A subscription business can pay only so much to rights owners and creators before an already difficult business model becomes outright untenable. Royalties are a zero-sum game: if some artists make more, some are going to make less.Ĭhanging how royalties are calculated can only help so much, though. A 2014 Norwegian paper found a user-centric approach would raise the royalties of Norwegian artists by an average of 13%. Not that a user-centric scheme will be a financial windfall: a 2021 study by Deloitte in France estimated artists outside of the top 10,000 - so most of them - will see their payouts increase an average of 5.2%, and less for more popular artists. Most artists won’t benefit from a shift to user-centric royalties until Spotify (31% of global market share), Apple Music (15%) and Amazon Music (13%) adopt the accounting system. SoundCloud’s business is primarily advertising based, which is already a user-based approach to paying royalties (a person listens, that listen generates a royalty, pretty simple). WMG’s move is evidence that royalties are neither stagnant nor easily influenced.

After Deezer and Yandex, each at 2%, SoundCloud falls into the “other” group with an aggregate 10% market share. In fact, SoundCloud wasn’t even named in the breakdown. It’s a small victory: SoundCloud wasn’t among the 8 largest subscription services in the world in Q2 2021, according to MIDiA Research, putting it far behind Spotify, Apple Music, YouTube Music and Amazon Music. And, according to some estimates, user-centric accounting will result in better royalties for independent artists who are otherwise drowned out by superstars. A user-centric system can also prevent royalties from fraudulent streams ending up in the wrong hands.

A user-centric system is arguably fairer because artists’ biggest fans become their most significant financial supporters (as explained by a MIDiA Research paper).

The traditional way of calculating royalties is to divide a pool of subscription fees amongst all tracks streamed in a particular month. If you pay $10 a month and rights holders get $7 in royalties, that fee is split between the rights holders of tracks that user actually streamed that month. User-based – SoundCloud calls it “fan-powered” – means royalties are calculated from the fees and streams of an individual subscriber rather than an anonymous pool of users and listening. This week, Warner Music Group announced it became the first major music group to agree to user-based royalty calculations with SoundCloud. For the Record: Who's Afraid of User-Centric Royalties?

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