Hey Pack People. I know it sounds dry… but I want to talk to you about music streaming business models. Wait, wait, don't leave yet! I promise to (try to) keep it entertaining! Oh come on... I gave you a picture of runway models - that's gotta be worth something, right!?
I know, that if you’re here engaging in my rants and musings, you love music. I mean, who doesn't, right? It's the universal language that brings us all together.
And we all know that in our 21st Century reality, our go-to for consumption of our precious tunes is streaming, and that’s not going anywhere soon. But did you know that the way streaming fees are paid to artists on these platforms is a little...well, let's just say it's all a bit complicated? And not all business models are alike.
What’s the difference?
Currently, most music streaming services use a pro-rata Market Share Payment System (MSPS) to pay out royalties to artists. In a very basic sense, this means that all the revenue generated by the platform is pooled together and then divided based on the number of streams each song receives. So, if you're an artist with a song that gets a million streams on Spotify, you'll obviously get a bigger piece of the pie than an artist with a song that only gets a hundred streams.
Now, on the surface, this seems like a fair system, right? After all, the more popular your song is, the more money you should make. But there's a problem with this approach. It doesn't take into account the fact that not all listeners listen to the same artists.
Let me give you an example. Let's say you're a big fan of Drake. You listen to his music all the time, and you're happy to pay your monthly subscription fee to Spotify because you know some of that money is going towards supporting him. But what about the other 7 million odd artists on the platform that you don't listen to? Why should your money go towards supporting them if you're not even interested in their music?
This is where the User-Centric Distribution model comes in. Instead of pooling all the revenue together and dividing it up based on the number of streams each song receives, this model distributes revenue so that it takes account of the different listening practices of individual listeners.
So, let's say you listened to 40 songs in a month, and 10 of those songs were by one band. Under the User-Centric Distribution model, that band would receive a quarter of your monthly subscription fee, minus any administration costs that keep the service functioning. This means that your money is going directly to the artists you care about, and not towards supporting musicians you're not interested in. And shouldn’t that be your right as a paying music consumer?
Now, I know what you're thinking. Sounds like an administrative nightmare – how would a streaming service be able to implement this kind of system?
The User-Centric Distribution model is certainly more complex to implement and administer than the MSPS, and in truth, the larger a system gets, and the bigger it’s catalogue, the more complex that becomes. But come on now, if we can explore space and get AI’s to write our ‘creative’ content, surely we can enable a simple creator-consumer transaction model? It’s a basic mathematical equation right – something computers were literally born to do!?
And in fact, there are already platforms out there that use this model to a greater or lesser degree, like Bandcamp. Bandcamp allows artists to directly connect with their fans and earn revenue from their music. Fans can choose to pay what they want for a song or album, and that money goes directly to the artist minus some small fees. This means that artists can earn more money from their music, and fans can directly support the musicians they love.
Why should we care?
You could argue that a rising tide lifts all ships, and that as long as the money is going into the ‘pool’, then at least the industry is getting stronger, right?
Well, here’s the thing. The rise of music streaming services has revolutionised the way we consume music, giving us instant access to millions of songs at the click of a button. But behind the convenience and seemingly endless options lies a troubling reality: independent and unsigned artists are becoming increasingly invisible on these platforms.
Have you ever tried to find an unsigned local artist on a popular streaming service playlist? It's like trying to find a needle in a haystack, except the needle is a song, and the haystack is a giant pile of Beyoncé, Drake and Ed Sheeran albums. It's not that independent artists aren't putting out quality music – it's just that the big four labels have a stranglehold on the industry, and they're making it pretty damn difficult for anyone else to grab a piece of the pie.
The reason for this is simple: the major music streaming services are beholden to the big four labels, in fact - they are major shareholders in the streaming services, and make massive amounts of money from having their catalogues on the streaming services. And when I say massive, I mean over a million dollars every single hour. These labels – Sony, Universal, Warner, and EMI – dominate the music industry, controlling the majority of the world's music catalogues and dictating what gets played on the radio, TV, and streaming services. And if that wasn't stinky enough, of those big bucks, they pay their artists around 16%. Lovely.
They feign interest in the ‘wider industry’, but at this point, it feels like the big four are just messing with us. They know we want to consume exciting new music, but instead, they keep serving their cookie cutter offerings, which have started to sound suspiciously similar (anyone noticed!?). They promote their product, which is, of course, their job – but it’s like they're saying, ‘You can have any song you want, as long as it's 'Shape of You' by Ed Sheeran.’
For independent and unsigned artists, this means that getting their music heard on these platforms is an uphill battle. Without the financial backing and marketing muscle of a major label, they are often relegated to the fringes of the streaming world, buried beneath a sea of mainstream hits and label-backed artists who can buy their way into popular playlists, ensuring themselves high visibility and rotation.
The result is a music ecosystem that is increasingly homogenised and lacking in diversity, and the implications of this trend are far-reaching. Not only does it limit choice for listeners, it also stifles creativity and innovation. Independent artists have long been a driving force in the music industry, pushing boundaries and experimenting with new sounds and styles. But if they are unable to get their music heard on streaming services, their ability to make an impact is severely diminished, and if they’re forced to create music so it ‘fits a commercial mould’, what then for our future music reality? I’m bored already.
So, how does changing the business model change things?
The User-Centric Distribution model doesn't just benefit artists and fans. It also has the potential to level the playing field for independent and unsigned artists. Under the MSPS, these artists often struggle to compete with more established, signed artists for a share of streaming royalties. But under the User-Centric Distribution model, they're able to earn more revenue from listeners who specifically choose to listen to their music, which gives them a little more control of their content, and of the value of their direct marketing efforts.
Now, I know what you're thinking… this all sounds great, but can we really make it happen on a larger scale? The truth is, it's going to take a lot of advocacy and collaboration from all sides to make the User-Centric Distribution model a reality for music streaming platforms, and we don’t really think the majors will ever embrace it (even though they can best afford to manage it!). It would require changes in legislation, negotiations between platforms and record labels, and a willingness from consumers to adapt to new ways of paying for music. Way more complex than simply changing the mathematical equation.
But at The Pack, we truly think that the benefits of this model are too great to ignore. Not only could it provide a fairer distribution of revenue to artists, but it could also give listeners more control over where their money goes and encourage them to support the musicians they love. It could even lead to a more diverse and inclusive music industry, where independent artists have a better chance of moving past surviving, to thriving.
As music consumers, what else can we do?
So, what can be done to address this problem? One strategy is to lobby for for streaming services to be more proactive in promoting independent and unsigned artists. This could include creating dedicated playlists and sections for indie music, or offering more support and resources to help these artists grow their fanbase. But of course, we would ultimately need music consumers to get behind these initiatives, and support their local, unsigned and independent music creators.
Ultimately, it's up to us as listeners to demand more diversity and choice in the music we consume. By seeking out and supporting independent artists on streaming services and other platforms, by supporting their Patreon and Bandcamp pages, and better yet, supporting streaming services that are trying to manage this systemic inequity from the get-go, we can help create a more vibrant and inclusive music industry for everyone.
So, to sum up these ramblings, the way we currently make music streaming payments is a flawed mix of corporate greed, and unintended consequences. The pro-rata Market Share Payment System may seem fair on the surface, but it steals the choice of listeners, and the creative control and sustainability of the artists they love. Frankly, my dear, we think it's time for a rebellion.