Streaming study: Remuneration models favor major artists

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Music streaming has not brought a golden age to independent artists. Rather, the new platforms have replaced the old gatekeepers of the music market. This is the conclusion of a study commissioned by Minister of State for Culture Claudia Roth: “The market for recorded music remains … characterized by information asymmetries and structural inequality, even in the streaming model”.

In over 350 pages, researchers attempt to find out what the current structures in the music streaming market mean for creative artists and what deficits there are. All of the groups surveyed welcome the fact that the era of copying problems has come to an end with streaming services. However, not all problems have disappeared, and some problems that already existed in the past may even have been exacerbated by the streaming era. The authors of the study attempt to answer at least some of the open questions.

Two of the key questions are whether the remuneration for streaming requests is fair for artists and whether streaming lowers barriers so that authors can at least partially make a living from their works. After all, they can now reach millions and millions of potential listeners without major labels, in theory.

The majority of artists earn little from streaming

A total of 2,868 people from the music business provided the authors of the study with information on their income situation. According to the self-reported data, only 13.9 percent of their income comes from streaming, compared to 34 percent from live performances. Almost three quarters of artists receive less than 500 euros per year from streaming, 17.8 percent receive between 500 and 4,999 euros. Nine percent receive between 5,000 and 100,000 euros, 1.1 percent more.

A good half of the income is attributable to Spotify, followed by Apple, YouTube, and Amazon Music (together 32.4 percent). The rest comes from royalties from Bandcamp, Deezer, Tidal, Soundcloud and other providers. Ad-financed streams hardly play a role, accounting for a negligible share of total streaming revenue.

“If 75 percent of sales are attributable to 0.1 percent of artists, that speaks for itself,” says Minister of State for Culture Claudia Roth (Greens), formerly a music manager, about the study results. “We need fair remuneration for music creators, more transparency and, overall, a democratization of market power.”

Controversial remuneration model

The core issue of fair remuneration (in addition to the overall amount of payments) is the so-called “pro rata” model. Under this model, a platform's distributions to the rights exploiters of a specific country and time period are calculated based on the share of a rights exploiter's streams in the total number of all streams. The pro rata model favors artists who are already well-known, scientists note. As marketing campaigns influence listening habits, artists with major labels have an advantage.

The majority of respondents to the study prefer a different, so-called user-centric model: the monthly subscription fees of individual users are divided by the number of times they listen to the music and the money is distributed directly to the rights holders of the music tracks listened to. This makes individual downloads more valuable the less a user streams in a given period. However, artists are not given any insight into the providers' actual playback data – a glaring shortcoming in the view of those surveyed.

GEMA calls for more algorithm transparency

What is heard depends less and less on the personal decisions of users, but on algorithms, emphasizes Tobias Holzmüller, Managing Director of GEMA, in an interview with heise online. This is the case with streaming services such as Spotify, but even more so with music on social media platforms such as Tiktok. “That's why these algorithms and their selection processes are hugely important when it comes to the question: what is successful on the market and what is not? And the transparency behind these algorithms is zero.” In other words: whether the market is distorted by the platforms is not comprehensible.

Holzmüller sees this as a real problem. “There are strong indications that the services are using these algorithms to benefit their own economic interests – for example, to give preference to music where they have to pay less or where they themselves have rights to it.” GEMA's Managing Director is therefore calling for the platforms' algorithms to be disclosed – and for a legal basis to be created for this if necessary.

Legal opinion recommends transparency office

An appendix to the study also calls for more transparency: an expert opinion by law professor Philipp Hacker discusses how music creators and streaming services relate to each other legally and what legal claims artists could possibly assert. Hacker concludes that there are indeed gaps in the German implementation of EU copyright law, and recommends changes to the Copyright Act to make the “appropriate remuneration” actually provided for by law enforceable against the platforms.

To make the remuneration system for streaming transparent, Hacker recommends “a central streaming transparency office”. This should act neutrally and collect data from providers and rights holders to provide an independent basis in the event of disputes.

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