When music fans listen to their favourite album, they get a sense of accomplishment from knowing that they paid for the music they enjoy – they’re giving back to the artists who created it.
That is not the case on music streaming platforms, where artists are not paid a fixed fee when their songs or albums are streamed. Instead, your subscription fee goes into a large pot, which is then divided among all artists on the platform based on their share of total streams. Consider the payment pot to be a pie chart: the size of an artist’s slice of revenue is determined by how many streams they receive in comparison to their peers.
This may appear to be a fair way to distribute revenue from music streaming. If Rihanna receives 1% of all Spotify streams, it is only fair that she receives 1% of subscription revenue. However, when the effects of curated playlists are considered, this system, known as the pro-rata payment model, appears to be unfair.
Popular playlists are repeatedly streamed by millions of people, accounting for roughly one-third of all streams on platforms such as Spotify – a third of the pro-rata pie. Because the third of the streaming pie represented by playlists consists primarily of the world’s most prominent musicians, the effect of playlists is to enlarge the slices enjoyed by the biggest artists at the expense of smaller artists, causing their tiny slices to shrink even further.
This uneven playing field was the focus of our recent investigation into Spotify playlists, which we conducted in collaboration with royalty-pricing expert Daniel Antal. We discovered that playlists not only benefit top artists but that the curators of these playlists may unfairly favour such artists due to the negotiating power of the major music labels that manage them.
Music streaming has become the dominant form of music distribution around the world in recent years. Streaming now accounts for more than half of global revenue from the sale of recorded music.
Almost four out of every five listeners in the world use Spotify, Apple Music, Amazon, Tencent, or YouTube. Some of the music that listeners discover on these platforms is the result of a targeted search for a specific artist or album, but many people prefer to rely on a playlist of some kind to round out their musical diet.
Independent label artists are underserved in terms of access to the most popular Spotify playlists. Photographer: Filip Havlik / Unsplash Independent label artists are underserved in terms of access to the most popular Spotify playlists.
Spotify’s most popular playlists are curated by the platform’s editors, attracting millions of regular listeners. As an artist, being featured in a top playlist is like winning the lottery: your streams will skyrocket, and your share of the pie will grow.
On Spotify, there are over 4 billion playlists, but the top 100 have a quarter of all playlist followers. According to our research, 81 per cent of the songs in the top 100 Spotify playlists are recordings by major music labels. According to a 2018 study, being on a top playlist with 18.5 million followers increases an artist’s streams by nearly 20 million and results in a payout of at least US$116,000 (£84,500).
Getting on the list
Naturally, artists, record labels, and distribution partners are all interested in increasing the number of streams their songs receive and, as a result, the revenue they can earn. Getting into the top playlists is a good way to do this, but with around 60,000 new songs uploaded on Spotify alone every day, this is not an easy task.
With their massive catalogue of current and past music as a bargaining chip, major record labels are in a strong position to negotiate preferential playlist access. Their bargaining power is bolstered further by the minimum payment guarantees they include in their contracts with streaming platforms, as well as equity stakes in some of them. The major labels also have large playlists, such as Filter and Topsify, which improves playlist access for their artists even more.
As a result of our analysis of Spotify data, independent label artists appear to be getting less than their fair share of access to the most popular playlists. And, because of the pro-rata system, smaller artists’ streaming revenues are being depleted even further – particularly by heavy users, such as pubs and cafes, which are constantly playing popular playlists throughout the day.
Earlier this year, musicians staged a series of protests outside Spotify’s offices around the world. One of their demands was that Spotify transition to a “user-centric” payment model.
It’s a system we’d strongly recommend because the royalties generated by your subscription would be split evenly between the artists you choose to listen to. According to the evidence, a shift to user-centric payments would benefit local and national artists who cater to more niche tastes, redistributing money from more international and mainstream stars.
The Department for Digital, Culture, Media, and Sport in the United Kingdom has formed a committee to investigate whether the economics of music streaming is fair to all artists. Our study is one of the submissions to the committee to help them plan the future of music streaming in the UK.
Music streaming is an important source of income for musicians in a world where live music is almost completely (though hopefully only temporarily) eradicated. However, if independent labels and artists are not given a fair share of the pie, the wonderful diversity of music that we now have on-demand access to from anywhere in the world will be jeopardized.