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Pro Rata and User Centric Distribution Models: A Comparative Study (2017)
- tyho 6y agoOn Spotify, the top 0.4% of artists are responsible for 9.9% of streams.
- iso947 6y agoBut not 9.9% of the revenue. Bob streams track 11,12,13,14 1,000 times a month each for their €10 Jamie streams track 21,22,23,24 100 times each for their €10 Total revenue €20, Total streams 4,400. .45c per stream. Track 11 gets €4.50, track 21 gets €0.45
- rckoepke 6y agoStealing and rephrasing this for clarity: Alice pays $10/month fee. Alice only listens to track A 990 times. Bob pays $10/month fee. Bob only listens to track B 10 times. Total revenue $20, Total streams 1000. $0.02 per stream. Track A gets $19.80, track B gets $0.20 If Bob got his twin brother to subscribe, and they had the exact same listening pattern next month: Alice pays $10/month fee. Alice only listens to track A 980 times. (Alice listens to the song less this month than last month) The Bobs are now paying $20/month. The Bobs only listen to track B 20 times total (Each Bob listens to the track 10 times). Total revenue $30, Total streams still 1000. $0.03 per stream. Track A gets $29.40. Track B gets $0.60. Track A just increased its revenue 48% despite being listened to less the second month. Track B was responsible for Spotify earning $10 more, but only saw $0.40 of what it brought into Spotify. However, I'm not sure what the downstream ramifications of the new incentives would be after hypothetically switching from pro-rata payment structure to a per-user structure. Would artists' / music labels' strategies change? I also wonder what would happen to the revenue from users who pay subscriptions for a month, but neglect to use the service at all. It seems it would make sense to either pay the artists that user has listened to over their lifetime/past year, or distribute pro-rata across all of Spotify.
- dutchmartin 6y agoAnd this seems reasonable, since I would expect that most of the streams come from the ‘popular in country x’ playlist.
- kzrdude 6y agoAnd premium users pay for everyone's streams. That's one of the conflicts, and the other is that those who listen to fewer plays get less influence than those who listen to many. So even if all the premium users prefer jazz (for example), their money will mostly go to whatever the free users prefer listening to. If spotify itself was seen as a market - I wouldn't say that this would be a very well-functioning market, because of the mismatch between what you use and who you pay.
- WJW 6y agoDon't non-premium users get ads interspersed into their playlists to make up the difference?
- kzrdude 6y agoIt doesnt make up for the difference
- kjaftaedi 6y agoYour comment implies the ad-supported users are responsible for revenue loss. In my mind, decisions like giving Joe Rogan 100 million dollars are more likely culprits.
- kzrdude 6y agoPaying users provide 90% of the income. That pretty much says that if it wasn't for them, Spotify would not be here today. Edit: That's the first I hear of that deal, and that's insane. Not a podcast I listen to, and I don't want to use any of the user-tracking, user-inlocking podcast players.
- dmurray 6y agoWhy not? Ads are enough to pay the licensing costs for radio stations, which have higher distribution costs and worse economies of scale than Spotify.
- birslip 6y agoAn interesting way to tackle this issue could be user-centric payouts. [0] It feels like a fairer system but it has yet to be tested at a large scale. [0]: https://musically.com/2020/05/13/what-are-user-centric-music-streaming-payouts/ https://musically.com/2020/05/13/what-are-user-centric-music...
- richardwhiuk 6y agoDoes it make any practical difference? Surely in aggregate the totals end up broadly similar?
- iamacyborg 6y agoThat's discussed in the original link. It makes a big difference.
- WatchDog 6y agoLess of a power law than I would have expected.
- rullelito 6y agoYeah I'm not sure what the point of this thread is.. Is it too little or too much?
- kzrdude 6y agoThe point is that there is too little connection between what you pay, what you listen to, and who gets paid for that. If we had more control here, the "market" would work better. Artists that make people pay for spotify and listen to their songs, would see benefits. Paying for music should be a positive feedback loop between buyer and producer of music, and spotify users and artists don't feel like they are in the loop.
- marketingPro 6y agoNot necessarily. I listen disproportionately to popular songs by popular artists most of the time. If spotify gives me a recommended suggestion, it's probably worth it to the aspring artist over trivial payment. The big money is shows.
- iso947 6y ago> In any case, the user centric model gives more direct power to users to target the money they pay for the service to the artists or tracks they favour compared with the pro rata model, which is not transparent from their point of view. This is the model most people would think their money goes to. But the recording industry has never been intuitive. Or fair.
- Y-bar 6y agoYes and no. I did personally think (before learning more) that my monthly payment was divided to the artists I listened to. But all money is pooled to a single bucket from which money is then distributed to all artists. So even if I never listen to any of the 0.4% artists here, 9.9% of my payment goes to them anyway.
- StringyBob 6y agoIt’s worse than that, because as a paying subscriber you are subsidizing listens coming from free/ad-supported accounts too. In fact, other users take away your money from artists you like if they are a heavier user of the service than you - as they get more of the total pot in current system. From the point of view of the big labels who have control this is a feature not a bug. http://www.serci.org/congress_documents/2019/user_centric_revisited.pdf http://www.serci.org/congress_documents/2019/user_centric_re...
- jonplackett 6y agoThe algorithm for payment is dumb. If I pay £15 a month and only listen to 4 artists over that time (I’m very predictable) I want those 4 to get £3.75 each. But they won’t. Lady ga ha will get most of it.
- lucb1e 6y agoEdit: just to bring this up a bit higher in the thread, replies like from u/kgermino, u/dtech, and u/anonymoushn are saying that popular artists rack up their number of plays from background noise (my wording, not theirs) whereas niche artists won't have that advantage. A bar or coworker might play a popular playlist a ton of times as background noise whereas your niche artist will have some dedicated people listening to it that don't rack up a meaningless play count. This causes money to flow from subscribers listening to this niche artist to the more popular artist. That's a problem to which I see various solutions, like only including active clicks on songs or artists in the revenue distribution model, or indeed changing the model to be per user instead of by aggregate number of plays. So it's not really that it's unfair to pay artists more that are played more, it's that because of the way some people use Spotify, plays are racked up for reasons other than because their music is so great. </edit> It effectively works in the way you describe, but aggregated instead of per user. So instead of splitting your £15 into 4, it splits Spotify's total revenue (minus service fee) among the artists listened to. If 100 million users listened to artist A and 50 million to artist B, and those are the only two artists listened to, then they get 100/(100+50)=67% and 50/(100+50)=33% of the revenue, respectively. Listening to certain artists still gets them more money. So I'm not sure why you say that most of your money goes to a popular artist instead. Other people's money goes there because they listened to it, yours doesn't really if you look at an individual subscriber's level. It's a bit like electricity: you can purchase green power but of course they don't dig new cables to get you exclusively green power, they just pay the wind/solar/hydro farms instead of the coal farms for the part of the power that you used. (Some notes I made for myself to make sure I got this straight, figured I could share them: If you listen only to artist A and 999 other people listen to artist B (everyone plays an equal number of tracks), then £15×1000=£15000 goes into the pot, and your artist will get 1/1000×15000=£15 and the other one will get 999/1000×£15000=£14985. Even in aggregate, it should work out, but please correct me if I went wrong somewhere!)
- StringyBob 6y agoI’ve been very interested in the user-centric model described, but I’m not aware of any streaming services using it. What are the chances that Spotify would make this an option? Even if it was just opt-in, that we go a long way to keeping me with them as a premium subscriber.
- dustinmoris 6y agoA fair model would be to charge users a pay-as-you-go rate for every minute listened. Someone who listens 20 hours a week should pay more than someone who listens 5 hours a month on Spotify. Just set a rate/minute and track each user's usage and bill them monthly. Then pay the same rate/minute (minus a super small commission %) to the artists of whom the music was streamed. This would mean that artists get a fair share for what they contribute. If Madonna releases a new album which is a flop then why should she still get the same payout as her last album which was a hit? Equally, if a new artist releases a real banger why should they get less for their talent only because their name is less established as someone else? This model would also allow a platform like Spotify to push the rate/minute slowly up until they reach a point where demand and supply meet happily. We would be able to find the real value of good music which consumers are willing to pay.
- rullelito 6y agoThis sounds stressful and complex to track and charge for.. Also, I usually listens to books/podcasts while I sleep, and when not sleeping I usually relisten large parts of them since I often wander away with my thoughts. This sounds horrible from my perspective.
- pbhjpbhj 6y agoWhy do you "listen" to books whilst you sleep, do you think it does something?
- simongr3dal 6y agoThen people would get self-conscious about their usage and won't use it as much. Artists might get a better rate but the paycheck would end up smaller. Also something something credit card processing fees.
- CyberRabbi 6y agoA “fairer” model but not necessarily a more successful model for Spotify is it?
- nkrisc 6y ago
- judofyr 6y agoIt's quite fascinating to see the comments on this article as it's pretty obvious who clicked the link and who only looked at the title here at Hacker News. The article itself is called "Pro Rata and User Centric Distribution Models: A Comparative Study" and it's a study showing the difference between "pro rata" (what's happening today) and "user centric" (a user gives their money to the artists _they_ listen to). The fact about the "top 0.4% artists" is just one of the results they found while sampling 10k tracks.
- dmitriid 6y agoI'd also wish all these "studies" brought in the Big Four record labels into the equations [1] as they are the ones primarily responsible for this. [1] See "Consolidation", https://en.wikipedia.org/wiki/Music_industry?wprov=sfti1 https://en.wikipedia.org/wiki/Music_industry?wprov=sfti1
- dtech 6y agoYou can link to a header in a wikipedia article by using #Header name https://en.wikipedia.org/wiki/Music_industry#Consolidation https://en.wikipedia.org/wiki/Music_industry#Consolidation
- dmitriid 6y agoI was posting from mobile and Wikipedia's otherwise excellent mobile app doesn't offer a way to share a link to a heading (or I haven't found it yet :) )
- cat199 6y agoYou can link to a header in a wikipedia article by using #Header name https://en.wikipedia.org/wiki/Music_industry#Consolidation https://en.wikipedia.org/wiki/Music_industry#Consolidation
- jonplackett 6y agoThe reason for it is that if they didn’t the the big artists wouldn’t put their music on Spotify because they’d get so little money. Correct me if I’m wrong but it looks like a smaller artists are essentially subsidising the larger ones.
- INGELRII 6y agoAlfred Marshall, Principles of Economics (London: Macmillan and Co. 8th ed. 1920). https://en.wikipedia.org/wiki/Principles_of_Economics_(Marshall_book) https://en.wikipedia.org/wiki/Principles_of_Economics_(Marsh... ---8<--- The relative fall in the incomes to be earned by moderate ability, however carefully trained, is accentuated by the rise in those that are obtained by many men of extraordinary ability. There never was a time at which moderately good oil paintings sold more cheaply than now, and there never was a time at which first-rate paintings sold so dearly. A business man of average ability and average good fortune gets now a lower rate of profits on his capital than at any previous time; while yet the operations, in which a man exceptionally favoured by genius and good luck can take part, are so extensive as to enable him to amass a huge fortune with a rapidity hitherto unknown. The causes of this change are chiefly two; firstly, the general growth of wealth; and secondly, the development of new facilities for communication, by which men, who have once attained a commanding position, are enabled to apply their constructive or speculative genius to undertakings vaster, and extending over a wider area, than ever before. It is the first cause, almost alone, that enables some barristers to command very high fees; for a rich client whose reputation, or fortune, or both, are at stake will scarcely count any price too high to secure the services of the best man he can get: and it is this again that enables jockeys and painters and musicians of exceptional ability to get very high prices. In all these occupations the highest incomes earned in our own generation are the highest that the world has yet seen. But so long as the number of persons who can be reached by a human voice is strictly limited, it is not very likely that any singer will make an advance on the £10,000, said to have been earned in a season by Mrs Billington at the beginning of last century, nearly as great as that which the business leaders of the present generation have made on those of the last. ---8<--- "But so long as" holds no more.
- dsco 6y agoI'd counter that by saying that the sharpest elbows always outperform the sharpest minds financially. Income and genius have rarely had a strong correlation. Instead I'd look at a mixture between greed, conscientiousness and that feeling of never being content as drivers of income. Also of course the field in which you're in as one could argue that each field has its own "total addressable market".
- lemoniidae 6y agoThat is one of the reasons I hesitate to pay for spotify premium (I only use their free add-based service). I listen mostly to small bands that don't get much money out of spotify. But still, spotify is great for discovering new and interesting music. I use the Daly Mix feature heavily. But the real way to support musicians that are important to you is to buy their merch and visit their concerts. That's where my money goes instead of spotify.
- JohnCClarke 6y agoSeems spot on: The top 1% of population (USA) receive 20.2% of the income. https://en.wikipedia.org/wiki/List_of_countries_by_share_of_income_of_the_richest_one_percent https://en.wikipedia.org/wiki/List_of_countries_by_share_of_...
- CyberRabbi 6y agoYet another manifestation of Zipf‘s law... why is this notable or surprising? This is just a natural phenomenon
- swiley 6y agoSomething a lot of people don't seem to know about spotify is that artists are compensated based on their position in the charts, not based directly on how many times their song was played. So if you only listen to obscure folk music, most (possibly all) of the $10 you're paying goes to artists you don't listen to. That's why some indie artists say they prefer piracy to spotify, it's almost the same to them.
- nemo44x 6y agoI didn’t realize that. I thought they totaled every artists “played songs” for the month and distributed the proceeds along those lines. How do they calculate the chart rankings?
- satyrnein 6y agoMost of the discussion here is missing the point. The actual subsidy is not from unpopular artists to popular artists, it's from (artists listened to by) casual listeners to (artists listened to) by heavy listeners. Under the pro rata model, any heavy listeners will divert "other people's money" toward the songs they listen to. This could be a superfan obsessed with some indie band, or it could be a fan of popular artists. Moving to a user centric model will certainly penalize any artists that overindex on heavy listeners. For example, children's music that gets put on repeat will probably take a hit.
- wombatmobile 6y agoUnder socialism, all artists would be paid the same amount.
- growt 6y agoSounds better than the general income/wealth distribution.
- e98cuenc 6y agoA subtle disadvantage of the Pro Rata model is that content creators in the platform can trivially exploit it. If a content creator subscribes to Spotify as a user and streams non-stop his own music, he will receive from Spotify more than the cost of the subscription. Repeat that a few times, and download here and there tracks from other random artists to cover your tracks, and the schema may work.
- satyrnein 6y agoThis is sometimes called "juicing" and streaming services monitor for it. It's possible they underspend on it (since decreasing it doesn't help their bottom line) but all the players are very aware of it.
- WJW 6y agoIt'd be pretty interesting to see a similar curve for software engineers. It's pretty clear that FAANG pays a lot more than most other companies and also that SV and NY companies regularly pay 3-4x as much for medium-level engineers as US heartland and EU companies pay for very senior devs. Then there are the vast offshore body farms in east Asia where a senior dev makes 10x less than that again. Also, if you count stock compensation there must be a few early unicorn employees that made 10x FAANG levels. It seems like it'd be a pretty steep power law, maybe even more so than the Spotify example from the article.
- phkahler 6y agoHey, can we get taxes to follow a similar curve?
- syrrim 6y agoWhy not have an a-la-carte model instead? Assuming many people only listen to a couple hundred songs per months, at Spotify's per stream rate of .3-.5¢, they would pay a lot less if they only paid for the music they were listening to. I think the "user centric" model has potential for problems because artists would feel cheated that they don't get paid proportional to how many listens they drive. And why shouldn't they feel cheated? If someone is listening to an artist for hours a day, everyday, then that person is getting a lot more value out of the artist than a measly 7 bucks(/euros) per month. So it's natural for the artist to demand to be paid more. The issue is basically that the more money comes not from the person who's driving more listens, but instead from other users who are using the service far less. The pro-rata approach basically exists to hides this unfairness, since paying for a streaming subscription feels like paying a fixed cost for a fixed service (access to a massive library). But there's potential for disruption, I think, via a service that exposes this unfairness through a-la-carte rates.