This is an edited version of an article that appeared in Music Ally’s Q1 2020 report. In the light of the current #BrokenRecord campaign around music industry economics – see our piece last week for more on that – we wanted to also share it in front of our paywall.
The topic of user-centric music streaming payouts is one that’s going to keep popping up, and many people talk about it from a position of gut feeling – that it’s a fairer way to distribute streaming royalties – rather than a deep knowledge of the model and its implications.
The good news: now is a good time to gen up on this topic, as there’s a relatively limited pool of articles and studies that you need to read to get a handle on it. The challenge being that this handle might be: there are still lots of unanswered questions around user-centric payouts.
But let’s not get ahead of ourselves: if you’re new to the idea, user-centric payouts are a different way of distributing streaming royalties to the current ‘pro-rata’ system.
At its simplest level of explanation, that’s where the royalties pool a streaming service has available in a certain territory for a certain period is divided up according to share of streams.
If an artist (Drake, say) got 2% of the streams in that period, then his rightsholders get 2% of the royalties pool. But what that also means is essentially 2% of the royalties generated by every individual subscriber are going to Drake’s music, even if they didn’t listen to him at all.
User-centric is – and you may want to have smelling salts to hand for this revelation – more centred on users. For each listener, the royalties portion of their subscription is divided only among the rightsholders of the artists they listen to. If they’re a hardcore metaller, folk or classical fan, that’s where the royalties go. If they only listen to Drake, his music secures 100% of the loot.
User-centric feels fairer: YOUR money goes to the artists YOU like. Does that mean smaller artists make more money and big artists make less? That major labels lose out to independent labels? That’s what some of the studies highlighted below have tried to understand. Spoiler: it’s not always clear).
The biggest question though, regardless of all this, is whether user-centric will ever happen: whether labels, publishers, collecting societies and streaming services can come together and agree that it’s the way forward, and switch en masse.
Finnish User-Centric Study
The most comprehensive recent study of what user-centric payouts would mean for artists and labels was run by the Finnish Musicians’ Union, based on data provided by Spotify. It’s a good starting point for getting to grips with the intricacies of what shifting to the model would do.
The Follow-Up Panel
The Finnish MU’s Lottaliina Pokkinen appeared on a panel at the by:Larm conference in March 2018 to talk about the study with a group of Nordic industry executives. It was a helpful discussion from people in the region that’s thought most about this, so we reported on it at length.
Norwegian Study from 2014
It’s also important to know that there have been studies of this in the past. In March 2014, Arnt Maasø from the University Oslo used data from Tidal’s forerunner WiMP Music to explore who the winners and losers would be from a switch to user-centric payouts.
Danish Study from 2014
Before it got bought by Jay-Z, WiMP was the streaming service at the forefront of research into the user-centric model. This study by Rasmus Rex Pedersen from Roskilde University was also published in 2014, and like Maasø’s was based on data from WiMP.
The Unintended Consequences
Former Spotify economics guru Will Page and collecting societies veteran David Safir published this paper on the potential intended AND unintended consequences of a switch to user-centric payouts. It’s hardcore – equations included – but may shed some extra light on the topic.
Money In, Money Out
Page and Safir’s non-technical paper focusing on collecting societies included analysis of the Finnish user-centric study. And if you want to go deep on the challenges of collecting societies, there are two more studies from the pair to digest: Can Two Societies Ever Be Better Than One? and The Causes and Consequences of Allocating Revenue between Mechanical and Performing Rights.
Royalty Inequity Study
Joseph Dimont, then of the Hastings College of the Law at the University of California, wrote a report exploring what he called the ‘per-subscriber model’, and it was published in February 2018. It looked at the implications, and suggested how the model might be implemented.
Deezer Plants Its Flag
Of the major DSPs, Deezer has been the keenest to back the idea of user-centric payouts. In September 2019 it talked to Music Ally about why it likes the model; what its modelling suggests the impact would be; and outlined its desire to launch a test in its native France with labels.
Deezer UCPS Website
The website that Deezer launched in September does a good job of summarising what the user-centric payment system is, and the reasoning behind the company’s backing of the model. It also has a list of supportive partners – although no major labels are to be found on it yet.
Midem Keynote in 2017
Going back a bit, Deezer’s CEO Hans-Holger Albrecht was interviewed by Music Ally’s Stuart Dredge for his Midem keynote in 2017, and he talked user-centric. “We did a calculation and this is better for mid-sized artists, smaller artists and upcoming artists…”
Creator Support Idea
In April 2019, Midia Research’s Mark Mulligan took a new spin on the user-centric model, mooting a system called ‘creator support’ under which each Spotify subscriber would ‘support’ up to two favourite artists, who’d always get 1% of the label royalties derived from that subscriber – 100% of which would be paid to the artist.
The Ethical Pool Idea
Industry lawyer Chris Castle had his own spin on the user-centric idea in October 2018, when he suggested an “ethical pool solution”. It was essentially user-centric, but with fans given the choice (when signing up) to opt in to the model, which could thus live side-by-side with the existing pro-rata system.
The Ethical Pool Revisited
Castle recently revisited the idea of ‘the ethical pool’ on his Music Tech Solutions site. It’s best to read the earlier post first as it has more details, with this newer post zeroing in on how the system might be implemented – including a way to make it work even if major music companies choose not to participate.
One of the benefits of user-centric payouts is the system’s ability to foil the so-called ‘Bulgarian Scam’ (a warehouse full of devices streaming songs uploaded by the scammer). If only that scammer’s accounts generated royalties for the tracks, it wouldn’t be profitable. MMF boss Annabella Coldrick explained why in this article.
UCPS at The Great Escape
In May 2019, user-centric payouts got an entire panel to themselves at The Great Escape conference. We reported on it, including the revelation (from Ivors Academy chair Crispin Hunt) that Apple Music had kicked the tyres of the model internally, to understand its effects.
The False Promise of User-Centric?
The Penny Fractions newsletter cast a sceptical eye over the excitement around user-centric in October 2019. “This consumerist solution removes the responsibility to fairly compensate artists from record labels/streaming services and reassigns it to individual fans…”
The Flaw in the Big Pool
Artist and entrepreneur Sharky Laguana made waves with his ‘Streaming Music is Ripping You Off’ blog post in August 2015, which did a good job of summarising the problems with the existing “big pool” system of paying out streaming royalties.
Midia’s 2015 Test
In July 2015, Mulligan sparked a bit of a debate with a blog post about user-centric payouts. He presented Midia’s own modelling of how the system might work, but also made his Excel spreadsheet available for people to fiddle with. The spreadsheet download link still works.
Because Music Views
Another backer of the user-centric model is Emmanuel de Buretel, boss of Because Music. In July 2019 he explained to Les Echos why. “Some services may like to say it won’t make too much difference, but that does not matter as much as being able to tell artists, ‘This system is fair, and this is how it works…’”
Sacem’s Opinion on UCPS
Some people assume that collecting societies would be obstacles to a user-centric system being introduced. Some are supporters of the idea though, with varying degrees of caution. Our July 2017 interview with Sacem CEO Jean-Noël Tronc, outlined his view of the idea.
Music Ally’s coverage
Browse stories tagged ‘user-centric’ in our online archives. That’s where you’ll find all our news stories about studies, opinions and other developments relating to user-centric payouts.