The saloon doors burst open and the piano player stops dead. The frontiersmen look up from their drinks. The first thing they see is the oversized hat. Glaringly white in the sun. “There’s a new sheriff in this town," growls the stranger as he grabs the piano player by the throat. “I am here to clean it up."
Except this “new" sheriff is the old sheriff in a slightly different hat. The largest of all the sheriffs. And he is not cleaning up the town for everyone. He’s primarily cleaning up the town for himself. That’s how (lawyers, please note) an entirely fictional and highly satirical screenplay could possibly open to explain what Universal Music Group (UMG) is planning around the piano-playing Spotify.
What has happened is this. Back in September, UMG announced it was working with Deezer, one of the smaller subscription services with around 10 million subscribers globally, to change how streaming royalties are paid out. Starting in October in France, this was originally intended as a trial run and a proof of concept for a whole new way to share out streaming income.
Moving away from the old “pro rata" system – whereby a pool of income is divvied up each month based on overall popularity of tracks as opposed to what each individual listener played that month – money would be paid out based on an “artist-centric" model (or “user-centric" model, the precise industry terminology is not yet agreed upon).
In short, your subscription money will be carved up among only the acts (and their labels and publishers) that you have played and will not go into this central pot where global superstars take a slice of everyone’s subscription money simply because they are popular.
This is being sold as true meritocracy in streaming economics. How could it not be? Except there is a lot more happening around this.
What UMG and Deezer term “professional artists" will get increased royalties, but they will have to pass a listening threshold of at least 1,000 plays and 500 unique listeners a month to qualify.
Tracks that users actively seek out (as opposed to ones they passively listen to as they were delivered by algorithmic playlists) will also get a royalty boost.
On top of this, a nefarious figure will be penalised in this brave new world. Anything deemed “non-artist noise content" would be excluded from this increased royalties model. Basically, that means white noise-like playlist of rain, wind and static will be demonetised. Deezer will make its own version of “non-artist noise content" available for those who want it (e.g. parents wanting to help babies sleep or people using it to study/concentrate) but not collect royalties on any plays so this does not dilute the overall royalties pool. Any “bad actors" gaming/defrauding the system would get both demonised and demonetised.
The core philosophical thrust of this royalties pay-out model is not new as SoundCloud launched its “fan-powered royalties" approach in March 2021; but the Deezer deal is significant in that the biggest music company in the world is backing it from the off. The biggest music company in the world backing it from the off was also seen as its biggest problem.
David Turner of the Penny Fractions newsletter told The Guardian, “The current pro-rata model is so broken that almost anything that steps away from that and prioritises active music listening may in the end be better for artists." He then cautioned, “The fact that this deal was done between UMG, the world’s biggest record label, and Deezer, without the input of working musicians, should temper any excitement."
His worries were amplified by key names in the independent record label sector. In a joint letter hosted by Music Ally, Martin Mills (Beggars Group), Darius Van Arman (Secretly Distribution), Stephan Bourdoiseau (Wagram Stories) and Emmanuel de Buretel (Because Music) outlined their many reservations with regard to the UMG/Deezer plan, notably the lack of transparency involved and the fact that no other record labels were consulted about it or involved in it.
“Although Universal and Deezer deserve credit for kickstarting this initiative, this should not just be an arrangement between one supplier and one DSP [digital service provider], formed in a vacuum," they wrote. “This should be universal with a small ‘u’, and should determine which side of the road we all drive on. The data which has driven this thinking needs to be made available to all those that need to buy in to this model." (Within a week, however, Wagram Music had signed up for Deezer’s “artist-centric" payment system.)
Denis Ladegaillerie, CEO of Believe, also stepped forward to outline his criticisms of the deal. His worry about the minimum threshold of streams/listeners is that this “would be raised over time, affecting progressively more and more artists" and “such a system would reduce diversity and discourage creativity". He added, “We strongly oppose an unfair ‘reverse Robin Hood’ system that is centered around taking compensation from rising artists to allocate it to top and established artists."
It took a few weeks, but other industry dominos started to topple, with Warner Music Group, the smallest of the three majors, announcing in mid-November that it was also signing up to the Deezer trial in France.
This Deezer development was to be the John The Baptist Deal to the Jesus Christ Deal that UMG was working on simultaneously with Spotify. In July this year, UMG signed a “<a href= “https://variety.com/2020/music/news/spotify-universal-music-group-licensing-deal-1234713082/" target="out">multiyear global music licensing pact" with Spotify. Nothing out of the ordinary there. Labels renew licensing deals all the time. Except this one seemed to have a number of significant conditions built in that only came to light a few months later.
In early November, Music Business Worldwide confirmed that Spotify was changing how it was going to make payments. Tracks would have to generate at least 1,000 streams a year before royalties would be paid out. The move was being sold as one “designed to [demonetize] a population of tracks that today, on average, earn less than five cents per month". This was exactly in line with what UMG has been lobbying for since the start of this year.
So the world’s biggest music company and the world’s biggest subscription streaming company were collaborating on a new way to apportion out streaming income for the whole industry. That is obviously going to be completely and utterly fine and there could not possibly be any problem with any of this. (At this point, you might like to imagine the emoji with the straight line for a mouth blown up to the size of the moon.)
Of course, because of the micropayment systems underpinning streaming services, a thousand streams generates at best a few pennies in royalties. So holding them back from the very smallest of acts that do not pass the required threshold is not exactly going to change their bank balance very much. Who cares about a few pennies? Except in aggregate they are more than just a few pennies.
“In 2024, Spotify expects this will move $40 million that would have previously been paid to tracks with fewer than 1,000 streams to those with more than 1,000 streams," wrote Music Business Worldwide. From that angle, it all starts to look like the “salami slicing" exploited by Gus Gorman (played by Richard Pryor) in Superman III where he noticed fractions of cents on employee pay cheques at Webscoe were being rounded down to the nearest whole number. His “normal" pay cheque, after taxes and other deductions, was $143.80. He then hacked the company’s accounting system to channel all those half cents not added to pay cheques into an expenses account for himself that he had set up. His first “expenses" cheque when it arrived on his desk was for $85,789.90. The next time Gus went to work, he drove there in his brand new red Ferrari.
Enough of the tedious licensing complexities and “inside baseball" esoteric nature of micro-royalties – only those on the inside seem to know how it all works. What does any of this mean for the acts The Quietus loves and champions? The smallest acts are, frankly, the collateral damage in this “war" on white noise and AI-generated music that Lucian Grainge, head of UMG, is insisting is all coming from “merchants of garbage" and other bad actors who are brazenly stealing UMG’s – oh, and other people’s – money. (With regard to UMG policing what is and is not “garbage" on streaming services, you might wish to visualise that moon-sized emoji from earlier but now blow it up to the size of Jupiter.)
An act like The Inward Circles has just 2,759 monthly listeners on Spotify currently and so would just about qualify now to get a few coins each month in royalties. Apostile, with 1,114 monthly listeners barely scrapes over the threshold. Mariam Rezaei, with just 326 monthly listeners is automatically excluded. A variety of musicians that are just starting out and might ping up on The Quietus’s radar next year will not earn a single, but symbolically significant, penny yet. Using AI and white noise as a form of mass misdirection, this all feels like a massive “get bent" to these acts.
Believe’s Denis Ladegaillerie got to the very heart of the matter. “Why would you not pay such an artist [for getting less than 1,000 streams]?" he asked. “It doesn’t make any sense. What signal as a music industry do you send to aspiring artists if you go in that direction?"
It all has echoes of the plans over a decade ago to have a two-tier internet that could have penalised data-heavy services, such as ones built around video streaming. In this case it is looking remarkably like a two-tier royalties system. If you’re at the top, you get a bit more; if you’re at the very bottom you get, and I believe this is the correct economist terminology, fuck all.
The future twist in it all is that, for songwriters at least, the move by Spotify is possibly illegal. Amelia Fletcher, a professor of Competition Policy at Norwich Business School, has suggested the demonetisation move is not just “intrinsically unfair" but is “also anticompetitive and seriously risks constituting an abuse of dominance under UK and EU competition law". It could also be the case, she says, that “any demonetization of songwriting rights would be illegal under copyright law".
By imposing a monetisation threshold, it all sends a message to new acts that, at the very start, the industry is regarding them as being literally worthless. The economic rewards in streaming, unless you hit proper scale, are not exactly great; but treating minuscule acts caught in this crossfire as pointless, essentially throwing them under the tanks in this supposed war on white noise, starts to smell ideologically repugnant.
“It fails to recognize that this ‘long tail’ includes a huge number of ‘real’ emerging artists, emerging genres, and emerging small labels, as well as artists and labels who are culturally important in smaller geographic territories, ethnic groups or genres," argues Fletcher. “It includes many musical seeds that have huge potential to grow into exciting new musical forces and change the future of music and culture. Demonetizing these smaller ‘grassroots’ artists is clearly discriminatory."
Spotify has already introduced a lower royalties “option" for labels and musicians in late 2020 whereby they can get their tracks “boosted" on the service if they accept a lower royalty (what the streaming service termed a “promotional recording royalty rate"). Spotify’s argument is to take a smaller royalty but potentially get played more (so, in aggregate, it might be more profitable). Critics of the scheme see it as merely “digital payola". This is all a twist on Moore’s Law, whereby streaming subscribers grow incrementally every two years but royalties for tiny acts shrink by the same amount.
Lower royalties. No royalties. It all sends out a particularly cruel message, with a particularly acrid scent, to musicians. “Your music was not worth much in the streaming economy to date: now we think it is worth even less. Enjoy!"
Earlier this year, The National released an album called First Two Pages Of Frankenstein. Not to be outdone, what UMG, Spotify and Deezer are writing for the whole recorded music business of tomorrow reads very much like The Last Paragraph Of Animal Farm.
