State Champ Radio Royalties
Last week, Bloomberg reported that Spotify will be raising prices for its premium subscription in five markets later this month and do the same in the United States at an unspecified time later this year. For about $1 to $2 extra per month, depending on the market, premium users will receive audiobooks alongside podcasts and ad-free music listening in their subscription — but the change will have a knock-on effect for mechanical royalty rates for songwriters and publishers.
Once the price increases are launched, all premium subscribers will automatically be subject to the new offering unless they manually change their subscription tier. While the increased price will result in Spotify getting increased revenue, a representative for Spotify believes it also qualifies the popular premium tier for a discount on its royalty rate on U.S. mechanicals because it is now considered a “bundle,” similar to how Amazon bundles Prime and Amazon Music and Apple bundles Apple Music and Apple News.
“Spotify is on track to pay publishers and societies more in 2024 than in 2023,” a Spotify rep said, citing the company’s Loud and Clear report that says the streamer has paid nearly $4 billion to publishers, PROs and collection societies in the last two years.
Trending on Billboard
“As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers. Multiple DSPs have long paid a lower rate for bundles versus a standalone music subscription, and our approach is consistent,” the company added. Though Spotify premium users have already gotten access to audiobooks on the service since October for no additional charge, the company clarified to Billboard that its re-classification of the tier as a “bundle” is not retroactive to when it began testing audiobooks but only begins when the subscription price increases.
Music publishers have made it clear they are not going to accept the change without a fight. David Israelite, president/CEO of the National Music Publishers’ Association (NMPA), called out the service for the move, saying that “it appears Spotify has returned to attacking the very songwriters who make its business possible.” He went on to add that the company’s attempt to “radically reduce payments” to publishers and songwriters is “a cynical and potentially unlawful move.” If it is determined that Spotify’s move is not properly categorized as a bundle, the trade organization says it will consider “all options,” including the MLC or publishers taking Spotify to court or before the Copyright Royalty Board (CRB), the entity that sets mechanical royalty rates for streaming in the United States. “We will not stand for their perversion of the settlement we agreed upon in 2022,” he warned.
Nashville Songwriters Association International (NSAI) took to Instagram, urging their followers to cancel their subscriptions: “NSAI, along with the the @nmpaorg, is contemplating our next steps to fight this move. Stay tuned, but in the meantime remember they are doing all this in the worst possible show of disrespect to the songwriters who make them billions.”
Songwriters of North America CEO Michelle Lewis shared the perspective of songwriters, telling Billboard, “We are disappointed, but not surprised, to see Spotify once again on the forefront of finding ways to pay songwriters less. This reclassification, which we see as a deliberate misclassification, dangerously undermines the good faith of the last CRB settlement. It’s also duly noted that it is always the same company leading in this way.”
Phonorecords IV Settlement
Every five years, the CRB reconsiders the royalty rate for mechanicals in the United States. It is a complex, multi-pronged formula, setting the rate that each streaming service must pay to publishers and songwriters based on a number of contingent factors, including the subscription price, the amount the service pays to record labels and more. There are other caveats to consider when setting the rate based on how the user is subscribed with their streaming service, including whether the music was streamed on a free, ad-supported tier or on a paid, premium tier and whether the user is subscribed to the service through a bundle of other products.
In late 2022, NMPA, NSAI and Digital Media Association (DiMA) jointly announced that they had come to a voluntary settlement about what the U.S. mechanical royalty rate would be for the period of 2023-2027 (also called Phonorecords IV or “Phono IV”).
Even though the changes to the way bundling worked were considered a concession to streaming services, many in the music business celebrated the Phono IV settlement as an overall win, especially because the previous five-year rate (Phono III) was fought over for years, causing confusion over rates in the interim. When it was announced, the NMPA touted the Phono IV settlement as delivering the “highest rates in the history of digital streaming,” and many felt it signaled a new era of cooperation between streaming services and the music business. Israelite says now in his statement that Spotify’s latest move to bundle audiobooks “ends our period of relative peace.”
How Bundling Affects Mechanical Revenue
Even though the price of Spotify premium is rising, that additional revenue does not benefit songwriters and publishers. Now that premium is considered a bundled service with audiobooks, some of the subscription price is owed to book publishers and authors to license their works, too.
Mechanical revenue for bundles is calculated by seeing what audiobooks are valued at as a standalone offering ($9.99) and weighing that against the price of the premium bundle offering ($10.99), according to Phonorecords IV. The value of music is found by dividing the total premium price ($10.99) by the two services (audiobooks only and premium) together ($21), which results in music being valued at about 52% of the total bundle, or around $5.70 per subscriber.
How Bundling Affects the Total Content Cost
The first step in calculating the mechanical royalty rate a streaming service owes to songwriters and publishers is to find the “all-in pool.” This is the greater of either the headline rate (which ranges from 15.1% for 2023, 15.2% for 2024, 15.25% for 2025, 15.3% for 2026, and 15.35% for 2027) of Spotify’s revenue (which is now lowered to around $5.70 per subscriber) or the percentage of total content cost (TCC), a.k.a. what royalty Spotify pays to labels.
Previously, Spotify premium qualified for the full rate of the lesser of 26.2% of TCC for the period or $1.10 per subscriber. Now, after deciding to change its premium offering to include audiobooks, Spotify argues it qualifies as a “bundled subscription offering,” which moves its rate down to 24.5% of TCC for the accounting period.
Regardless of whether Spotify calculates its royalties due to songwriters and publishers based on the percentage of TCC or the headline rate, both options are affected by Spotify reclassifying premium as a bundle. One source close to the matter tells Billboard that Spotify has been paying based on the TCC recently.
On Mar. 6, the Digital Media Association’s (DiMA) new president/CEO, Graham Davies, published a blog post calling the five-year anniversary of the Music Modernization Act (MMA) a “key moment to course-correct” in a blog post about the Mechanical Licensing Collective. In the process, he suggested the organization has “gone beyond its remit” in collecting and administering the blanket mechanical license in the United States.
On Monday (Mar. 18), the National Music Publishing Association (NMPA) responded to the letter in an email sent to members, in which it said DiMA’s “calls for change” were not “a good faith effort to make the MLC more effective and transparent.”
Trending on Billboard
So why are the two organizations sparring now?
According to the MMA, the MLC — which serves as the collector and administrator of the blanket mechanical license in the United States — is reviewed every five years by the Copyright Office in a process called “re-designation.” This process will be a routine occurrence moving forward to ensure efficiency, effectiveness and neutrality for the organization.
Now, with the MLC’s first-ever re-designation currently underway, both its critics and supporters have become more vocal in hopes of swaying the results and/or public opinion about the organization’s operations to date.
DiMA’s blog post begins by saying it “remains committed to the success of the MMA and the mechanical licensing collective it established.” Later, the letter focuses on the fact that its membership, which includes the world’s biggest streaming services, is required by the MMA to foot the bill for the MLC. While in the letter it does not ask for this arrangement to be changed, the organization does point out that it feels this system has led to a lack of incentive for the MLC to be cost-conscious, neutral and efficient.
“Reasonable costs of the collective cannot include everything from traveling to distant countries to conduct outreach to songwriters far beyond the U.S. licensing system,” writes Davies. The DiMA CEO/president, who assumed the role in January of this year, also points out that the MLC is “suing one of the licensees [Pandora] that pays its costs — using licensee money to pursue its allegations against a licensee on a novel legal theory.”
The NMPA’s reply, titled “DiMA using copyright office MMA review as opportunity to re-write history and undermine MLC’s progress,” focuses first on re-explaining to its members the history of the MMA and the MLC and the nature of the MLC’s duties before getting into its reply to DiMA. It has a far more favorable take on the MLC overall, claiming the organization “is currently the most efficient, transparent, and cost-effective licensing collective in the world.”
The NMPA goes on to say that streamers “do not want what is in the best interests of music publishers or songwriters,” calling DiMA’s “new…strategy” “an effort by the world’s largest digital companies to leverage their power to pay less, make it easier for non-compliance, and make it more difficult for the MLC to execute its statutory responsibilities as envisioned by Congress.”
“Make no mistake, when big tech says ‘course correct’ they mean a change to the carefully negotiated law to fund only MLC activities that benefit digital companies,” the letter continues.
DiMA’s blog post can be read here. The NMPA’s reply can be read in full below.
MMA Five Years On
It’s astounding how much progress can happen in five years. In 2018, the Music Modernization Act (MMA) became law, creating the Mechanical Licensing Collective (MLC) and fundamentally changing how songwriters and music publishers are licensed and paid by digital streaming services.
Since 2018, the MLC has done a great job building a rights organization that today represents thousands of rightsholders, administers over fifty blanket licenses and has distributed over $1.5 billion in royalties.
The MLC Review
Under the MMA, the Copyright Office reviews every five years its initial designation of the MLC, with the first review starting this past January.
DiMA, the trade association representing the five largest digital music companies—Spotify, Apple, Amazon, Google and Pandora (DSPs)—recently released a blog about the review process.
In it, DiMA called for radical changes that would upend the purpose of the MMA and the MLC under the guise of a “course correction” and a focus on MLC “neutrality.” Reflection at this pivotal point is necessary. But what’s clear is the digital services’ calls for change are not a good faith effort to make the MLC more effective and transparent, as they argue, but the opposite. It is time to set the record straight.
MMA History Refresher
It is important to remember that DiMA and the DSPs were significantly involved in the drafting of the MMA, which reflected the culmination of years of negotiation and consensus building among songwriters, music publishers, and digital music services.
The central compromise of the MMA was the creation of a new mechanical licensing collective to administer Section 115 streaming blanket licenses, governed by rightsholders, and funded by DSPs. The agreement to fund the MLC’s operations was made in exchange for the MLC taking on what had been the DSPs’ royalty administration responsibilities and the DSPs’ securing limited liability for hundreds of millions in statutory damages exposure due to their prior failures to properly license and distribute royalties.
The MLC’s Fundamental Role & Responsibilities
The MMA placed upon the MLC expansive responsibilities under Section 115. In addition to administering licenses and distributing royalties, the MMA provides explicitly that the MLC must handle non-compliance of DSPs through legal enforcement efforts, default of licenses and collection of late fees. It requires the MLC to audit DSPs to ensure proper royalty payments and accounting. These critical rights were traditionally held by copyright owners. However, the MMA took these legal rights from rightsholders and gave this authority to the MLC alone to act on their behalf.
Further, the law empowers the MLC to initiate proceedings before the CRB to set its funding and before the Copyright Office in rulemaking and regulatory processes on behalf of copyright owners. The MLC can also negotiate against DSPs and on behalf of rightsholders non-precedential interim royalty rates for new service offerings under the blanket license.
The MLC’s Success
By any metric, the MLC has been successful in meeting the MMA’s broad directive. After only five years, it is administering over 50 interactive streaming licenses and distributing billions in royalties to thousands of rightsholders. It has heeded the calls of the MMA and the U.S. Copyright Office to focus on outreach to all copyright owners, from the smallest self-published songwriters to the largest music publishers, and domestic and foreign organizations that exploit musical works in the U.S. It maintains a fully public database. And yes, it just announced the start of DMP audits and has used its legal enforcement authority where necessary to ensure compliance, such as the recent Pandora litigation.
It has succeeded in doing all of this with the lowest operating budget of any license administration collective. The MLC is still developing its capabilities, and the next five years will see it continue to grow and improve, but it is currently the most efficient, transparent, and cost-effective licensing collective in the world.
The DSPs’ Vision
Back in 2019, as industry participants sat down to develop the new MLC, it was clear that while the DSPs wanted the benefit of a blanket license and limited liability, they did not want to fund an effective MLC that could accomplish everything statutorily required of it. One DMP executive suggested that the MLC could be just several employees at a WeWork.
Thankfully, the music publishers and songwriters that supported and created the MLC understood—and convinced the DSPs at that time—that to develop a collective that fulfilled the mandate of the MMA and addressed the significant issues of the past, the MLC needed reasonable funding equal to its broad statutory responsibilities.
In their latest calls for a “course correction” and MLC “neutrality,” however, the DSPs and DiMA are once again trying to undermine the MLC and the central compromise to which they agreed.
Make no mistake, when big tech says “course correct” they mean a change to the carefully negotiated law to fund only MLC activities that benefit digital companies.
When they speak of “neutrality,” what they want is to “neuter” the ability of the MLC to accomplish the clear responsibilities set out for it in the MMA. Those responsibilities include being an effective administrator of the compulsory license, being a diligent enforcer of DSP reporting and royalty obligations, and being a strong defender of the rights that the MLC is charged with licensing on behalf of music publishers and songwriters. It should come as no surprise that MLC neutrality vis-à-vis DSPs, either explicitly or in spirit, is not found anywhere in the MMA.
In Short
DSPs do not want what is in the best interests of music publishers or songwriters. Instead, this new DSP/DiMA strategy is an effort by the world’s largest digital companies to leverage their power to pay less, make it easier for non-compliance, and make it more difficult for the MLC to execute its statutory responsibilities as envisioned by Congress.
Their strategy will disempower rightsholders by disempowering the only entity created and authorized to act on their behalf with respect to mechanical licenses – the MLC.
As we look to the next five years, know that the NMPA will continue to be laser focused on fulfilling the clear goals of the MMA and ensuring the MLC is empowered to effectively work for us all.
A new bill designed to increase streaming payouts for artists was introduced in the U.S. House of Representatives on Wednesday (Mar. 6). Titled the Living Wage for Musicians Act, the legislation proposes the establishment of a new royalty fund that would pay artists directly, bypassing labels altogether.
Introduced by Reps. Rashida Tlaib (D-Mich.) and Jamaal Bowman (D-N.Y.), the bill aims to boost artists’ streaming royalty from fractions of a penny up to one penny per stream by way of the new fund. It proposes to fund the additional royalty payments, in part, by mandating the addition of a fee to every streaming subscription equal to 50% of the subscription price — an amount that would be set anywhere between $4 and $10. The bill would also establish a royalty cap for tracks that generate at least 1 million streams per month, with royalties generated by the tracks beyond that number to be divided among all artists.
Notably, the bill would not affect the existing payout model but rather establish a separate fund on top of what artists already receive under the current system.
Trending on Billboard
“It’s only right that the people who create the music we love get their fair share, so that they can thrive, not just survive,” said Tlaib, who has long advocated for higher royalty payments to artists on streaming services, in a statement.
Damon Krukowski, a member of the band Damon & Naomi (and formerly Galaxie 500) and an organizer for the Union of Musicians and Allied Workers (UMAW), added in a statement, “There is a lot of talk in the industry about how to ‘fix’ streaming — but the streaming platforms and major labels have already had their say for more than a decade, and they have failed musicians.”
The UMAW partnered with the representatives in drafting the act.
It’s unlikely streaming services and top labels will support all of the changes proposed by the bill. Daniel Ek, Spotify’s co-founder/CEO, expressed reluctance for years to raise subscription prices, although they did finally increase in 2023, rising from $9.99 to $10.99. Also likely to be unpopular with streaming services: a mandate that 10% of all of their non-subscription revenue, including from advertising, goes to the fund as a way to further increase payments to recording artists.
Labels and some artists also seem likely to oppose the cap in which the most popular artists share portions of their streaming revenue with the rest of the streaming pool. And labels — which have lobbying power through the Recording Industry Association of America (RIAA) — will also likely challenge the provision that would see artists paid directly from the fund rather than through the labels themselves.
An RIAA representative declined to comment on the bill.
Songwriters and publishers are due nearly $400 million in additional payouts following the Copyright Royalty Board‘s Phonorecord III final determination in August, according to information the Mechanical Licensing Collective (the MLC) released on Friday (Feb. 23). During the Phono III blanket license period (2021-2022), the MLC reports that digital service providers like Spotify, Amazon Music, […]
Catch Point Rights Partners, the private-equity backed music rights acquisition firm that has purchased the publishing of such artists/songwriters and/or producers as Brantley Gilbert, Yelawolf and All Time Low, is now offering a program through which it will buy performance rights income streams from songwriters while allowing them to retain ownership and control of all of […]
LONDON — The British government’s Intellectual Property Office has said that bringing streaming in line with TV and radio broadcasts in the U.K. by obligating record companies to pay performers ‘equitable remuneration’ does not provide “a simple solution” to creators’ concerns over low returns from services like Spotify and Apple Music – and is “unlikely to yield a net positive income for the industry at large.”
In its report into the potential impact of equitable remuneration on the U.K. music business, published Monday, the Intellectual Property Office (IPO) says its introduction could result in labels reducing their investment in developing new acts and would see rightsholders paying out “a significant sum of money” in administration costs.
The report goes on to say that more work is needed to fully assess whether labels’ ability to negotiate competitive deals with streaming services on behalf of artists would be weakened — as claimed by record labels – by changing how royalties are paid out for music streams.
Trending on Billboard
“While not a satisfying conclusion, it is clear that more research is required into the nuances of how best to balance the incentives to create with the need to monetise creation,” states the report.
The IPO research paper into equitable remuneration is the latest chapter in a long and ongoing series of government-led interventions into the U.K. music industry fuelled by artist discontent over low payments from streaming.
In 2021, a Parliamentary inquiry into the music streaming business called into question the major record labels’ dominance of the industry and branded the global streaming model as unsustainable in its current form, saying it “needs a complete reset.”
One of the key proposals made by the Parliamentary inquiry was changing the revenue model for music streaming by forcing record labels to pay performers equitable remuneration — equivalent to a 50/50 royalty split — on music streams, which it called “a simple yet effective solution to the problems caused by poor remuneration.”
A similar statutory right to equitable remuneration has existed in the U.K. since 1996 for TV and radio broadcasts, where revenues are split 50/50 between labels and performers and distributed via by the collecting society PPL. The statutory right guarantees royalties to non-featured performers, such as session musicians, whenever a song they played on is broadcast on U.K. radio or television.
By contrast, under the current music streaming model only the copyright owner receives payment from streaming platforms, which it then shares with the artist according to the terms of their contract. Average royalty rates are typically set between 25% and 30% on new artist deals and far less on legacy contracts, while some indie labels now offer artists 50/50 profit-share deals. (Session musicians do not typically receive any royalties from music streaming).
The IPO’s report examines what impact equitable remuneration would have on the U.K. music business by applying several predictive models to streaming over a five-year period.
When equitable remuneration is applied to 100% of streaming income — based on a scenario where a record company invests £150,000 and a release generates £240,000 (3 times the recoupable advance) — earnings for featured artists almost double to just under £115,000, while record label revenues move from a £90,000 profit to a loss of almost £13,000. Session musician income jumps from zero to just under £30,000.
In instances where equitable remuneration is applied to 35% of streaming income, the same metrics see label revenues drop from £90,000 to just under £54,000, while featured artists’ income rises from a flat £60,000 advance to almost £100,000 (including recoupable costs spent).
The research also models the impact on loss making deals and instances where 7x the record company advance is generated, as well as the impact of equitable remuneration on DIY artist deals.
The IPO’s modeling surmises that equitable remuneration would make record label investment “more risky and more difficult to justify,” while DIY artists would see increase in administration costs and receive little financial gain or, for heavily streamed releases, a reduction in profits.
“If the intention is to better support the careers of current and future artists then there is a significant risk that introducing” a full version of equitable remuneration “would make it more difficult for the current label investment model to continue,” says the report.
The research paper, which was carried out by the IPO in conjunction with a working group made up of industry stakeholders, additionally looks at the potential impact of the U.K. introducing a version of equitable remuneration similar to what already exists in Spain.
In Spain, 5.6% of streaming income is currently shared out between featured artists and non-featured performers, with equitable remuneration paid by streaming platforms, not labels. However, the practice has been mired in litigation since its introduction in 2006 and critics say that it resulted in only marginal gains for artists and performers.
When applying the so-called ‘Spanish model’ to the U.K. business, researchers found that it offers a much less significant shift in revenue than other ER methodologies but raises unanswered questions around whether it would make “a material difference” to creator earnings.
The report warns that if an equivalent to the Spanish version of ER was introduced in the U.K. streaming services might look to recover “some or all” of the extra revenue they would have to pay out from their deals with rights holders.
Reaction among U.K. music trade groups to the IPO’s findings was mixed.
Jo Twist, CEO of labels trade body BPI, said the report reinforces record company’s long-held concerns around equitable remuneration. Making such a change to how streaming royalties are shared “would undermine the essential role that labels play in investing in and supporting artists,” Twist said in a statement.
The Council Of Music Makers noted that the IPO report “reaches no conclusions, and no decisions should be made on the basis of its ambiguous findings.” The trade group said it would continue to work with all industry stakeholders on a “wider discussion” around creator remuneration from streaming and various solutions that have been proposed.
Responding to the IPO’s research, government ministers Julia Lopez and Viscount Camrose said that “in light of the risks” highlighted in the report, “the government does not intend to apply the ‘broadcast model’ of equitable remuneration to on-demand streaming.”
Instead, the findings “lend weight to the view that the best way to address creator concerns is through dialogue among industry and, where appropriate, industry-led actions,” said Lopez and Camrose in an open letter to Dame Caroline Dinenage, chair of the Culture, Media and Sport Select Committee.
For Will Bratton, the best part of Super Bowl LVIII was not when Kansas City Chiefs wide receiver Mecole Hardman caught the game-winning pass for an overtime touchdown or when Chiefs kicker Harrison Butker nailed a 57-yard field goal. It was when Chiefs tight end Travis Kelce, during the trophy ceremony after the game, belted out an impromptu, raggedy chorus of “Viva Las Vegas” on the CBS broadcast.
Those three words, repeated several times in a pacing and melody only vaguely resembling Elvis Presley’s classic 1964 hit, have delivered an unexpected payday for the song’s rights holders.
“We were very excited about him doing that,” says Bratton, president of Pomus Songs Inc., namesake publisher for the late Doc Pomus, who wrote the song with Mort Shuman. “Royalties are paid for that performance through BMI.”
Trending on Billboard
Kelce’s rendition constituted an “ephemeral use,” according to Rachel Jacobson, who oversees film and TV for Warner Chappell Music (WCM), which administers Pomus’ recordings. As when a marching band plays an off-the-cuff snippet of a song during a televised football game, the use generates a royalty payment through BMI as a public performance. “Anything beyond that, then you come and clear it,” she says.
Although Bratton couldn’t say how much money Pomus Songs made from Kelce’s performance — “BMI’s generally three quarters behind, so we won’t have that data until probably next December” — the revenue is likely to continue. Late-night talk shows airing Kelce’s version would have to pay for a “previewing synch license,” according to Bratton, which would lead to a negotiated fee as opposed to the ephemeral use royalty payment. WCM’s Jacobson is not aware of any requests for such a license involving Kelce’s rendition of “Viva.”
For the Super Bowl, Bratton says, “It was also licensed to CBS Sports for a pre-game show and it was shown once during the game over a viewing of Taylor Swift. That paid — I don’t want to say how much, but it was good money.”
Written for the Presley film of the same name, “Viva” has come to symbolize Las Vegas glamor-and-gambling culture and has been covered by Bruce Springsteen, Dead Kennedys, ZZ Top and Shawn Colvin. Bob Dylan wrote a chapter about the song in his 2022 book, The Philosophy of Modern Song: “This is a song about faith. The kind of faith where you step under a shower spigot in the middle of the desert and fully believe water will come out.”
The song was also in The Big Lebowski and a Viagra commercial (“Viva Viagra”), which, Bratton recalls, “was a very nice synch license momentarily — but I’m not sure if we regret it or not.”
Pomus, a Rock and Roll Hall of Fame songwriter who wrote classics such as The Drifters’ “Save the Last Dance for Me” and “This Magic Moment”; The Coasters’ “Young Blood”; and Presley’s “Little Sister,” was a “sports fanatic,” according to Bratton, who is married to Pomus’ daughter, Sharyn Felder. “He would have been thrilled that his song was used like that,” he says of Kelce’s “Vegas” rendition. “It was more of a holler than a sing. It was his enthusiasm that was notable.” He adds: “We just like it to make money.”
The recording and publishing catalogs of late country star Toby Keith continue to bring in a combined $9 million per year in streaming and sales activity, according to Billboard estimates.
Keith, who died Monday (Feb. 5) at age 62, had slowed his output considerably over the last decade, releasing just two proper studio albums over that period: 2015’s 35 MPH Town and 2021’s Peso in My Pocket. But a vast stable of past smashes over the past 30 years, including the multi-platinum albums Pull My Chain, Unleashed and Shock’n Y’all along with 20 No. 1 hits on Billboard’s Hot Country Songs chart, including “Who’s That Man,” “Should’ve Been a Cowboy” and “How Do You Like Me Now,” allowed his catalog to remain lucrative up to the present day.
Over the last three years, Keith’s catalog has averaged nearly 475,000 album consumption units per year in the United States, according to Luminate. That consists of an average of nearly 61,000 albums (CDs, LPs, downloads) per year, as well as 152,000 tracks and about 570 million on-demand streams.
While streaming has helped country music begin to gain an international audience, some artists in the genre are racking up fans outside the United States faster than others, and Keith’s audience remained largely a domestic one. As it is, Keith’s U.S. streaming accounts for about 83% of the 686 million streams his music averaged on a global basis annually over the last three years. Likewise, his U.S. song downloads make up 91% of his annual average of 167,000 downloads over the last three years.
Overall, Billboard estimates that Keith’s album sales and streaming activity generated about $5.3 million in revenue on average over each of the last three years for his recorded music catalog, while his publishing has brought in about $3.7 million per year. However, since Keith has a stake in close to 50% of his songs, and because he likely owned the albums he released since he started his Show Dog Nashville label in 2005, he likely gets the bulk of that revenue as his take-home pay. Before Show Dog, he released music on Universal Music Group-distributed labels including Mercury, A&M and Dreamworks Nashville.
Keith was diagnosed with stomach cancer in 2021 but didn’t publicly reveal the news until the following year. He died less than two months after he performed his final shows: a trio of December concerts at Dolby Live at Park MGM in Las Vegas.
A year into SoundCloud’s fan-powered royalties, a departure from the traditional “pro rata” method of calculating streaming royalties, artists have a better understanding of their fan bases and a better chance to monetize their listeners, according to a new report by author, podcaster and economics professor Will Page.
Fan-powered royalties — known more broadly as user-centric royalties — is a method for calculating streaming payouts to independent artists based on individual fans’ listening on SoundCloud. The traditional, pro-rata model divvies up a large revenue pool based on a track’s total number of plays. In that scenario, an up-and-coming artist shares the same royalty pool as the biggest superstar.
User-centric royalties turn a big pool into smaller silos by splitting a listener’s subscription or advertising revenue based on only the tracks they streamed. If a listener streams only independent artists, most or all of the user’s subscription or advertising revenue will go to those artists. Since SoundCloud first announced fan-powered royalties in 2021, Warner Music Group and Merlin have agreed to use the calculation approach for their artists.
SoundCloud singles out an artist’s biggest fans and gives artists the tools to engage with those supporters through person-to-person messaging. With the help of tools that help artists engage directly with their fans on the SoundCloud platform, a small number of what SoundCloud calls “true fans” will provide an “outsize” share of an artist’s royalties. (Page did not define “true fan” or explain the threshold that separates them from less passionate ones.) The combination of the engagement tools and the fan-powered royalties “make this true fan game the most desirable to play,” wrote Page.
The promise of fan-powered royalties is a more sustainable business model for up-and-coming and working-class musicians. For SoundCloud, a well-known springboard for young musicians’ entry into the big leagues, a model that benefits independent artists over major-label superstars would help cement that platform’s credentials in the creator community.
So, Page offered three case studies that examined artists in different stages of their careers. In 2022, Rapper Lil Uzi Vert opted into fan-powered royalties and gave SoundCloud an exclusive on the track “Space Cadet” from his Red & White EP. As a result, according to Page, “more of Uzi’s listeners became true fans, and those true fans made up an even greater proportion of the overall revenue.” With fan-powered royalties and insights from the platform, true fans accounted for 6.5% of the rapper’s audience in July 2022, up from 5.2% in the previous month, as well as 71.8% of his revenue, up from 54.6%. The audience he gained was engaged: 6% of them were true fans, 69% were classified as engaged and only 9% were passive listeners.
To show that fan-powered royalties can help a mid-tier, independent artist, Page offers the example of Kelow LaTesha, a rapper with about 14,000 SoundCloud followers. LaTesha used fan-powered royalties to reach more listeners. True fans’ share of her revenue jumped to 45.7% in July 2022 from 32.2% in June 2022. The number of true fans increased, but because she gained a greater share of passive listeners, LaTesha’s true fans accounted for 1.4% of her listeners, down from 1.7%.
The do-it-yourself case study, focusing on EDM producer/DJ ShortRound, improved both his true fans and his revenue from those fans. From June to July 2022, true fans’ share of DJ ShortRound’s SoundCloud audience climbed from 3% to 4.4% and their share of his revenue jumped from 77.7% to 82%.
SoundCloud’s adoption of fan-powered royalties pre-dated a larger effort to make streaming more financially viable for labels and artists. Universal Music Group partnered with streaming service Deezer in 2023 to improve payouts to professional musicians while reducing payouts to background noise and other types of audio content that arguably provide less value to listeners. In Europe, politicians are calling for “fairer models of streaming revenue allocation” for artists.
SoundCloud’s approach might not be the best approach for all streaming platforms, but the handful of case studies is evidence that the approach works for SoundCloud. The combination of fan-powered royalties and creator tools “opens a new path to prosperity that the entire music industry should understand,” wrote Page.
Since unveiling Spatial Audio in June 2021, Apple Music has been pushing labels and artists to rework their music in the immersive format. Now, the platform is offering a financial incentive in the form of increased royalties.
In a letter sent out by Apple Music to its partners on Monday (Jan. 22) and obtained by Billboard, the streamer revealed that beginning with month-end royalty payments in January, music available in Spatial Audio — which is supported by Dolby Atmos — will receive a royalty rate up to 10% higher than content not available in the format.
“Pro-rata shares for Spatial Available plays will be calculated using a factor of 1.1 while Non-Spatial available plays will continue to use a factor of 1,” the letter reads. “This change is not only meant to reward higher quality content, but also to ensure that artists are being compensated for the time and investment they put into mixing in Spatial.”
The letter offers an update on the format’s adoption by artists and users, including a claim that more than 90% of Apple Music listeners have experienced the format and that “plays for music available in Spatial Audio have more than tripled in the last two years.” It additionally states that the number of songs available in the format has increased nearly 5,000% since launch and more than doubled over the last year alone. The company further claims that more than 80% of songs to have charted on the platform’s Global Daily Top 100 in the past year are available in Spatial Audio.
Seemingly to deter bad actors, the letter includes a mention of Apple Music’s “zero-tolerance policy against deceptive or manipulative content,” noting the service has a “quality control process that includes flagging content not delivered in accordance with Apple Music’s Spatial Audio specifications and standards of quality.”
Spatial Audio officially rolled out on June 7, 2021. The format, which provides a surround sound experience in users’ headphones, is offered at no additional cost for Apple Music users, seemingly to speed adoption. As part of this effort, Spatial Audio tracks also enjoy enhanced visibility on the app’s home page, sitting higher than even new music releases. Early adopters of the format included Taylor Swift, Katy Perry, The Weeknd, Billie Eilish, J. Cole and Post Malone.
In a June 2021 interview with Billboard, Eddy Cue, Apple’s senior vp of internet software and services, conceded that encouraging artists to mix their tracks for Spatial Audio would be a challenge given the time, work and financial investment required.
“This is not a simple ‘take-the-file that you have in stereo, processes through this software application and out comes Dolby Atmos,’” Cue said at the time. “This requires somebody who’s a sound engineer, and the artist to sit back and listen, and really make the right calls and what the right things to do are. It’s a process that takes time, but it’s worth it.”
