Been a minute since we caught up on what's cooking in the music business these days.

In 2020, I wrote about how streaming royalties are calculated by DSPs as there has been an ongoing debate in the music industry regarding this mode of payout. Currently known as the Pro-rata model, this system has faced criticism from artists and labels due to perceived discrepancies, as every revenue for every track is calculated evenly regardless of its genuineness on the platform.

While there’s been debate to explore an artist-centric approach all these years, Universal Music Group (UMG) is taking action by partnering with Deezer to actually experiment this model. This is arguably the biggest streaming market development in years, as it will set the tone for market-wide change.

What This Would Mean

When implemented, what will this mean for artists when their music is streamed on Deezer?

• Artists who have a minimum of 1,000 monthly streams from at least 500 unique listeners (whom Deezer will call ‘professional artists’) will get double the royalties of artists who don’t (whom Deezer will call ‘non-professional artists’). This boost aims to reward artists for their engagement on the platform. This may extend to 3000 or even 10,000 monthly listeners. The YouTube model for monetization, I see! 

• Songs that are organically searched for or streamed from a user’s library will also get double the royalties compared to songs that are played or recommended via algorithmic playlists.

• The payout for "white noise" content (tracks that are commonly used for sleep, study, and relaxation purposes - by non-artists) will be valued lower compared to songs created by recognized artists, regardless of their stream count. This adjustment mirrors the fact that all content cannot be valued the same. The sound of rain or a washing machine cannot hold the same value as a song from a listener's favorite artist, especially when streamed in HiFi. Amen to that!

As a result, more popular artists who [typically] meet the criteria of high engagement and active listener counts will receive a payout that is four times larger compared to songs by less popular artists that have been served algorithmically to people.

UMG and Deezer jointly developed this artist-centric model, and a similar arrangement is expected to be implemented with Soundcloud. This shift aims to channel more funds to artists with active listeners, bringing them greater financial benefits. It’ll mark a departure from the incumbent Pro-Rata or Service-centric payout model. Deezer plans to launch the new payment structure in France in Q4, with other markets to follow. 

In summary, this new dispensation signifies an effort by UMG and Deezer to prioritize artist compensation based on meaningful engagement and recognition; reevaluating the value assigned to different types of content within the streaming landscape. So, artists with low engagement or those whose plays are primarily driven by algorithmic playlists will likely feel a pinch in their earnings.

Believe is Not Digging This Approach

So far, Believe, owner of the DIY distribution platform TuneCore, is the only music company to publicly issue a statement in this regard. While applauding Deezer’s effort to crack down on ‘white noise’, they, however, questioned the possible impact of this development. The statement reads:

“As a company working with artists and labels at all levels, Believe considers that all artists shall be compensated equally by streaming services regardless of their stage of development.”

“We strongly oppose an unfair ‘reverse Robin Hood’ system that is centered around taking compensation from rising artists to allocate it to top and established artists. We are experiencing commercial negotiations to lower the market share of all independent artists.

We do not think it is right to trade less diversity for better economics, nor for top artists to take away revenue from emerging acts”

What do you think about this game-changing move? Do you think it takes away something from emerging artists?