Universal Music boss Lucian Grainge has confirmed that a big old rejig of the way streaming monies are allocated to individual tracks by the digital platforms each month is a key priority for the biggest music rights company in the world. This confirmation came in a start-of-the-year memo to the major’s workforce.
While subscription streaming may have taken the record industry back into growth after fifteen years of decline, “every blazingly transformative technological development inevitably creates new challenges for us to confront”, Grainge writes in his memo.
The main challenges at the moment, Grainge reckons, are the sheer quantity of music now available on the streaming platforms; the nature of some of the music that is being uploaded and the intent of some of the uploaders; how that music is presented and pushed to consumers by the streaming services; and how that all impacts on the way streaming money is shared out.
“Today, some platforms are adding 100,000 tracks per day”, Grainge notes. “And with such a vast and unnavigable number of tracks flooding the platforms, consumers are increasingly being guided by algorithms to lower-quality functional content that in some cases can barely pass for ‘music’”, he adds, somewhat judgementally.
“In order to entice consumers to subscribe, platforms naturally exploit the music of those artists who have large and passionate fanbases”, he goes on. “But then, once those fans have subscribed, consumers are often guided by algorithms to generic music that lacks a meaningful artistic context, is less expensive for the platform to license or, in some cases, has been commissioned directly by the platform”.
“Just witness the thousands and thousands of 31 second track uploads of sound files whose sole purpose is to game the system and divert royalties”, he then muses.
“The result? A less fulfilling experience for the consumer, diminished compensation flowing to artists that are driving the business models of the platforms, and fewer cultural moments that fans can collectively share, all of which undermines the creativity and development of artists and their music that the platforms were, in part, designed to foster”.
Under the current system, pretty much anyone can push audio into the streaming services, because the DIY distributors will provide basic distribution to anyone who wants it. The services then operate a revenue share based on consumption share model.
First, in each market each service’s monthly income is divided up across its vast catalogue with each track being allocated a percentage share of the money based on what percentage of total consumption it accounted for in that market. Each track’s allocation is then shared with the label or distributor that delivered the recording, and whichever publishers or collecting societies control the accompanying song rights.
That system led to a widely documented scam where rogue entities would upload nonsense music that no one is interested in, but then buy a load of subscriptions and set a warehouse of computers off listening to that music. Using a trick that Grainge notes, because for royalty purposes a play is counted at 30 seconds, that nonsense music would usually consist of relatively short tracks, boosting the overall play count.
With all those computers set to stream the nonsense music, and the short track length boosting the play count, the level of consumption gained by the scammers means that they can get more out in royalties than they put in by buying all those subscriptions. Now, the services, under pressure from the music industry, have been seeking to identify and block the scammers, though some reckon a lot more work needs to be done in that domain.
However, that’s not really the “gaming of the system” that Grainge is talking about here. Other players have entered the market uploading music that some people do actually want to listen to, but not conventional pop music. That includes the kind of mood music that fills relaxation playlists and which some people have playing as they fall asleep. Mood music of that kind gets a lot of plays and can often be split up into lots of smaller tracks to further boost the play count.
The streaming service’s playlisting operations and algorithms do then further boost this kind of music. Though the services would almost certainly argue that that’s because its users want to hear that music and not because it gets to keep more of any money allocated to those tracks at the end of the month. Even though the companies that control a lot of the playlisted mood music probably have agreed to a lower revenue share rate.
But even if Grainge’s argument that this negatively impacts on the consumer experience can be disputed to an extent, it’s not only the major labels that are increasingly concerned that certain kinds of music which are cheap to produce and serve a specific purpose are grabbing an ever increasing share of streaming income each month.
Some have noted that, in the physical era, mood music – and things like generic kids songs – would be sold on super cheap CDs, often at the pound shop, and then be played on a very regular basis but basically as background noise. Yet under the current system that music is allocated a share of streaming income in the exact same way as the biggest pop releases. And plenty of people in the wider music community agree with Grainge that, in hindsight, that was a mistake.
And with that in mind, Grainge is keen to stress that majors, indies and even DIY artists all have an interest in addressing this challenge. “In the past, music industry conflict was often focused on ‘the majors versus the indies’”, his memo continues. “Today, however, the real divide is between those committed to investing in artists and artist development versus those committed to gaming the system through quantity over quality”.
“The current environment has attracted players who see an economic opportunity in flooding platforms with all sorts of irrelevant content that deprives both artists and labels from the compensation they deserve”, he goes on.
With that in mind, “what’s become clear to us, and to so many artists and songwriters – developing and established ones alike – is that the economic model for streaming needs to evolve. As technology advances and platforms evolve, it’s not surprising that there’s also a need for business model innovation to keep pace with change”.
And what might that innovation involve? A shift to an “artist-centric” model, of course! Grainge adds that such a model should not “pit artists of one genre against artists of another, or major label artists against indie or DIY artists”. Instead we “need a model that supports all artists – DIY, indie and major”.
“An innovative, ‘artist-centric’ model”, in fact, which “values all subscribers and rewards the music they love. A model that will be a win for artists, fans, and labels alike, and, at the same time, also enhances the value proposition of the platforms themselves, accelerating subscriber growth, and better monetising fandom”.
That sounds great doesn’t it? If somewhat lacking in specific detail. Though, Grainge assures his staff, “this year, we will be working on the innovation that is absolutely essential to promote a healthier, more competitive music ecosystem, one in which great music, no matter where it’s from, is easily and clearly accessible for fans to discover and enjoy”.
In terms of what that absolutely essential innovation might involve, it’s not clear to what extent shifting to a user-centric approach of track allocation – as has been widely proposed – would help. Although it would combat much of the more overt scamming.
Having length of track impact on the pay out would potentially help, however, and that would also be a good development for those genres like classical music that tend to release longer tracks.
Distinguishing between push and pull streams might also have an impact, so that tracks that a user specifically selects to play get a higher pay out than tracks pushed to a user by a playlist or algorithm. Though the majors that often get a lot of support – and therefore plays – from the biggest streaming service playlists might not agree on that.
So probably the most obvious innovation would be to segment the catalogue by some set of criteria, and have more money flow to some segments than others.
Though setting that criteria would prove controversial and could also create a whole new set of transparency issues for artists and songwriters who have been repeatedly kept in the dark about the specifics of the music streaming business model.
Plus – despite Grainge’s efforts to rally the wider music community behind his cause – once you’re segmenting the catalogue, at what point does the corporate end of the industry push to segment music released by DIY artists and hobbyist musicians into a lower paying segment?
In addition, some mavericks might argue that – the outright scammers aside – the people and companies creating mood music, and other background sounds that the data tells us streaming subscribers actually want, are just clever creative entrepreneurs who spotted a gap in the market. And established artists and labels could have also filled that gap had they spotted it soon enough.
Indeed, it will be interesting to see if those people and companies stand up to object to Grainge’s proposals and, if so, to what extent they receive a backlash from the wider music community.
So, fun times ahead for sure. I’m off to stream three hours of white noise to celebrate.