[This 2018 MusicAlly post by the great Stuart Dredge summarizes my “Ethical Pool” strategy as an intermediate step toward solving the unsustainable streaming artist royalty issue. The Ethical Pool can be implemented immediately–SoundCloud’s “Fan Powered Royalty” version demonstrates the immediate application potential while further engaging fans. It also blows past the complexity objection from streaming services which is the threshold rejection when user-centric (or what I call “artist centric”) is presented because the Ethical Pool is essentially bolted on to the existing royalty system so that services run both simultaneously. That’s what SoundCloud has done with FPR and that’s why it is an intermediate step. You would have to make some decisions about what business rules would allow the two systems to operate side by side, but because all participants in the Ethical Pool would be opt-in you would not have to amend any existing contracts, pass any laws, or change any existing royalty accounting systems. The “Big Pool” stays as is, the Ethical Pool is a new and separate license. The market will tell us if it flies or crashes and burns. It must also be said that there is a tremendous amount of fraud in streaming services–naturally, it’s on the Internet after all–and any royalty system like the Ethical Pool that encourages the existence of actual fans is likely to create natural barriers to fraud.
But know this–the status quo is not sustainable (as Professor Claudio Feijoo and I wrote in our WIPO study on streaming remuneration). Stuart returns to this topic in a recent MusicAlly post in light of Sir Lucian Grainge’s recent statements about sustainability.]
Industry blog Music Tech Solutions has been thinking about the debate around ‘user-centric’ streaming royalties. That’s where the royalties from every paying streamer’s monthly subscription are divided only between the artists they listen to, rather than going into a bigger pool divided by overall listening share on the entire service.
MTS’ new idea: let fans choose if they want their subscriptions to be divided up in this new way. “When the fan signs up for a service, let the fan check a box that says ‘Ethical Pool.’ That would inform the service that the fan wants their subscription fee to go solely to the artists they listen to,” it explains, suggesting that this would ensure streaming services don’t fall foul of contracts that require them to treat royalties in the traditional ‘Big Pool’ way. “Artists also would be able to opt into this method by checking a corresponding box indicating that they only want their recordings made available to fans electing the Ethical Pool. The artist gets to make that decision. Of course, the artist would then have to give up any claim to a share of the ‘Big Pool.’ Existing subscribers could be informed in track metadata that an artist they wanted to listen to had elected the Ethical Pool. A fan who is already a subscriber could have to switch to the Ethical Pool method in order to listen to the track.”