Spotify announce profit and millions more subscribers, but also royalty cuts to less popular tracks

Spotify have announced that less popular tracks won’t earn any royalties whatsoever, despite the company reporting better-than-expected third-quarter profits and subscriber gains.

The Swedish streaming service gained an extra 6million paying subscribers from June to September, bringing its total to 226million. This exceeds its forecast that their paid subscriber levels would pass the 224million mark.

Despite these gains, however, Billboard reports that Spotify is restructuring its royalty system and plans to de-monetize tracks that had previously received 0.5% of Spotify’s royalty pool.” The plans will reportedly be implemented early next year.

The changes in the royalty system are set to benefit more established artists and labels, while the biggest difference from the old system is that  a track will need to reach a minimum number of annual streams before it starts generating royalties.

Spotify is reportedly also planning to crack down on “fraud” and will issue financial penalties against distributors and labels it deems guilty of this. Non-music tracks such as white noise or ambient sounds will also have to reach “a minimum play-time length” to generate royalties.

Billboard claims the major labels, which recently entered talks with Spotify, will likely sign off on these changes because they will make more money as a result.

In an earnings call in July, Universal Music Group CEO Lucian Grange reportedly announced a “newly expanded agreement” with Spotify, claiming that it’ll be “artist-centric” and that it’ll benefit “real artists with real fanbases.”

Meanwhile, it was rumoured earlier this month that the streaming service was preparing to launch a new ‘Supremium’ tier that contains extra features for higher prices.

A report in The Independent said the new tier will cost twice the current price at $19.99 (£16.33) and that it will offer lossless audio – a feature currently offered on Apple Music for free.

The tier will also reportedly include new statistics about listening, a new audiobook feature as well as AI playlist generation tools. The Independent say the changes have been noted by technology expert Chris Messina, who, according to the publication, “found mentions of the update with Spotify.”

Last month, the platform launched Showcase – a new tool which allows artists to pay to have their music promoted on the site’s homepage.