AIM Releases Artist Growth Model for Streaming Royalty Distribution
Business News Digital Labels & Publishers
By Chris Cooke | Posted on Tuesday, July 6, 2021
The UK Association of Independent Music has released the results of research it commissioned exploring the artist growth model for the distribution of streaming royalties.
AIM first proposed the model in a submission to the UK Parliament’s inquiry into the streaming economy, which focused heavily on various aspects of the digital pie debate. That is, the debate on how the money generated from streaming subscriptions each month should be shared among all players in the music community, including artists, musicians, songwriters, the record companies, music publishers and streaming services themselves.
With the Spotify variety streaming services, there are three stages through which artists are paid their digital royalties.
First of all, the allocation of tracks. All the money that a streaming service makes by selling subscriptions (or advertising) each month must be allocated to the music that has been streamed. This is currently done on a pro-rata model for each type of subscription. So if your track accounts for 0.1% of all plays by UK premium subscribers in a month, your track is credited with 0.1% of all subscriptions paid by UK premium subscribers during that month. .
Second, the revenue share. The money allocated to each song should be shared between whoever controls the recording rights (either a label or distributor), whoever controls the separate rights to the songs (either a music publisher or a collecting society) and the streaming service itself. The revenue sharing agreements are different in each individual license agreement, but typically 50-55% goes to recording rights and 10-15% to song rights, with the service keeping 30-35%.
And third, the royalty of artists. Out of the sums paid for recording rights – that is, to a label or a distributor – part of this income goes to the main artist who appears on the track. The cut the artist gets depends entirely on the deal he has made with the label or distributor. This can be anywhere from a few percent to 100% of what the label or distributor receives.
There are debates about what is happening at each step of this process.
At the third stage, there are debates about what is a fair share for the artist, especially if the artist signed a recording contract in the pre-digital age so that his contract does not actually set a specific price for flows. There are also issues around the ability for the label to make additional deductions; artists continue to pay advances and other recoverable costs incurred by the label; and the lack of transparency on how an artist’s royalty is calculated.
Some argue that a solution to these problems would be for artists to receive at least a portion of their share of streaming money through the collective licensing system as “fair remuneration for performers”. Then there could be industry standard rates and specific contract terms would not be relevant.
At the second stage, the big debate is whether the current distributions of revenue shares are correct, and in particular whether it is fair that a significantly larger share be allocated to registration rights compared to recording rights. song. Most songwriters argue it doesn’t.
And then, at the first stage, there is the debate over whether the lead allocation process should actually be done for each type of subscription, given that this system means that part of the Money invested by subscribers who listen to less music each month is allocated to tracks played by subscribers who listen to more music.
The most commonly proposed alternative would see the allocation process performed for each individual subscriber – i.e., a user-centric approach – although this would mean that the average allocation per read would be different for streamers. high level compared to low level streamers.
The pattern of artist growth would also change what happens at the lead allocation stage. Basically, money would still be allocated to tracks based on the overall percentage viewership they represented, however, an additional metric would apply.
The result would be that the leads with the higher percentages would earn slightly less per flow, while those with lower percentages would earn a little more.
One of the arguments in favor of a user-centric distribution of royalties is that it would result in high-level artists earning a little less and mid-level artists a little more. However, while this would likely be a general user-centric trend, this outcome is not guaranteed. The Artist Growth Model, by definition, redistributes money from the most performed artists to the least performed artists.
AIM tasked former Spotify and PRS economist Will Page and collective licensing expert David Safir to model what might happen if the Artist Growth Model is applied. These results can now be uploaded to the AIM website along with a recording of last week’s event.
Commenting on the model, AIM says, “With 80% of streaming revenue going to just 1% in current ‘pro-rated’ streaming distribution models, the artist growth model seeks to counter this ‘winner takes it all’ situation. , by distributing profits more equitably on the market and allowing an increased number of credible niche and emerging artists to make a sustainable living from streaming ”.
He also notes Page’s comparison of the artists’ growth model and the tax system, in which you “tax the very rich to help the less rich, and leave everyone unchanged.”
Page and Safir applied a specific version of the Artist Growth Model – that is, a specific set of rules about what is taken out and how that is redistributed – to real-world streaming data for a period defined in UK. During this period, with this set of rules, the independent industry as a whole and Universal Music would have seen an increase in payouts had the artist growth model been in effect, while Sony Music and Warner Music would have seen a decline. .
The artist growth model would not change the way revenue is shared in Stage 2 or the royalties artists receive in Stage 3, and it could also coexist with a user-centric approach in Stage 1. Although supporters of the model argue that if it succeeds in giving mid-level artists a boost, it could reduce the need for some of the other proposed reforms.
You can access last week’s discussion and download the search results of Page and Safir, on the AIM website here.