THE MUSIC STREAMING INNOVATIONS TO TAKE ON THE TITANS
Updated: Apr 28
By now, you’ve probably heard about Spotify’s latest controversy – or maybe you’ve tuned it out, considering how often they happen.
This time, Spotify announced a new Discovery system to help artists. Long story short, artists will be able to choose specific tracks of theirs to get boosted visibility on algorithmically-generated playlists – so, for example, listeners’ Discover Weekly or Release Radar playlists. In exchange, Spotify will take a larger portion of the revenue generated from the streams of those chosen tracks.
This announcement sparked widespread ire from both musicians and Spotify users. The pressure has been on the industry titan for years now to increase the payout artists receive from their streams, the current number being unsustainably low (about £0.0024 per stream). Even at its most positive impact, this new ‘payola‘ system – as it has been dubbed in reference to the payola scandal of the mid-20th century, where record labels secretly bribed radio show hosts to play their tracks – is like graciously handing a starving man an extra 50 daily calories.
Regardless, critics of Spotify’s announcement have the foresight to predict the damage it will do. Anthony Fantano concisely picks it apart, musing that inevitably as more and more artists agree to take a revenue hit for further promotion, 1) the system will render itself useless as the space for promotion gets evermore crowded, and 2) Spotify becomes nigh-on completely useless for artists who choose not to sign up. It is essentially a self-neutralising system; more artists pay to receive promotion, meaning less organic promotion for non-paying artists, meaning more artists pay to receive promotion, meaning the space for promotion gets too crowded, meaning artists are then paying Spotify for little-to-no gain.
I’ve seen a few defenses of Spotify’s payola system – most of them cite the scalability of it, claiming fairness based on the fact that if the boosted song doesn’t receive many streams, then Spotify doesn’t take much money from the artist. In This article, Luke Girgis of ‘The Brag Media’ claims that most record labels/managers/artists he knows pay Spotify upfront for promotion already, so having a payment that scales with the amount of streams is much fairer than a single payment disconnected from the success of the track. When I read this claim, my eyebrow shot up my forehead – as yours probably did too. No doubt the world’s biggest artists pay Spotify an unholy amount of money to promote their releases (remember when Drake’s face dominated Spotify for a few days in 2018?), but I’ve never heard of medium-level or smaller artists doing so. Naturally, I took the matter to an Instagram poll, and asked ‘bands/artists/managers: have you ever paid Spotify upfront for them to promote your release?’ – sure enough, from 34 responses, 33 answered ‘no’ and one answered ‘yes’.
As seems the norm with Spotify, the biggest artists are getting a disproportionate amount of protection despite the well-documented plight of medium and smaller artists. As the streaming titans continue to monopolise how we consume music in the 21st century, a number of campaigns and innovations are popping up around the world, experimenting with new methods to ensure music streaming is a viable source of income for all artists, as well as ethical towards both the artist and the consumer. In the rest of this article, let’s take a look at what options we have, and where each of them stand in 2020.
The Pro-Rata System (Spotify, Apple Music)
Pro-rata, the Latin term for ‘in proportion’, is the name of the payment system used by music streaming titans Spotify and Apple Music – and has thus become the industry norm. The revenue from users’ monthly Premium subscription fees is collected in a big pot, and redistributed to the rights-holders of songs (whether they be record labels, publishers, songwriters, artists, etc.) according to their share of the total streams for that month. For example, say that Ed Sheeran got 5% of all the total streams on Spotify for November – that means that 5% of the payout revenue Spotify generated from subscription fees goes straight to him and his other rights-holders. Seems simple and pretty fair, right?
The main issue that critics have with the pro-rata system is its lack of transparency and user influence. Because the revenue from user subscriptions is collected and redistributed, you and I have no authority over which artists our money is supporting. Spotify takes a ~30% cut from subscription revenue, meaning that the remaining £7 you paid for the month is going to be redistributed pro-rata to music rights-holders – if Ed Sheeran gets 5% of total streams for the month, then 35p of your money goes supplement his income, regardless of whether you listen to his music or not.
Due to the many millions of songs on Spotify and Apple Music, the pro-rata system means that fractions of fractions of fractions of your subscription fee go towards the artists you like.
Some see this as an objectively fair system, and others don’t; whether you prefer to direct your monetary support yourself or to have it redistributed by Spotify is down to personal choice. What Spotify and Apple Music must be held accountable for, though, is the virtually imperceptible payout that artists receive per-stream.
For every stream of a song, Apple Music pays the rights-holders around $0.0056 (£0.0042), and Spotify pays around $0.0032 (£0.0024). Those fractions of a pence are further divvied up between the record label, the publisher, the songwriter, the performer(s), and whoever else may count as a rights-holder. All in all, the artist themselves taking home up to 30% of their streaming royalties is ‘about as good as it gets‘. That means that 1000 streams on Spotify earns the rights-holders roughly $3.18 (£2.39), with at most only 95¢ (72p) going to the artist.
This is, clearly, completely unsustainable for smaller to medium-level artists attempting to make a living, when a whopping 100,000 streams only earns them £72. For years now, campaigners have been calling for Spotify and Apple Music to increase their payouts to – at the very least – an acceptable level, though very little headway has been made; and, don’t shoot the messenger, but it seems increasingly unlikely that these titanic companies will do so in the near future. In Spotify’s case, 40,000 new tracks are being uploaded every day, while ‘subscriber numbers will inevitably begin to plateau.‘ The value of each song will continuously fall as exponentially more are uploaded while Premium users even out, meaning Spotify’s payouts will decrease further. To offset this, the company could decide to increase Premium users’ subscription fees, though that carries the risk of negating the increased revenue as some Premium users end their subscription and move to a cheaper streaming service.
The pro-rata system is fundamentally broken, and essentially impossible to fix.
This revelation is spreading like wildfire. In the past few years, a number of different music streaming models have cropped up to provide alternatives. “One-size-fits-all is a very crude, barbaric approach to music,” says artist, teacher, and music streaming innovator Mat Dryhurst – if these new streaming models can be made nearly as convenient and cost-effective to the user as Spotify is, then streaming can become a genuinely viable income option for artists. No-one needs to undertake the gargantuan task of toppling Spotify and Apple Music, but the less of a monopoly they hold over the 2020s, the better.
Let’s take a look at some of the most intriguing leading innovations.
User-Centric Payment System (Deezer)
Currently the leading alternative to pro-rata, the User-Centric Payment System (UCPS) is being trialed by France’s biggest music streaming service, Deezer.
UCPS is, like pro-rata, a subscription-based model – however the revenue from said subscriptions is paid directly to the rights-holders of the songs that the user listens to, instead of simply collected and redistributed based on share of total streams. This makes UCPS a much more transparent system, wherein the subscriber can see their money flow to the artists they support, as opposed to supplementing the income of massive artists that they never listen to.
Where UCPS is fantastic for those involved music listeners who want to directly support their favourite artists, it remains unclear whether it would provide a sustainable income to artists, or simply pay out pittance like Spotify does. Deezer has been experimenting, but their efforts to transfer fully to UCPS have been blocked by at least one of their big record label partners. For the world’s first wide-scale UCPS venture to take place, these big businesses must be convinced to let Deezer run with it – and engagement numbers talk. If you’re interested in pioneering UCPS, read more and/or sign up to Deezer here.
Pay-As-You-Play / Stream-To-Own (Resonate)
Founded by CEO Peter Harris in 2015, Resonate is catching an ever-increasing amount of eyes as the hunt for music-streaming alternatives beings to pick up pace.
Unlike both pro-rata and UCPS, Resonate’s innovative model does not operate on a monthly subscription fee. Instead, users buy ‘credits’ with real money (for USD, GBP and EUR, the number of credits is roughly equivalent to the currency; for example, 5 credits will cost you somewhere in the ballpark of 5 dollars/pounds/euros). These credits are consumed whenever you stream a song. After you have listened to a song nine times, and therefore paid nine listens-worth of credits (in total, this comes to roughly £1), you can stream that song for free, forever; essentially, you own it.
Harking back to the days when we purchased individual tracks and albums, Resonate’s goal is to combine that old-school ownership and direct artist support with streaming, and create a workable solution – hence why their model has been dubbed ‘pay-as-you-play’ or ‘stream-to-own’.
Resonate’s per-stream payout to rights-holders stands at a rough average of $0.006 (£0.0045), which is on the higher-end of streaming service payouts – almost double Spotify – but still undeniably low. However, the more a user listens to a track for those first nine streams, the more credits are consumed; 0.002 for the first listen, 0.004 for the second, 0.008 for the third, doubling each time all the way up to 0.512 credits for the ninth. This means that as the number of long-term Resonate users increases, listener ‘loyalty’ will kick in. Currently, as new users are drawn to the platform, we’re listening to the odd track here and there, paying 0.002 credits each time. As an increasing number of users spend an increasing amount of time using Resonate, the proportion of repeated listens to our favourite tracks will increase, meaning users are spending more of those juicy 0.512-credit ninth-listens than they used to.
Because Resonate pays rights-holders ‘directly and per-play‘ in proportion with the amount of credits a user has spent listening to their songs, the inevitable increase in listener loyalty means an increase in the per-stream payout.
Moreover, Resonate is a co-operative. They promise to include both listeners and artists in decision-making, and to share profits with them as well. Find out more about that here.
To the crucial question: does Resonate have a chance of competing with the likes of Spotify? This chance will live and die on two factors: 1) can Resonate match Spotify/Apple Music in pricing? And 2) can their music library compete?
Addressing the first question, Resonate have published a detailed, but easy-to-understand pricing breakdown here. A heavy listener might be paying around $15 (£11.29) per month, while the average user would pay around $10 (£7.53). Depending on your Resonate usage, you’d still be paying roughly the same amount of money per month as Spotify Premium’s £9.99 fee – with the added benefit of directly supporting the artists, ‘owning’ tracks like the days of yore, and the option of joining the co-operative.
As for the second question, there’s no beating around the bush – Resonate’s library is meagre compared to titans like Spotify and Apple Music. As is the case with any new streaming service, until usership increases and reputation is spread, it’s unlikely you’ll find many of your existing favourite bands or artists on Resonate. However, as aforementioned, what the streaming industry needs is the freedom of choice. What Resonate does incredibly well is showcase some of the best smaller to medium-level artists front and centre, curated brilliantly – this platform is an absolute gold mine for finding new talent. Without moving from the home page, I’ve become a fan of outstanding artists like Tess Roby, Thunderpaw and Nefer Moor. Resonate makes finding new music a much cleaner process than Spotify does – and if that is the niche that it fills, it will thrive there!
Signing up to Resonate is a quick and easy process, and they gift you a pretty hefty supply of credits so you can start streaming immediately. If you’re in the market for some new tracks, I recommend you try it out.
Fan-To-Artist Subscription (Mixcloud, kind of)
Mixcloud, a streaming platform for long-form audio (DJ mixes, radio shows, podcasts), has pioneered its ‘Select’ service. Users can listen to anything on the platform for free, but if they choose to, they can subscribe for at least £3 a month to a particular creator. 18% of that fee goes straight to the creator in question, while 12% goes to Mixcloud, and the remaining 70% goes towards ‘fees due to artists, labels, publishers and transaction fees’.
Mixcloud isn’t particularly forthcoming with information about what that last 70% chunk actually means. Is it used for pro-rata payout to all the creators on the platform? Is it used to pay off partnerships with record labels and massive artists? I tried to do some digging, but all I found was repeated use of the word ‘fair’.
Regardless of the murky details of Mixcloud’s payout distribution, the fan-to-artist subscription model remains largely untapped in regular music streaming. I would be interested to see a streaming service that remains free for broad usage, but users can subscribe for a monthly fee to artists they want to directly support. Livestreaming platform Twitch.tv garnered immense success with this model, whereby fans can subscribe to their favourite channels for £5 a month, the revenue split 50/50 between Twitch and the livestreamer. While the world of livestreaming and music streaming are hugely different, I reckon the same model could be replicated to potentially give music artists the financial stability they need in the low-cost-high-convenience context of the modern internet.
This is a discussion that I could really get into, but as you are aware, this article is already far too long. I’ll save it for the next one!
A Taxpayer-Funded Music Streaming Service (the American Music Library proposal)
Buckle up, because here comes one of the most innovative solutions to our music streaming crisis, and it’s been right in front of our eyes the whole time:
A public library for music streaming.
Pioneered by American entertainment attorney Henderson Cole, this idea involves separating the solution from private business entirely. Instead, the government would build a streaming service that runs much akin to our regular public library system; funded by a small tax, all recorded music would be collected on the service, free to stream by all residents of the country.
‘As the creator of the entire copyright system,‘ the government would have full autonomy over their royalty payments. Being free from the bonds of partnerships and deals with predatory record labels, it would enable a payout system that treats artists and songwriters much fairer than private streaming services. You can read all the intriguing details for yourself in Cole’s proposal for an American Music Library here – but the key takeaway is that he estimates…
‘the American Music Library would be able to offer somewhere in the neighborhood of $0.01 per Artist master stream and $0.0075 per Songwriter composition stream.’
…a huge increase from the current norm.
Cole also writes that there is no worry that a public music library would destroy existing streaming services. Essentially functioning as an archive, the user would need to navigate it themselves, given that the library would not be able to offer the same playlisting and curating services that private companies can. Even if there were jobs lost from the private sector, the library would ‘create thousands of government jobs with pensions, far more secure jobs than at any of these corporations.‘
So – a music streaming service that functions as a public library, funded by a small tax (that could be levied on the wealthiest without even a scratch to their income), free for all to use forever, that pays artists and songwriters a sustainable income. What’s the catch?
Unfortunately, Cole doesn’t mention the issue of actually trusting our governments. Perhaps the USA’s new administration will present less of a challenge than the outgoing one, but here in the UK, we still have at least three-and-a-half more years of a Conservative government renowned for haemorrhaging the arts. The first issue of trust is this: can we have faith that the government would prioritise artists over large record labels? This government have shown – especially during the pandemic – that they have no qualms with nepotism. I do not believe that artists and songwriters would be paid their fair share, when music industry billionaires like Vincent Bolloré (who has huge influence in Universal Music Group) have existing connections to Boris Johnson and his ilk.
The second issue of trust is that of free speech. Cole writes that, being government-run, the primary disadvantage of the American Music Library is that it would be bound by the laws of free speech, meaning anything and everything must be allowed to exist on the platform – even if it borders on the territory of hate speech. This may present an issue indeed, however I would argue that the main concern is the opposite, particularly here in the UK. For better or worse, we don’t hold the concept of free speech quite so high as our friends across the pond do; our government have demonstrated this by enacting forms of music censorship as recently as 2017. Due to the breaching of electoral campaigning regulations, the Captain Ska song ‘Liar Liar GE2017’ was banned from radio play nationwide. In 2015, Tyler, the Creator, was prohibited from entering the UK for four years due to then-Home Secretary Theresa May’s perspective that lyrics on his 2009 mixtape ‘Bastard’ and 2011 album ‘Goblin’ incited violence and terrorism, despite a lack of evidence.
The implied risk is clear: if the UK government ran a public music streaming library, could they and would they legally censor any music from appearing on the service if they found it disagreeable? Would particularly niche, experimental, and/or hard-listening artists like Show Me The Body, Death Grips or Daughters be banned from the platform, thereby discouraging the creation of fringe music altogether?
The concept of a public music streaming library is truly exciting, and Henderson Cole has my full support in developing this vision – though I worry that it cannot be safely implemented until there is legal apparatus in place to prevent the ham-fisted censorship of music, or until we elect governments that the arts can trust…
…Or, alternatively, until we get real choice of trustworthy private streaming services!
For now, if these streaming models have piqued your interest, try out platforms like Resonate and Deezer. There are plenty of other budding services out there that I haven’t covered, and supporting one means supporting them all. Once a few fair, transparent, and supportive new platforms begin to catch mainstream attention, we will begin to see the tangible mending of our broken music streaming system.
This article is in support of the #BrokenRecord campaign. On Tuesday 24th November, for the first time ever, evidence will be given to a House of Commons committee for an inquiry into the state of music streaming. Follow campaign founder Tom Gray on Twitter.