4 May 2024
After years of decline, music streaming services drove a return to growth in the music industry from “$14.3 billion USD” in 2014 to “$20.2 billion in 2019” [1]. Currently, streaming accounts for about 84% of recorded music revenue [2]. These music streaming services are how the majority of people consume music and thus they are the platform through which artists can earn revenue from their recorded music. The question of how artists should be paid for their music being streamed is contentious, with multiple different platforms using different royalty models. This question was recently revisited in November of 2023, when Spotify updated their royalties model, which arguably further exacerbated the issue of streaming revenue going to major artists and labels. Concerns around the lack of livable revenue from streaming royalties has prompted the introduction of the “Living Wage for Musicians Act” in Congress [3].
Musicians have long advocated for the necessity of an increase in streaming royalties. Zoë Keating, an independent cellist, lent some transparency to the issue by posting her streaming earnings. Over 200,000 streams of her music on Spotify in September of 2019 led to a total payout of $753, about $0.0036 per stream. For artists signed to labels, receiving 25% of royalties, or $0.0009 per stream, would be considered a generous rate, as music labels often receive around 75% of an artist’s royalties [4]. The “Living Wage for Musicians Act” hopes to create the opportunity for musicians to sustain their work and continue to create art. This act proposes the creation of an additional pool of royalties intended to create an artist’s payout per stream. While I agree there is a need for an increase in artists’ streaming royalties, I believe that the model for increasing pay suggested in the newly proposed legislation should be improved in two ways. Firstly, the act should focus on royalty allocation reform, as the current system is set up to strongly advantage music labels, not the artists and creatives behind streaming music. Secondly, a shift to a user-centric royalty model could help to mitigate streaming services’ royalty models continuing to disproportionately benefit top labels and artists.
Currently, Spotify and Apple determine streaming royalties using a “pro rata” model. This means that, for each country, the money from subscriptions that Spotify pays to artists goes into a single pool, and artists are paid a percentage of that pool based on their percentage of total streams. For example, if a major artist accounted for 3% of all streams on Spotify in a given country, then that artist and their label would receive 3% of the pool [5]. Critics of this model cite how it supports major artists at the expense of more niche ones. Additionally, critics argue that users’ individual music choices should have a stronger determination on how their money is allocated. They support artists’ royalties coming from individual listeners’ subscription fees based on users’ listening habits, instead of artist royalties being broadly pooled and divided [6].
In November 2023, Spotify updated its royalty model, cracking down on streaming fraud and adding more restrictions on what is eligible for royalties. Notably, these changes now require a song to receive 1,000 streams before it is eligible for royalties [7]. Currently, musicians and their label receive an estimated $0.003 to $0.005 per stream, making it almost impossible—unless you are a top charting artist—to earn what constitutes a livable wage from recorded music revenue alone [8]. Representative Rashida Tlaib noted that in order to make the equivalent of a full-time job at $15 per hour, artists must acquire over 800,000 streams per month. In response to this, the United Musicians and Allied Workers (UMAW), in collaboration with representatives Rashida Tlaib and Jamaal Bowman, introduced the Living Wage for Musicians Act [9].
This act would not impact the existing payout model, but instead creates a separate fund that pays artists a minimum of one penny for every stream on their song [10]. This fund, titled the “Artist Compensation Royalty Fund” would be financed through both a mandated added subscription fee up to 50% of the user’s streaming subscription price and a 10% levy on ad and other non-subscription revenue [11]. These additional royalties from the fund would be capped at 1 million streams on a major service provider, such as Spotify or Apple Music, paying $10,000 per track, per month. This kind of federal mandate for paying artists does come with a precedent, as it highlighted by UMAW. Laws in the early 2000s created a mandated royalty structure to pay musicians for their songs being streamed on broadcast and satellite radio, also referred to as “non-interactive streaming services” [12].
The streaming service price increase is likely to be unpopular with users, services, and labels alike. Streaming service users are bearing the largest costs of creating this new fund through streaming subscription price increases. Additionally, streaming services are unlikely to be willing to use 10% of their non-subscription revenue for this fund. This bill puts pressure on the consumers to make up for musicians’ lack of livable wages, instead of targeting the major streaming services and music labels who continue to report increasing profits. While I believe that streaming royalty reform is necessary and that it is important for artists to have a say in the process, there are multiple ways in which this model could be improved to make it both a more effective and realistic model for ensuring a living wage for musicians.
One suggested area of reform to consider as an alternative to the Living Wage for Musicians Act’s provision is for streaming services to switch from a pro rata model to a user-centric one. Instead of the previously detailed pro rata allocation of profits based on percentage of total market share, a user-centric model would allow fans to directly contribute the royalties from their streams to the artists that they listen to. For example, if a fan’s top artist accounts for 60% of their streams, then the 60% of the user’s royalty-bearing subscription fee would go to that artist, their label, and other rights owners. Currently, SoundCloud employs a “Fan-powered Royalties Model” which could be used as an example if other major streaming players were to adopt a similar payout structure [13]. The economic impact of this model is called into question by a recent study which determined that simply switching to a user-centric model would not have a strong impact on smaller artists’ royalty share if not paired with other reforms [14]. This solution also does not address the fact that streaming royalties themselves are extremely low and often unfairly allocated to labels; however, shifting to this model would allow fans to feel more strongly tied to their favorite artists. As music journalist David Turner explains, though this change does not impact the unfair share that major streaming services and labels receive, it still could be an important step in reform as it “represents such a major pivot in how music streaming works and would allow for a much healthier conversation around the entire business model.” [15].
An aspect of the act that is likely to incite opposition from labels is the fact that artists will be paid directly through this fund instead of through their label. This is an important aspect of the act, as the royalty divide between labels and music artists is an area in need of reform. Liz Pelly, a journalist and music writer, commented how music streaming payout “was shaped by the majors for the majors” [16]. Currently, the already small standard streaming royalties are divided so that the artist and recording label split around “75% to 80%” while around 25% is allocated to publishing, which includes both songwriters and publishers [17]. In some cases, it is estimated that for every $1 made from royalties, artists receive around 16 cents while the label receives around 64 cents [18]. Why have such an uneven distribution structure when it is artists and songwriters who are in need of a more livable wage?
Originally, this uneven distribution was created to account for the label’s expense of manufacturing physical media such as CDs and vinyls [19]. Despite labels’ claims that this percentage model is still necessary for them to maintain the data and continue marketing and other standard expenses, the shift from physical to streaming in users’ music listening habits should also incur a shift in the royalties model. In a time where most labels do not incur as many costs of physical media production, the act should also work to target a mandated minimum percentage of royalties that music artists and producers receive to prevent labels from unfairly receiving an unnecessarily high share. Instead of just focusing on creating a fund to pay musicians, UMAW’s Living Wage for Musicians Act should also direct attention to reforms in the royalty structure payout model itself in order for artists and songwriters to gain a higher percentage of the revenue and a more livable wage.
Works Cited
[1] Hesmondhalgh, D. (2021). “Is music streaming bad for musicians? Problems of evidence and argument.” New Media & Society, 23(12), 3593-3615.
[2] Selinger, J. (2024, March 20). “Musicians want streamers to pay a living wage. Can this bill make that happen?” https://www.fastcompany.com/91063051/new-bill-living-wage-musicians-tlaib-umaw
[3] Booth-Singleton, D. (2024, March 7). “Michigan Rep. Rashida Tlaib proposes Living Wage for Musicians Act to address streaming royalties.” CBS News. https://www.cbsnews.com/detroit/news/michigan-rep-rashida-tlaib-introduces-living-wage-for-musicians-act/
[4] Doctorow, C., & Giblin, R. (2022, October 10). “Why streaming doesn’t pay.” ProMarket. https://www.promarket.org/2022/10/03/why-streaming-doesnt-pay/
[5] Kobayashi, J. (2023, September 25). “Streaming payout models.” Medium. https://medium.com/musicinfo/streaming-payment-models-981c7e6a1538
[6] Ibid.
[7] Selinger, J. (2024, March 20). “Musicians want streamers to pay a living wage. Can this bill make that happen?” https://www.fastcompany.com/91063051/new-bill-living-wage-musicians-tlaib-umaw
[8] Ibid.
[9] Knopper, S. (2024, March 8). “New House bill aims to raise streaming royalties for artists by tacking on additional subscription fees.” Billboard. https://www.billboard.com/business/streaming/new-congressional-bill-increase-artist-streaming-royalties-1235627390/
[10] Ibid.
[11] “Make streaming pay – United Musicians and Allied Workers” — UMAW. (n.d.). UMAW. https://weareumaw.org/make-streaming-pay#:~:text=United%20Musicians%20and%20Allied%20Workers%20(UMAW)%20celebrates%20the%20introduction%20of,careers%20in%20the%20digital%20age.
[12] Selinger, J. (2024, March 20). “Musicians want streamers to pay a living wage. Can this bill make that happen?” https://www.fastcompany.com/91063051/new-bill-living-wage-musicians-tlaib-umaw
[13] Ingham, T., (2023, November 8). “Deezer’s ‘artist-centric’ model now has a new ‘user-centric’ element.” Music Business Worldwide. https://www.musicbusinessworldwide.com/deezers-artist-centric-model-now-has-a-new-element-dubbed-user-centric/
[14] Ibid.
[15] Doctorow, C., & Giblin, R. (2022, October 10). “Why streaming doesn’t pay.” ProMarket. https://www.promarket.org/2022/10/03/why-streaming-doesnt-pay/
[16] Ibid.
[17] Aswad, J. (2022, July 29). “Inside the Multi-Billion Dollar Battle Royale Over Music-Streaming Royalties.” Variety. https://variety.com/2022/music/news/streaming-royalties-music-biz-dsps-spotify-1235327760/
[18] Peoples, G. (2022, February 25). “Who gets paid for a stream?” Billboard. https://www.billboard.com/pro/music-streaming-royalty-payments-explained-song-profits/
[19] Aswad, J. (2022, July 29). “Inside the Multi-Billion Dollar Battle Royale Over Music-Streaming Royalties.” Variety. https://variety.com/2022/music/news/streaming-royalties-music-biz-dsps-spotify-1235327760/
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