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Rethinking royalties - Alternative payment systems on music streaming platforms

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  • Frederik Juul Jensen

    (Université Sorbonne Paris Nord, CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord)

Abstract

Music streaming changed the recorded music industry's business model from individual product sales to unlimited on-demand access subscriptions. The streaming platforms experienced strong growth during the 2010s and now drive most of the industry's revenue, up to 90% in the most mature markets. The payment system for rights holders has remained unchanged. Many industry stakeholders criticise the system's alleged unfairness, and artist organisations, independent labels and major labels all propose different ideas to 'fix' the music streaming payment system. The current 'Pro Rata' payment system pools all subscription fees, with each rights holder receiving a payment proportional to their share of the accumulated number of streams. The system does not look to align the individual users' payments with their actual musical preferences and consumption. Therefore, this paper defines the problem of the current music streaming payment system as its allocation of equal value on all streams. The paper proposes a framework to systematically evaluate alternative payment systems inspired by policy analysis and planning. It additionally contributes with a structured evaluation of six alternative payment systems that rethinks how streams are calculated and remunerated to restore the price discrimination between different listening behaviours. The paper finds that developing a mixture of the alternative systems can likely solve many of the current system's challenges.

Suggested Citation

  • Frederik Juul Jensen, 2023. "Rethinking royalties - Alternative payment systems on music streaming platforms," CEPN Working Papers hal-04286879, HAL.
  • Handle: RePEc:hal:cepnwp:hal-04286879
    Note: View the original document on HAL open archive server: https://hal.science/hal-04286879v1
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    References listed on IDEAS

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    1. Aguiar, Luis & Waldfogel, Joel, 2016. "Even the losers get lucky sometimes: New products and the evolution of music quality since Napster," Information Economics and Policy, Elsevier, vol. 34(C), pages 1-15.
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    Keywords

    Recorded music industry digitisation business models; Recorded music industry; digitisation; business models;
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