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Pro-rata vs User-centric in the music streaming industry

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  • Lei, Xiaochang

Abstract

An endogenous model, which allows the artists to determine the streaming times strategically, is used to compare two remuneration rules in the music streaming industry: Pro-rata (P rule) and User-centric (U rule). The two judgement criteria are 1. efficiency, in terms of no dominance on quality profile. 2. egalitarian fairness, in terms of the lowest royalty among all artists. Our main result is that P rule always outperforms U rule in efficiency and fairness when the superstar’s marginal cost is the lowest. This means that the transition from P rule to U rule can not only enlarge the existing royalty gap but also decrease the efficiency of the music streaming industry.

Suggested Citation

  • Lei, Xiaochang, 2023. "Pro-rata vs User-centric in the music streaming industry," Economics Letters, Elsevier, vol. 226(C).
    • Handle: RePEc:eee:ecolet:v:226:y:2023:i:c:s0165176523001362
    DOI: 10.1016/j.econlet.2023.111111
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    References listed on IDEAS

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    1. Gustavo Bergantiños & Juan D. Moreno-Ternero, 2022. "On the axiomatic approach to sharing the revenues from broadcasting sports leagues," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(2), pages 321-347, February.
    2. Ginsburgh, Victor & Zang, Israel, 2003. "The museum pass game and its value," Games and Economic Behavior, Elsevier, vol. 43(2), pages 322-325, May.
    3. Benjamin Shiller & Joel Waldfogel, 2013. "The Challenge Of Revenue Sharing With Bundled Pricing: An Application To Music," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1155-1165, April.
    4. Gustavo Bergantiños & Juan D. Moreno-Ternero, 2020. "Sharing the Revenues from Broadcasting Sport Events," Management Science, INFORMS, vol. 66(6), pages 2417-2431, June.
    5. Karol Flores-Szwagrzak & Rafael Treibich, 2020. "Teamwork and Individual Productivity," Management Science, INFORMS, vol. 66(6), pages 2523-2544, June.
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    Cited by:

    1. Gustavo Berganti~nos & Juan D. Moreno-Ternero, 2023. "Revenue sharing at music streaming platforms," Papers 2310.11861, arXiv.org.
    2. repec:hal:journl:hal-04679366 is not listed on IDEAS
    3. Jiachen T. Wang & Zhun Deng & Hiroaki Chiba-Okabe & Boaz Barak & Weijie J. Su, 2024. "An Economic Solution to Copyright Challenges of Generative AI," Papers 2404.13964, arXiv.org, revised Sep 2024.

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