Digital Distro: Financial transparency: how DSP’s payout and how to solve the pricing disparity

Streaming services (Spotify, Apple, etc.) calculate royalties for artists by putting all of the subscription revenue in one big pool.

The services then take out 30% for themselves and the remaining 70% is set aside for royalties.

Once the percentage splits are broken down, The royalties are then divided by the overall number of streams (Big Pool Method).

The result is called the “per-stream royalty rate”.

Would you agree or disagree with this statement:

The only artists that should receive your money as a streaming subscriber are the artists you listen to?

Deezer is planning to change this model. According to engadget, it intends to launch a user-centric payment system (UCPS) as a pilot in France early next year, with a global rollout to follow if all goes to plan.

At the moment, all Deezer subscription fees get put into a giant pot, and artists are paid based on the percentage of listens they get. Under Deezer’s proposed UCPS, your subscription fee goes only to the artists you listen to. The graphics below help clarify things. This is what the system currently looks like:

Deezer says the system could help artists currently at the lower end of the revenue spectrum earn up to 30 percent more, while top streaming artists could end up earning 10 percent less. It could also help to eliminate — or at least significantly reduce — streaming fraud from bots, as the system would only share the revenue from that particular bot account.

Deezer also claims its UCPS would help fix distortion on the charts caused by younger listeners, as the 18–25 year old market represents 19 percent of all subscribers, but generates 24 percent of total royalties. To help encourage momentum around the new approach, the company has launched a #MakeStreamingFair social media campaign, as well as a dedicated website that goes into greater detail about what makes the new model the right choice for artists and listeners alike.

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