Music streaming must switch to a fair and logical payout model. There is no time to lose.

Didier Martin, Outhere Music

The following MBW op/ed comes from Didier Martin, the CEO of Outhere Music. Outhere is a Paris-headquartered music company that is home to classical record labels such as Alpha Classics, which counts two US Grammy winners amongst its artists: Barbara Hannigan (soprano and conductor) and Patricia Kopatchinskaja (violin). Alpha Classics was nominated for Label of The Year by Gramophone magazine in 2020.

Here, Martin makes the case that, for certain genres, there is no time to lose for a move to user-centric licensing on streaming platforms. As MBW has written about many times before, services such as Spotify currently operate a “pro rata” (or “one big pot”) royalty model, whereby the majority of all money paid by subscribers is pooled, then paid out based on the market share each artist/label claims of all streams. This means money paid by individual subscribers regularly gets paid to artists they’ve never listened to. A “user-centric” model would instead see the $9.99 subscription from an individual instead paid out based only on what that individual has listened to – i.e. shared only between the artists and songwriters the individual played that month.

Below, Martin references an analysis recently published by the Centre National de la Musique (CNM) and Deloitte, which ran the numbers on what a switch might mean for individual genres in France. The study found that such a move would see streaming revenues for classical music rise by an estimated 24%, while rap and hip-hop (counted as separate genres) would be negatively impacted, with a respective 21% and 19% reduction in royalties.

Despite this reduction, rap and hip-hop, said CNM’s report, would – when combined – remain the biggest streaming genre in the industry. Over to Didier…

A study published by the Centre National de la Musique (CNM) last month has the merit of being the first serious analysis on the consequences of a possible change in the remuneration of streaming listening from a “pro rata” model to a “user centric” model.

The main lesson of the study is that the data currently available is insufficient to draw a reliable conclusion. Only two platforms responded to the study (Deezer and Spotify) and the data provided was inconsistent. Further studies are therefore necessary – probably over a period of years – in view of the lack of goodwill of certain players within the music sector.

Yet waiting is not an option, because streaming has now become the predominant mode of listening. CD players are disappearing; downloading is not available in a broad and practical manner.

Everyone is switching to paid streaming, even older people. The current health crisis is accelerating this shift towards digital tools.

The current “pro rata” streaming payment system was established at a time when this format was fairly marginal; it was based on subscribers (mainly young people) who listened consistently throughout the day to songs formatted over an average duration of around 3 minutes 30 minutes. The distribution of streaming revenues was therefore made on the basis of the overall audience and a track that was listened to for at least 30 seconds.

Today, streaming is practised by people aged 7 to 99, across all genres, from 3 minute songs to classical symphonies… where each movement (and hence each track) can last 20 minutes! The listening habits and durations of one sector of the population compared to another are extremely different.

“A distribution system based on what subscribers as a whole listen to is no longer suitable.”

A distribution system based on what subscribers as a whole listen to is no longer suitable. The CNM study shows that today 30% of intensive streaming listeners generate 70% of total streams… and therefore dictate where 70% of the money goes.

There is therefore a phenomenon of income being sucked into certain repertories, listened to in a loop by the biggest streaming consumers. We even know that some artists are being pushed to deliberately reduce the length of their songs to 2 minutes in order to maximise the revenue per track!

This is the perverse effect of an illogical system.

This system must be changed now because if the revenues generated are too low for certain genres/repertories, then they will simply disappear, as no one can afford to produce this music anymore.

The CNM writes that the redistribution of income in a “user-centric” model would be “in reality very limited”. But the figures, such as they are, simply do not enable anyone to assert this.

As concerns specialists such as classical music labels, a 24% rise in streaming revenue (according to the study) is far from being “limited”!

“This is the perverse effect of an illogical system.”

Note that behind this 24% rise for classical and a 21% drop for rap lie sums that, in reality, would in no way change the balance of the market: rap would remain very dominant and classical a minority interest, which is quite logical.

The rebalancing would occur only on the margins, but it would enable some to survive and continue investing in the art they champion.

The CNM rightly denounces France lagging behind its European neighbours in terms of streaming subscriptions.

In order to increase the number of subscribers, a transparent, logical and fair system of revenue must be adopted. We must enable people to be confident that “I subscribe and what I pay goes to the artists I have listened to.”

Rather than launch into years of impact studies and debates, action must be taken now to save the creative diversity of music:

  • By urging all platforms to change their method of remuneration: pay the rights holders based on what each subscriber has listened to according to their listening time.
  • At a time when responsible and respectful consumption is on the rise, both artists and music lovers can press for a worldwide change in the system.
  • Is legislation necessary? This would be an honour for France, the country of Beaumarchais. The CNM should investigate the feasibility of such a measure on a national scale.
  • In the meantime, let’s create a “compensation distortion correction fund” or “musical diversity support fund”, which would be supplemented by streaming platforms and which would direct financial help towards recording genres/repertoires disadvantaged by the current system.
  • The technical costs of changing the system are indicated by the study as being an obstacle. A worldwide music industry’s network could finance these costs. This is a matter of survival!
  • Lastly, the study rightly calls for clarification of the system dealing with the platforms’ algorithms that push one title rather than another… The CNM could negotiate with all partners a code of good conduct and of transparency in this area.

Let’s also take advantage of this change of model to ask streaming companies to improve the services offered to its subscribers by giving them a level of information equivalent to the old CD, with complete booklets, even if it means only offering them in slightly more expensive premium subscription packages.

At the same time, let’s continue to discuss how to share these revenues ‘downstream’, between musicians, composers and all those involved in production. Musicians are right to demand greater clarity on the subject and a better share of the value of music, especially at this time of crisis with Covid 19 when concerts are cancelled and neighbouring rights are in decline.

“Musicians are right to demand greater clarity on the subject and a better share of the value of music.”

At a time when music has never been so present in everyone’s life, when with a monthly payment one can listen to one’s favourite music or discover some other genre wherever and whenever, let’s adopt a system of remuneration that is fair, clear and logical.

Let’s be transparent with our audience.Music Business Worldwide

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