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User-centric streaming payouts: Apple, major labels, new artists…


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Apple has internally modelled how a user-centric system of music-royalty payouts would work, in an effort to understand its potential impact on artists and labels, according to Crispin Hunt, chair of songwriting body The Ivors Academy.

“They said ‘Be careful: we’ve modelled how this comes out’,” said Hunt, in a panel session about user-centric payouts at The Great Escape conference in Brighton. “Though some fringes like jazz would do much, much better… in the States, for Apple’s streaming service, in fact Taylor Swift is subsidising everybody else. An awful lot of people are playing Taylor Swift, but her music [royalties] are shared out among everybody.”

Hunt added that streaming service Deezer, which has “done an awful lot of work” analysing the user-centric model, has told him that the model *would* result in a different (and fairer, to independent artists and smaller genres) distribution of royalties.

The user-centric model, if you’re new to it, would see a music-streaming service divide each user’s subscription (or the ad royalties generated from their listening) only between the rightsholders for the songs they’ve listened to, rather than putting that money in a bigger, service-wide pool that’s divided up by overall streams on the entire platform.

Or to put it more simply: under a user-centric model, if you don’t stream Drake, then Drake isn’t getting any of your money. Under the existing model used by streaming services, he’s getting one of the biggest chunks of your money.

During the panel, Hunt also suggested that major labels might swing their weight behind the user-centric model as territories like Latin America and India start accounting for a greater share of global music-streams.

“As emerging markets grow like South America and India, the value of those listeners [in terms of subscriptions / advertising revenues] is far, far less than the value of rich American and European subscribers,” said Hunt.

“So, if it isn’t user-centric, all of the streams are going to go to South American [and Indian] artists, who aren’t owned by the big American labels! So the big labels are going to go ‘Damn! We have to change to user-centric…’”

There’s a big caveat here, however. Spotify tied up its licensing deals with major labels for India shortly before its launch there earlier this year. The country is thought to be a ‘carved out’ market in licensing terms, meaning its payouts are separated from those generated (and shared out pro-rata) in existing, mature markets like the US.

Still: “As the big labels try to push Anglo-American artists across South America and India, it makes sense that they will not want to be having the vast majority of global streams going to Indian artists and South American artists,” claimed Hunt. “I think it’s a wonderful thing if we did have global music from Indian artists and South American artists. But I’m not sure that Universal would agree!”

During the panel, Per Kviman from Versity Music and international managers body EMMA, called for more research. “The principle of user-centric is definitely something we should get deep into, and I think we need to do more studies of what the effects would be,” he said, before suggesting that smaller music territories could benefit – which might bring its own tensions within the global major labels.

“All the majors in Sweden want the user-centric model… I think they will have problems driving it through with the US and UK,” he said. Kviman also made the point that switching to a user-centric model is far from the only change that might put more streaming royalties in smaller and niche-genre artists’ and songwriters’ pockets. “One thing that we should also be getting rid of is the so-called black-box money!” he said.

Lucie Caswell, CEO of the Featured Artists Coalition, expressed caution about the idea of user-centric payouts as a panacea for the music industry’s various royalties controversies.

“It sounds lovely, doesn’t it… however, the reservation is in the current regime, is it even feasible?” she said. “Is it going to go back to the wallet-share of who can put the most tracks in front of you, as the user? And it’s also about where the money does go when it comes in: Those services are still going to pay their licensors. So however much they might be able to create a whole new royalty system.. will that compute, or even be reflected, in the receiver of that money?”

“Anything that allows for new models, or even just puts up the priority of who should get paid in this conversation, is obviously valuable. But we’re an industry that likes one fix for everybody, and this won’t be it!”

That was the general theme for the panel: a liking for the principle of user-centric payouts; a desire for more research to be done to understand the likely impact; and careful warnings that any such shift would not solve the industry’s problems at a stroke.

Kviman, for example, suggested a rethink is required for how streaming services compensate catalogue versus frontline music. “There have to be more incentives for the platforms and the labels to break artists,” he said.

“The income that the big labels – majors including the big indies – are getting from catalogue is insane, and not healthy for the industry as a whole. It doesn’t give an incentive to really try to break new artists,” he added. “So if we have user-centric and it proves to be a better way, it will still only solve one small part of the problem, I think.”

(There may be disagreements on this. At the recent FastForward conference, for example, Interscope’s EVP of urban operations Nicole Wyskoarko said that not only is streaming enabling her label to sign many more artists – it’s also enabling it to take more creative risks on some of those signings, who might not be as obviously commercial. So by that argument, UMG’s catalogue income is fuelling investment in frontline artists.)

Still, Hunt agreed. “The platforms need to start concentrating on breaking artists and not just dealing with legacy catalogue. But the trouble is that streaming, as Spotify keeps telling us, is a track-based medium. It’s really about songs, and not about artists,” he said.

“The truth is, as a medium it doesn’t work. The whole industry is going through a massive change, and I think it’s tragic. I made albums in the past, and albums are like novels and songs are like short stories, and it’s a much richer world if we’re living in a world of novels… But there is no incentive to listen to 40 minutes of music any longer. It’s just about songs, and the playlists are just about songs.”

Kviman agreed that listening habits may have changed in terms of tracks versus albums, but suggested that this “doesn’t mean we couldn’t have more focus on artists, rather than on songs”.

The wider principle here was about connecting fans AND their money more directly with artists. Hunt cited Midia Research’s recent proposal for ‘creator support’ as a different spin on user-centric payouts: where each streaming subscriber chooses up to two favourite artists, who’ll get top-up ‘support’ income from their subscription payment.

“I don’t think music should be a charity, and supporting your local band shouldn’t be a charity… but something like that is a possibility. It opens up the conversation about how we can reconnect the fans’ money with the music that they’re listening to,” said Hunt. “We need to be able to sustain a jazz sector, and if all the jazz sector’s money is going to [other genres]…”

He elaborated by referring to the genre that’s become the most important to modern streaming services. “Hip-hop 25 years ago was a little fringe in New York, and it would never have become what it is now, if it had been starved from birth,” said Hunt.

Stuart Dredge

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