One of the most debated concepts in the modern music rights market is user-centered licensing. This model sees streaming royalties paid based on the subscriber’s individual behavior – with a percentage of each subscriber’s subscription fee being distributed only to the artists / labels that they listened to individually that month.
This model is in contrast to the current ‘pro rata’ streaming payment system, which sees all royalties on a service like Spotify “href =” https://www.musicbusinessworldwide.com/companies/spotify/ “> Spotify grouped at the end of each payment period … after which the recorded music rights holders are paid according to their market share in the total reproductions on the platform.
The latter model, of course, benefits global pop stars the most; the first model, it is believed, would bring more benefits for indie artists and for more niche genres, such as classical and jazz.
Critics of the ‘pro rata’ model point out that it regularly causes a proportion of an individual’s subscription fee to be paid to artists whose songs they haven’t even played. Furthermore, “pro rata” risks turning streaming into a game in which only artists with the most repeated moves in a given month earn a lot. This, in turn, risks triggering market manipulation, whether by artists / composers creating deliberately short songs (in order to maximize repeat reproductions) or even in the form of streaming fraud through paid stream farms.
On the other side of the coin, some studies have suggested that a switch to user-centered licensing would incur costly administrative costs for services, and even if that change may not make a material difference to those it is most designed to help – so-called Artists “middle class” who may not boast a successful global fanbase, but who attract a loyal audience of significant size that broadcasts their music regularly.
SoundCloud “href =” https://www.musicbusinessworldwide.com/companies/soundcloud/ “> SoundCloud is about to end this debate once and for all.
In a pioneering move in the industry, SoundCloud is introducing what it calls “fan-powered royalties” – its own brand of the user-centric model – which, he says, will mean “every [SoundCloud] The listener’s subscription or advertising revenue is distributed among the artists they listen to, rather than their pieces being grouped together ”.
The “fan driven” royalties will be released on SoundCloud on April 1 (within 30 days), and the platform suggests that the change will “benefit the growth of independent artists with loyal fans”.
How much will these indie artists earn? A new microsite launched by SoundCloud on the topic today points to the possibilities.
He 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-driven” and away from “pro rata” model, based on their recent SoundCloud piece counts, the service estimates that Chevy’s monthly royalties will grow by 217%, while Vincent’s will multiply. for five, from $ 120 to $ 600.
It is well known that consensus among the top three labels has not yet been reached on user-centric licensing in streaming – and that without Universal Music Group “href =” https://www.musicbusinessworldwide.com/companies/universal- music -group / “> Universal, Sony” href = “https://www.musicbusinessworldwide.com/companies/sony/”> Sony and Warner Music Group “href =” https://www.musicbusinessworldwide.com/companies/ access-Industries / warner-music-group / “> Warner collective approval, the concept will be hard to take off.
So, how did SoundCloud achieve this?
In short, because the platform has a direct monetized relationship with around 100,000 independent artists through its SoundCloud Premier, Repost by SoundCloud and Repost Select levels. Artists who use these services recruit SoundCloud as a distributor / aggregator, delivering their music on the SoundCloud platform itself or – in the case of Repost – other services as well.
Because of this, SoundCloud is able to run two royalty ‘calculators’ together, keeping most artists on their platform paid through ‘pro rata’, while allowing almost 100,000 indie artists to be paid through fan- centric / “user with engine”.
As such, SoundCloud is about to launch the first real-world user-centric licensing experiment, demonstrating exactly how to switch to “fan-powered” and away from “pro rata” will adjust the savings for artists in their – and others – streaming services.
SoundCloud’s insiders suggest that its first “fan-driven” royalty tests showed the opposite of what some research papers feared.
The calculation of these royalties by SoundCloud, they say, happens much faster than the usual calculation of the royalty service ‘pro rata’, with the burden of additional administration easily resolved by machine learning.
“SoundCloud is uniquely positioned to offer this new transformative model due to the powerful connection between artists and fans that occurs on our platform.”
Michael Weissman, SoundCloud
Michael Weissman, SoundCloud’s CEO, said in a statement: “Many in the industry have wanted this for years. We are excited to be the only ones to bring this to the market to better support independent artists.
“SoundCloud is uniquely positioned to offer this new transformative model due to the powerful connection between artists and fans that occurs on our platform.
“As the only music streaming platform direct to the consumer and next generation artist services company, the launch of fan-powered royalties represents a significant move in SoundCloud’s strategic direction to elevate, grow and create new opportunities directly with artists independent. ”
An interesting aspect of all this: with the “fan-driven” and “pro rata” payment calculations going on at the same time, it is entirely possible that SoundCloud will have to pay a surplus in its royalty distributions for some periods.
That’s because a total break from pro-rata to “fan-driven” would be a zero-sum game – that is, where an artist within the 100,000 affected “fan-driven” acts (Artist A) could see a larger payout due to the new model , it usually means that another artist (Artist B) elsewhere on SoundCloud may see a lower payment.
However, if Artist B remains in the ‘pro rata’ group of artists, SoundCloud would have to cover this cost increase for Artist A, while honoring all royalties that Artist B would have received on the ‘old’ model. ‘.
“MBW is informed that almost 20% of all current SoundCloud payments to the recorded music industry are made to independent artists who monetize directly on their platform.”
Why is this risk worth SoundCloud in business terms? Because the promise of “fan-driven” royalties is not just a crusade for justice, idiot; it’s a good deal too.
For SoundCloud, this is a powerful marketing tool to try to win direct business from independent artists who are currently distributed elsewhere, with the promise of a fairer way to earn royalties.
Another thing that helps: MBW is informed that almost 20% of all current SoundCloud payments to the recorded music industry are made to independent artists who monetize directly on their platform; that is, a good part of the redistribution of royalties after the “fan-powered” launch will take place in between the 100,000 artists on the SoundCloud user-centric ‘calculator’.
SoundCloud clarifies that, in addition to a listener being a paying subscriber (of SoundCloud Go +) or a free user, royalties “moved by fans” will also be determined by a calculation of “how much [a] fan listens [each] artist in relation to all his listening time in a given month ”.
SoundCloud currently hosts more than 250 million tracks by 30 million creators in 190 countries.World Music Business
