Of course, the definition of fair compensation is elusive and varied. In one context, fair is used to describe the accuracy of payments -- the use of blockchain technology to track royalty splits would ensure proper payments to all parties, for example. In another context, fair means equitable -- an independent artist should receive the same royalty rate as an artist on a larger label that negotiated a better deal with a streaming service. Another use of the word fair means sustainable -- artists should receive royalty rates that provide something akin to a living wage. A user-centric royalty scheme -- artists are paid based on how many times a specific user streams their music -- fits this definition.
The report also revealed a paradox of public support for independent artists: even though seven out of 10 people want independent artists to make more money from music, 28% of music streamers use the free version of a service rather than subscribe to its paid tier. People certainly listen to music in high numbers: nine out of 10 respondents said they are frequent music listeners (surveys typically find that over 90% of Americans listen to the radio every week) and 54% of people listen to music multiple times per day. But given that free options pay artists far less than paid version, people could do more to help artists make more from their music. For those free listeners, music streaming services such as Spotify and Pandora provide free listening.
There’s also a disconnect between support for better compensation and understanding of how royalties are paid. When asked how much music streaming services should pay artists as a percentage of their revenue, only 12% of respondents replied 76% or greater, and 46% believe artists should receive 50% or less. Subscription services typically pay artists 70% of total revenues, whether from subscription fees or advertising sales. The average American cannot be faulted for not understanding the financial breakdown of streaming revenue. Instead, the survey suggests people can generally support fair compensation of musicians without needing to know the complexities of recording contracts and royalty schemes.
The larger question is how to convert public support for independent artists into more money in those artists’ pockets. Public support doesn’t affect how labels negotiate with artists. When music streaming services negotiate with record labels, distributors and rights groups such as Merlin, public sentiment doesn’t come into play. Music streaming services could take the survey information to heart, however. Playlists and radio stations dedicated to independent artists could find a welcoming audience.
Public sentiment might transfer into government action, however, and may have helped spur government intervention. From November 2020 to March 2021, the U.K. Parliament held seven hearings about the economics of streaming services’ payments to artists. Then on June 2, 2021, the head of the the House Judiciary Committee sent a letter to Spotify CEO Daniel Ek seeking information about its Discovery Mode, a program in which artists swap promotion for a lower royalty rate that “set in motion a ‘race to the bottom’ in royalty payments,” the letter stated.
Congress definitely listens to record labels and music publishers’ complaints about digital services, but they should be acting on behalf on their constituents. Then again, Downtown’s survey found just 12% of respondents believe the government should determine fair royalty rates.