Creator Support: A New Take on User Centric Licensing

User-centric licensing (i.e. stream pay-outs based on sharing the royalty income of an individual user split across the music they listen to) has stimulated a lot of debate. I first explored the concept of user-centric licensing back in 2015and stirred up a hornet nest, with a lot of very mixed feedback. The big issue then, as now, was that it is a very complex concept to implement which may well only have modest impact on a macro level but may also have the unintended consequence of worsening income for smaller artists. Fans of smaller artists tend to be more engaged listeners who generate a larger number of streams spread across a larger number of artists. The net result could be lower average income for smaller indie artists, and higher income for mainstream pop acts who have listeners with lower average streams spread across a smaller number of artists. Since then, Deezer has actively explored the concept and it continues to generate industry discussion. It is unlikely there will ever be consensus on how user-centric licensing should work, but the underlying principle of helping artists earn from their fans remains a valid one. So, here is an alternative approach that is both pragmatic and far simpler to implement: creator support. A new way to solve an old problem.

Creator support is gaining traction across the digital content world

In the on-demand world, monthly streaming income for creators can be both modest and unpredictable. Amuse’s Fast Forward,YouTube’s channel memberships and Patreon are illustrations of how the market is developing solutions to give content creators (especially artists, podcast creators, YouTubers and Twitch streamers) an effective way to supplement income. But it is Epic Game’s ‘Support-A-Creator’ model that provides the best example of an alternative to user-centric licensing. Epic Games enables Fortnite players to choose a favourite creator to support (which typically means YouTube and Twitch Fortnite players). Epic Games then contributes the equivalent of around 5% of all in-app purchases that the gamer makes to that creator.

How creator support can work for music streaming

Using Spotify and a selection of artists as an illustration, here is how a creator support approach could work for streaming music:

• All Spotify subscribers get given the option to ‘support’ up to two of their favourite artists
• For each artist that a subscriber supports, 1% of the record label royalties derived from that subscriber’s subscription fee goes directly to the artist, regardless of how many streams that user generates
• The label of each artist then pays 100% of this ‘support’ income

To illustrate how creator support can work, we created a model using Spotify and a selection of diverse artists. We assumed that 75% of Spotify subscribers support an average of 1.5 artists. In the above chart we took five contemporary frontline artists across major labels and label services, and we assumed that 10% of their monthly Spotify listeners support them. Factoring the different types of deals and royalty rates these artists have, as well as the ratios between average monthly streams and monthly listeners, there is an intriguing range of revenue impact that creator support delivers. For Taylor Swift (on a major deal, but one in which she held the negotiating whip hand), Lauv and Rex Orange Country (both on Kobalt label services deals) the creator support income is between 18% and 22% of their existing streaming royalties from Spotify. For Billie Eilish and Circa Waves, both on their first major label deals, creator support income would represent a much larger 78% and 65% of streaming royalties. The rate is higher for Billie Eilish as she has a higher streams-to-listeners ratio.

Artists get paid more with minimal impact on the wider royalty pot

Putting aside the irony that this approach would help put many major label artists more on par with what label services and independent artists earn from streaming, the clear takeaway is that creator support can be an effective way of fans ensuring that some of their streaming spending directly benefits their favourite artists. Because we have structured the model to be just 1% per artist (rather than Fortnite’s 5%) the net impact on the total label royalty pot is minimal. Applying the above assumptions to Spotify’s 2018 label payments, the royalty pot (and therefore per-stream rates) would reduce by just 1.13%, meaning that non-supported artists would feel negligible impact.

We think the creator-approach model enables labels and streaming services to deliver on the ambition of user-centric licensing without the complexities and unintended inequities. But perhaps most importantly, it helps put artists and fans closer together, bringing the pledging model to the mainstream.

Let us know what you think. Also, we’ve added the excel model to this post for you to download and test your own assumptions against it.

MIDiA Research Streaming Creator Support Model 4 – 19

After The Album: How Playlists Are Re-Defining Listening

Later this week we’ll be publish a new report in the MIDiA Research Music report and data service: ‘After The Album: How Playlists Are Re-Defining Listening’.  In it we explore the changing role of streaming playlists and in particular how they are impact albums both as a consumption format and as a revenue model. The full 18 page report includes half a dozen graphics and a couple of sheets of excel, including a detailed revenue model.  I want to share with you here one of the key themes we explore in the report…

Playlists Are The Lingua Franca Of Streaming

Streaming hit a host of milestones in 2015, reaching 67.5 million subscribers and driving $2.9 billion of trade revenue, up 31% on 2014. While the competitive marketplace upped the ante, music services wielded curation to drive differentiation. Playlists have always been the core currency of streaming, but now more than ever they are becoming the beating heart, the fuel which drives both discovery and consumption. In doing so they are helping drive hit singles into the ascendancy and albums to the side lines.

The Album Is No Longer The Market

Perhaps the biggest problem with streaming’s dissolution of the album is that the wider industry is still catching up with the concept. Artists still consider the album as their core creative construct, their novel. Similarly, labels still build P&Ls, marketing campaigns and their core business models around albums and album release schedules. There will long remain a market for albums, especially among core fan bases, as TIDAL’s exclusive album campaigns for Kanye West and Beyoncé reveal. But it is just that: a market, not the market anymore.

Income Per Streaming User

The most effective way to measure the value of streaming is to measure the value per user. For record labels at a macro level this equated to $2.80 annual revenue per subscriber and $0.37 per free streamer globally in 2015. But even that measure is too blunt to allow label campaign teams, artists and their managers to understand the value to them because that value is wrapped up with all the music in the world. For these stakeholders a more meaningful measure is the average amount they earn per album per streaming user.

Income Per Album Per Streaming User

Music subscribers in the US and UK streamed an average of 3,447 streams each in 2015, averaging 66 streams a week. But the average number of complete unique albums streamed was just 47 for the whole year. The average across free and paid streaming users was 11. Less than one new album per year. In the old model that average would have been just fine, pulling in more than $100 in retail revenue per user but in the streaming model that equate to a combined total of $0.73 in rights holder revenue.

Even that measure though, is only partially useful for an artist, manager, songwriter or label campaign manager. What matters for them is how much they earn per streaming user, not the music industry in general. The average royalty income per album per streaming user is $0.21, with $0.03 flowing to the artist and $0.02 flowing to the songwriter. For subscribers the average income is $0.44 with $0.05 flowing to the artist and $0.04 flowing to the songwriter. While for free users it is $0.13 and $0.01 for artists and $0.01 for songwriters.

What It All Means

Albums are not the currency of streaming.  Everyone needs to rethink what long form, artist led content consumption looks like on streaming. Music fans still want artist led experiences. Drake’s 46 million Spotify listeners is more than double all the Filtr, Digster, Topsify and Todays’ Top Hits followers put together. As I have suggested before, multimedia artist subscription bundles for $1.50 on top of standard streaming fees feel like the right fit and would also help start pushing up streaming ARPU.

The power of music discovery used to lie in the hands of the radio DJ, now it lies in the hands of the playlist curator. And because streaming has melded discovery and consumption into a single whole, that means their power is becoming absolute. Albums are not quite an afterthought in the curated playlist world, but they are certainly an awkward relative that doesn’t quite fit in at the party.

None of this to say that the album is dead, but it can no longer be considered the main way most people listen to music. Of course some would argue that with radio it has ever been thus…

To find out more about the report and how to access MIDiA reports and data either visit our website or email us on info AT midiaresearch DOT COM