‘User-centric’ streaming payouts refers to a proposed system where the royalties generated by someone’s subscription would be divided only between the artists that they listen to, rather than going into a central pool divided by market-share on the platform as a whole.
‘If you only listen to Ed Sheeran, your money only goes to Ed Sheeran’ is the high-concept pitch for it, although in truth, it’s seen more as a way for fans of smaller artists and niche genres to be sure that their money *isn’t* going to Ed Sheeran, as it would under the current ‘pro rata’ systems of payouts on services like Spotify. No offence to Ed!
None of the major streaming services currently operate a user-centric model, although Deezer said in 2017 that it was exploring the idea.
While discussion about it has traditionally focused on whether the model would redistribute streaming income from the biggest stars to the long tail, it recently cropped up as a potential solution to the so-called ‘Bulgarian scam’ which Spotify shut down last year – since a warehouse full of computers streaming a scammer’s own tracks would be unable, under a user-centric system, to make more money than they spent on fake subscriptions.
That’s clear enough, but the redistribution issue is something we need more data on. Until now, the two main studies of user-centric payouts’ impact were quite old: published in 2014 and based on data from Scandinavian streaming service WiMP (Tidal’s precursor) in 2012 and 2013.
Now the Finnish Musicians’ Union has published a new study, based on anonymised data provided by Spotify on everything its premium subscribers in Finland listened to in the month of March 2016. The study divided tracks into three tiers: 90% only got “a few individual streams” in the sample; then nearly 10% got “dozens” of streams in the sample; while the top 0.4% of tracks got the most.
The key finding: under the current pro-rata model, that top 0.4% of tracks get around 10% of the royalties generated by those premium users, whereas under a user-centric model, they got 5.6% of those royalties.
“The difference between the two models is it’s clear that pro-rate favours these few at the top of the pyramid,” said the Finnish Musicians’ Union’s head of contracts Lottaliina Pokkinen, as she presented the results at the by:Larm conference in Oslo on Friday, in a session covered by Music Ally.
But it’s a bit more complicated lower down. “Some artists in this middle and basic tier would lose, and some would gain,” she said. “One thing is sure: the money would come down from the top of the pyramid, so the top tier would lose.”
A panel debate following Pokkinen’s presentation added some context to the findings. Larry Bringsjord of Norwegian music-industry body FONO called for user-centric payouts to be implemented – but also for ‘minute-based’ payouts, referring to royalties based on the share of listening time rather than individual streams, to avoid penalising genres (e.g. classical, jazz) with much longer average track-lengths.
“The people that can change it is the people who are delivering the music to the services: the international record companies, the independent record companies. We have to agree before we talk to the bosses in Spotify. If we don’t agree, it won’t happen,” he said. “I haven’t yet met a musician who doesn’t want this user-centric system.”
Publishing boss Kai Robøle had another request for Spotify though. “Spotify has cost €9.99 a month for 10 years now. They have to raise the price. First of all raise the price. You need minute-based [payouts]. You have to force them to pay mechanicals in all territories,” he said. “That’s going to lift the low end. Those are the things that are really going to make a difference. And if we can do that AND do it user-centric, then fine!”
It remains to be seen whether this latest user-centric study will put the ball more firmly in the court of the big streaming services to respond to these calls for change in their payouts structures.
That should include more exploration of the potential arguments against the user-centric model, some of which were touched upon during the Oslo panel – from higher data-processing costs to potential difficulties for rightsholders auditing the streaming services.
All of these are discussions well worth having, as music-streaming evolves. What price an investor asking Spotify’s senior management about the model during its upcoming Investor Day on 15 March?
Our suspicion remains that the most positive argument in favour of user-centric payouts isn’t about redistributing royalties, but about persuading even more music fans to pay for a subscription – because they feel a stronger connection to financial support for the artists they love.