For artists who don’t change the economic outlook of a city with a couple of concerts, some extra money from a new royalty deal could go a long way.
Driving the news: Universal Music—the world’s largest record company—has cut a deal with French streaming service Deezer to change the way royalties are paid to artists, a move that could be the first domino to fall in the reshaping of music streaming’s business model.
- The deal is expected to increase payouts to professional artists by 10%, in part by doubling the royalty payments for those who generate at least 1,000 listens a month.
- Under the new arrangement, each song listened to will be counted as four streams if a listener searches specifically for that artist's music.
Why it matters: The shift would improve the cut of streaming profits artists get after years of seeing earnings eroded by the rising dominance of platforms like Spotify.
- Streamers currently pay music rights holders an average of ~US$5 per 1000 streams, a rate that translated into negligible earnings for all but the most popular artists.
- Universal is currently in talks with top streaming platforms, including Spotify, Tidal and SoundCloud, hoping to strike similar deals.
Zoom out: The move also tackles the music streaming industry's white noise problem. Since the current royalties system doesn’t differentiate between music from a professional musician and ambient audio, a big share of artists’ cut goes to white noise producers.
- Goldman Sachs estimates that makers of white noise pulled in royalties of US$900 million last year alone.
- In 2021, a Spotify artist generated 10 million streams a day from short recordings of electronic rainfall, outperforming some of music’s biggest stars, including Lady Gaga.
Bottom line: This new model won’t make as big a difference to the Drakes and Taylor Swifts of the world (they're doing just fine), but it could give smaller artists a chance to make a living off of their royalties.—LA