A model for a new music streaming industry

The music industry is approaching a pivot point. On the one hand, things look positive: we have UMG’s Streaming 2.0, artist centric licensing, the impending launch of supremium and expanded rights revenue hitting $4.0 billion. On the other we have streaming growth slowing to 6.2% growth in 2024, Artists Direct revenue growing three and half times slower than the number of artists, and independent labels beginning to voice concern over the lost royalties that may result from artist centric. The very real challenge facing the music industry is that both of these views of the world are true. In short, if you are big, you can see a path to getting bigger and if you are small you can see a path to getting smaller. This is Bifurcation Theory, a concept MIDiA introduced in 2024. 2025 is going to be the year that the bifurcation rubber hits the road. In doing so, it creates a major (pun intended) opportunity for all non-majors.

The long tail is being demonetised

Artist centric might, just might, result in "many" independent artists and labels seeing their royalties increase but what is inarguable is that many artists and labels will earn less. This is because the very essence of the model is that songs with less than 1,000 streams in the prior 12 months will not get paid royalties. To be absolutely clear, what this means is that a body of labels and artists will see their music demonetised. Demonetising the long tail is not something new. It is widely employed by the big social platforms who set earning thresholds for their creators. For example, you need 1,000 subscribers to share ad revenue on YouTube - though when they do monetise, they get a fixed share of their revenue, rather than sharing it on a pro-rata basis with all other creators. YouTube’s creator benefits are better than streaming’s because it was built for creators first and large rightsholders second.

The groundswell of discontent is coming

When you add all this to the long-term challenge of feeding the insatiable appetite of the algorithms with endless releases and social posts, a growing body of artists and labels are going to be asking why they should even bother. That this has not happened yet is because the majority of artists hit by two-tier royalties were smaller, non-label artists, already used to small royalties and probably without the industry awareness to understand just what is at play. The same cannot be said of smaller independent labels, who absolutely do understand the dynamics of royalty mechanisms and will already be doing the arithmetic on how the new system will impact their revenues. Indeed, 71% of indie labels are worried about two-tier royalties, up from 64% the prior year. Distributors will be doing a similar analysis of the labels and artists they distribute. 2025 will be the year we see a rapid growth in discontent as these industry constituents start to comprehend what is coming.

So much for the problems, what about solutions?

Now is the time to build a place for the long tail. A place where the smaller players do not have to compete on unequal terms with the bigger ones. Asymmetric models are not designed for the small players to win. That is the entire point. But simply creating an indie Spotify will not be enough. The pro rata royalty pot model was never designed for a massive long tail and porting it over somewhere else will bring with it the same superstar dynamics, just with smaller superstars. Here is a model for an independent alternative to streaming:

• Curation: A highly curated place for smaller labels and artists, with human curation at the fore
• Play credits: A credits based system, where people can subscribe for a certain number of credits and top up if they want, with each credit equalling one play (thereby guaranteeing a fixed per stream rate rather than a wish-and-a-prayer that the royalty pot does not get divided too many ways this month)
• Discretionary pricing: Where labels and artists can determine (on a track-by-track basis) how many credits each track requires. Despite us having been educated so by streaming, not all music is worth the same. Labels and artists might decide they want some of their songs to be zero credits to drive streams, some to be 1 and others 10 to drive remuneration. It is a model that works well in other areas such as stock photography libraries
• Curated freemium: Instead of simply a free tier, and in addition to zero credit streams, the free ad-and-brand-supported ‘front door’ would be an Apple Music Radio-like set of live streaming radio stations. All with clickable ‘now playing’ track details and some stations with regular shows you recognise and human DJs
• Not just music, but about the music too: Artist interviews, album reviews, etc. Taking the best of what Bandcamp and Apple Music do
• Alternative remuneration: Artist subscriptions, tipping, social commerce, Shopfiy-like artist stores, virtual items. Not each and every one of these will fit every artist and label, so these would be opt-in extras

This may sound like pie in the sky thinking, but much of this has already been done, some of it in the music business (e.g., Apple Music Radio for curation and interviews, Bandcamp for reviews) and some outside it (e.g., Audible and Getty Images for credits). MIDiA also laid out a lot of further detail for a similar model in our Bifurcation report last year. It just needs all pulling together into a compelling whole.

There is, however, one really difficult thing needed to make this really work: artists and labels would have to remove some or all of their music from mainstream DSPs, even if this is only done on a windowing basis. If you are a smaller label or artist facing the prospect of demonetisation then how much is there to lose other than the vanity metrics of stream counts? Is this much easier for an analyst to write as a blog than for a label or artist to action? Of course it is. But the alternative for many will be to play the role of the slow-boiled frog.

Also, what is great about this approach is that it benefits both sides: the long tail gets a place where it is welcome and stands a fair and reasonable chance of monetisation, while the big labels and artists have more space (and therefore monetisation) for themselves on traditional streaming.

This will not be some huge Spotify killer. It will be a Bandcamp move for the 2020s. An additional place for alternative-minded superfans who do not want to spend their entire time lost in the algorithm’s mainstream maelstrom. Music is not all the same, it has never been. It is time to stop pretending that it is.

Now, who wants to go and build this thing?!...