Shulou(Shulou.com)11/24 Report--

Universal Music, the world's largest record company, reached an agreement with French streaming music company Deezer this week to revolutionize the business model of streaming music and distribute more compensation to professional musicians, rather than the "sea of noise" that Universal Music CEO Lucian Grainge once criticized.

Under the agreement, professional artists will be paid 10% more. This is the first major change in the streaming music business model since the establishment of streaming music giant Spotify in 2008. As part of the new model, when calculating royalties, professional artists, that is, those who get at least 1000 listenings a month, will have twice as much weight in royalties as non-professional artists.

"this is a major change in the way the music industry works," said Jeronimo Folgueira, chief executive of Deezer. "We have 90 million tracks, many of which are noise, literally noise, the noise of washing machines and the sound of rain. If the 30-second washing machine noise is the same as the pay for Harry Styles's latest single, this is fundamentally wrong."

If listeners actively search for songs or artists, the weight of these plays will be doubled again. For example, if a user searches for "Taylor Swift" on the Deezer app and plays one of her songs, the song will be counted as four streams and royalties will be calculated accordingly.

The goal is to reduce the flow of money to amateurs, robots and white noise. Goldman Sachs estimates that such "long tails" generated about $900m in royalties last year.

Michael Nash, Universal Music's chief digital officer, said the changes would make a "positive contribution" to the company's revenue. Universal Music has stars such as Taylor Swift, Elton John and Drake.

If these changes are widely replicated in other streaming music services, it will have a significant impact on the music industry. Services such as Spotify, Apple Music and Deezer have contributed to the recovery of the music industry, whose revenues have been growing over the past decade. However, the way streaming platforms pay artists has not changed, which makes record companies and artists feel treated unfairly.

In the current payment structure, monthly subscription fees for listeners are pooled in a pool of music royalties and distributed among copyright holders according to their share in the audience. Artists receive the same royalties no matter who creates the music and whether the audience listens passively through the algorithm or actively listens to the music through search. As long as someone listens to music for more than 30 seconds, it will be counted as the number of times the music is played.

Goldman Sachs expects total revenue in the streaming music market to reach $38 billion this year, while streaming music platforms pay 2% of revenue to copyright holders such as Universal Music. On average, streaming music users pay about $0.005 per playback, or $5 for 1000 broadcasts. Goldman Sachs analysts pointed out: "listen to a 31-second independent artist song, a pop artist's full three-minute song, or five minutes of rain, the copyright owner's income is equal."

Music industry executives worry that fraud and a surge in "noise" on streaming music platforms are taking royalties away from record labels and artists. More than 120000 songs were uploaded to Spotify every day in 2023, up from 20,000 in 2018.

Deezer will launch a new payment model in France in October and plans to launch it to the global market from January next year. Forquila said the threshold for 1000 broadcasts was "quite low" and that only "human artists", not songs generated by artificial intelligence, were eligible for more royalties. At the same time, songs detected as "noise" will not receive any royalties.

Nash said the move will "ensure that we can better support and inspire artists at all stages of their lives, whether they have 1000 fans, 100,000 fans or 100 million fans."

Universal Music is also in talks with other streaming music platforms such as Spotify, Tidal and SoundCloud to adjust the way royalties are paid.

Skeptics argue that pushing for change in the streaming music industry is a defensive move for big companies, which worry that the streaming music boom is waning. "Universal Music, Sony and Warner need to maintain revenue growth to satisfy investors, so they are looking for non-spontaneous growth," said Mark Mulligan, an analyst at Midia.

Mr Forquila of Deezer says the changes are designed to help artists who want to make a living from music. "We will deprive those who upload a large number of nonsense that is of little value to the audience."

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