Streaming subscribers and revenues hit new heights this past year. Label valuations climbed. Song catalogs from artists including Bruce Springsteen and Neil Young were purchased for record sums. Yet in the midst of this booming music economy, many artists felt that they were not receiving their fair share of the rewards.
In 2022, that will change. As pressure mounts from fans and rival services that offer a different model for payment, streaming music stalwarts will begin to change how the billions in streaming revenues get divvied up to benefit emerging musicians and bands with the most dedicated fans.
If you thought that the $10 you pay each month for Spotify or Apple Music flows to the artists you listened to most, you’d be wrong. The money each user pays for streaming goes into one big pot. A major portion of those dollars go to rightsholders to cover the use of the recording music and compositions thus establishing the revenue pool for the month.
That pool is then divided up on a “pro-rata” basis using the collective listening history of all users. If half of all plays this month were Adele songs, then Sony Music would receive 50% of the record label share of the pool and would pay her based on their mutual contract terms. The “bottom line” (pun intended) is that the amount of money paid for each play is a result of an algorithm. It varies from month-to-month based on usage patterns. An emerging band unknown to virtually all the hundreds of millions of streaming subscribers might have 100 devoted fans who listen to their songs and only their songs repeatedly. Under the current system, that band would receive almost none of the thousands of dollars their fans pay annually because their listening is outweighed by the billions of plays from all the other users. If every subscriber found this month’s Netflix movies boring and decided to listen to more music instead, that emerging band’s per-play rate would decline.
Suppose instead that every listener’s dollars were divided up according to their listening alone and tallied across all subscribers. The result of this “fan-centric” accounting: That emerging band would receive the lion’s share of the money paid by their most loyal fans.
Soundcloud already allocates payments this way for independent musicians and is negotiating with the major labels to treat the artists they represent similarly. Tidal and the French service Deezer plan to do the same. Major stars like Paul McCartney, Chris Martin and Stevie Nicks expressed their support for a move within the UK to offer more “equitable remuneration” from streaming for all artists.
None of the larger services have indicated they plan to shift from “pro-rata” accounting…yet. Pressure from artists, governments and, most importantly, music fans should begin to change that.
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