The business of streaming is such that no-one but the streaming platforms seem happy with how it’s run. In the past, we’ve covered the issues around Spotify on the podcast, and alternative models have ben explored here.
User-centric payment systems have been supported by Deezer and most recently, Soundcloud has adopted the model under the title Fan-Powered Royalties.
User-centric payment systems
As a reminder of how they work, UCPS means that the money from a single listener’s subscription is only be distributed to the artists that that person has actually listened to in that subscription period. So if that person listens to 10 artists in a single month, their €9.99 subscription will be divvy’d up between those 10 artists or their artist representative, depending on volume, minus streaming cut.
The pro-rata model
Spotify employs the pro-rata model, where-in all the revenue from all users is put in a single pot and distributed to the artist/label based on the percentage of total streams from that artist or representative rightsholder. So if a big streaming artist like Ed Sheeran receives 20% of the total streams in a period, they will receive 20% of the total payout.
On that system someone who only listens to Saint Sister that month will still end up paying some of Ed Sheeran’s 20%, while Saint Sister likely earn less.
Spotify and some recent reports have suggested that a User-centric payment model would only bring marginal gains to smaller artists, so are reluctant to try it.
A new report on User-centric payment systems
- 68% of artist profiles could see an increase or decrease of at least 40% in their streaming revenue.
- 19% of artist profiles could at least double their streaming income.
- More than 25% of all streaming revenue would be redistributed to different artist profiles (a reallocation of €161 million per year in Germany alone)
- According to this analysis, almost every third artist profile could increase their revenue by at least 40% in the major countries. Almost one in five artist profiles could at least double their income under UCPS.
There are a number of factors in the increase or decrease which includes average user spend on subscriptions, number of users listening to one artist in ratio to streams and ratio of listening to one artist compared to other artists.
UCPS may not be a win-win for all
As Reynaldo points out, it’s a small sample size that doesn’t include US data in its report (the report author is Ryan Rauscher, who has formerly worked with many major labels) for example, and the truth isn’t an automatic win for all, some artists may lose out on revenue, while some may gain. You can be sure the big streaming artists are not willing to find out which side of the curve their revenue falls on.
Adopting user-centric payment systems is a better principled model, that could potentially cut down on currently unchecked bot and fraud streaming on the platforms at least for a while, but that’s not how the music world works, sadly.
Muddying the water here is whether adopting the UCPS model is fairer overall to artists as was originally hoped, and the latest report suggests it may not be the rising-tides-lifts-all-boats model that it is sometimes thought of.
Reynaldo’s piece does deeper on the numbers and the author of the report, and is well worth a look and a Substack subscription.