Spotify has been sued in the US state of Connecticut over claims it instigated a change earlier this year in the way it counts plays and therefore calculates royalties, in doing so reducing payments to grassroots artists.
The lawsuit also wants the court to rule that Spotify’s controversial 1000 stream payment threshold - which means tracks that get less than 1000 plays from 50 unique users in a year receive no royalties at all - is an “unfair and deceptive practice” under Connecticut law.
The lawsuit has been filed by Mark M Kratter, who is both an attorney and an independent musician. He says that Spotify “publicly represents itself as a fair, transparent and creator-supportive platform”, but, “in reality” it “employs opaque rules and undisclosed filtering criteria that disproportionately harm independent artists while benefiting major labels and high-volume catalogues”.
He specifically alleges that, in March this year, Spotify implemented a change to its “filtering criteria” that caused “large categories of legitimate plays” of his music “to not be counted as streams”. Which meant lower royalties and, in some cases, resulted in tracks falling below the 1000 stream threshold, meaning he received no payment at all.
The change, he says, “altered how streams, saves, playlist additions, radio plays, autoplay sessions and algorithmic sessions were counted and credited towards an artist’s performance metrics”.
It’s not clear on what basis Kratter is claiming that these changes were made to Spotify’s rules, other than inferring changes must have been made to account for the “sharp and measurable decline in counted streams” for his own recordings, "”despite continued listener activity”.
How Spotify counts plays and calculates royalties is set out in its licensing deals with record labels and music distributors, so any change to that system would need to be negotiated with the bigger players and clearly set out in updated licensing agreements. Although artists don’t generally get to see those agreements so wouldn’t necessarily know about any changes.
But there’s another set of rules that could also impact on any one artist’s plays and royalties, which is the rules Spotify enforces to crackdown on streaming fraud and stream manipulation, which are constantly evolving, including in the context of AI-generated music.
Obviously the industry supports Spotify’s efforts to crackdown on fraud and manipulation, but some anti-fraud measures can negatively impact artists and labels who are not involved in any dodgy activity.
For example, scammers might put third party music alongside tracks they are trying to manipulate on playlists that they then artificially boost, and a crackdown on those playlists could impact on the legit tracks too.
For independent artists, spotting and dealing with problems like that can be tricky, and - while Spotify provides some information on how it deals with streaming fraud - for indies there is rarely full transparency on how everything works behind the scenes.
It remains to be seen if this lawsuit forces some transparency on what changed at Spotify to cause the slump in streams documented by Kratter.
If Kratter’s lawsuit does proceed, his separate claim that the 1000 plays threshold is unlawful will - in itself - be very interesting. The threshold was forced onto Spotify and other streaming services by the majors in 2024, because its other artists and labels who benefit from grassroots music being frozen out for the royalty pool, with the superstars and major catalogue owners being the biggest winners.
That threshold has been criticised by artist and indie label groups, and by competition law experts in Europe, so it would be interesting to see how legal arguments against the threshold under US law were received by American judges.