Concerns surrounding the economic viability of music streaming have been the subject of global debate for several years, but it was the COVID-19 pandemic that truly revealed the system to be entirely unsustainable. The suspension of live music stripped musicians of their most crucial source of income and revealed that many artists are unable to live off the money generated from streaming platforms alone. The issue fuelled anger and frustration among artists, who took their frustration to streaming behemoth Spotify in a global display of defiance in March 2021, with acts protesting outside the company’s offices worldwide.
The UK Government formed a parliamentary enquiry into the economics of music streaming last November, which assessed the validity of a system that generates around £1 billion a year, yet fails to ensure musicians are fairly recompensed.
As pressure grew, SoundCloud took the biggest step towards resolving the problem by adopting a user-centric model. Under the new model, introduced at the start of April, streaming royalties are paid out based on the listening behaviour of each subscriber, meaning that every artist receives a percentage of the subscription fee paid by subscribers that have individually listened to the artist that month.
In contrast, Spotify—who declined to comment for this article—operates using a ‘pro rata’ payout system, whereby all the royalties generated are pooled at the end of a payment period and music rights-holders are paid according to their overall market share. This model suits the most popular superstars, as they consistently have a bigger share of the revenue pool. SoundCloud’s new model juxtaposes this and is much more likely to ensure all artists are recompensed fairly.
Independent artist, James Yorkston, told The Indiependent: “Spotify just isn’t part of my world view at all … from a financial point of view, there’s little point in me interacting with it. It seems ridiculous that the man at the top is a billionaire, whereas most of us get peanuts.”
The need to switch to a user-centric model was further highlighted by the parliamentary enquiry, where voices of those critical of the ‘pro rata’ system grew louder. Elbow’s Guy Garvey, for example, told MPs he was worried about the continuation of music itself: “The system as it is, is threatening the future of music.”
He added: “That sounds very dramatic, but if musicians can’t afford to pay the rent … we haven’t got tomorrow’s music.”
Founder of the #BrokenRecord campaign, Tom Grey has been speaking out against music streaming models since April 2020. Last November, he also told the enquiry why a more user-centric model is preferable. “I am a fan of user-centric. It does a couple of core things,” said Grey. “It funds niche music; jazz and classical we know do better. … another thing that it does is it helps artists who have developed a fan base, because if you have subscriber listeners who are coming back to you all the time that will pay out better than just a whimsical one listen that pays something else.”
Fair remuneration is clearly the key to sustainable music streaming but, unfortunately, it’s not as simple as pushing for a change of models from Spotify. In many ways, major labels have the power when it comes to the share artists get. They, as rights-holders, currently receive the share of the pool, then typically split it 80/20 with the artist. It gets worse too: a recent study by the University of East Anglia found that major labels enjoy an unfair advantage on Spotify and are thus able to take most of the subscriber revenue.
It’s clear then, that major labels have a vested interest in maintaining the status quo. They have ensured user-centric models like SoundCloud’s haven’t got off the ground until now.
Encouraging suggestions have been made, however, as the Universal Music UK Chief Executive and Chairmen, David Joseph, told the enquiry that user-centric licensing could be a way to ensure artists earn a healthy wage. This is very encouraging; major change is sure to soon materialise if a label the size of Universal backs it.
A BPI spokesperson told The Indiependent: “There is an argument for looking at it [user-centric models] more closely, including all its implications—to better understand potential advantages but also possible downsides. There is also the question of how UCPS could impact on different genres and groups of artists, so any new approach will have to be very carefully thought through.”
SoundCloud has fired the starting gun for the race to a fairer, sustainable music industry. But if Guy Garvey’s worries are to be taken seriously, it’s a change that can’t come soon enough.
Words by Adam Wright
This article was published as part of The Indiependent‘s May 2021 magazine edition.
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