A Meta Study of User-Centric Distribution for Music Streaming

Research output: Book/ReportReport

Abstract

This report presents a comparative analysis of existing studies of user-centric distribution (UCD) and discusses the advantages and disadvantages of the user-centric model compared to the current pro rata model.Four studies have made empirical research on the effects of user-centric distribution, and the main findings from these studies are:•The record label share is largely the same in the two models.•The most recent studies in Finland and France suggest that the user-centric model would be a benefit for creatorsoutside the extreme top, however,earlier research in Norway and Denmark to some point contradicts this and points to gains for top and mid-level creators•A switch to user-centric distribution might benefit local creators.•The effects of switching to a user-centric model varysignificantly between individual creators. Within each segment,there will be some who win from a switch and some who lose out.•Other demographic characteristics such as age might be significant factors because the current pro rata model rewards high quantity listening. One study found that 18-25 year-olds account for 19% of the users, but generate 24% of the royalties. However, there is a needfor more data in order to evaluate the effects in this area.From a theoretical perspective, the report’s main findings are:•In the pro rata model,there is a disconnectbetween the business model and royalty distribution model for subscription-based streaming services: royalties are paid out per-stream, even though users pay a flat subscription, which results in a cross-subsidization from the low-streaming user to the heavy-streaming user.•The comparison of the two models should includebotheconomic considerations and considerations of the intangible value of equity and transparency in the calculation of added value.•The economic considerations include 1) the economic change due to change in distribution model (which can be either positive or negative for the individual artist) and 2) the decrease in distributable income that is due to the increased administration costsof implementing and running a user-centric model.•User-centric distribution would not prevent all types of stream fraud, but it would remove the direct financial benefit of the simplest examples.The report furthermore discusses different aspects that need consideration before implementinganew distribution model.The report concludes that from a purely economic perspective, the user-centric model will have varying effects for individual creators across segmentsand that the uniting argument for switching to a user-centric model might be that it increases equity, which should, however, be weighed against the decrease in efficiency and transparency.Importantly, the distribution model must be implemented at the level of the individual streaming service tier. Therefore, a decision to switch models must be reached in consensus among the stakeholders of the music industry
Original languageEnglish
Place of PublicationKøbenhavn
PublisherKoda
Number of pages22
Commissioning bodyKoda
Publication statusPublished - 2020

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