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How a math trick helped one band made 500% more in streaming music royalties

How a math trick helped one band made 500% more in streaming music royalties

Pitchfork recently reported a game-changing accounting revolution in the music industry:

Under SoundCloud’s “fan-powered” royalty model, unveiled in March, a listener’s subscription or advertising revenue goes directly to the artists to whom they listen in a given period of time; that’s instead of the “pro-rata” model typically used by Spotify and other streaming services where money is pooled and divvied up to rights holders based on their market share.

Put another way: you pay $10 a month for Spotify. Under a “user-centric” or “fan-powered” accounting system, your $10 would get divvied up between all the things you actually listen to. Let’s say you really, really love my band, and one month you use Spotify to exclusively listen to the Roland High Life (which would be pretty cool of you). We would get your full $10. If you listened to some other stuff, too, those artists would get a proportional cut of that money, and we’d make a little less. That sounds fair, right?

Under the “pro-rata” system used by most music streaming platforms, however, your $10 goes into a large pot. And even though you, personally, listened to our new single 100 times this month, everyone else listened to Taylor Swift’s new version of “Wildest Dreams” (and nothing else) 15 million times. In this accounting system, we would get paid 0.000006667% of the total money in the pool for that month relative to our proportion of all streaming activity. Taylor Swift would get the rest.

Working-class musicians have been advocating for this kind “user-centric” approach to accounting for a long time, as studies have shown it to be more equitable to than the “pro-rata” system, which tends to only benefit artists who already massively successful.

Case-in-point: when SoundCloud made this switch with royalty payments, the trip-hop group Portishead ended up making 500 percent more money for the same number of plays.

I know what you’re thinking: what the ever-loving fuck?!

As Dada Drummer explains, the pro-rata accounting system actually rewards the use of bots:

If you google “Buy Spotify plays,” you’ll find any number of offers that are variations of this one:

“Starting at 1,000 plays for $4 and going up to 500,000 plays for $745, you can take a pick according to your budget and needs.”

I have no idea which if any of these offers are real and which are scams, but the going rate does seem logical, at least as a come-on. At the lower end, you lose money ($4 for 1,000 streams on Spotify will earn back about $3 in royalties). And at the higher end, you double your money ($745 for 500,000 streams will earn back about $1500). Does it really work? I’m not going to spend any cash to find out.

But let’s say it does – and some variation of click farms is what Van Vugt successfully uses to boost his playlists of rain to rival even Spotify’s most popular ones like Rap Caviar. Wouldn’t that explain the difference between what Portishead’s song earned from user-centric accounting, which registered actual listeners to the track, vs pro-rata, which credited the band with a proportional share of all streams, including any fraudulent ones?

Dada Drummer also points out, that curiously, when pressed on the possibility of enacting user-centric accounting, Spotify says:

A shift to user-centric payments would not benefit artists as much as many may have originally hoped… the change would result in ‘at most a few euros per year on average’ for artists outside the top 10,000.

Curiously, artists outside the top 10,000 are explicitly left out consideration here. Convenient, that! And that’s because — as WIRED recently explained — the three major music labels essentially share monopoly power over the whole damn industry, and this payment system works for them:

Three major record labels produce two-thirds of all music consumed in America. They are the most powerful buyer of music and talent, and they use that power to prioritize a handful of mega-stars and pop hits. They pitch music into massive radio conglomerates and streaming platforms that control how music is consumed, and they collect an ever-growing share of industry revenue.

As streaming rose to prominence, so too did the outsize corporate power that has come to control nearly all music distribution and revenue. Spotify and Google’s YouTube account for three-quarters of all streams globally. Along with streaming services of tech monopolists Apple and Amazon, four companies have a near-total stranglehold on the market. “The level of control in those few large companies is very dangerous,” says Louis Posen, head of legendary punk label Hopeless Records. To him it’s no different than elsewhere in an increasingly monopolized economy, and no different than a century ago, when monopolies in railroads, oil, steel, and other essential goods controlled American commerce. “When just a few companies control the power, bad things happen.”

If we can’t enforce anti-trust for the music industry, then at least the Union of Musicians and Allied Workers has a streaming committee dedicated to trying to bring more equity to royalty payments, through methods like user-centric accounting. Because it makes a huge difference.

This content was originally published here.