Is Spotify’s Discovery Mode Screwing Over Artists?

The Future of Music Coalition slammed Spotify for its Discovery Mode tool, which may lower royalty rates to algorithmically boosted songs

A graphic used by Spotify to promote its Discovery Mode tool, which algorithmically boosts songs (but may cut royalty rates)
Is boosting a song worth a reduction of royalties?

What’s the real cost for a new artist who wants to get a little extra promotion for their music in this era of streaming? We’re about to find out, as the use of a tool by Spotify may algorithmically juice some tracks in exchange for a lowering of royalty rates — which aren’t that great to begin with.

A number of new initiatives were announced at Spotify’s second annual Stream On event, which took place earlier this month (including an AI personal DJ). Within all the announcements — some quite interesting and positive — was a rather vague description of Discovery Mode, an expanded service for musicians and labels.

Discovery Mode is a tool through which artists and their teams identify priority songs, and Spotify will add that signal to the algorithms that shape personalized listening sessions,” per a Spotify blog post. If you dig a bit deeper, the streamer talks about how songs placed in this Discovery Mode service are being saved 50% more often and added to playlists 44% more frequently by listeners, who are then following the artist 37% more often.

We Tried Spotify’s New DJ Feature, an AI-Crafted Radio Station with Commentary
It’s essentially your favorites in a playlist with a chatty AI-generated disc jockey

There is, of course, a cost to this increased exposure. In a series of tweets by the Future of Music Coalition (FMC), a music non-profit geared toward artists, the organization ripped Spotify’s Discovery Mode as a brazen payola scheme.

“Hearing that Spotify is starting to send around submission information for Discovery Mode, its new wage suppression scheme,” they write. “It’s perhaps the most brazenly anti-competitive form of payola we’ve seen in digital music.”

The FMC claims that Discovery Mode involves a 50% cut in Spotify’s already low royalty rates, “in exchange for algorithmic manipulation that boosts these low-cost tracks.” The organization then suggests that the government, labels, artist groups and others get more involved in fighting back against this arrangement. And it also saves some anger for digital distributors. “It’s worth asking why an entity that is supposed to be negotiating on behalf of artists is encouraging artists to voluntarily cut their wages,” they write.

The site Music Ally, which first reported these tweets, notes that the suggested 50% cut in rates has not been verified by Spotify. However, the publication also reports that “at least” one major label-owned distributor is declining to offer the tool to its clients — suggesting that Discovery Mode will continue to be a contentious subject for artists and labels.

Spotify, meanwhile, does note that the number of artists generating $1M+, as well as those generating $10,000+, has more than doubled during the past five years, pointing out that even the 50,000th highest-earning artist on the service generates “more than $50,000 across all recorded revenue sources.” This is somewhat good news, as it suggests that more middle-class musicians can actually make a living via streaming.

The InsideHook Newsletter.

News, advice and insights for the most interesting person in the room.