blowing up from the prioritized radio and autoplay functions. Basically artists and labels will have to decide if they are willing to sacrifice their hard efforts for a chance of higher fame.
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