In addition to the pro-rata and user-centric models for distributing music streaming revenues, which were highlighted in part 15, a model negotiated between the French music streaming service Deezer and Universal Music Group has recently attracted a lot of media attention. However, it is not the user-centric model that Deezer has advocated in the past, but a so-called artist-centric model.
The Music Streaming Economy – Part 16: The Artist-Centric Model
The story behind this goes back to April 2017, when Mark Mulligan exclusively reported on his Midia Music Industry blog that Deezer was considering introducing a user-centric model and had already entered into discussions with major rights holders.[1] But nothing concrete followed. Two years later, at the beginning of September 2019, the French streaming service invited journalists to a press conference in Paris, where they were informed of the company’s plans to test the user-centric model in a pilot phase in France at the beginning of next year. Worldwide, 40 labels and music distributors, including Believe Digital, have spoken out in favour of switching to the new model, and Deezer assured the media present that the introduction of the user-centric model would not require significant investment.[2]
The switch from the pro-rata to the user-centric model has once again been quiet. It is possible that Deezer was too preoccupied with its planned IPO, which was announced several times and only went ahead with a delay on 5 July 2022 on the Euronext in Paris.[3] It was therefore a surprise when Deezer, together with the Universal Music Group, announced the introduction of an artistic-centric model in a joint press release on 6 September 2023 “[…] to better reward artists and music, while enhancing fan experience.”[4] This should be achieved by allowing “professional artists” to generate more than 1,000 streams per month from at least 500 unique users. The streams of these artists are valued twice as highly as those below these thresholds. In addition, music that is actively searched for and accessed by users is doubled in value. This means that musicians above the threshold, whose music is actively searched for and not suggested by algorithms, receive four times more royalties than artists who are not. This double boost is designed to reduce the relevance of algorithmic music recommendations and increase the role of music fans in the distribution of streaming royalties. It also aims to remove the “white noise” of non-music from the revenue pool. The transition is accompanied by increased measures to detect fraud with corrupted streams.[5]
What the press release does not mention, however, is that only a few artists will benefit from the “royalty boost”. Let’s remember that in the UK in 2020, only 97,222 or 23 per cent of musicians were able to generate more than 1,000 streams per month. Around 327,000 artists remain below this threshold. It is an affront on the part of Deezer and Universal to downgrade all these artists as “non-professionals”. If the Deezer rule also requires 500 unique users per month and that they are actively searching for the music, the proportion of artists who will see their streaming revenues double or quadruple is reduced even further. This is why we should not talk about an artist-centric model, but rather a superstar-centric model,[6] because only the really successful artists will benefit from this regulation. In his blog, Mark Mulligan calculates that between 2000 and 2022, DIY artists without a label contract increased their income from music streaming by 60 per cent, while the streaming income of the majors only grew by 35 per cent. In 2022, DIY artists had an 8 per cent share of the global music streaming market. However, many of these artists had fewer than 1,000 streams per month, which leads him to conclude: “Which means that the fastest-growing and most dynamic part of the music business could become a permanent funding mechanism for the biggest labels and stars.”[7] This is, of course, in the interests of Universal Music Group, which has the world’s largest music catalogue and represents many of the superstars whose streams are now being ‘gold-plated’. Universal and the other majors can therefore look forward to significantly higher payments from Deezer. However, the artist-centric model will do nothing to change the income misery of the vast majority of artists; on the contrary, it will exacerbate it by economically devaluing their music streams. And the fact that the 14 per cent of musicians in the UK who receive between 1,000 and 10,000 streams per month would benefit from the double increase, does not change the picture at all.
Finally, it must be said, that Deezer was forced in the negotiations with Universal to change its mind, as the French streaming service has been promoting the switch from pro-rata to user-centric model for years. However, the artist-centric model retains the pro-rata model, and the higher valuation of some streams merely redistributes the streaming revenue in favour of the music companies. Meanwhile, Warner Music Group has signed similar agreements with Deezer in November 2023[8] and label licensing agency MERLIN in March 2024,[9] increasing pressure on other streaming services to adopt the artist-centric royalty model.
Endnotes
[1] Mark Mulligan, “Exclusive: Deezer Is Exploring User Centric Licensing”, Midia-Music-Industry-Blog, April 19, 2017, accessed: 2024-07-05.
[2] Music Business Worldwide, “Deezer plans 2020 User-Centric Payment System pilot launch – if it can get rightsholders to sign up”, September 11, 2019, accessed: 2024-07-05.
[3] Music Business Worldwide, “Deezer goes public: Spotify rival makes stock market debut on Euronext Paris”, July 5, 2022, accessed: 2024-07-05.
[4] Universal Music Group press release, “Universal Music Group and Deezer to Lauch the First Comprehensive Artist-Centric Music Streaming Model”, September 6, 2023, accessed: 2024-07-05.
[5] Ibid.
[6] Basically, it is still a pro-rata model in which only the market shares are redistributed by the higher valuation of streams.
[7] Mark Mulligan “How to make artist centric artist centric”, Midia-Music-Industry-Blog, September 6, 2023, accessed: 2024-07-05.
[8] Music Business Worldwide, “Warner Music Group has signed up for Deezer’s ‘artist-centric’ royalties model in France”, November 12, 2023, accessed: 2024-07-05.
[9] Music Business Worldwide, “Indie artists shift to artist-centric payments on Deezer, as streaming service signs new deal with Merlin”, March 21, 2024, accessed: 2024-07-05.
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