Music Business

Streaming Needs To Pay Artists Better And There’s An Idea In China That Can Help

With many artists struggling to earn an adequate income from streaming platforms like Spotify, Apple Music, and Pandora, a micro-payment system already being utilized by China’s Tencent Music could provide the answer to some of these royalty woes.

By William Ralston and Niko Seizov via Slate

Back in July, Spotify CEO Daniel Ek caught flak for saying it’s no longer enough for artists to record “once every three to four years”—that they need to pump out more product if they want to make a living streaming their music on his platform. As the man cutting their modest checks, Ek would know.

Streaming on platforms like Spotify, Apple Music, and Pandora accounted for 79.5 percent of the $8.8 billion total global revenue for recorded music last year. But this latest stage of technology’s reordering of the music business has left large chunks of the artist community struggling to make meaningful money from their work. While these platforms generate mammoth revenues through advertising and subscriptions, they pay out negligible amounts per steam, and only a portion of this ends up in creators’ pockets. To make it even worse, Spotify has proposed a new feature that will enable artists and rights holders to boost specific tracks in the platform’s recommendation algorithms provided they agree to a lower royalty rate for those streams. It’s a race to a bottom we didn’t know existed.

The shortcomings of the streaming payment model have long been blunted by a swelling live music industry: Streaming barely paid for most artists, the argument went, but at least it facilitated audience expansion so that musicians could better make a living on the road. The pandemic has killed that argument, at least for now—and now many artists must wonder where their next paycheck will come from. It has underlined a profound need to restructure, so that artists can depend on selling their art as well as their time.

Some of this will likely depend on the royalties platforms pay to stream artists’ music. But an integral part of any solution may exist within China’s walled-off internet. On several streaming platforms under the umbrella of China’s Tencent Music—QQ Music, Kugou, and Kuwo, as well as WeSing, a karaoke application—micropayments from fans help compensate artists where royalties fall short. This has partially allowed artists to do some smaller-scale hustling every time they release a new album. In part it’s given them a digital tip jar. But it hasn’t been all small change.

Whereas western streaming platforms wrestle with profitability, Tencent Music’s operating profits in 2019 were $664 million. What’s interesting is that only around 30 percent of Tencent Music’s revenue comes from subscriptions, music downloads, and advertising revenue; the lion’s share comes through a commission on one-off payments given to artists by listeners, called micropayments. These can be straight-up donations, or given in exchange for virtual goods.

For example, a listener can send a few dollars as a sign of appreciation for a live stream performance. They can also customize their application with an artist skin, and purchase behind-the-scenes content or a pre-release streaming block for a new record. In 2016, pop singer Jay Chou sold limited time early access to his Bedtime Stories LP for $3. The platform can then drive fans to engage and spend through gamification, such as offering buyers raffle tickets to win artist merchandise. With Bedtime Stories, Tencent Music published leaderboards showing how many times fans had purchased the album—and the winner exceeded 400.

There’s no reason why Tencent Music’s model can’t be applied beyond China. We all inherently crave a deeper emotional bond with our favorite artists, and we will part with money for it. That’s why we splash out on concert tickets. That’s why more than 100,000 people paid at least one dollar to watch Erykah Badu stream from her living room in April. That’s why top creators on WeSing pocket more than $7,000 per month in tips alone.

In the west, however, the on-demand streaming model has ruptured the audience-artist relationship. There’s no longer a traditional exchange of X record for Y; instead, platforms like Spotify have become gatekeepers, and music has become more like a utility: unlimited supply for a monthly charge. We listen to curated playlists with the creators demoted to the background, their work consumed by a detached and disengaged audience. With its micropayment features, Tencent Music bridges this gap, and provides artists with a toolkit to foster and more importantly monetize deep fan loyalty.

Skeptics might say that the Tencent model wouldn’t work in the west because there isn’t the same culture of tipping over the internet. In China, online tipping is referred to as “da shang,” and it’s been common practice nearly a decade, normalized for anything from live streams to literary works. But western platforms like Anchor and Twitch have been successful in implementing micropayment features in podcasting and gaming, and the same could be true of music. There just has to be a convenient mechanism.

Social media platforms like Facebook have capitalized on this dynamic—the desire for an interaction—to amass billions of global users, and billions of dollars, withoutrewarding artists for their efforts for their own contributions to these networks. Not only are the artists not rewarded, but they must invest in advertising to reach the followers they attracted to their page in the first place.

The toolkit in the west is materializing. Bandcamp, the independent-focused online music store, has offered the “pay what you wish” model for years. Artists set a minimum purchase price for goods, but leave you free to add more. And during the coronavirus crisis, major streaming platforms have started to tip-toe toward this model. Spotify, for one, has launched “Artist Fundraising Pick,” which allows listeners to make donations via artists’ profiles. That it’s enabling a kind of one-off payment over the platform to occur is encouraging, but it’s not enough, because there is neither a direct exchange nor an additional incentive to trigger action. One manager we spoke with said that none of his three artists, one of which generates more than a million streams a month, had received a single donation.

On Patreon, on the other hand, around 4 million fans, or patrons, subscribe to their favorite creators in return for rewards like exclusive songs, physical merchandise, or private lessons. There are no micropayments per se, but the platform is monetizing the direct artist-audience channel, becoming a digital incarnation of a fan club. Between mid-March and late May, the collective value that patrons paid to musicians on Patreon increased by more than 60 percent, and the total number of musician accounts grew by 200 percent.

One major barrier for Patreon is that it exists as an isolated ecosystem separate from where you actually go to listen to music. For enough people to pay, it must be convenient; that’s how Spotify monetized music at a time when piracy made it available for free. It’s a lot to expect listeners to jump to another site, but Patreon does provide a foundation that could feasibly be integrated into a major streaming platform.

None of this is to say it’s as easy as wrapping up Tencent and rolling it out globally. (Nor, again, does this relieve streaming platforms of their responsibility to properly reward artists for their music.) It’s somewhat of a leap to assume a seamless adoption of micropayments in the west, but against a backdrop of our current system’s shortcomings, and as Spotify continues to prioritize podcasting at the expense of musicians whose work it’s long relied upon, they present an alluring revenue source for musicians globally.

In the meantime, we must support artists in any way we can. We can do this by becoming an active listener rather than merely a passive consumer. Subscribe to their Patreon page, if they have one, and consider buying your favorite releases in physical or downloadable form. When you purchase a record, as opposed to streaming it, a larger amount of money ends up with the artist. Among the online platforms, Bandcamp is the most artist-friendly vendor, thanks to its relatively low 15 percent commission. And if you like an album enough to buy it, why not add a tip?

Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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