Is This a Better (Read: More Fair) Way to Distribute Royalties from Streaming Services?

It’s the start of a new month, which means if you subscribe to a streaming music service, your credit card or PayPal account just got dinged for the monthly fee. All that money goes into a pool which is then paid out to artists, labels, and publishers. Simple, right? Actually, not really.

Spotify and the others use a pro-rata system of payments. Let’s say that Ed Sheeran accounts for 2% of all Spotify streams in a given month, which is not an unusual figure for the ginger man. That means 2% of the royalties pot–money collected from paying subscribers plus ad revenue from the freemium tier–goes to Ed.

But what if you never listen to anything by him? You spend 70% of your time on Spotify listening to Norwegian black metal bands. Why should any of your $9.99 monthly fee go to Sheeran?

This is the thinking behind a new payment model–the so-called “user-centric” model–being tested in Finland. Under this scheme, streaming companies log your individual streams and pay out to artists based on your streams. So if 70% of your streams are of Norwegian black metal bands, then about $7.00 or that $9.99 will go directly to those artists. Seems more fair, doesn’t it? I though that this was how the royalty system already worked, but apparently not.

What’s interesting about this study is that the big hit songs take, well, a hit. Acts like Ed Sheeran would no longer benefit from being paid from the pool of royalties in the same way. Beneficiaries would be nichey artists in niche genres.

Sounds like a good idea to me, but you know that the people on top are never going to go for this. But then again, there are more people at the bottom, so who knows?

More details at Music Ally.