Midia Research’s Mark Mulligan tends to focus on analysis and predictions rather than breaking news, but yesterday he claimed a scoop: that Deezer is exploring an alternative form of licensing.
Specifically, the ‘user-centric’ form that sees royalties paid out based on each individual user’s listening habits, rather than the entire pool of monthly listening.
“So if a subscriber listens 100% to Metallica, Metallica gets 100% of the royalty revenue generated by that subscriber,” as he described it. Compared to the current model where “if Katy Perry accounted for 10% of all streams in a month, the 10% of that metal fan’s subscription fee effectively goes towards Katy Perry and her label and publisher”.
“This is the model that I can exclusively reveal that Deezer is now exploring with the record labels,” continued Mulligan. “Deezer has had encouraging if not wildly enthusiastic feedback from labels, not least because this could be an operationally difficult process to implement. The general consensus among labels I have spoken to is cautious optimism and a willingness to run the models and see how things look.”
It would certainly be interesting to test the model, but be wary of jumping to conclusions about it shifting revenues away from the biggest stars towards niche and emerging artists. A study conducted in Denmark in 2014 based on data from Tidal predecessor WiMP suggested that the effects of ‘per-user’ licensing might be surprising.
“Because the most popular artists have the least intensive listeners, per user distribution would generally move money from the tail towards the head,” claimed author Rasmus Rex Pedersen, who compared a per-user system to the existing way of paying royalties.
“Overall, the two models would generate almost the same amount for the top 5,000 artists… Among the top 5,000 artists, per user distribution would primarily benefit the most popular artists at the expense of the less popular.”
However, Pedersen’s study also suggested that local (i.e. Danish) artists would benefit from a switch to a per-user system; and also that it “re-establishes the economic connection between the consumer and the artist”.
For that reason, if Deezer is considering exploring the model and getting some new data on its possible implications, it could be a positive thing – whether it proves that the change would be worthwhile or not in the long term.