2023-09-08 15:22:29
There is countless data that underlines how important streaming is for the music industry: payouts from Spotify & Co. alone accounted for $17.5 billion of the $26.2 billion in sales on the global market for music recordings. A change in the method of payment Services that have been discussed for years would therefore be a big step.
Apart from small exceptions, in essence – as explained briefly – they now distribute money to the rights holder based on the market share of a respective song. A song only has to be listened to for 31 seconds; no further distinction is made in the current system.
More money for better-known artists
The world’s largest music company, Universal Music, and the French service Deezer now want to establish a new model starting in the fourth quarter of this year. The key points of the project presented on Wednesday are quickly listed: Streams from artists who have at least 1,000 streams per month from at least 500 monthly listeners will be weighted twice in the billing.
The companies say this rewards them more fairly for the quality and attractiveness they bring to the platform and fans. On top of that, a song with which a listener “actively interacts” – for example by searching for it – will once again be in a better position and the economic influence of the algorithm’s recommendations will be reduced.
In addition, pure noise and other functional music that does not come from artists will in future be provided by Deezer itself and will no longer be part of the distribution pool. What does not change with this “Artist Centric” model is the allocation of market shares, the basic logic of the original system called “Pro Rata” used by all services to date, and the amount of distributions from Deezer itself. They are just distributed differently. Like all services, the company pays out around two thirds of its revenue to the rights holders of the songs featured on the platform.
In 2024, Deezer wants to apply “Artist Centric” everywhere
Now Deezer is a small player on the market with currently 9.6 million subscribers and the system will initially only be used in France. On top of that, “Pro Rata” will continue to run in parallel, as not all rights holders outside of Universal have yet agreed to the new model, as a Deezer spokesman confirmed to the FAZ. Next year, the service wants to have all partners on board and roll out the model to all markets.
The financial impact of the new model is limited for now. Nevertheless, the move marks the first major change to the payment method since the start of streaming more than ten years ago – and this could have far-reaching consequences.
The announcement comes earlier than expected after Universal boss Lucian Grainge announced work on a new model earlier this year, said an analyst comment from investment bank JP Morgan. In his New Year’s memo to staff, Grainge complained about the sheer volume of songs on the service – more than 100,000 are uploaded every day – and that content such as mere noise was depriving “real musicians” and their partners of royalties. After years under the old model, it is time for changes. How Grainge and Universal envisioned a new model in detail was, however, unclear until now.
Sony and Warner Music are also likely to benefit
If the “Artist Centric” model is also introduced by other, larger services in the coming months, it could increase streaming subscription revenue for the industry’s big three, Universal, Sony and Warner, by 9 percent, says JP Morgan analyst Daniel Kerven continues. After all, the so-called majors distributed a large part of the “current hits and the best music from the past”. Accordingly, the elements of greater weighting would particularly benefit them.
#billing #model #streaming #consequences