
A recent blog by Spotify stated
“ As we grow, the amount of royalties we pay out to artists, songwriters and rights holders continues to climb faster than ever”
That is good news, but unfortunately that only tells part of the story. As per the structure of Spotify’s business model, as Spotify’s Gross Revenue, subscribers and music royalty pool goes up, the amount artists, songwriters, publishers and labels are paid goes DOWN.
Why Does this Happen?
The Spotify Premium monthly per-stream rates are calculated by dividing the money in the royalty pot (the Spotify Reported Gross Revenue) by the number of streams in that month. The decrease in the per-stream rate is occurring due to the number of streams per month growing at a more rapid rate than the revenue.
In other words, it appears anyone that pays $10 a month for unlimited music streams a hell of a lot of music. In addition, as the rates drop, the money is being spread over a larger number of artists causing the money to spread more “thinly”.
It also means that in many cases, they can have more streams than the previous month and make less money. But this isn’t just limited to Spotify, it can be seen more dramatically across all music streaming services
If these trends continue, it will be a forever diminishing return for the music creators and copyright holders to the point where there may no longer be an economic business model that generates any real revenue for the music creators and copyright holders.
The Alternative
Music artists and to some extent, record labels need to consider alternative business models which enable all in the music ecosystem to develop a sustainable mechanism for achieving a career in music
The diminishing returns outlined in the current streaming business model do not provide the growth in revenue and influence for the actual creators of music; instead benefiting Big Tech and global record labels.
By utilising the emerging technology of Blockchain and tokenisation;music artists can create unique relationships with their fans and other stakeholders by implementing business models which lead to sustainable outcomes.
Digital music tokens provide a unique approach to drive new revenue streams and new forms of engagements with music fans; increasing fan loyalty by enabling exclusivity and scarcity.
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