Fan-centric approach: How Spotify should change

I have stumbled upon a striking idea of how music streaming services like Spotify could save music diversity.

This is how Spotify (and others) distribut their earnings today: they take all of the money generated from users (except for the part they keep) and divide it by the total share of streams each artist received. ⁠

So let’s say Justin Bieber is responsible for five per cent of all streams, then five per cent of all money goes to Justin Bieber.

This has two consequences: Firstly, the few very successful musicians get most of the cake. Secondly, catchy music is often played constantly, for example, as background music, and, therefore, gets a lot more streams. Instead, sophisticated music goes almost empty-handed.

Subsequently, musical diversity is decreasing. Especially since the income from concerts has collapsed in the pandemic.

Streaming services should, therefore, change their distribution key.

Today, listeners’ 9.99 subscription goes into a central pot, which gets divided by the number of streams. Instead, these services should allocate their royalty payments based on the behaviour of individual listeners. So the individual subscription should be divided by the number of songs the individual listener has played during a month. If they listens to a single artist the whole month, all their money goes to this artist. If they listens to a few songs, the value per song is higher.

This distribution would be fair because the customer’s money would go to “their” artists. But especially this would promote the diversity of art because most of the money would not go to a few artists.

ABBA’s co-founder Björn Ulvaeus, from whom I got this idea, calls this the “fan-centric approach”. More at his TED talk.

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