What’s the darn problem with the current allocation of music streaming royalties (Pro-Rata)? - Part 1 - UCPS & mainstream artists

A quick note for context

So last week, PRO MUSIK - Verband freier Musikschaffender e.V. published a study on #usercentric (#UCPS) that I authored. Going forward I will touch on a number of aspects of UCPS in particular and alternative #paymentmodels in general. Some of these posts will relate to specific parts of the study. Others will contain food for thought on important discussion points beyond the scope of that paper.?

The problem with Pro-Rata

When you’re thinking about alternatives to the current #prorata model, it does not matter whether you’re looking at User-Centric, #artistcentric or a completely different payment model. If you haven’t defined what the problem is with Pro-Rata, there is no way you could possibly determine that a different model would be “better”. You need to be able to understand and articulate what the issue with #revenueallocation currently is and then come up with compelling arguments on why another payment model would improve that situation.?

My plan is to publish a series of articles here where I’ll address this question. I will start with what I believe is NOT the problem with Pro-Rata. Starting with the very common diagnosis that “mainstream” artists benefit from the current #musicstreaming payment model and niche artists do not.??

Disclaimer?

The views expressed here are my own personal ones and do not necessarily represent the position of my current employer or any other people or entities I have worked for or with.

Myth #1: Mainstream artists benefit from the current payment model in music streaming (= Pro-Rata)

This is the most widespread problem description when people discuss the current payment model and criticize Pro-Rata. You see this message reflected in a number of public campaigns and in almost all respective media coverage. It comes up in virtually every conversation I have with folks on User-Centric & Co.?

To be clear: this is not about whether famous artists get more support for Marketing or Promotion on streaming services. Of course they do. Bias towards mainstream artists may be an issue within streaming and/or within the music industry at large.?

It's just not what's wrong with Pro-Rata. Or any other payment model - as long as its rules are applied equally to every artist. It is possible of course to add discriminatory rules on top of an otherwise artist-agnostic model. But it's at least not public knowledge that this is currently the case for Pro-Rata.?

The Ed Sheeran argument

But let’s reflect a bit more on the notion that mainstream artists profit from Pro-Rata. For some reason - or maybe obvious reasons - #edsheeran is almost always the example chosen when people refer to this alleged problem. The argument usually goes like this: “Even if you don’t listen to Ed Sheeran, a (big) portion of your subscription fee goes to him!”.?

It’s a very convincing concept because of course you wouldn’t want your hard-earned money going into Sheeran’s - or any other artist's - pockets, if you don’t listen to his music. The problem with this argument is that the same logic applies to literally any other artist as well.?

Every single artist or songwriter - from a great niche artist to an unknown newcomer with just 1 stream - technically gets a portion of your subscription money, even if you haven’t consumed their tracks.?

Oh and by the way: based on analyses I've seen so far, I personally believe that Ed Sheeran's streaming income would be positively impacted by UCPS (please don't conclude from this that all "mainstream" artists would benefit).

So if you come across this argument in the future, keep in mind that the rules of Pro-Rata are designed to be applied equally to every artist on a streaming service. In fact, the payment model is one of the cases where there is explicitly no bias towards any type of artist.?

There is an argument that is frequently made in this context which is that streams and thereby revenue is highly concentrated towards the upper end of the scale. Something like “90% of streams are generated by only 0.4% of artists”. I want to be clear that it is absolutely possible, and probably reasonable, to question whether such a level of concentration is just or to conclude that it presents a problem.?

But: this sort of “wealth distribution” is not predominantly caused by a particular payment model. Different models may have an effect on the top-heavy concentration. But it is just as much - or even to a greater extent - caused by editorial selection & curation, algorithms, radio coverage or resource allocation at labels and other industry players, to name a few parameters.?

There’s also a rather nebulous “the winner takes it all” argument. And yes: under Pro-Rata, whoever gets the most streams, receives the most money from streaming. But that’s the case for any allocation model that you could apply: any artist that performs well across the criteria relevant under that model will get the biggest piece of the pie. I find it quite difficult to call that “unfair”, unless your view is that every artist should get the same, regardless of any consumption based success metrics.?

So based on the logic above, my conclusion is that the Pro-Rata model does not unduly favor mainstream artists. Still, this notion seems to be ingrained in almost everybody’s mind. Campaigns still claim that UCPS would redistribute from the mainstream to the niche (I'm planning to address that notion in a separate piece). I have even seen journalists write that our research suggests that revenue would be shifted away from mainstream artists - despite the fact that our paper did not even address this question. The main reason being that we think previous research has already provided proof that this would not be the case.

If you disagree, I’m happy to discuss and reconsider. If the above sounds reasonable to you, please drop that argument - in the context of UCPS and payment models - and help educate your peers by sharing this article and passing our research on to them.