Pro Rata and User Centric Distribution Models: A Comparative Study (2017)
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[1] See "Consolidation", https://en.wikipedia.org/wiki/Music_industry?wprov=sfti1
Correct me if I’m wrong but it looks like a smaller artists are essentially subsidising the larger ones.
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The relative fall in the incomes to be earned by moderate ability, however carefully trained, is accentuated by the rise in those that are obtained by many men of extraordinary ability. There never was a time at which moderately good oil paintings sold more cheaply than now, and there never was a time at which first-rate paintings sold so dearly. A business man of average ability and average good fortune gets now a lower rate of profits on his capital than at any previous time; while yet the operations, in which a man exceptionally favoured by genius and good luck can take part, are so extensive as to enable him to amass a huge fortune with a rapidity hitherto unknown.
The causes of this change are chiefly two; firstly, the general growth of wealth; and secondly, the development of new facilities for communication, by which men, who have once attained a commanding position, are enabled to apply their constructive or speculative genius to undertakings vaster, and extending over a wider area, than ever before.
It is the first cause, almost alone, that enables some barristers to command very high fees; for a rich client whose reputation, or fortune, or both, are at stake will scarcely count any price too high to secure the services of the best man he can get: and it is this again that enables jockeys and painters and musicians of exceptional ability to get very high prices. In all these occupations the highest incomes earned in our own generation are the highest that the world has yet seen. But so long as the number of persons who can be reached by a human voice is strictly limited, it is not very likely that any singer will make an advance on the £10,000, said to have been earned in a season by Mrs Billington at the beginning of last century, nearly as great as that which the business leaders of the present generation have made on those of the last.
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"But so long as" holds no more.
Could you provide any sources for your claim that income and genius rarely have a strong correlation?
True today as well, I'd guess, and at every intervening point in time too.
This causes money to flow from subscribers listening to this niche artist to the more popular artist. That's a problem to which I see various solutions, like only including active clicks on songs or artists in the revenue distribution model, or indeed changing the model to be per user instead of by aggregate number of plays. So it's not really that it's unfair to pay artists more that are played more, it's that because of the way some people use Spotify, plays are racked up for reasons other than because their music is so great.
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It effectively works in the way you describe, but aggregated instead of per user. So instead of splitting your £15 into 4, it splits Spotify's total revenue (minus service fee) among the artists listened to. If 100 million users listened to artist A and 50 million to artist B, and those are the only two artists listened to, then they get 100/(100+50)=67% and 50/(100+50)=33% of the revenue, respectively. Listening to certain artists still gets them more money.
So I'm not sure why you say that most of your money goes to a popular artist instead. Other people's money goes there because they listened to it, yours doesn't really if you look at an individual subscriber's level. It's a bit like electricity: you can purchase green power but of course they don't dig new cables to get you exclusively green power, they just pay the wind/solar/hydro farms instead of the coal farms for the part of the power that you used.
(Some notes I made for myself to make sure I got this straight, figured I could share them: If you listen only to artist A and 999 other people listen to artist B (everyone plays an equal number of tracks), then £15×1000=£15000 goes into the pot, and your artist will get 1/1000×15000=£15 and the other one will get 999/1000×£15000=£14985. Even in aggregate, it should work out, but please correct me if I went wrong somewhere!)
For this reason, the following is the important difference: Other people's money goes there because they listened to it (Rebuttal: Many other people use free spotify, and didn't pay any money).
If they did it per user, that wouldn't happen.
I'm not sure if it's unfair. If you think artist B is more deserving of your money than artist A despite B being listened to fewer times, then yeah this would be unfair. I'm just not sure why you would say that they deserve your money more than an artist that people listened to more often.
If I wanted to get the same behavior from Spotify, I would need to leave devices streaming at all hours, because I am competing for amount of streams against restaurants and gyms that buy a single Spotify subscription and leave it on constantly.
Yeah, there's a reason that that's illegal, but it being illegal doesn't change reality, so you're right. I hadn't considered this in previous comments until u/kgermino pointed it out in [1]. I see your point better now.
I still stand by that "more listens resulting in more money" isn't necessarily bad, but that the way of counting who gets actively listened to might need revising. Another solution to the problem is the (let's call it) Bandcamp model. I'm not opposed to that, I'm just wondering if that will solve any issues, given that I perceive the problem not as "we should pay per subscriber listening to an artist instead of per number of plays" but instead "we should not pay for illegitimate plays."
It does also make me wonder if Spotify considered this and, if yes, why they rejected it. I guess more popular artists are more important to Spotify's survival and therefore they can demand more money under the guise of it being all fair? It's quite an allegation but that's the only thing I can think of. But then, I've been wrong before :)
I'm just thinking about CD sales vs subscription. If you buy, the artist gets paid once, not for how much you listen to it. So the above just moves in that direction.
I've also seen a gym just putting popular music on repeat with Spotify. That should be at least 10.000 streams per month. Not hard to make that skew the numbers even if it's somewhat rare.
Hypothetical: I mostly listen to Spotify during workouts so I only have about 200 streams a month. My coworker has a top 40 playlist running all day so they have over 2000 streams a month.
If we each pay $11 their artists will get $20 while mine will only get $2.
I.e. even though I never listened to a top 40 song, the artists I listened to will only get $2 from my subscription, the rest will go to the artists my coworker follows
I see what you're saying in this scenario, but in general more listens resulting in more money doesn't strike me as unfair.
I'm also not opposed to doing it the way others are proposing (dividing individual subscribers' money among their played artists instead of aggregating it and doing it by number of plays). I guess that would be one way of solving this issue, even if it's not the underlying problem. In your scenario the underlying problem seems to be that someone plays generic garbage as background noise all day and thereby generates plays that a niche artist whose listeners really love their music wouldn't generate. That's a separate problem, though perhaps changing the revenue distribution model would indeed be the best way to solve this issue.
You pay $15 and listen to Bad Romance by Lady Gaga five thousand times.
We are the only Spotify users.
The denominator of 1000 in your fraction is artists but the pro rata calculation in the paper has total streams as the denominator.
If Spotify paid out by directly mapping userid to (unpopular) artist, and a user only listened to 1 track that month, that 1 artist of that 1 stream would receive the entire user's subscription revenue. (I.e. Assuming a rough calculation that Spotify pays ~70% of revenue to license royalties, that 1 artist would receive 70% of $15 which would be ~$10)
But with the total streams aggregation, the more people listen to Lady Gaga / Katy Perry / Taylor Swift / etc, the more it makes the denominator bigger with popular streams. Therefore, the more it reduces income percentage of the unpopular artist. (I.e., that's why an unpopular unknown indie artist receives a fraction of a cent for each stream instead of $10.[1])
It's a calculation that favors artists of popular songs (streams).
In contrast, I believe the Amazon's subscription for Kindle Unlimited payout is based on author's pages read without aggregating all other authors' pages into the denominator. Therefore, an Amazon's subscriber's revenue goes more towards the particular authors the subscriber read and is not affected by millions of others reading the more popular JK Rowling or Stephen King.
[1] https://www.google.com/search?q=spotify+indie+musician+payou...
If you played a single song during the month. That artist would only get that fractional cent. The remaining of your monthly fee will go to other artists you have never played and may have no interest financing.
Most will be the popular artists du jour pushed by the records labels. They like the current system because -by definition- popular songs will be played a lot, probably in large part by free users (they are the majority anyway at around 55%)[1].
So popular streams always get the lion share of Spotify's revenues, mostly financed by those who don't listen to them.
[1]: https://www.businessofapps.com/data/spotify-statistics/
"other than because their music is so great." There are multiple ways to measure music. One of them is how touched you are by it, to each his own - and this is why niche artists are "niche" - because there are so many unique ways to make special music.
There is value in music that appeases to everyone equally. You will never be able to play niche music in a bar for prolonged periods (unless it's a special bar).
This is kindof like the difference between a ferrari and an F150. The truck does it all for everyone. A single ferrari is more special and more expensive than a ford, but in the end, you cannot argue that Ford the company sells more cars than Ferrari, which is why they deserve a larger stock value.
Well first of all, it's illegal. Spotify's TOS disallows you to play your 9,99 subscription for an audience of more than a usual household amount of people. If you're entertaining a dozen guests or more 365 days a year and for commercial purposes, your part should be quite a bit more than ten bucks a month.
And so I get that people are unhappy that their individual subscription money goes to the entertainment of restaurant guests, background noise for a workplace, etc. because of the way plays are counted.
> to each [her] own - and this is why niche artists are "niche"
Sure, I'm not saying that we should pay all artists equally right? Not like anyone above a certain (low) threshold of monthly playbacks should earn a minimum wage to support the niche ones. No, what people mind is that the money they pay to listen to artist B is instead sent to artist A due to a side effect of the revenue distribution model.
Artist A gets more playbacks not because they are better but because of, so to say, a runaway effect of being popular. Those popular artists would already earn enough if this distribution model would be on an individual user basis, but the current distribution system causes even less money to go to niche artists despite having plenty of fans listening to them. It makes it harder to earn money with niche music, which would be a negative effect on what I think you value as well: each can have their own.
Spotify doesn't seem to support your favorite artists as well as you might expect from paying for Spotify and knowing that the money goes to the artists behind the tracks you play.
> The truck does it all for everyone.
Erm looking that "F150" up on image search (I don't speak car and driver), it looks like a huge asshole car. If everyone would drive that we might as well pick up and leave this planet. Also I don't get what the comparison is trying to tell me.
If all you wanted was a streaming platform that didn't have all these major artists on it, it could be provided for much less than £15.
This sounds like economies of scale but backwards, which makes me suspicious of this claim.
A small act can't support itself from licensing fees alone either way, it would make sense to settle for less, or waive fees entirely, just to increase exposure.
There I know where my money goes and I can even decide how much I want to give the artists.
It seems like it'd be a pretty steep power law, maybe even more so than the Spotify example from the article.
Bob streams track 11,12,13,14 1,000 times a month each for their €10
Jamie streams track 21,22,23,24 100 times each for their €10
Total revenue €20, Total streams 4,400. .45c per stream.
Track 11 gets €4.50, track 21 gets €0.45
Alice pays $10/month fee. Alice only listens to track A 990 times. Bob pays $10/month fee. Bob only listens to track B 10 times.
Total revenue $20, Total streams 1000. $0.02 per stream. Track A gets $19.80, track B gets $0.20
If Bob got his twin brother to subscribe, and they had the exact same listening pattern next month:
Alice pays $10/month fee. Alice only listens to track A 980 times. (Alice listens to the song less this month than last month)
The Bobs are now paying $20/month. The Bobs only listen to track B 20 times total (Each Bob listens to the track 10 times).
Total revenue $30, Total streams still 1000. $0.03 per stream. Track A gets $29.40. Track B gets $0.60.
Track A just increased its revenue 48% despite being listened to less the second month. Track B was responsible for Spotify earning $10 more, but only saw $0.40 of what it brought into Spotify.
However, I'm not sure what the downstream ramifications of the new incentives would be after hypothetically switching from pro-rata payment structure to a per-user structure. Would artists' / music labels' strategies change?
I also wonder what would happen to the revenue from users who pay subscriptions for a month, but neglect to use the service at all. It seems it would make sense to either pay the artists that user has listened to over their lifetime/past year, or distribute pro-rata across all of Spotify.
If spotify itself was seen as a market - I wouldn't say that this would be a very well-functioning market, because of the mismatch between what you use and who you pay.
In my mind, decisions like giving Joe Rogan 100 million dollars are more likely culprits.
Edit: That's the first I hear of that deal, and that's insane. Not a podcast I listen to, and I don't want to use any of the user-tracking, user-inlocking podcast players.
> Spotify’s Premium subscriptions, which still account for the majority (~90%) of its revenues, grew by 17% to reach €1.76 billion in the quarter https://techcrunch.com/2020/07/29/spotify-users-are-streamin...
Paying for music should be a positive feedback loop between buyer and producer of music, and spotify users and artists don't feel like they are in the loop.
If spotify gives me a recommended suggestion, it's probably worth it to the aspring artist over trivial payment.
The big money is shows.
[0]: https://musically.com/2020/05/13/what-are-user-centric-music...
This is the model most people would think their money goes to. But the recording industry has never been intuitive. Or fair.
In fact, other users take away your money from artists you like if they are a heavier user of the service than you - as they get more of the total pot in current system. From the point of view of the big labels who have control this is a feature not a bug. http://www.serci.org/congress_documents/2019/user_centric_re...
Under the pro rata model, any heavy listeners will divert "other people's money" toward the songs they listen to. This could be a superfan obsessed with some indie band, or it could be a fan of popular artists. Moving to a user centric model will certainly penalize any artists that overindex on heavy listeners. For example, children's music that gets put on repeat will probably take a hit.
I think the "user centric" model has potential for problems because artists would feel cheated that they don't get paid proportional to how many listens they drive. And why shouldn't they feel cheated? If someone is listening to an artist for hours a day, everyday, then that person is getting a lot more value out of the artist than a measly 7 bucks(/euros) per month. So it's natural for the artist to demand to be paid more. The issue is basically that the more money comes not from the person who's driving more listens, but instead from other users who are using the service far less.
The pro-rata approach basically exists to hides this unfairness, since paying for a streaming subscription feels like paying a fixed cost for a fixed service (access to a massive library). But there's potential for disruption, I think, via a service that exposes this unfairness through a-la-carte rates.
But the real way to support musicians that are important to you is to buy their merch and visit their concerts. That's where my money goes instead of spotify.
If a content creator subscribes to Spotify as a user and streams non-stop his own music, he will receive from Spotify more than the cost of the subscription.
Repeat that a few times, and download here and there tracks from other random artists to cover your tracks, and the schema may work.
So if you only listen to obscure folk music, most (possibly all) of the $10 you're paying goes to artists you don't listen to. That's why some indie artists say they prefer piracy to spotify, it's almost the same to them.
How do they calculate the chart rankings?
https://en.wikipedia.org/wiki/List_of_countries_by_share_of_...
Someone who listens 20 hours a week should pay more than someone who listens 5 hours a month on Spotify. Just set a rate/minute and track each user's usage and bill them monthly.
Then pay the same rate/minute (minus a super small commission %) to the artists of whom the music was streamed.
This would mean that artists get a fair share for what they contribute. If Madonna releases a new album which is a flop then why should she still get the same payout as her last album which was a hit? Equally, if a new artist releases a real banger why should they get less for their talent only because their name is less established as someone else?
This model would also allow a platform like Spotify to push the rate/minute slowly up until they reach a point where demand and supply meet happily. We would be able to find the real value of good music which consumers are willing to pay.
Also, I usually listens to books/podcasts while I sleep, and when not sleeping I usually relisten large parts of them since I often wander away with my thoughts. This sounds horrible from my perspective.
Also something something credit card processing fees.
"If Madonna has a more successful album, then she will get more money."
Now imagine situations in which this statement is true but Madonna does not have a more successful album. There are plenty of situations in which she can earn more money without better albums which is exactly what the entire submission is about.
Madonna's revenue increases when more people get a Spotify premium account even when those new users don't listen to Madonna.
There are large differences between users. Some users listen to 2000 streams per month, others listen to 200 streams per month. There might be "crazy" people who listen to Madonna songs on loop 24/7.