At the moment, streaming services like Spotify, Deezer and
Apple put royalty payments into one big pot and dish them out based on which
artists have the most global plays.
Many artists and unions say this system is grossly unfair,
giving a huge slice of the pie to mega-stars like Drake and Ariana Grande, and
leaving almost nothing for musicians further down the pecking order.
It means that many fans of more niche artists and genres
fund music they never actually listen to.
Instead, from April 1, SoundCloud will start directing
royalties due from each subscriber only to the artists they stream.
"Many in the industry have wanted this for years. We
are excited to be the ones to bring this to market to better support
independent artists," said Michael Weissman, SoundCloud's chief executive
officer, in a statement.
The company said the new payment system -- known as
"fan-powered royalties" or "user-centric model" -- would
empower listeners and encourage greater diversity in musical styles.
"Artists are now better equipped to grow their careers
by forging deeper connections with their most dedicated fans," the
statement said. "Fans can directly influence how their favorite artists
are paid."
Major record labels are thought to have resisted such a
move, in part because the current system allows them to generate massive
profits through a relatively small number of huge stars.
A study by France's Centre National de la Musique earlier
this year found that 10 percent of all revenues from Spotify and Deezer go to just
10 artists at the top.
That has allowed the major labels to amass record revenues
over the past year, just as most musicians were thrown into crisis by the
cancellation of live tours due to the pandemic.
Earlier this year, label bosses told a British parliamentary
commission investigating the streaming economy that it may be too complicated
for platforms to shift to fan-based royalty payments.
But SoundCloud said this was exactly wrong -- that its
computing calculations took just 20 minutes under the new model, compared with
23 hours under the old one.
"The most important takeaway from SoundCloud's data is
that none of the previous modeling has been accurate, that when you actually
run a user-centric system, the rewards to artists that have an audience are
significantly improved," said Crispin Hunt, chair of the British Ivors
Academy, which has been running a campaign to "fix streaming".
"It proves the distortion in value that the existing
model delivers," he said.
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