User Centric As Competitive Advantage: The Arc of the Moral Universe is Bending — Music Technology Policy

How long? Not long, because the arc of the moral universe is long, but it bends toward justice.

Reverend Dr. Martin Luther King, Jr., Our God Is Marching On!
March 25, 1965, Montgomery, Alabama

Everyone knows that streaming royalties are unsustainable. The question is what to do about it. The current system evolved from the early days of online music services and the advertising-driven madness of the Web 2.0 era. Over time, the interactive streaming revenue share model has been extended from advertising and applied to subscriptions. The terms have been tightened down again and again until it has become what it is today–the hyper-efficient market share distribution of revenue that completely ignores the vast wealth extracted from the public financial markets by companies like Spotify. It comes as a surprise to fans that when they think they are supporting the artists they love, the fan’s subscription revenues are being paid to artists that the fan never listens to. It also comes as a surprise to artists that their streaming royalty check is derived from their fellow artist’s work product. And this doesn’t address the session players and background vocalists.

It is this unsustainable model that has attracted great attention. Many alternatives have been proposed to connect fan listening to fan payments, often under the category of “user-centric” royalty methods. This was a topic at the recent hearings before the UK Parliament’s Digital, Culture, Media and Sport Committee where there was considerable testimony about user-centric in an effort to develop an equitable and fair model–the implication from the Members of Parliament being that if the industry didn’t fix the “market centric” structure, the government might fix it for them. 

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What was most interesting to me was that Amazon, Apple and Spotify were all essentially testifying that they knew the system was grotesquely unfair and seemed to accept that as a given. While Spotify’s representative put up the usual risible drivel about how poor Spotify cannot make a profit, he pretty much had to acknowledge that Spotify had to pay more (and do make direct payments to both featured and nonfeatured artists in a few countries like Spain). Which means that the pretense that streaming royalties would be adequate if it weren’t for the greedy labels had far less purchase with the Members than it did before. Which is what you would expect from any right thinking person who educated themselves about the situation on the ground. 

We’re a long way from here to there, but a journey of many miles starts with a single Parliamentary inquiry. I believe that the trick is going to be getting the market to drive adoption of a user centric model as a competitive advantage, and that brings us to the SoundCloud announcement about their new “fan powered” royalty offering

SC Fan Powered

The tone of SoundCloud’s announcement is definitely one of “look at me.” Although for once a streaming service is not saying look at me I have floors and floors of the most expensive office space on the planet while I pay artists a fraction of a penny, or look at me I’m a billionaire, or look at me I saved the music industry. Instead, and most remarkably, a streaming service is saying look at me, I’ve identified the problem of fans paying for music they don’t listen to and the embarrassingly low royalties for artists (and songwriters for that matter) and I’m doing something about it. As I read SoundCloud’s public messaging campaign, the company is putting it out there for a competitive reason–they want to attract artists because they are making an effort at treating people fairly.

In other words, SoundCloud is positioning user-centric as a competitive advantage to attract artists to opt in to the SoundCloud version of user centric. I think this is a very important development because it identifies the real choice for independent artists–to stream or not to stream. If you are driving your fans to a music service but the service pays you so little there may as well be no royalty at all, the question for you is not how many streaming services you can do free work for in fear of missing out. The question for you is whether any of it is worth it, particularly if you now have a better alternative. This may be a sign that the market is starting to drive the issue.

SoundCloud’s new program is also an indicator of another voice on the horizon–successful artists who get woke to the idea that this model causes them to take money away from the less fortunate artists. The day may easily arrive when an artist like Billie Eilish or Taylor Swift walk away from a service because she doesn’t want to be exploited in the “market centric” royalty model. When artists announce these decisions on the Grammy Awards. Now that would be quite a market force.

And if Daniel Ek doesn’t like windowing, just wait til he gets a load of what the arc of the moral universe has in store for him. It won’t be long.

@MicahSingleton: SoundCloud to Let Fans Pay Artists Directly

[Editor Charlie sez: The “virtual gift” is kind of old news and we’ve been covering it since 2018–but–it’s another market confirmation that streaming royalties are inadequate (nobody talked about virtual gifts with Tower Records or iTunes Music Store). It would be better if Spotify spent less time gorging themselves with their snouts in the public markets trough and more time figuring out how to pay performers a sustainable royalty.]

SoundCloud is preparing to introduce a new payment system that would allow fans to pay artists directly, multiple sources close to the situation tell Billboard, setting what could be a game-changing precedent for the streaming world.

The move would make SoundCloud the first major music streaming service to embrace a direct payment model, a strategy that has been popular with Chinese streaming services like Tencent Music’s QQ Music for years, and one that subscription services like Patreon and OnlyFans have built their businesses around, as musicians and fans around the world clamor for bigger digital music distributors to do the same.

Read the post at Billboard

Read Chris’s 2018 post about virtual gifts: Ethical Props–How Streamers Can Empower Fans on the Path to Sustainability 

@musictechpolicy: How Songwriters Get Screwed by Cheese and Pies

For some reason, there’s a focus at the moment on songwriter royalties and in particular for streaming royalty rates.  Notice that I said “rates” not “share” or the one I find particularly irritating, “share of the pie.”  Let us be clear—there is no “pie” there are only “rates”.  Or should be.  Let’s investigate why.

To frame this idea (speaking for the U.S. market), let me take you back to a conversation I had with a Nashville session musician and hit songwriter many years ago back before physical mechanical royalty rates were frozen.  

He looked at me and said, “Why do I have to take this government cheese royalty rate?  I get double scale when I play a date, why can’t I get double stat?”  

What he was really saying was why can’t I set my own price as a songwriter for mechanical royalties?  And the answer is the same today as it was then:  Because songwriters allow the U.S. government to set the price and terms for mechanicals.  Or rather the “minimum statutory rate” which is a joke because the “minimum statutory rate” has never been a minimum, it has always been both a minimum and a maximum.

There has also long been an obsession with songwriters and publishers comparing their rates to what artists and record companies get.  This comparison was only compounded in the digital era particularly for interactive streaming.  If you combine song rates and recording rates, some people get a pie.  Other people (like me) get an error message.  I’ll explain why.

Read the post on MusicTechPolicy

@volumecontrol10: Streamlining the Streaming Regime: Of rat kings and royalties in the streaming age

After a decade in which it seemed like illegal downloading had made it all but impossible for record companies to eke out a profit, recent years have seen things improve for the music industry. The rise of streaming services like Spotify have helped restore the major labels—now fused into three massive conglomerates—to their nineties-era wealth, with untold riches beckoning on the horizon. Despite this, the situation for musicians has never been grimmer. Streaming has failed to match the income that artists once garnered from album sales. Constant touring has replaced some of this, but for many, especially older performers, it can’t make up the gap.

While musicians struggle to bring attention to these untenable conditions, the industry’s C-suite has focused their efforts elsewhere. As firms like Spotify and Pandora glided to multi-billion-dollar valuations, hailed in the press as “saviors” of the industry, they failed to pay for all of the intellectual property on which their products were based. This gave rise to a slate of expensive and potentially destabilizing litigation that threatened such companies—and the major labels’ projected earnings. Faced with these pressing concerns, record label executives, music publishers, tech moguls, and telecommunication lobbyists came together to create legislation to address what they perceived to be the pitfalls of music’s new digital economy.

Read the post on The Baffler