Study shows who wins and loses if music streamers adopt user-centric payments

An extensive new study examines how a shift to user-centric music-streaming payments will impact artists.

While careful not to advocate for or against a shift from the current payment model, Pro Musik, a German group representing musicians, has released the ‘Payment Option Transparency’ study, which forecasts the impact of a user-centric payment system (UCPS) based on data from 18 countries.

Under current pro-rata music streaming calculations, artists are paid proportionate to their share of overall streaming volume. But in the often proposed UCPS, each user’s subscription fee is divided proportionally among artists based on the consumption of that individual user.

Key findings include:

• Almost one in three artists could increase their revenue by at least 40% in the major countries.
• Almost one in five artists could at least double their income
• More than a third of artists could lose 40% or more of their income

Three factors determine who wins and loses

Beyond the debate about what is fair, every artist and label want to know if they will be a winner or a loser if streamers shift to UCPS, along with anything they can do to ensure they are among the winners.

This new study offers the clearest answer yet.

The stats showed three characteristics that directly determine which artist will benefit from UCPS:

1. User Reach
2. User Commitment
3. Average User Spend.

Instead of only considering the number of streams, an artist will make more money under a UCPS if they have many fans who spend much of their time listening to that artist’s content and are willing to contribute the most money to the system.

The per-fan spend would be measured in subscription revenue but could be expanded to include premium subscription tiers and new payment schemes that could include tipping or merch sales.

How additional revenue is divided between the streamer, the record label, and the artist is certain to be the subject of much debate.

There’s a lot to digest in this impressive study, but it’s worth the time to dig through it if you care about how artists are compensated in the age of streaming.

Reads the full report here.

Bruce Houghton is the Founder and Editor of Hypebot, a Senior Advisor at Bandsintown, President of the Skyline Artists Agency, and a Berklee College Of Music professor.