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Singing A New Tune

by: Aashish Pathak | July 24, 2023

Will user-centric royalties ring in a promising future for music creators?

The explosive rise of music streaming has transformed the industry, with millions of subscribers driving revenue to unprecedented heights. However, the current royalty system often leaves creators feeling undervalued and marginalized. A new model, user-centric royalties, could reshape the future of the music industry, empower deserving artists, foster fan engagement, and ensure fair compensation.

According to the Recording Industry Association of America (RIAA):

  • Streaming accounts for 84% of U.S. recorded music revenue, with more than 90 million subscribers.
  • Global streaming revenue is predicted to hit $90 billion by 2030.

Pro-rata vs. user-centric

The pro-rata model, criticized for favoring megastars, divides royalties based on overall streams. In contrast, user-centric royalties direct subscriptions exclusively to consumers’ chosen artists, creating a more equitable and transparent system. By basing royalties on actual listener engagement, creators receive their due rewards.

The opportunity for artists to receive more equitable remuneration from a user-centric model assists in perpetuating a more positive ecosystem, thereby allowing artists to feel more appreciated for their works and promoting this system to their fellow artists.

If user-centric royalties gain more traction than the current model, it will disrupt the industry. This would force more prominent labels and publishers to partner with or invest in companies already serving this market to maintain profitability.

Fan power fanning innovation

With a focus on personalized experiences and fan engagement, artists can drive streaming revenue to new heights. User-centric royalties restore power to the fans, creating a level playing field where creators of all calibers can thrive.

Transparency, data verification and fraud prevention are crucial to address concerns and build trust among smaller platforms and algorithmic recommendations.

A promising future, but not without challenges

The greatest challenge for artists is proving that the user-centric model is profitable enough for bigger companies to take notice and force them to adopt it. Prominent artists and their management tend to have more clout in support of pro-rata models, which are more beneficial to their clients.

The music industry must also navigate other challenges to make this vision a reality, including:

  • Simplifying contractual arrangements and licensing agreements
  • Investing in new technology and infrastructure
  • Ensuring fair pay for all creators
  • Addressing the complexity and cost of implementing a user-centric royalty system.

By addressing these challenges head-on, the music industry can move towards a more equitable, sustainable and user-centric future.

Will niche genres thrive while others suffer?

Those with vast music catalogs stand to benefit, despite the potential redistribution of royalties from megastars to a broader roster. Niche genres like classical, blues, jazz, folk and metal could thrive from passionate fans, while hip hop, EDM and other genres may face potential revenue reductions.

While there are concerns that a user-centric model may disadvantage certain artists and genres, the allure lies in reestablishing a more direct connection between listeners and the artists they love.

New vision requires new solutions

The future of streaming hinges on the ability to find harmony between expanding the revenue pie and providing equitable compensation for all artists.

Analytics is the most important key to determining any form of compensation, whether through pro-rata or user-centric models. Any company that can analyze data from streaming platforms and break down critical sector data such as top songs streamed, territories, platform and genre will allow their clientele to hone in on the crucial decisions of where to focus their efforts.

To realize this vision, the music industry must embrace advanced, data-driven solutions for:

  • Managing music rights and royalties
  • Providing transparent, user-friendly interfaces and comprehensive reports on music usage and distribution
  • Ensuring accurate tracking and payment management
  • Optimizing royalty distribution

Royalties revolution

The music industry stands at the precipice of a royalties revolution. User-centric royalties offer fairness, transparency, and unwavering fan engagement. This new model promises a prosperous ecosystem where musicians and communities thrive together, opening the door to limitless creative possibilities.

Regardless of the user-centric or pro-rata model, what matters most is that the artist continues to work hard at growing their brand. If being completely self-autonomous is the desired goal, then user-centric might be better. If the desire is to cede some control for a more established system of growth, then signing with a label that uses a pro-rata method compensating their artists might be a better focus.