Analysis

Martin Goldschmidt: ‘Why I have come round to the user-centric model’ (guest column)


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User-centric payouts has been bubbling on the fringes of the music industry for years as an issue. The first time I took it seriously was at an industry board meeting last year – no names! – where we got two presentations on the topic.

The big question everyone in the room wanted answered, including me, was: would we earn more money under the user-centric payment model?

One presentation used Spotify data, and showed that the overall streaming pie remained the same – obvious – and that the indies’ slice might be slightly less. Not surprisingly, the interest in the model was not great after this.

Then Deezer did a presentation, which also showed that the pie would be the same, and which suggested that we indies would earn about the same. But they made two other points that took a while to sink in.

Under a user-centric model, all the royalties from your subscription money go just to the artists you listen to. If someone is a big Metallica fan and just plays Metallica, all those royalties go to Metallica and none to – for example – Taylor Swift or BTS. And vice versa.

Under the current model, each subscribers’ listens affect the overall pot, and the net effect is that far more of their money goes to Taylor Swift and BTS than to Metallica.

Deezer’s argument was that user-centric is great for the listener. The reaction of the room – and also the response of the major labels in their recent submissions to the UK’s parliamentary inquiry on the economics of music streaming – was: that’s nice, but no big deal as there’s nothing in it for me.

A few days later, the penny dropped…

The job of a label is to get music from the artist to the consumer as efficiently and frictionlessly as possible, with marketing, promo, distribution etc. The better we do it, the more the consumer engages and pays: hence the more the artist makes, and we add more value.

Record labels and distributors tend to leave selling to the consumer up to other people like record shops and streaming services. The great exception, that proves my point, is D2C. We all know how people will buy records at gigs or from artists’ websites because they want to support the artist they love, with their money.

The bottom line, for me, is that user-centric is obviously a big win for the consumer. Long term, this will be a big win for artists, labels, distributors and DSPs. And we will all make more money.

If the pie remains the same, then how can that be? It would stop fake-stream scammers for a start. Even with a warehouse of devices streaming your own tracks – the so-called ‘Bulgarian scam’ – under user-centric you would only get 70% back from the money you were spending on subscriptions, killing your business.

Which, let’s face it, is a great result in its own right. Whatever share of the pie that was going to those fake streams under the current pro-rata model would now go to legitimate artists and labels, growing the pie.

I have come around to wholeheartedly endorsing the user-centric model.

Music Ally

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