There’s a fantastic new academic article out by Ruth Towse that explains in some detail why the ‘supply side’ of music streaming is so bad for artists and songwriters. It’s worth reading in full but for many who can’t access the paywall I’ve summarised it here–a lot more detail missing but this is the basic argument I think:

What I think Ruth Towse is saying in this article is basically: In the old model, songwriters would create songs, and if they were successful songs, they would eventually be paid royalties via copyright contracts with distributors etc., and would be able to control their rights either themselves or via a publisher.

In the new digital model, the royalties from streaming are subject to more complex arrangements inbetween the songwriter and the platform (e.g. spotify etc.) via copyright management organisations. Crucially these platforms create ‘network effects’ where more value is created through increasing the number of consumers (listeners). This happens in streaming through both the scale of audience and through the additional algorithmic stuff they do to show you other songs you might like, ratings etc. (from which the platform also profits because they sell audience data on to advertisers). This is all an attempt to maximize profit, but it leadds essentially to a two-sided market where one side is the audience/listeners and the other is advertisers (i.e. NOT songwriters or performers).

Unlike in the older model then where prices were set by record companies and artists for a physical product, today’s platform providers (like Spotify and Apple etc.) can set the price of a music subscription, or even offer music streaming for free to the audience because they have monetized their personal data on audience listening habits as another source of revenue (because they have the ‘network effects’ of scale).

Because most songwriters/performers have to go through record companies and copyright management organisations for mechanical and performance rights, there is then a percentage split of the royalties from streaming revenue depending on publishing, mechanical and performance rights for each song which is not transparent. There is also a new ‘making available right’ which is basically the right which only came in recently that was supposed to confer the right from the artist to the label or record company to ‘make available’ their files for download–essentially it was meant to combat file torrenting of music. However, one of the new problems is therefore the ability of copyright management organisations like PRS in the UK or many hundreds of others around the world to deal with the scale of data coming from streaming (as opposed to older physical product sales and licensing) where songwriters have given their ‘making available’ right to copyright mangement organisations. So not only are the platforms like spotify paying a lot less in royalties because they have monetized the audience data to advertisers, they are now paying it to copyright management organisations that are set up for older systems, and are yet another platform essentially inbetween the songwriter and the listener. The net result is that songwriters and performers have far less control of their earnings both because of the change to platform economics–whereby price is dictated by network effects where royalties are far lower, but also because there is increased complexity in the middle of the chain because of copyright management organisations like PRS, MCPS and others who now have to manage individual rights to songs rather than collective rights, and they might not be properly set up to deal with the volume of data. The other key aspect of it, is that the market has shifted and pushed artists/songwriters out of the price-setting equation which is now (for Spotify at least) a two-sided affair involving just the audience and the advertisers, based on a willingness to pay, rather than any product-related value. Worth reading in full!