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Abu Dhabi-based music streamer Anghami led all music stocks this week after gaining 17.6% to $0.82. On Thursday, the company announced through an SEC filing it had received a written notification from the Nasdaq Stock Market regarding its closing share price being below $1.00 for the previous 30 days. The Nasdaq gives companies 180 days to regain compliance or face de-listing from the exchange.
The warning appeared to spur a 16.5% gain on Thursday as investors saw signs the share price won’t remain under $1. In its SEC filing, Anghami stated if the share price remains under the $1 threshold it will “consider available options to cure the deficiency,” including a reverse share split (which would increase the share price by reducing the number of shares outstanding while the market capitalization remains unchanged).
SiriusXM gained 5.7% on Friday (Oct. 13) and finished the week up 11.8%. Its $4.85 closing price was the highest for the satellite radio company since Aug. 9. The typically steady stock has fallen 17% this year as self-pay satellite radio subscribers stagnated at or around 32 million for eight straight quarters. SiriusXM will host a Nov. 8 presentation to unveil a new streaming app and preview upcoming in-car innovations and new programming.
The 21-stock Billboard Global Music Index fell 1.3% to 1,355.65 this week as 13 stocks were in negative territory and only eight stocks gained ground. Year to date, the index has gained 16.1%. Led by SiriusXM’s gain and a 7.6% increase from Cumulus Media, the index’s three radio stocks had an average improvement of 5.5%. Eight record labels and publishers had an average weekly gain of 0.3%. HYBE improved 6.8% while Believe climbed 3.6% and Universal Music Group added 0.6%. Streaming companies were, on average, flat this week.
Live music stocks dropped an average of 4.8%. Shares of Sphere Entertainment Co. dropped 11.1%, effectively offsetting the 11% gain on Oct. 2 following U2’s debut performances at Sphere in Las Vegas. Live Nation dropped 3.9%, MSG Entertainment fell 3.5% and CTS Eventim shares fell 0.7%. If investors are curious what’s next for Sphere Entertainment, clues comes from an interview published Thursday. Executive chairman and CEO James Dolan said the company is “actively pursuing other markets” and “has six different kinds of spheres down to a 3,000-seater.” A Las Vegas-style Sphere may not work in London, where according to reports residents are concerned about the location and light pollution that could arise from a massive external display similar to the Las Vegas venue.
Music stocks underperformed numerous indexes. In the United States, the S&P 500 gained 0.1% and the Nasdaq composite fell 0.3%. In the United Kingdom, the FTSE 100 gained 1.4%. South Korea’s KOSPI composite index rose 2%.
Stocks faded after the release of consumer sentiment data for October by the University of Michigan showed a decline from September based on “a substantial increase” in concerns about inflation. Expectations for inflation in one year rose from 3.2% in September to 3.8% this month. That’s the highest mark since May 2023 and substantially above the 2.3% to 3% range seen in the two years before the pandemic.
Also a factor in stock prices, the U.S. Federal Reserve expects to raise interest rates one more time, according to minutes released from its September policy meeting. Interest rates have an inverse relationship with equity prices. Higher interest rates make borrowing more expensive and cut down on corporate profits.
Following Hamas’ attacks throughout Israel this past weekend and Israel’s current bombardment of Gaza, the three major labels, along with the Recording Academy, have released statements condemning Hamas. In a statement posted Thursday to X, the platform previously called Twitter, Warner Music Group wrote, “We condemn the terrorist attack on Israel by Hamas and the […]
It’s been nearly 20 months since Neil Young pulled his music off Spotify and, according to Billboard’s estimate, the move has cost him about $300,000 so far in lost recorded music and publishing royalties.
On Jan. 24, 2022, the singer-songwriter gave the streaming company an ultimatum: “You can have Rogan or Young. Not both.” Young blamed Rogan and his Spotify-exclusive podcast, The Joe Rogan Experience, for spreading “fake information about vaccines” and putting the public’s health at risk. Spotify acquiesced a few days later and removed Young’s catalog from its platform.
Other artists in Young’s circle of friends, such as Joni Mitchell and Nils Lofgren, also requested that Spotify remove their music from the platform — and remain off to this day. But Young’s absence leaves the largest hole in Spotify’s catalog: 45 studio albums, two EPs and 12 live albums as a solo artist and with his band Crazy Horse, plus compilations and soundtracks, that includes such rock classics as “Cinnamon Girl,” “Heart of Gold” and “Rockin’ in a Free World.”
Young’s open letter and demand for removal from Spotify attracted worldwide media attention and caused a brief spike in streams, but his departure from the platform at the end of January 2022 created an immediate decline in his average stream rate — and it hasn’t rebounded since, according to Luminate data. From 2021 to Sept. 21, 2023, Young’s average weekly global on-demand audio streams declined 32% from 10.5 million to 7.1 million. The actual loss is deeper considering that weekly on-demand audio streams in the U.S., Young’s largest market, increased 25% over that period.
The impact of Young’s Spotify pullout isn’t much for an artist of his stature and net worth, but it’s not nothing, either. Each month Young is away from Spotify, he loses about $16,000 in royalties from both his record label and his music publishing, according to Billboard analysis of Luminate data.
In nearly 20 months, Young’s absence has cost him about 273 million on-demand audio streams. The gross amount of lost royalties during Young’s Spotify absence totals roughly $1.3 million. Billboard estimates that Young’s labels, Warner Music Group’s Reprise Records and Universal Music Group’s Geffen Records, have lost approximately $1 million in gross revenues, from which Young receives a royalty. Young’s gross publishing revenue has fallen about $270,000. Young sold 50% of his publishing rights to Hipgnosis Songs Fund in 2021.
Sales of Young’s music in the U.S. have dropped, too, although whether his absence from Spotify played a role is unknown. So far in 2023, Young has sold about 25% fewer albums per week than compared to 2021; 2022’s weekly average was 9% below 2021 levels. Physical album sales, which outnumber digital album sales nearly eight-to-one for Young, are down 24% from 2021 to 2023. This year, weekly digital album sales are off 29% from 2021 (they increased 3% in 2022). Young’s weekly digital track sales have fallen by 35% from 2021 to 2023.
The cumulative effect of the sales slowdowns amounted to 59,000 fewer album sales and 54,000 fewer track sales over nearly 20 months. (Luminate does not track the Neil Young Archive, an online subscription service that provides access to a vast catalog of Young’s audio and video, but in October 2019 Wired reported it had 25,000 subscribers with a goal to reach 40,000 paying $1.99 a month.)
There’s much more to Young’s career than Spotify, though, and plenty of other ways for him and his rights holders to earn off his music. In the last 18 months, for example, Young’s music has been used in over 75 TV and film synchs, according to a person with knowledge of the songwriter’s business. These have included the NBC series “This Is Us” (Jill Andrews’ cover of “Only Love Can Break Your Heart”), the AMC series “Dark Winds” (Young’s recording of “Birds”), the Hulu series “Poker Face” (Young’s recording of “Walk On”), “The Tonight Show Starring Jimmy Fallon” (the band’s performance of “Old Man”) and “Sunday Night Football” (Beck’s cover of “Old Man”).
One place you won’t see Young’s music is advertisements. Young is famously opposed to using his music to sell products and advertise corporate brands. Young encapsulated his distaste for putting music in advertisements in his 1989 song “This Note’s For You” — a take on a Budweiser ad slogan from the era, “This Bud’s For You.” “Ain’t singing’ for Pepsi, ain’t singing for Coke,” Young sang in the album’s title track. “I don’t sing for nobody, makes me look like a joke.” The song’s video stirred up controversy — and was initially banned from MTV — for its mocking depiction of a 1984 Pepsi commercial shoot during which pyrotechnics set Michael Jackson’s hair caught fire.
Surely, Young has lost untold millions of dollars over his career in potential ad sales and endorsement deals. But as an artist who’s always clearly voiced his principals and stood by them, he’s long made it clear money is not his first priority.
Earlier this month, Deezer announced a new “artist-centric” royalty model with Universal Music Group, under which the streaming service will distribute royalties under what amounts to a weighted system, rather than simply pro rata. The weighted system will attribute a doubled value to streams of “professional” artists, defined as those with 1,000 or more streams per month by 500 or more users, and would double that value again for tracks that fans searched for as opposed to those served up by the platform.
Assigning more value to music that subscribers deliberately choose to hear is clearly a good idea. In some ways, algorithmically served songs might be more akin to non-interactive radio, which under U.S. law has always generated significantly lower royalty payments.
Giving additional weight to music from more successful artists simply because they are successful is a less obvious move. Some have said that this new system sounds like a cynical reverse-Robin-Hood move that essentially takes money from the long tail of unsuccessful artists and hands it to the likes of Taylor Swift and Jay-Z simply because big artists are powerful enough to demand it. In fact, however, the proposed cutoff for defining “professional” artist status is pretty low – 1,000 streams per month from at least 500 monthly users. Long tail “noise” would be ineligible for the bonus, though, while even mildly successful developing artists would be treated the same as superstars.
What will all of this mean in practice?
Thomas Hesse
Deezer says in its press release that “97% of all uploaders on the Deezer platform generated only 2% of the total streams. Whereas only 2% of all uploaders—those artists attracting a consistent fanbase—had more than 1,000 monthly unique listeners.” It’s not clear what percentage of uploaders constitute UMG’s group of professional”artists with more than 1,000 streams from at least 500 monthly users, or what share of total streams they command. But if 2% account for more than 1,000 monthly streams and 3% make up 98% of all streams, then under any reasonable assumption those having at least 1,000 streams from at least 500 monthly users must make up at least 99% of the streams.
If 99% of streams were weighted three-fold under this artist centric policy – all would get doubled, but presumably many tracks would still be served up algorithmically – then, mathematically, that would increase their share to 99.66% (3×99 divided by (3×99+1)). So, the bottom, “noise”, uploaders would see their share of streams and revenues diminished by 0.66% from 1% to 0.34%.
And what does it mean in real money?
Applying this calculated reduction to IFPI’s published wholesale audio streaming market number of $12.7 billion for 2022 would imply a squeeze on the “noise producers” of $84m (assuming that all labels would eventually follow the UMG model). That’s hardly a large number, but as UMG EVP Digital Strategy Michael Nash says, “we’re fixing the roof while the sun still shines” – the industry leaders want to quash the value of the long tail while it’s still relatively small. Assume that the streaming market grows at 10% a year to over $20 billion within the next 5 years, then assume that, left to the status quo, the revenue take of long tail noise would grow to 5%. If that’s true, UMG’s artist-centric system would cut the noise producer share from 5% to 1.70%, a squeeze of 3.3%, and the professional artist share would go from 95% to 95×3 divided over 95×3+5, or 98.3%. That would amount to a redistribution of $660 million to professional artists, an amount of money that would certainly register.
That means artist-centric royalties do make sense, although they feel like more of a tweak to the existing system than a fundamental change.
As has been often noted, the current pro-rata model essentially takes subscription money from users who spend less time on a platform (lower intensity users) and passes it to the artists favored by those who spend more time there (high intensity users, or super fans). This redistribution of subscriber revenue does not reflect the proportional tastes of all fans in the market, so it disadvantages deep catalog artists and creators in genres favored by less active users, who tend to be older, such as classic rock, jazz and classical music. Besides being perceived as unfair it also reduces the funds that support a more diverse music landscape and contributes to more streamlined and monolithic business driven by megastars and TikTok. The artist-centric royalty system doesn’t even address this.
It also doesn’t do anything about the fact that heavy users still pay the same low monthly price for access to essentially all the music ever recorded as those who stream far less. Combining a higher monthly price for heavy users with a fan-centric royalty model could represent the leap forward that the industry needs, increasing average revenue per user (ARPU) from heavy users, who would be the least price-sensitive, while distributing the resulting royalties to better reflect the music preferences of everyone who pays for a service. Such a change would grow the overall business and at the same time fund the creative development of a more diverse music landscape.
Thomas Hesse is the former president of global digital business & US distribution at Sony Music Entertainment, and the president and chief digital officer of Bertelsmann. He currently builds and supports the next generation of media companies.
For some music companies, 2022 was the payoff for weathering the darkest days of the COVID-19 pandemic. When business returned that year — sometimes in record-setting fashion — these companies rewarded their executives handsomely, according to Billboard’s 2022 Executive Money Makers breakdown of stock ownership and compensation. But shareholders, as well as two investment advisory groups, contend the compensation for top executives at Live Nation and Universal Music Group (UMG) is excessive.
Live Nation, the world’s largest concert promotion and ticketing company, rebounded from revenue of $1.9 billion and $6.3 billion in 2020 and 2021, respectively, to a record $16.7 billion in 2022. That performance helped make its top two executives, president/CEO Michael Rapino and president/CFO Joe Berchtold, the best paid music executives of 2022. In total, Rapino received a pay package worth $139 million, while Berchtold earned $52.4 million. Rapino’s new employment contract includes an award of performance shares targeted at 1.1 million shares and roughly 334,000 shares of restricted stock that will fully pay off if the company hits aggressive growth targets and the stock price doubles in five years.
Live Nation explained in its 2023 proxy statement that its compensation program took into account management’s “strong leadership decisions” in 2020 and 2021 that put the company on a path to record revenue in 2022. Compared with 2019 — the last full year unaffected by the COVID-19 pandemic — concert attendance was up 24%, ticketing revenue grew 45%, sponsorships and advertising revenue improved 64%, and ancillary per-fan spending was up at least 20% across all major venue types. Importantly, Live Nation reached 127% of its target adjusted operating income, to which executives’ cash bonuses were tied.
The bulk of Rapino’s and Berchtold’s compensation came from stock awards — $116.7 million for Rapino and $37.1 million for Berchtold — on top of relatively modest base salaries. Both received a $6 million signing bonus for reupping their employment contracts in 2022. (Story continues after charts.)
Lucian Grainge, the top-paid music executive in 2021, came in third in 2022 with total compensation of 47.3 million euros ($49.7 million). Unlike the other executives on this year’s list, he wasn’t given large stock awards or stock options. Instead, Grainge, who has been CEO of UMG since 2010, was given a performance bonus of 28.8 million euros ($30.3 million) in addition to a salary of 15.4 million euros ($16.2 million) — by far the largest of any music executive.
This year, shareholders have shown little appetite for some entertainment executives’ pay packages — most notably Netflix — and Live Nation’s compensation raised flags at two influential shareholder advisory groups, Institutional Shareholder Services and Glass Lewis, which both recommended that Live Nation shareholders vote “no” in an advisory “say on pay” vote during the company’s annual meeting on June 9. Shareholders did just that, voting against executives’ pay packages by a 53-to-47 margin.
Failed “say on pay” votes are rare amongst United States corporations. Through Aug. 17, just 2.1% of Russell 3000 companies and 2.3% of S&P 500 companies have received less than 50% votes on executive compensation, according to executive compensation consultancy Semler Brossy. (Live Nation is in both indexes.) About 93% of companies received at least 70% shareholder approval.
ISS was concerned that the stock grants given to Rapino and Berchtold were “multiple times larger” than total CEO pay in peer group companies and were not adequately linked to achieving sustained higher stock prices. Additionally, ISS thought Live Nation did not adequately explain the rationale behind the grants.
To determine what Rapino, Berchtold and other executives should earn, Live Nation’s compensation committee referenced high-earning executives from Netflix, Universal Music Group, SiriusXM, Spotify, Endeavor Group Holdings, Fox Corporation, Warner Bros. Discovery, Inc. and Paramount Global. Netflix co-CEOs Reed Hastings and Ted Sarandos were paid $51.1 million and $50.3 million, respectively, in 2022. Warner Bros. Discovery CEO David Zaslov made $39.3 million in 2022 — including a $21.8 million cash bonus — a year after his pay totaled $246.6 million, including $202.9 million in stock option awards that will vest over his six-year employment contract. Endeavor CEO Ari Emanuel and executive chairman Patrick Whitesell received pay packages worth $308.2 million and $123.1 million, respectively, in 2021 thanks to equity awards tied to the company’s IPO that year (the received more modest pay of $19 million and $12.2 million in 2022).
Some companies in the peer group didn’t fare well in “say on pay” votes in 2023, though. Netflix, got only 29% shareholder approval in this year’s say-on-pay advisory vote after Hastings’ and Sarandos’ compensations both increased from higher stock option awards while the company’s stock price, riding high as COVID-19 lockdowns drove investors to streaming stocks, fell 51% in 2022. Warner Bros. Discovery’s 2022 compensation squeaked by with 51% shareholder approval.
Minutes from UMG’s 2023 annual general meeting in May suggest many of its shareholders also didn’t approve of Grainge’s compensation. UMG’s 2022 compensation was approved by just 59% of shareholders, and the company’s four largest shareholders own 58.1% of outstanding shares, meaning virtually no minority shareholders voted in favor.
UMG shareholders’ votes could be meaningfully different next year. Anna Jones, chairman of the music company’s remuneration committee, said during the annual meeting that in 2024, shareholders will vote on a pay package related to Grainge’s new employment agreement that takes minority shareholders’ concerns from the 2022 annual meeting into consideration. Grainge’s contract lowers his cash compensation, and more than half of his total compensation will come from stock and performance-based stock options.
Other companies in Live Nation’s peer group received near unanimous shareholder approval. SiriusXM’s 2022 executive compensation received 98.5% approval at the company’s annual meeting. Paramount Global’s executive compensation was approved by 96.4% of its shareholders. Endeavor didn’t have a “say on pay” vote in 2023, but a year ago, it’s sizable 2021 compensation packages were approved by 99% of voting shareholders.
As the radio industry came back from pandemic-era doldrums, two iHeartMedia executives — Bob Pittman, CEO, and Richard Bressler, president, CFO and COO — were among the top 10 best-paid executives in the music industry. It was new employment contracts, not iHeartMedia’s financial performance, that put them into the top 10, however. Both executives received performance stock awards — $6.5 million for Pittman and $6 million for Bressler — for signing new four-year employment contracts in 2022. Those shares will be earned over a five-year period based on the performance of the stock’s shareholder return. Neither Pittman nor Bressler received a payout from the annual incentive plan, however: iHeartMedia missed the financial targets that would have paid them millions of dollars apiece. Still, with salaries and other stock awards, Pittman and Bressler received pay packages valued at $16.3 million and $15.5 million, respectively.
Spotify co-founders Daniel Ek and Martin Lorentzon once again topped the list of largest stockholdings in public music companies. Ek’s 15.9% stake is worth nearly $4.8 billion while Lorentzon’s 11.2% stake has a market value of nearly $3.4 billion. Both Ek and Lorentzon have benefitted from Spotify’s share price more than doubling so far in 2023. In September 2022, the inaugural Money Makers list had Ek’s stake at $3.6 billion and Lorentzon’s shares at $2.3 billion.
The billionaire club also includes No. 3 HYBE chairman Bang Si-hyuk, whose 31.8% of outstanding shares are worth $2.54 billion, and No. 4 CTS Eventim CEO Klaus-Peter Schulenberg, whose 38.8% stake — held indirectly through his KPS Foundation non-profit — is worth $2.25 billion. They, too, have benefitted from higher share prices in 2023. Last year, Bang’s stake was worth $1.7 billion and Schulenberg’s shares were valued at $2.1 billion.
These top four shareholders and three others in the top 10 have one important thing in common — they are company founders. At No. 5, Park Jin-young, founder of K-pop company JYP Entertainment, owns a $559 million stake in the label and agency he launched in 1997. Another K-pop mogul, No. 8 Hyunsuk Yang, chairman of YG Entertainment, owns shares worth $199 million in the company he founded in 1996. And No. 9 Denis Ladegaillerie, CEO of 18-year-old French music company Believe, has a 12.5% stake worth $112.7 million.
Live Nation’s Rapino again landed in the top 10 for amassing a stockholding over a lengthy career, during which he has helped significantly increase his company’s value. Rapino, the only CEO Live Nation has ever known, took the helm in 2005 just months before the company was spun off from Clear Channel Entertainment with a market capitalization of $692 million. Since then, Live Nation’s market capitalization has grown at over 20% compound annual growth rate to $19.1 billion. Rapino’s 3.46 million shares represent a 1.5% stake worth $291 million.
Selling a company that one founded is another way onto the list. Scooter Braun, CEO of HYBE America, has a 0.9% stake in HYBE worth $69.8 million. That’s good for No. 10 on the list of executive stock ownership. Braun, HYBE’s second-largest individual shareholder behind chairman Bang, sold his company, Ithaca Holdings — including SB Projects and Big Machine Label Group — to HYBE in 2021 for $1.1 billion.
These rankings are based on publicly available financial statements and filings — such as proxy statements, annual reports and Form 4 filings that reveal employees’ recent stock transactions — that publicly traded companies are required by law to file for transparency to investors. So, the list includes executives from Live Nation but not its largest competitor, the privately held AEG Live.
Some major music companies are excluded because they are not standalone entities. Conglomerates that break out the financial performance of their music companies — e.g., Sony Corp. (owner of Sony Music Entertainment) and Bertelsmann (owner of BMG) — don’t disclose compensation details for heads of record labels and music publishers. Important digital platforms such as Apple Music and Amazon Music are relatively small parts of much larger corporations.
The Money Makers executive compensation table includes only the named executive officers: the CEO, the CFO and the next most highly paid executives. While securities laws vary by country, they generally require public companies to named executive officers’ salary, bonuses, stock awards and stock option grants and the value of benefits such as private airplane access and security.
And while Billboard tracked the compensation of every named executive for publicly traded music companies, the top 10 reflects two facts: The largest companies tend to have the largest pay packages and companies within the United States tend to pay better than companies in other countries.
The list of stock ownership is also taken from public disclosures. The amounts include common stock owned directly or indirectly by the executive. The list does not include former executives — such as former Warner Music Group CEO Stephen Cooper — who are no longer employed at the company and no longer required to disclose stock transactions.
European independent labels trade group IMPALA says it has concerns that the new “artist-centric” streaming model being rolled out by Deezer and Universal Music Group (UMG) later this year could create a “two-tier” music market that unfairly disadvantages indie artists and labels.
In an announcement on Friday (Sept. 15), Brussels-based IMPALA says that Deezer’s plans to introduce a new methodology for paying out streaming royalties for UMG artists from October 1 — at first only in France, Deezer’s biggest market — risks impacting independent and micro labels, which provide 80% of all new releases in Europe.
Among those whom IMPALA warns could be affected by the new streaming model announced by Deezer and UMG last week are new artists yet to be discovered, acts that deliberately cater to niche audiences and musicians from smaller markets.
The European trade body, which represents nearly 6,000 independent companies and labels, including Beggars Group, Cooking Vinyl, Epitaph and PIAS Music Group, says “the fact that the Deezer proposal has been developed in a vacuum” with UMG, the world’s biggest music company, “instead of the sector generally is also a concern.”
In response to its members’ worries, IMPALA says it is seeking “more clarity” from Deezer about its new streaming royalties model, which replaces the existing pro-rata setup — whereby one stream equals one play, with the total number of plays proportionally divided up by artists and labels — with a new system that prioritizes active listening, meaning users who intentionally search for or click on an artist’s song.
Under the new “artist-centric” model, “professional artists,” which Deezer and UMG categorize as artists who have accumulated at least 1,000 monthly streams from at least 500 unique users, will receive a higher share of streaming royalties, while Deezer will remove “non-artist noise” — essentially, white noise and nature sounds, which the company says accounts for 2% of streams — from the available royalty pool. As part of its reforms, Deezer has also vowed to crack down on streaming fraud and malicious actors exploiting the system.
At present, Universal is the only label signed up to the new streaming royalty allocation model, although in an interview with Billboard, Deezer CEO Jeronimo Folgueira said the Paris-based company is in discussions “with all content providers” and anticipates that more than 50% of its repertoire will be on the new model come its launch in October. He said the company also plans to expand the offer beyond France, where it will be piloted this fall, to “all providers in all countries” in 2024.
Responding to the UMG-Deezer plan, IMPALA’s executive chair Helen Smith said she welcomes Deezer’s “commitment to improve the streaming market” but cautions that “more debate is needed on this vital question… and its potential impact on the music ecosystem.”
In April, IMPALA published an updated version of its own 10-point plan to reform streaming, which proposed various changes to how digital royalties are allocated, including attaching a premium value to tracks that the listener has sought out as well as a so-called “Fan Participation Model,” whereby artists and rights holders could generate incremental revenue within digital services through offering special features and extra tracks.
The trade group says it has discussed its proposals with multiple digital services and will continue to push for “meaningful streaming reform.”
“It’s a common thread through the history of recorded music that the great artistic advances and changes have come from, and through, the independent sector. I don’t expect Goldman Sachs to know that but Deezer and UMG certainly do,” said Mark Kitcatt, chair of IMPALA’s streaming reform group.
Kitcatt added, “We hope that services will join with us to reform the streaming world in a way that increases opportunity and reward for all dedicated music creators, and enhances and enriches the experience for fans, rather than just diverting more royalties towards the biggest artists.”
Last week, French music streaming service Deezer joined with the Universal Music Group to roll out what they called an artist-centric music streaming model, which they said was “designed to better reward the artists and the music that fans value the most.” It’s the result of a six-month partnership announced in March that promised to examine the current “pro-rata” streaming royalties model, in which artists and labels are paid according to their share of streams out of the available pool of revenue generated by streaming services. They aim to identify a new way of paying out that revenue, at a time when streaming service catalogs have exploded to north of 200 million tracks and fraud and streaming manipulation have proliferated on platforms.
The artist-centric model, which Deezer says will begin rolling out Oct. 1 in France for UMG artists with plans to expand it to more content owners and additional territories, relies on a “boost” model that rewards artists who are actively searched for by users, as well as those who maintain a level of 1,000 streams per month from at least 500 unique accounts — what Deezer/UMG are terming “professional artists.” And it has generated plenty of scrutiny from many corners of the industry, despite its initial limited scope.
Here’s how it works: Under the “old” pro-rata model — or the one still in effect at every major streaming service — one stream equals one play, and the total number of plays is divided up by artists and labels according to how many they accrue. Under this “artist-centric” model, if an artist qualifies as a “professional artist,” one stream would get “boosted” to count as two plays; and if a user actively searches for or clicks on an artist’s song, that stream would get “boosted” to count as two plays. If a user actively searches for or clicks on a song by a “professional artist,” that stream counts as four plays when the pool of revenue gets divided up. As part of this, “non-artist noise” content — essentially, things like the sound of rain or a washer/dryer that contains no music — will be removed from eligibility from the royalty pool, and eventually deleted from the service altogether, to be replaced by in-house noise uploaded by Deezer that will not generate revenue.
That’s the headline change, but there are many other elements to this switch as well, some designed to root out streaming fraud or bad actors gaming the system, and others that are designed to promote human artists at the expense of general audio. Deezer also released some statistics to support the changes, including that “non-artist noise” content accounts for 2% of all streams; that in 2022, 7% of all streams on its platform were fraudulent; and that, contributing to the clutter on the platform, 97% of all uploaders to Deezer generated just 2% of total streams. All told, Deezer eventually expects the changes to increase artist royalties by as much as 10%.
Still, there is work to be done for the service to implement this more widely. Deezer CEO Jeronimo Folgueira says the company is actively looking to bring more partners aboard, and expects to have more content providers on the system by the time of the Oct. 1 launch, with a full rollout with all providers across all territories intended by next year. In the meantime, “the royalty structure of labels and artists that are not signed on yet will not be affected during the transition period,” he says. The model will also initially only cover recorded music royalties, though he says “our goal is to include publishing royalties as well and will begin discussions with publishers in the near future.”
Folgueira spoke to Billboard to explain how it all works and break down how the companies created the thresholds and distinctions that underpin the new system.
Billboard: Can you walk me through the last six months of how you guys got to this point?
Jeronimo Folgueira: Deezer has been promoting a change in the model for more than four years, advocating for UCPS [User-Centric Payment System]. UCPS is much better than the old model that we had, but we figured that there’s a better way of implementing this, which is artist-centric. Artist-centric is better than UCPS, which is why we were able to get this one over the finish line, whereas with UCPS there was a lot more resistance.
Basically, given our background, it was obvious that we would engage in reviewing the system. And Universal has, in the last few months — since Lucian Grainge took on this topic personally very strongly — supported changing the model to artist-centric, so we announced a collaboration with them where we looked into the data with a consultant that they hired to see, basically, what would be the right way of moving the model.
It started from different parts. We came from a UCPS base, Universal came from an artist-centric point of view that was different from where we ended up, and we tried to find something that would make sense and would be fair for the whole industry and achieve the benefits of what we wanted while minimizing the negative impact. Because with UCPS, there were some really good artists who got negatively affected. But with the artist-centric model we’ve created now, basically all professional artists creating valuable content will get a benefit. Some get a huge benefit, and some get a small benefit, but creators making high-value content all benefit. With UCPS, there was more shuffling for artists.
That’s why in this first version of artist-centric, we’re focusing mostly on eliminating noise from the royalty pool and giving a boost to professional artists that create valuable content that users love and want. We’ve been working on this for months, working on different versions of the model, running data to make sure that we eliminated the wrong incentive and created the right reward for the right content and behavior.
What do you expect the effect to be?
Overall, the pool doesn’t really change, it changes the distribution of the pool. But effectively what we’re doing is reducing the economic incentive for fraud and gaming the system. We’re eliminating the payouts to pure noise, and we’re boasting the payouts to real artists. So effectively there will be a shift of money from low-quality content — or not even real music — back to real, professional artists. So what we see is that producers of valuable content will get an uplift, on average, of around 10%.
What does a “boost” mean?
The boost is for a professional artist — and we consider that to be if you have more than 500 listeners a month and more than 1,000 streams. The threshold is very low, and any small, independent artist will reach those levels, so as long as you have a minimum amount of a following and fans, you’ll get to that boost. And if people search for your song, or add it to favorites or have it in a playlist, it gets another boost. So it basically means a stream of a song from one of those artists will count four times for the pool system. So it’s still a pool system, but those streams will count four times. Whereas rain, for example, will count zero, and functional music will count once. So they get boosted 4x for producing content that people actually love.
And where does the extra money come from?
The pool is the same, but the way that pool gets distributed is based on the share of streams. But that’s where the boost comes from. Noise will not get paid at all, so that’s where some of the money comes from; functional music, or music from artists that do not qualify for the threshold, will get paid less; and then artists that create valuable content will get the boost, therefore they’ll get paid more.
How did you come to the “professional artists” distinction?
We looked at different thresholds. We wanted to create a threshold that was transparent and fair, so that a small, up-and-coming artist could get there, because we want to support new up-and-coming artists and independent artists. So it was very important that this was something that was good for all artists, not just artists that were signed to a major record label. With that threshold, even though a lot of the artists on the platform will not qualify to get that boost, the majority of the streams actually do. If an artist doesn’t get to 1,000 streams and 500 listeners a month, they cannot make a living [through streaming] regardless of what the payout of the model is. So you’re not technically a professional. And any up-and-coming artist that is rising up gets to those levels pretty quickly. You don’t need big marketing budgets or promotions behind that. We’re talking about levels that are relatively easy to achieve once you are a professional and do this seriously.
But wouldn’t those smallest artists need that money the most?
Yeah, but we’re talking about people that are making €3 or €5 euros per month; it doesn’t make any real difference. It will not change anything at all. That’s why the threshold is so low — that economically it makes no impact whatsoever.
What effect would this have on playlisting? If you click on an artist’s song, they qualify for the boost — is that just if you’re looking at an artist’s page and seeking out their music? Or if you click on their song that’s first on a playlist?
If a song is on a playlist, it will always get the active boost. You would not get it if it’s algorithmically pushed to you. So if you’re listening to [algorithmic playlist] Flow, for example, and you discover new songs on Flow, you haven’t really chosen them, so those would not get the boost. If you come across a song [on an algorithmic playlist] and favorite it, that would get the boost.
What do you define as “non-artist noise”? Is there a threshold there?
We wanted to be very fair and transparent and start in a very simple way, which is noise that has no music at all. Right now what we are going to stop paying, and eventually deleting, will be pure white noise — the sound of a washing machine, or rain, but without any music or anything else. That is the first stage, because it’s very easy to detect and very fair.
Then, there are different layers. Once it has music, then obviously it will not have the artist boost, most likely, and will probably not get to the active boost, but it will still be paid and still be there. So it won’t qualify for the boost, but it will still be paid and be available. Later on we’ll look into how that evolves and make sure that people aren’t abusing it, and if it becomes an issue then we will address it. It has to be a model that gets reviewed regularly, the same way that the Google search algorithm gets reviewed regularly to make sure that it’s always giving you the most relevant results, to make sure that there’s no gaming of the system, that it’s actually helping real artists.
What we’re trying to do here is support the creation of high-value content from real artists. And therefore we will continue to monitor it. Initially, it’s a very simple execution: pure noise gets kicked out, but anything with music will stay for the time being.
Where do you draw that line between what is “functional music” and what is artistry?
Right now, we don’t, because it’s a very difficult line to draw. If we find a way to draw that line then we will, but it has to be fair and it has to be very transparent. It cannot be subjective. We haven’t found a rule that is fair and transparent to define what is functional music and what is not, so that’s why we decided not to go there and went for the boost instead. Because what we see is, if it’s functional music, people don’t really add it to a playlist or follow it or search it or put it in favorites. So usually, things that are functional music, by nature, will not qualify for the boost. So the boost is basically a smart way of letting the behavior of the users boost what is real, high-value content, versus what is purely functional music.
Is this also about AI protection? Protecting “real” artists vs. AI artists?
Initially, we’re not taking any steps against AI. The model is not designed against it. However, it is a model that is built in a flexible way that can protect real artists from AI in the future, and what we said is that the real artist boost should be applied to real, human artists, so if it’s a machine it should not qualify for the active boost.
Your press release also mentioned a “stricter provider policy” that you guys are implementing. What does that entail?
Basically right now, like every other DSP, we allow people to upload music through these do-it-yourself [distribution] platforms; there’s plenty of them. And there’s a lot of content being uploaded. What we want to do is make sure that we get content that is valuable. We don’t want more noise getting uploaded to the platform and we want to be very strict with fraud and gaming [the system]. There are certain providers where more than 50% of what they uploaded we had to take down because of fraud. So we’re going to potentially block those providers altogether. We do not want to be used to game the system. Until now we had been allowing everything, and only when something gets detected as fraud did we deal with it. Now we want to be a lot more strict with what we allow to be uploaded.
But as you were saying, so much gets uploaded every day. How do you screen that?
AI. There will be clear rules, and then the machine will be screening all content that gets uploaded, and once you get to certain thresholds where they’re providing too much content that is detected as fraudulent or gaming the system, then we will just block them, the same way that Google will penalize anyone that is gaming their SEO and will remove them from search results for at least six months. There are penalties for bad behavior. Right now in streaming there are no penalties for bad behavior, and we’re trying to introduce them, the same way that Google and many other platforms do.
What other practices are you instituting to combat this fraud?
One really important aspect of eliminating the fraud element is we’re going to put a cap on the impact of a single user on the pool of streams: only 1,000 streams per user per month will count. So if you listen to 2,000 streams, then your streams will count half. That way, you cannot have one account racking up 10,000 streams and stealing money from the pool. A normal human will consume anywhere between 400 and 600 tracks per month, so we’ve set the threshold at 1,000. At 1,000, more than 90% of the behavior is captured and then only the outliers go beyond that. Some of it is not fraudulent — it’s usually young kids listening to K-pop or rock day and night. But the behavior of the fraudulent accounts, or gaming the system, happens by hacking accounts and generating huge amounts of streams to steal money from the pool. So by putting a cap of 1,000 streams per user, we are eliminating the economic incentive. You’d have to fake or hack a lot of accounts to have an economic impact, whereas right now with only a handful of accounts you can have a massive impact on the pool.
That 400-600 tracks, that was a result of your research?
Yes, our data. We have 10 million monthly subscribers, and over the last 15 years it’s pretty statistically significant that a normal human will listen to something in the range of 500 tracks. It really depends on age; the younger you are, the more tracks you listen to. But generally speaking, in normal human behavior, everything will be captured below 1,000 streams. If you’re above 1,000 streams you’re an outlier, and we don’t want those outliers or gamers of the system to have an impact on the pool.
What other tweaks are possible as you guys start to roll this out?
One thing we left out that we looked at was potentially adding another layer, which was streaming time. So instead of calculating it by stream, calculating it by the time you spend streaming a song. But what we saw is that with the current boost, the impact is already captured. So if you added listening time on top of the current layers that we created, the impact is minimal, because if you love a song, you usually listen to the whole song. We explored it, looked at the data and decided it wasn’t needed, and we wanted to keep it as simple as possible. But we haven’t completely ruled out listening time.
The other thing we haven’t completely ruled out is moving more and more towards a user-centric approach. Right now we cap things at 1,000 streams. But that can come down eventually to make it closer and closer to a UCPS approach. So that’s another variable that we’ll want to keep an eye on. And the other one is the threshold for a “professional artist.” We need to make sure that the 1,000 streams and 500 listeners a month is the right level and that it doesn’t have negative consequences. Because we really care about new, independent up-and-coming artists. We want to support them. So we will be reviewing that and its impact on new artists as well.
What might make you lower that threshold?
We have looked at so much data, which is why I feel like the level is in the right place. But feedback from the community and if there were any unintended consequences that we couldn’t see in the data that we already have.
When you roll this out, does this only apply to UMG artists?
Yes and no. Right now, the agreement is with Universal, however we’re in discussions with all content providers. The majority of content providers are very happy with the artist-centric model, because everyone who produces high-quality content gets a boost, whether you’re a major record label, an independent record label or a small indie artist distributing yourself. As long as you create content that people value, you will benefit from the model. I expect a big chunk, if not more than half, of our content will be on the new model by the time we launch this on the first of October. And our intention is to roll this out to all providers in all countries in 2024.
What would be a mark of success for this program? Six months from now, what would tell you that this is working?
I think it’s if real artists really get the boost, if they see an uplift in royalties, that’s where we would say that this model is working and helping good artists create valuable content. That’s ultimately what we want to do. The pool of money is the pool of money. Obviously we’re working to raise the ARPU [average revenue per user] and grow the pie, but that’s a different discussion. But from the pie that we have, more of the money has to go to artists who create valuable content, to implore them to continue to create valuable content. If those boosts work as intended and the real artists creating valuable content see an uplift in royalties, this model will have succeeded.
Roc Nation veteran Ty-Ty Smith and London-based musician and A&R executive Shabz Naqvi have joined with Universal Music to form a new label venture dedicated to Desi Trill, a new genre that incorporates South Asian music with hip-hop. UMG said the first release from the label, called Desi Trill Music, will arrive next month with […]
As the music streaming business matures, the way people listen to music could determine how artists get paid. Sitting back and letting a streaming service choose a song will result in a lower royalty than choosing the song yourself, if this week’s news of a new streaming model is any indication.
It’s not a phobia toward algorithms that’s driving the change. Rather, the approach rewards those artists who create the most active engagement. Songs that play in the background are deemed to be less valuable.
On Tuesday, French music streamer Deezer and Universal Music Group announced a partnership to reinvent how Deezer calculates UMG’s streaming royalties. The partnership will “[reduce] the economic influence of algorithmic programming” and reward “engaging content” with greater royalties, according to the companies’ press releases.
When they say, “algorithmic programming,” they mean the streaming service’s personalized recommendations about what song will play next. That’s a more passive, lean-back approach to listening than hunting and pecking on the app’s user interface to choose a song.
At some point between the launch of internet radio platforms and the present battle for better royalties, passive listening got a bad rap. What has the world come to, some people fret, when dreaded algorithms are deciding what music gets heard? What gives an algorithm such an important role in determining how royalties will be paid?
But algorithms are a common way to stream music. When given an on-demand streaming service, people often let an algorithm do the hard work of picking the next song. A 2021 MusicWatch survey found Spotify Premium users spent 25% of their time in “lean-back” listening rather than “lean-in” listening. That figure rose to 31% for Apple Music users and 32% for Amazon Prime Music users. In all, 48% of time spent listening to music was “lean back” listening on streaming services, broadcast radio and satellite radio.
Algorithms also drive helpful products such as Spotify’s Discover Mode, a promotional tool that allows artists and labels to find new listeners in return for a lower royalty rate. It works by increasing the likelihood a song will be recommended to a listener. It’s popular, too. From the first quarter of 2021 to the first quarter of 2022, Discovery Mode had a 98% customer retention rate, Charlie Hellman, Spotify’s vp/global head of music product said during the company’s 2022 investor day presentation.
When a streaming service does personalization well, it adds great value to a listening experience. Pandora was revolutionary when it launched in 2005 because it had a spooky sense of what people wanted to hear. Its Music Genome Project, a proprietary technology that classifies recordings’ various musical traits, gave it the ability to pick the right songs based on a history of giving other songs a “thumb up” or “thumb down” vote. Pandora took away the effort in digging for songs and provided a much broader catalog than broadcast or satellite radio.
Today’s music streaming services are superior to their predecessors — and their own previous iterations — specifically because they have mastered passive listening. Consider how far Spotify has come since it was launched. Spotify used to recommend songs based on a user’s social network — kind of an “if your friend likes it, you’ll like it” approach to song-picking. But it wasn’t a good listening experience. Spotify’s decision to acquire music intelligence startup The Echo Nest in 2014 was the cornerstone for a new approach to providing a personalized listening experience.
The proliferation of smart speakers only adds to the need for algorithmic listening. About two-thirds of U.S. smart speaker owners wanted to own the devices to discover new songs, according to a 2022 Edison Research survey, and their share of time spent listening to audio through a smart speaker increased 400% over the previous five years. The joy of owning a smart speaker is allowing the device and streaming service to do all the work — it’s passive listening at its best.
Most Americans use their favorite streaming service when doing things around the home such as cleaning, relaxing, cooking, eating and entertaining guests, according to the same MusicWatch study. Most people stream music when exercising. More than half of people also use their favorite streaming service when driving, although satellite and broadcast radio were preferred in the car over streaming. Streaming service Songza, acquired by Google in 2014, was built on the premise that people chose music for moods and activities. That approach to curation has since been adopted by most — if not all — streaming services.
The UMG-Deezer partnership is evidence that background listening is on its way to getting a demotion. Deezer will remove tracks of white noise, which account for 2% of its streams, from the royalty pool. That leaves more royalties for professional artists who depend on streaming to earn a living. Throughout the year, UMG has been calling out “functional music” — a term that has come to mean low-cost or generic music built for moods or activities — and drawing a distinction between artists who draw people to streaming services and sounds that people play in the background.
Taylor Swift and Drake may rule the charts, but functional music is mainstream, too. Of U.S. music streamers who listen to playlists, many of them listen to playlists for white noise (36%), rain sounds (45%) and relaxation (61%), according to a 2023 MIDiA Research survey. In recent years, streaming services have broadened their playlists and radio stations to address the fact that consumers want a variety of sounds.
Artists with small followings will get less, too. Deezer will “boost” the royalties of “professional” artists with at least 1,000 streams per month by a minimum of 500 unique listeners. That will relegate hobbyists and artists early in their career development to a different tier. Exactly how many artists will be affected isn’t clear, but Deezer says just 2% of artists on the platform have more than 1,000 monthly unique listeners.
UMG and Deezer aren’t exactly taking an innovative stance, however. The music industry — at least in the United States — has already determined that active, on-demand listening is more valuable than passive, non-interactive listening. The Deezer-UMG partnership merely codifies for an on-demand service what is standard at internet radio. In the United States, non-interactive internet radio streams from the likes of Pandora pay 0.24 cents per ad-supported stream (and 0.3 cents per subscription streams). That’s less than any on-demand stream from a premium streaming service such as Spotify, Apple Music and YouTube Music.
In effect, a streaming service pays less for non-interactive streams because it gives the listener less value than on-demand services. To qualify for the lower royalty rate, a non-interactive streaming service cannot have the same robust features as an interactive one. At Deezer, a listener can stream any song from any artist any number of times. They can listen to playlists and build playlists, too. They can listen to songs shared by friends through SMS or social media. That’s all lean-in listening, and it’s more valuable because people will pay $11 a month to do it.
Until now, on-demand services’ standard pro-rata model hasn’t separated passive from active listening. When labels negotiated licensing deals with streaming services, they have always treated one stream the same as any other stream. A stream from a user-curated playlist is treated the same as a stream from an algorithmically created radio station. Whether the listener actively hits the play button to listen to a particular track isn’t taken into account. Right or wrong, that’s how the pie has been divvied up.
A couple of decades into the life of the pro-rata system, Deezer shows there is a greater willingness to treat active listening differently than passive listening. MIDiA Research’s Mark Mulligan called this demotion “a very welcome and long overdue move” that will “disincentivis[e] the commodification of consumption by rewarding active listening.” There’s certainly a logical argument to be made here: The artists people actively seek out arguably provide the most value — give the streaming service the most foot traffic, so to speak — while less popular artists play the important but less financially valuable role of giving breadth and depth to music catalogs.
Time will tell if and how other streaming services follow Deezer’s lead. An alternative already exists: In 2022, Warner Music Group adopted the user-centric model that SoundCloud rolled out to independent artists the prior year. That system pays royalties based on an individual subscriber’s listening rather than pooling all subscribers’ fees into a larger pool. So, a subscriber who listens to out-of-the-mainstream or independent artists is assured their money is not going to popular artists.
Over the next few years, labels and services are likely to experiment with different approaches to calculating streaming royalties. But regardless of how the dust settles, streaming services and rights holders should respect what passive listening brings to their listeners.
Universal Music Group (UMG) has expanded its presence in the fast-growing Middle East and North Africa (MENA) region with the acquisition of United Arab Emirates-based music company Chabaka, it was announced Wednesday (Aug. 30). Founded in 2013 by brothers Ala’a and Tarek Makki, Chabaka provides digital distribution, marketing, publishing and label services and has deals […]