Music Business Worldwide reports…
One of the most hotly-debated concepts in the modern music rights business is user-centric licensing. This model sees streaming royalties paid out based on individual subscriber behavior – with a percentage of each subscriber’s subscription fee being distributed only to the artists/labels they have individually listened to that month.
This model is in contrast to the current ‘pro rata’ streaming payout system, which sees all royalties on a service like Spotify pooled at the end of each payment period… after which recorded music rights-holders are paid according to their market share of total plays across the platform.
The latter model, obviously enough, most benefits global pop superstars; the former model, it’s thought, would bring more benefit to indie artists and to more niche genres such as classical and jazz.
Critics of the ‘pro rata’ model point out that it regularly leads to a proportion of an individual’s subscription fee being paid to artists whose music they haven’t even played. What’s more, ‘pro rata’ risks turning streaming into a game where only the artists with the most repeated plays across a given month win big. This, in turn, risks triggering market manipulation, either by artists/songwriters creating deliberately short songs (in order to maximize repeated plays) or even in the form of streaming fraud via paid-for stream farms.
On the other side of the coin, some studies have suggested that a switch to user-centric licensing would incur cumbersome administrative costs for services, and even that such a move might not make a material difference to those it’s most designed to help – so called “middle class” artists who might not boast a blockbuster global fanbase, but who draw a significantly-sized loyal audience that streams their music regularly.
SoundCloud is about to settle this debate once and for all.
In an industry-first move, SoundCloud is introducing what it calls “fan-powered royalties” – its own branding of the user-centric model – which it says will mean “each [SoundCloud] listener’s subscription or advertising revenue is distributed among the artists that they listen to, rather than their plays being pooled”.
“Fan-powered” royalties will launch on SoundCloud on April 1 (in 30 days’ time), and the platform suggests the move will “benefit rising independent artists with loyal fans”.
How much will those indie artists gain? A new microsite launched by SoundCloud on the topic today hints at the possibilities.
It cites two independent artists currently operating on SoundCloud – Chevy and Vincent. Chevy currently has 12,700 followers on SoundCloud, Vincent has 124,000.
By switching these artists to a “fan powered” model and away from ‘pro rata’, based on their recent playcounts on SoundCloud, the service estimates that Chevy’s monthly royalties will grow 217%, while Vincent’s will multiply by five, up from $120 to $600.
