Will Page’s Little Frankenstein
Angelo Carrasco
Music streaming services have achieved a noble and long sought-after goal: bring the most amount of art to the most amount of people. Paying a $9.99 subscription for millions of tracks is bargain simply too good to pass up. It may be easy to see the streaming industry as the cliché, egalitarian agents for music, but that picture isn’t painted so warmly. There is an extensive literature detailing an uneven trade between artists and streaming companies, where the companies, especially Spotify, pay only a small portion of total revenue from streams to artists. Often told by music-fanatic journalists or interviewed artists, the literature has rarely explored the artists pay controversy from the perspective of those driving these disruptive platforms.
Herein lies the opportunity of Tarzan Economics: Eight Principles for Pivoting Through Disruption. As the former Chief Economist for Spotify, Will Page offers his seasoned analysis of the streaming’s disruption of the music industry. Page likens an industry disruption to swinging through a jungle, where you (companies) must learn when to let go of the old “vine” and swing to the next, in order to stay off an unforgiving jungle floor (2021). Tarzan Economics thus serves as a keyhole into the economic thought leadership that has driven streaming to its current role in music consumption. Unfortunately, the pillars to Page’s framework — his approach to market building and aversion to intermediary agents — fail to acknowledge the elephant in his own writing chair: Spotify’s current application of his principles. Spotify has fostered an unsustainable model by ignoring Page’s framework, thus impeding progress towards Page’s ultimate aspirations of a return to patronage.
The key to Spotify’s success, like other streaming platforms, is how its track portfolio fosters robust markets. Spotify’s selection of upwards of 70 million tracks drives economic-minded processes to create a monthly user base larger than the number of people in the United States (Spotify, 2021). In the first, following economic theory, consumers are naturally drawn to choices that maximize their utility — usually choices that are diverse and large in consumption. Having a seamlessly playable, 70+ million track selection is diverse and large enough to incentivize consumers towards Spotify. The second relies on Page’s “edge theory”, wherein Page claims that appealing to market fringes drives a robust, sustainable user base. By offering eccentric art for niche markets, streaming platforms can create organic growth via clusters of social networks. Early adopters show their friends with niche taste, allowing them to gather on a common platform. Early adopters can also show their mainstream friends, who repeat this process to foster an expedited natural growth curve, one that includes mainstream and fringe adoption. Even if niche content is provided at a loss, the consumer acquisition more than compensates in market dominance.
Page’s edge theory not only fosters demand-side growth but helps shift the entire equilibrium point outwards by expanding the supply of music content. Page poses that targeting the edges of a market “broadens participation” from a market that would have been otherwise been forgotten (2021). In a retail setting, like a record store, where selection of tracks is limited, artists that may walk the line of traditional genres may be relegated to only a handful of mainstream genres. In turn, niche content is dismissed by mainstream-palette listeners and camouflaged from their intended niche listeners. Spotify’s emphasis on portfolio breadth provides the incentives for smaller artists to not only be more likely to be heard but more likely to be matched with their intended audience. As Page notes, this, in combination with the market growth effect, is how edge theory drove streaming platforms outperform and dethrone record stores as music vendors.
Although his model praises how the “needs of a few are critical in allowing crowds to gather,” Page neglects to mention how Spotify’s payment structure is in stark contrast with the principles of edge theory. Since it’s conception Spotify has been plagued with criticism of its meager pay to artists., and the statistics justify the backlash. Spotify’s current average payment is $.0033 per stream, meaning about 250 streams would be required for one dollar of income (Jacob, 2021). Worse yet, that measly figure marks a low point in Spotify’s payment history, specifically a 36.36% decrease from 2014, when artists were paid an average of $.00521 per stream. Artists’ measly pay is compounded with the fact that they are underprioritized in Spotify’s payment scheme since record labels own the first tranche of the gross royalties. Music-industry journalist Ben Sisario put it best: “the losers are the 99 percent of artists who aren’t at Beyonce’s level of fame” (Ovide, 2021).
Even in his defense of Spotify’s payment model Page does not bridge his theory with practice. For example, he poses that if an artist’s song were played on The Breakfast Show (a popular UK show), a total royalty of £150 ($204.57) should be expected, and if divided by the average 8 million listeners, would yield a £.00002 ($.000027) royalty per viewer (2021). If an artist were to get 8 million streams an (deceptively generous) average of £.005 ($.0068) per stream, Page notes that the “artist and the songwriter” would be rewarded with £40,000 ($54,552). Nowhere, however, does he mention the difficulty in incentivizing 8 million people to complete the deliberate act of searching and playing an unknown song 8 million times, whereas radio play is simply background music for drivers made possible by a single gatekeeper’s say. Low-stream artists, in order to be on par with median income, must output numbers that are, at the least, improbable, and realistically, implausible. In 2020, only 13,400 of the 1.2 million artists on Sportify, or 1.12%, made over $50,000 in recording and publishing royalties (Spotify, 2021). Page is effectively defending a practice that casts aside the very artists who are central to his own edge theory.
The second pillar to Page’s framework is circumventing the dependence on intermediaries — record labels — to shepherd an artist’s success. Page notes how the “principal-agent relationship” has “fundamentally changed” with the streaming paradigm, as artists (the principals) are no longer required to sign ownership of their creation in return for a “sizeable cheque” and the promise of mass exposure (Page, 2021). In short, he argues that the promise of the monolithic gatekeepers of has lost its luster. Evidently, Page is right. Popstar sensations like Justin Bieber, Alessia Cara, and Charlie Puth found early success on platforms like YouTube, and hip-hop MC’s like JuiceWrld and Lil Peep found their ‘come up’ by mastering SoundCloud’s underground niche (Harding, 2019). These artists have begun to challenge the the record-label catch-22: artists sign over ownership of their creation to labels with the promise of market-access, but must prove themselves worthy by showing popularity in the very markets they need access to. Indeed, this point has been discussed ad nauseam in the social spheres and literature of the music industry, solidifying streaming services as tools of music democratization.
The validity of Page’s noble characterization of streaming stops there, since it is oblivious, and even ignorant to the way that Spotify currently pushes artists to be even more dependent on the very intermediaries that Page sought to break free from. As a result of Spotify’s inequitable payment algorithm, most artists — those that do not fall in the exclusive club of Drake’s, Beyonce’s, and Ed Sheeran’s — do not make a livable income. And for the Drakes and Beyonce’s, even then, streaming income is negligible when compared to their main source of income. In 2017, the band U2 was the highest earning artist of the year with $54.4 million in income, but over 95% of it came exclusively from touring, with less than 4% coming from both album and streaming sales (Delfino, 2018). Currently, touring, merchandising, and licensing makes up most of an artist’s revenue, each method requiring vast amounts of capital, supply chains, and business networks that only monolithic record labels can offer. Streaming payment practices are shepherding revenue streams to gatekept reservoirs, while keeping the “edges” of the music market in constant drought.
Although the current streaming paradigm may not be consistent with Page’s guiding principles, he offers his own aspiration for a future in artist-listener value exchange: a return to patronage. It’s obvious that art can no longer be funded solely by landed aristocrats or powerful politicians, so, Page argues that the order of value exchange for musicians’ art can be flipped. Instead of artists performing a leap of faith by outputting more tracks in the hope that consumers either stream or purchase, consumers can pay artists to produce the art they want. That said, artists must still perform the leap of faith in the beginning of their careers so they can attract an initial base of patrons. Nevertheless, having consumers shoulder the impetus for exchange provides initiated artists with a transparent and intermediary-absent revenue stream, “forging intimacy that intermediaries cannot create” (Page, 2021). As Page notes, the direct evocative relationship between artist and listener — the “aura” — can be returned in an era where intimacy is otherwise lost in the expanse of the internet.
Fortunately, there are multiple solutions that help bridge artist pay and foster intimacy. As Page suggests, platforms like Patreon and Kickstarter are explicit manifestations of his vision for modern patronage. With Kickstarter, artists can announce projects and solicit their own base of supporters, who can then organically grow support for their product. Where Kickstarter lacks in sustainability (Kickstarter is based on a sprint funding model), Patreon fulfills with a continuous source of funds. Patrons on Patreon can subscribe to an artist and provide a more predictable monthly income in exchange for regularly published content (depending on how quickly the artist works). In both cases, artists retain ownership and nearly full payment for their art, and consumers become part of a more intimate artistic community.
The other, more experimental approach tackles Page’s concerns at the core of the streaming paradigm: the payment algorithm. Streaming oligarchs like Spotify and Apple Music pay artists based on their performance out of the total pool of tracks in their portfolio (Miukku, 2017). If Beyonce received 10% of total streams on Spotify, she receives 10% of Spotify’s total streaming revenue, this is the Pro Rata model. Considering the top 1% and 10% of artists receive, respectively, 90% and 99.4% of total streams (Blake, 2020), 90 cents for every dollar paid by the user goes to the Beyonce’s and Drake’s, regardless of who they listen to. Thus, this model forces fringe artists to struggle for crumbs of a pie that’s already been cut and served. The User Centric Model (UCM) focuses precisely on addressing where the Pro Rata model is negligent. Under the UCM, an artist’s streaming revenue is calculated as the product of, one, a user’s individual revenue, and two, the proportion of the user’s total streams received by the artist’s track (Muikku, 2017). In short, rather than pitting independent artists against label-supported ones in the arena of all users, the UCM cares only about the performance at the user level. If a user is a die-hard fan of Japanese Breakfast, Japanese Breakfast receives every cent of their revenue. Much to Page’s delight, users effectively become pseudo-patrons (tabling the fee for the streaming company).
This new payment algorithm has already shown signs that it can support smaller artists on a larger scale. A study commissioned by the Finnish Musicians’ Union involving Spotify Premium user data has found that as stream counts decrease, the difference in revenue between the UCM and Pro Rata models increased, implying the UCM would effectively bolster independent artist pay. In addition, SoundCloud, a streaming platform with “underground” music communities, has shown the UCM can live up to its promise. Fan-powered royalties, as SoundCloud coins it, are eligible for independent artists that monetize directly with SoundCloud, and has rolled out as of April 2021 (SoundCloud, 2021). Select independent artists have already seen increases in revenue upwards of 200% and 400%. While it is too early to judge the UCM’s long-term viability, this model does show that the artist pay controversy need not be the unsolved tragedy of the music industry.
The disheartening part of this story is that Spotify has demonstrated a firm reluctance toward reform. Spotify launched a new informational campaign called Loud & Clear, with the goal of pacifying their critics with a transparent acknowledgement of the question of artist-pay. Despite their approach to being data “transparent,” Spotify used misleading graphs and figures to dispel the notion that artists are not paid enough. For example, the previously mentioned figure — 13,400 artists on Spotify made over $50,000 — was marketed as an 80% improvement from 2017, with big colorful graphs and plenty of plus “+” symbols (the website is worth a look). This “80%” improvement from 2017 is and 80% improvement from the 2017 figure; the percentage of artists that meet the $50,000 threshold has only increased by 0.51 percentage points (using the 1.2million total artists for calculation). Past the visual salesmanship, at the bottom of the webpage, they have a Q&A section that simply markets themselves in the same way that Page positioned streaming platforms as tools for music democratization. Indeed, this double-down behavior should be expected, since Page disputes the need for regulating monopolies, seeing a convenience-focused monopolist (like Spotify) as a “force for good” (2021). If a demonstrably obstinate firm is motivated by thought leadership that sees dominating convenience as benevolent, then change could never come.
So, the task of challenging the status quo then shifts to the listeners. Patronage platforms like Patreon or Kickstarter and the reformative UCM in its infancy may not be a robust enough net to support the fringe artists that help create the aura in the music community, but it’s a start. Listeners can use their same power that put Spotify in the throne it sits in today. Whether it be UCM platforms like SoundCloud or simply ones that pay more than Spotify like Tidal, listeners can use choice as the time-tested impetus for change. Listeners, as consumers, must ask themselves some reflective questions. Do I need 70 million tracks? Is the $9.99 worth artists’ struggle?
Maybe, the framework left by Page has become the old vine that we must let go.
