Introduction

In the ever-evolving landscape of the music industry, the battle for fair compensation for artists has been ongoing for years. Recently, Universal Music and Deezer have joined forces to introduce an innovative streaming royalties model that aims to address this issue head-on.

The Streaming Model: A Quick Overview

Before delving into the specifics of Universal Music and Deezer's new streaming royalties model, it's essential to understand the current landscape of music streaming royalties.

Traditionally, streaming platforms like Spotify, Apple Music, and Deezer have relied on a pro-rata model. In this system, the platform pools all subscription and advertising revenue and then divides it among artists based on their share of total streams. While this model has its merits, it often results in unequal payouts, with mega-popular artists benefiting more than emerging or niche musicians.

Universal Music & Deezer's Game-Changer

Universal Music, one of the world's largest music labels, and Deezer, a prominent music streaming platform, have embarked on a collaboration to create a more equitable streaming royalties model. Here's a closer look at some key aspects of their approach:

1. User-Centric Model:

The Universal Music and Deezer model adopts a user-centric approach to royalty distribution. Unlike the pro-rata model, which distributes revenue based on total streams across the platform, the user-centric model ensures that each subscriber's subscription fee is primarily directed to the artists they listen to. In other words, if you primarily listen to indie artists, your subscription money goes to support those artists, rather than disproportionately benefiting megastars.

2. Transparency and Accountability:

One of the significant advantages of this model is the transparency it brings to royalty distribution. Artists can now see exactly how much they earn from each individual listener. This transparency empowers artists to make informed decisions regarding their careers and provides a fairer and more sustainable income source.

3. A Potential Boost for Emerging Artists:

The user-centric model could potentially level the playing field for emerging and independent artists. It ensures that smaller, niche acts receive a more equitable share of the revenue, making it easier for them to sustain their careers and continue producing music.

Impact on Artists

So, how will this innovative streaming royalties model impact artists?

1. Fairer Compensation:

The most apparent benefit is that artists can expect fairer compensation for their work. Instead of their earnings being diluted by superstar streams, they will receive more direct support from their dedicated listeners.

2. Incentive for Creativity:

Artists will be incentivized to create more music, as they can see a more direct correlation between their work and their earnings. This could lead to increased artistic output and creativity across the music industry.

3. Improved Livelihood for Niche Musicians:

Niche and independent musicians who might have struggled to make a living under the pro-rata model will likely see improved livelihoods, enabling them to continue making music.

Too Good To Be True?

Well, that depends on where an artist is at in their career. The standard payment structure on popular streaming services is called a pro-rata structure. Companies such as Tidal, Apple Music, and Spotify use this pro-rata structure that pays out streams based on how they perform against every other stream on the platform.

The ‘artist-centric’ structure that Deezer and UMG plan to implement works differently from what is considered today's norm. This structure will pay 2 to 4 times more royalties to artists that are considered ‘professional artists’. They define a professional artist as having 1,000 streams per month or 500 listeners per month. Artists who do not live up to this threshold will be paid less than artists who do.

The ‘professional artist’ requirements that Deezer and UMG have put into place may not seem like a lot, but you have to consider the markets. Deezer only has 9 million subscribers compared to Spotify’s 500 million subscribers. To put this in perspective, 1,000 streams per month on Deezer would be the equivalent of 60,000 Spotify streams based on market share. Critics have labeled this structure as a 'reverse Robin Hood effect,' contending that it redirects funds away from smaller indie artists who may be in the early stages of their careers or haven't yet had their breakthrough moment.

So if pro rata-and artist-centric aren’t the most ideal structures, what would be? Ari Herstand from Ari’s Take suggests that the best model to use would be something called a ‘user-centric model’.

To illustrate this concept, let's consider a scenario. Suppose you pay $10 a month for a streaming service, and you spend 50% of your time listening to Drake, 30% of your time listening to BTS, and 20% of your time listening to The Weeknd. In a user-centric model, Drake would receive $5, BTS would receive $3, and The Weeknd would receive $2. This approach ensures that consumers' money flows more directly to the artists they support.

While many hope for the global adoption of a user-centric structure, do you believe we are moving in the right direction by shifting towards artist-centric models instead of pro-rata systems?

Sustainability of the Model

The big question now is whether this new streaming royalties model is sustainable in the long run.

1. Other Potential Challenges:

While the user-centric model seems promising, it may face some challenges. For instance, platforms might need to make significant adjustments to their existing systems and potentially negotiate with record labels. Additionally, the success of this model depends on the engagement of subscribers, making it essential for platforms to maintain and grow their user base.

2. Industry-Wide Adoption:

To achieve lasting sustainability, this model would ideally need to be adopted industry-wide. If only a few platforms and labels implement it, there may still be disparities in artist compensation.

3. Evolving Technology:

As technology continues to evolve, the music industry may need to adapt further to ensure fair compensation for artists. Ensuring that the model remains effective and equitable will require ongoing evaluation and adjustment.

Universal Music and Deezer's new streaming royalties model is undoubtedly a step in the right direction toward a more equitable music industry. By adopting a user-centric approach, it promises fairer compensation for artists and increased transparency in royalty distribution. However, its long-term sustainability will depend on industry-wide adoption and the ability to adapt to future changes in technology and consumer behavior. With the right support and commitment from all stakeholders, this model could be a game-changer for artists worldwide, offering them a brighter and more sustainable future in the music industry.