A collaboration between Portishead and SoundCloud has shed light on a new royalty distribution system that proponents claim can help level the playing field for working musicians. Under SoundCloud’s “fan-powered” royalty model unveiled in March, a listener’s subscription or advertising revenue goes directly to the artists they listen to for a given period of time; it is instead the “pro-rata” model typically used by Spotify and other streaming services, where money is collected and split up to rightholders based on their market share.
Proponents of the new royalty approach, also known as “user-centric”, have long argued that it would increase the income of a class of professional musicians beyond the biggest stars, and an academic study from Finland 2017 supported this view. SoundCloud’s fan-driven royalty plan is exclusively available to the nearly 100,000 independent artists who make money directly through SoundCloud artists signed to major brands and independent labels are already subject to existing licensing agreements — so data on the model’s impact has so far been scarce.
SoundCloud has now described how at least one song has performed under the fan-driven model compared to the traditional pro-rata pool system. On July 8, British trip-hop pioneers and psych-rock veterans Portishead released their cover of ABBA’s “SOS,” previously only streamed as a music video, via SoundCloud. Streams from the track earn revenue through SoundCloud’s fan-driven royalties with charitable revenue. In less than a month, “SOS” earned more than six times the revenue it would have under a proportionate model, according to statistics from SoundCloud provided to Pitchfork. In other words, it represents more than a 500 percent increase.
A SoundCloud representative said in a statement that “there is a complete aggregation of data regarding market payments awaiting in the coming months,” as the company is in the process of launching its system. “The model tracks as expected, and Portishead status is a strong confirmation of the model’s design – fan engagement drives significant revenue.”
“[The fan-powered royalty model] is a real opportunity for people who want to support artists, ”Portishead’s Geoff Barrow told me over the phone. “I did not expect large numbers of people to listen [‘SOS’]. It was more about getting the idea out of being able to stream music and it could make money…. That’s the difference between being able to order a pizza and having someone actually pay the rent. ”
Barrow heard about fan-driven royalties through the #BrokenRecord campaign, a British movement that led to a parliamentary inquiry into whether platforms like Spotify and Apple Music are fairly redistributing their revenue.
Tom Gray, founder of #BrokenRecord, claims that the user-centric model, along with increasing revenue for professional musicians, is making great strides, also eliminating streaming scams because fraudulent streams would no longer count in the share of a revenue pool. Gray also maintains that the fan-driven system could ultimately provide artists with more accurate data on their fan’s listening habits, which could help them sell items and plan trips. Regional, specialized, and local dialect music would also generate more revenue under the user center, according to Gray. “Which is what I would describe as good for the culture,” he told me over Zoom. “You might start to see labels investing in things that don’t pop up again because they want to build a broader and deeper catalog.”
The user-centric model has critics. Spotify’s former chief economist Will Page, British indie-branded group Association of Independent Music and others have argued that “user-centric distributions would increase administrative and operating costs due to increasing complexity”, according to a recent UK government report. But the report adds that “these would probably be within the current processing limits of modern computer systems (which are still improving).”
Read “Is there a fairer way for streaming services to pay artists?” on the field.