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This month, Universal Music Group boss Sir Lucian Grainge went public with his belief that “the economic model for streaming needs to evolve”.

Grainge wrote of his desire for “an updated model… an innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love.”

This is a wider discussion within the music industry, as shown by Ivors Academy chair and Broken Record campaigner Tom Gray’s comments at this month’s NY:LON Connect conference.

“Consumption isn’t the same as consumer. The number of people who engage with your music culturally, socially, is more important than the number of times that your music gets heard,” said Gray, who believes this is not reflected in the current streaming economy.

What could that new model be? Music Ally has some thoughts, based partly on the discussion at NY:LON Connect; on our analysis of some of the research that’s been done into new models; and on conversations with people in a position to know how Grainge and UMG’s are thinking about these issues.

One clue from his memo was the choice of wording. ‘Artist-centric’ is not the same phrase as ‘user-centric’ – the model that’s most often been suggested as a better alternative to streaming’s current ‘pro rata’ model (primer here).

Grainge’s choice of words was a signal that UMG isn’t about to throw its weight behind the calls for user-centric payouts in their current form.

Why not? UMG has actually been studying the user-centric model for some time, parsing external studies and conducting its own internal research to understand what the impact might be of such a system.

Music Ally understands that the company began with an open mind, but that its review of the research raised concerns that a switch to user-centric risked taking one set of systemic biases from the pro-rata model – certain artists and genres doing well and others suffering – and simply replacing them with another set.

One issue, which was highlighted in a 2021 study by the Centre National de la Musique (CNM) in France, and again in a 2022 study by researchers at Hamburg University and Kuehne Logistic University, was that hip-hop and rap are among the genres that would likely see a decrease in royalties under user-centric.

A new model where young Black hip-hop artists (not just the superstars but emerging and independent musicians) may be ‘losers’ is enough to raise red flags, certainly within UMG.

(We should be clear though: this not to pigeonhole on racial grounds. Black artists make every genre of music, and people of every ethnicity make hip-hop. As we understand it, the concerns and questions are about whether any shifts from a switch to user-centric would disproportionately affect Black musicians.)

Critics might question whether there is a more self-interested argument: that the world’s biggest music company would be worse off under user-centric, and that’s why it doesn’t like the model.

However, we understand that UMG’s research so far has suggested the opposite: it would actually be better off, or at least around the same, because user-centric actually pays off well for companies with big catalogues of music, even if in theory it could end up redistributing royalties from their biggest acts towards the rest of their roster

Another thing that is informing UMG’s strategy is disquiet with one of the key arguments that has been put forward in favour of user-centric payouts: they they increase the importance (in financial terms) of the most engaged ‘superfans’.

This was the thrust of a report published last year by Midia Research for SoundCloud, focusing on the latter’s ‘fan-powered royalties’ model. “FPR provides an opportunity for superstars to change their strategy and build deeper fandom,” was one of its key conclusions.

That report, as well as SoundCloud’s efforts in not just proposing a user-centric model, but getting it up and running, deserve huge credit, as do the researchers, executives and campaigners whose analysis sparked the discourse in the first place. We should also remember, and celebrate, one of the most powerful things about user-centric: the way it reconnects listeners more directly to the income of the artists they love.

However, there’s an alternative view on that report’s conclusion, which is to question whether a user-centric model might actually give more power to the least engaged music listeners: people who stream less music, and tend to play the biggest hits and artists.

How so? It depends on how superfans behave. Do they stream their favourite artists a lot? Unsurprisingly, yes. But do they stream music by many artists a lot? Also yes.

As we understand it, the concern – certainly within UMG’s upper ranks – is that this might mean the royalties from those most-engaged listeners are spread more thinly in comparison to those from the lesser-engaged.

There’s a lot to think about here, because it goes against some of the stereotypes around the user-centric model – for example: that jazz or classical or folk would do well because their listeners listen more exclusively to their favourite genre, but stream fewer tracks than the average streaming user – and a lot fewer than the keenest Gen-Z listeners.

It’s complicated, because the CNM study *did* show that classical music, blues, jazz, folk and metal would be among the genres benefitting from a switch to user-centric, so that would mean that keen fans of those genres were more valued.

We’re not picking a side, but rather setting out some of the behind-closed-doors pushback against the user-centric model. The concern that it might massively amplify the financial power of the least engaged listeners merits more discussion.

We also need to zoom out a bit. The debate about user-centric versus pro rata may include worrying about which artists win and which lose. But Grainge made it very clear in his memo that he wants to draw a different dividing line.

“The real divide is between those committed to investing in artists and artist development versus those committed to gaming the system through quantity over quality,” he wrote.

“We need an updated model. Not one that pits artists of one genre against artists of another or major label artists against indie or DIY artists. We need a model that supports all artists—DIY, indie and major.”

Hence ‘artist-centric’, and there’s one more thing that’s important to understand here. While UMG has a clear set of objectives, it doesn’t have a single model in mind here. It hasn’t drafted a new system for calculating streaming royalties that it intends to make streaming services adopt.

Our understanding is that it believes there is no single artist-centric model, but rather that the principles outlined by Grainge could be applied differently by each DSP, depending on their varying customer acquisition strategies, and what metrics they see as indicating true engagement with music.

Or to put it another way: artist-centric payouts are the goal, but UMG doesn’t think there is one method to get there, nor does it intend to try to find one and impose it on the wider industry.

The trouble with the music industry is that trust can sometimes be in short supply, particularly when you’re the biggest major label.

Getting round a table with the streaming services to figure out how artist-centric models (plural) might work will happen in the natural course of licensing renewals. But there’s also a wider conversation here: one that goes to the heart not just of how musicians are rewarded for their art and for the loyalty of their fans now, but also the artists emerging in the future.

In that sense, the idea of ‘artist-centric’ models might be an evolution of user-centric rather than a repudiation of it. Slowly, but surely, we might be working our way towards something that the whole industry can get behind as a positive next step for the streaming economy.

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Stuart Dredge

Music Ally's Head of Insight

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1 Comment

  1. Reading this article gives hope and confidence in the evolution of our global business digital model. We need to protect quality vs quantity, for sure, and make our model evolve to a lifelong and equitable mecanism of payment for all kind of artists, music creators, producers. Also, value fan’s dedication through digital will strengthen their global engagement towards all the range of physical products (merchandising, vinyls, vintage and collector’s music products) and experiences artists and producers propose and work on.

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