In a recent digital exchange that has music enthusiasts buzzing, Julian Klymochko, the CEO of Accelerate, raised an intriguing possibility surrounding music royalties on Spotify Technology SA SPOT, only to have its founder and chief debunk it.
What happened: Citing a JPMorgan report, Klymochko tweeted, “According to JPMorgan, if someone uploaded their own 30-second track to Spotify, and then programmed their phone to listen to it on repeat 24 hours a day, they would receive $1,200 a month in royalties.”
See Also: Elon Musk Says Bill Gates ‘Doesn’t Get Enough Negative Feedback’
The claim, which came from an analysis conducted by JPMorgan, as reported by the Financial Times last week, suggests that the royalty structure of Spotify could be manipulated by artists — or even regular users — to gain significant monthly revenue through repeat plays of short tracks.
However, the Swedish music streaming giant’s CEO was quick to counter the argument with a touch of humor. Responding to Klymochko’s tweet, the Spotify CEO wrote, “If that were true, my own playlist would just be ‘Daniel’s 30-second Jam’ on repeat! But seriously, that’s not quite how our royalty system works.”
Why is it important: While the witty response highlights the absurdity of the claim, it also underscores a larger issue.
Platforms like Spotify have complex mechanisms for calculating artist royalties, designed to balance the interests of both large and small artists, ensuring fair compensation.
Gaming the system, as the JPMorgan analysis suggests, is not as straightforward as it might seem.
Spotify pays two types of royalties: recording royalties for artists and publishing royalties for songwriters. These royalties are earned with each play, whether the listener has a free or paid account.
Spotify subscribers pay $10 a month to listen to music online. The platform pools subscriber fees and distributes the money based on each musician’s share of listening. Around two-thirds of Spotify’s earnings are paid out as royalties, as per the FT report.
However, up to 10% of music streams are reportedly considered “fake,” originating from streaming farms where multiple devices play Spotify continuously. Criminal groups have even used Spotify’s royalty system for money laundering, according to FT.
Spotify has acknowledged the issue of artificial streaming in the past, as per the publication, and is actively working to combat it across its service.
As for listeners considering a 30-second track loop for easy money? It might be best to keep those day jobs.
Image Credits – Shutterstock
Check out more of Benzinga's Consumer Tech coverage by following this link.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
