Royalty Inequity: Why Music Streaming Services Should Switch to a Per-Subscriber Model

Joseph Dimont

Volume 69, Issue 2, 675-700

Digital music streaming services, like Spotify, Apple Music, and Tidal, currently distribute royalties based on a per-stream model, known as service-centric licensing, while at the same time receive income through subscription fees and advertising revenue. This results in a cross-subsidization between low streaming users and high streaming users, streaming fraud, and a fundamental inequity between the number of subscribers an artist may attract to a service compared to how much they are compensated. Instead, streaming services should distribute royalties by taking each user’s subscription fee and dividing it pro rata based on what the specific user is listening toknown as a subscriber-share modelor user-centric licensing. Many scholars have focused on creating a minimum royalty rate; however, this does little to solve the inherent inequity.

Either the music industry should self-regulate by switching to a subscriber-centric model, or the Copyright Royalty Board should make the switch for them. Under a subscriber-centric model, royalty distribution would more accurately reward artists for generating fans, not streams. Each month, the streaming service should take each subscription fee and apportion it out based on the percentages of artists that unique listeners choose to listen to during the subscription period. This change could come through the industry itself, litigation, or regulation, but will likely face resistance from the major record labels and the services themselves.

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