A new, large-scale survey of musical artists in Europe has found that seven in 10 of them are unhappy with the royalties they receive from music streaming services, but the level of dissatisfaction has dropped noticeably over the past two years.
The survey, carried out by IAO, an umbrella group of artists’ organizations across Europe, surveyed 9,542 artists in 19 EU countries, where there are an estimated 480,000 working artists. Of those surveyed, 4,215, or 44.2%, are signed to a record label, while the remaining 5,327 are independent (DIY) artists and session musicians.
The IAO described the study as “one of the most comprehensive surveys undertaken concerning artists’ professional and economic situation.”
The survey found that 69.1% of respondents were “somewhat dissatisfied” or “very dissatisfied” with the payments they are receiving from streaming services. Only 5.1% were “very satisfied” or “somewhat satisfied” with the payments they receive.
However, this marks a significant improvement from a survey IAO carried out in 2022, when fully 87% of respondents said they were “very” or “somewhat” dissatisfied with payments from digital service providers (DSPs), and 4% said they were “very” or “somewhat” satisfied.
The IAO’s Streams & Dreams report on the survey attributes this to higher payouts from the DSPs and new rules in the European Union regulating how artists are paid in the digital ecosystem.
“After the [European Union’s] DSM directive was implemented in the national legislation of member states, a majority of DSPs have increased subscription fees and have also experienced growth in their user bases,” the report stated.
“The royalty pools have increased, as have the payouts to rights holders. 2023 was the best year ever for recorded music, with revenues to record labels reaching USD $28.6 billion.”
Over the past year and a half, most of the major music streaming services have raised their subscription prices at least once, resulting in higher payouts to rightsholders. These payments are generally proportional to DSPs’ revenues.
Nonetheless, the still-high levels of dissatisfaction were to be expected, “given the intense competition on DSPs, with 100,000 to 120,000 new tracks (ISRCs) being uploaded each day,” the report stated. “The number of artists, and labels, releasing music on DSPs is outpacing the rate at which royalty pools are expanding.”
The report offered a succinct outline of how streaming services pay royalties:
All DSPs operate under a similar revenue share model: approximately 52-55% of the revenue is allocated to record labels and distributors, who subsequently distribute these earnings to artists based on individual contractual agreements; 13-15% is allocated to PROs, songwriters and publishers; and the remaining 30-35% is retained by the platform. Regardless of which DSP it is, Apple Music, Spotify, Amazon Music, Deezer, Tidal, YouTube Music, they all operate under the same revenue share licensing scheme. To augment the royalty pools, DSPs must either increase their revenue, or reduce their own share of the proceeds.
Recently, a number of music streaming services have experimented with changes their payout models, in an effort to address concerns over issues such as the fairness of royalty payments, streaming fraud, and the problem of low-quality tracks flooding DSPs, thereby taking income away from professional artists.
First out of the gate was SoundCloud, which began applying a “user-centric” payment model in 2021. Unlike the pro-rata model traditionally employed by DSPs – in which all revenue is pooled and paid out to artists based on their share of streams – the user-centric model distributes money according to each subscriber’s behavior, with revenue raised by each user being split among those artists the user listened to.
Streaming service TIDAL also implemented a user-centric model, for its pricier Hifi Plus subscription plan.
“The number of artists, and labels, releasing music on DSPs is outpacing the rate at which royalty pools are expanding.”
IAO’s Streams and Dreams report, 2024
However, other DSPs have gone in another direction, applying what Universal Music Group first referred to as an “artist-centric” model.
Under Deezer’s version of this payment model, artists with at least 1,000 streams per month and at least 500 unique listeners per month receive a “double boost” to their royalty payouts. Artists who are actively searched for by subscribers also receive a boost to royalty payouts.
Since last year, Deezer has signed agreements to implement artist-centric payments with Universal Music Group, Warner Music Group and Merlin.
Spotify has also implemented elements of the artist-centric model. As of this year, the streaming service no longer pays royalties on tracks that have received fewer than 1,000 plays over the previous 12 months. Notably, only 19% of the artists on Spotify had more than 1,000 listeners in 2023.
“There are still parties taking advantage of the low bargaining power of artists, not providing fair remuneration, full transparency or not giving the opportunity for artists to renegotiate their deals.”
IAO’s Streams & Dreams report, 2024
While this payment model is designed to disincentivize the uploading of low-quality and/or unpopular tracks to music streaming services, some have criticized it for potentially disadvantaging less-popular artists and those at the start of their careers.
“The long term effect of these changes remains to be seen,” the IAO report stated.
A key reason for the IAO’s survey was to evaluate how well the EU’s new regulations on payments to artists are working out. As part of the Directive on Copyright in the Digital Single Market (DSM), starting in 2019 EU countries implemented a number of new rules affecting artists, including:
- A right to appropriate and proportionate remuneration;
- A right to transparent information on the use of recordings
- A right to contract adjustment when the remuneration originally agreed is disproportionately low
- A right to request alternative dispute resolution, and
- A right to revoke the transfer of rights where there is a lack of exploitation of a recording (the “right to rights revocation”)
The survey showed a fairly limited impact from the new rules. Not only are a majority of artists still unhappy with their payouts from DSPs, but 64.7% of respondents reported a continued lack of transparency and detailed information on their payments.
Additionally, 23% of those who attempted a contract adjustment were successful; and 30.6% of those who attempted to revoke their transfer of rights due to a lack of exploitation of their works were able to do so.
The IAO report suggested that artists have some way to go in understanding their rights, and how royalty payouts work.
“The study… shows that many artists do not know enough about the rights they are entitled to, and it is plausible that many labels, especially smaller independent labels, are not aware of the obligations they have to fulfill [under new EU regulations]. Hence, some of the problems described in this report could likely be addressed by enhancing the knowledge within the music industry itself.
“At the same time, it is obvious that there are still parties taking advantage of the low bargaining power of artists, not providing fair remuneration, full transparency or not giving the opportunity for artists to renegotiate their deals.”Music Business Worldwide