How Spotify’s new model could accelerate a forking of music

Spotify’s new royalty model is the latest attempt to try to bring streaming royalties in line with the dynamics of todays’ streaming market. It has many laudable objectives and intentions, but there is no escaping the threat perceived by artists and companies that operate in the long tail. With many of those artists set to no longer collect even paltry royalty statements, the question is what those artists will do next.

Most will likely still find it important to keep their music on Spotify for discovery and exposure purposes. There is no harm in keeping up what is already there, and relatively few creators will actually take anything down. But many will increasingly focus their efforts on other platforms, bringing their fans and cultural capital with them, and the next class of early-stage creators might not automatically distribute their music to Spotify. Already, the base of self-releasing creators who upload directly to user-generated content (UGC) platforms is growing faster than those who release to streaming services.

Meanwhile, Deezer has a slightly more fandom-centric new model (at least, one that accounts for active versus passive listening), and TikTok Music has struck a deal with DistroKid to bring more independent artists on board. It is possible that the streaming space is about to get a lot more fragmented, and that may not be a bad thing.

One royalty model to rule them all?

The streaming conversation has revolved around finding the next remuneration model. But it does not make much sense for all streaming services to employ the same one, since their userbases behave so differently.

For example, MIDiA’s 2022 study found that the majority of SoundCloud creators will benefit from a user-centric model on the platform, which tends to attract the most engaged music fans. However, the bigger a platform’s userbase, the less engaged users will be, while a smaller userbase equals more engagement. (Once again, we are met with the power of niche!). This means a model that revolves around fandom (i.e., engaged users) might not have the same effect on a platform like Spotify as it does on SoundCloud, or could have on a platform like Tidal.

Another thread here is the difference between artist fandom and music fandom. Some music listeners are superfans of specific artists, driven by the desire to engage with the artist beyond their music, such as through social content, merchandise or live. However, these artist fans may actually stream music slightly less, because in their fandom, the music itself comes secondary. Other music listeners are fans of music as a whole, driven by the desire to discover. They are the crate diggers. And they likely stream music more, and spread their listening across many more artists, but may be less likely to engage in artist fandom. (Of course, many more fans fall along the spectrum between the two).

Based on all this, music fans are more financially valuable to major streaming services and major record labels than artist fans. And artist fans are more valuable to fandom monetisation platforms and artists themselves than music fans. There are many rabbit holes to go down here, but for now, all this is to say: Perhaps there should be different models that cater to and value these types of fans differently.

The forking of music

While Spotify’s model risks pushing smaller independent artists away, TikTok’s latest deal draws them in. DistroKid artists can now add their music directly to streaming service TikTok Music (in addition to the TikTok music library and Commercial Music Library). As creators react to these shifts, the future of distribution could look something like this:

• TikTok Music and TikTok become the hubs for consumer creation (including through artificial intelligence generators and vocal models), as well as hobbyists and aspiring professionals. SoundCloud also competes in this space

• Spotify, Apple Music, and Amazon Music become the go-to spaces for music from aspiring professionals and full-time artists (those who graduate on from TikTok Music), and focus mainly on serving and monetising music fandom, which is more about pure consumption

• A range of other streaming platforms become the artist fandom hubs, harnessing their smaller, but more engaged, userbases. Artists launch direct subscriptions on these platforms, and may release exclusive deep cuts and other content here

In other words, TikTok becomes the independent flea market, Spotify becomes Target, and other platforms become the boutiques in between.

As Darren Hemmings at Motive Unknown / Network Notes has pointed out several times, today’s artists actually have more spaces than ever on which to promote and monetise their music beyond the major streaming services. There is nothing to stop those artists from prioritising other platforms, except for the enormous space Spotify takes up in the room. If we end up in a situation where mainstream DSPs become less appealing to the long tail, some of those artists might finally make the jump, with platforms like TikTok Music happy to take them in.