Some Random Nerd

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Streaming music's misaligned incentives

I had assumed that the way your streaming music subscription turned into royalty payments would be something along the lines of;

Your subscription / Your streams = Payment per stream.

Turns out, it isn't. Apparently its more like;

Everyone's subscriptions / Everyone's streams = Payment per stream.

In other words, suppose you and I both use the same service, and pay £10 per month for it. This month, you only listen to one song — lets say, "Shake It Off", by Taylor Swift. And you only listen to it once. Meanwhile, I listen to another song - "Killing In The Name Of", by Rage Against The Machine. Except, I listen to it every day (So, 31 times in the month of August.)

To keep things simple, lets say nobody else subscribes to this service, and it passes all of the payments directly to the artists. It feels like Swift and RATM should get a tenner each. But in actual fact, Taylor Swift would get 63p, and Rage Against The Machine would get £19.38.

I think its pretty likely that a subscription streaming model is going to be the future of the music industry. And therefore, the commercially successful artists are going to be tailoring the music they produce to fit with this model.

This is an opportunity for the industry to truly reshape itself, and align the financial incentives with the qualities of the art that will drive the industry forwards. But I don't really feel like this model is the best way to go about it.