With the mud nonetheless removed from settled on the UMG / Deezer streaming royalty proposal, one thing even greater is coming: Spotify is popping the idea into actuality in Q1 2024. The behind-the-scenes conversations have been ongoing for a while, however the particulars have been said publicly on panels eventually week’s ADE convention, which means that the data is now firmly within the public area. Obviously, nothing is official at this stage, so think about this ‘as reported’ info. Even if the ultimate particulars find yourself various, what is evident is that two-tier licensing is about to change into a actuality.
Things are shifting quick, going from ‘limited trial’ to ‘actually happening’ within the proverbial blink of the attention. If Spotify is certainly set to launch two-tier royalties simply months from now, it begs the query as to what the Deezer trial was about within the first place? If selections had already been made elsewhere, then the chances are high that it was a manner of softening up business opinion earlier than the large information hit subsequent 12 months, to acclimatise the business group to the idea forward of launch.
Streaming democratised entry to the technique of distribution, enabling an unprecedented development in artists and releases. But the brake is now being firmly utilized. Streams might have all been created equal, however now some streams have gotten extra equal than others.
There are, after all, compelling arguments for ‘fixing’ streaming royalties (arguments that we’ve got mentioned at size). But if customers are selecting to take heed to long-tail artists, or if the algorithms think about long-tail artists to be the best match for his or her tastes, then the ‘problem’ lies with consumption patterns, not royalties. (And after all, what customers are listening to can also be essentially the most exact manner measure the place and the way subscribers allocate the worth pf their subscription.)
Between 2019 and 2022, artists direct streaming income grew by 130% whereas the majors grew by 58%. Long-tail artists are rising their share of ear (even accounting for the truth that algorithms will not be impartial brokers). In 2022, artists direct accounted for 8% of world streaming income and at present trajectory would attain 10% by 2025. Consider that WMG’s share was 16% in 2022, and it turns into clear simply how important the long-tail pool is.
But right here is the place the cynical genius of the two-tier system comes into play. Right now, streams and income are successfully synonymous, however by this time subsequent 12 months, they are going to imply very various things. The majority of artists direct artists will not be paid for his or her contribution to the worth of the $11.99 subscription. The c.10% of consumption they are going to generate will disappear from the streaming income map. They shall be othered, their income changing into a brand new black field for the most important artists to share between themselves. Which implies that, hey presto, all that annoying artists direct market share out of the blue will get reallocated to everybody else. Market share erosion? What market share erosion?
The two-tier system doesn’t even attempt to flip again the clock on the rise of independence, it merely funnels the rising income from this cultural paradigm shift to the larger artists who’re shedding share. If DSP streaming was the one sport on the town, then the dangers of antagonising long-tail artists (label and direct) can be comparatively low. But the music consumption and creation landscapes are altering. Non-DSP streaming income is outgrowing DSP streaming, whereas creators selecting to launch solely on non-DSP platforms is rising twice as quick as artists releasing onto DSPs.
Perhaps it might serve greater labels and artists nicely, to have smaller artists and labels focus their consideration elsewhere. But in the event that they achieve this, then they are going to take viewers consideration and cultural capital with them. At some stage or one other, that sort of shift will begin to chunk into DSP acquisition and retention charges. By which stage it might be too late to halt the decline.