Revolution of Micropayments

The dawn of the internet gave rise to the concept of digital music sharing for the first time, beginning with Napster’s model of a free peer-to-peer sharing network. Today, consumer-facing apps have revolutionized how we access music.

As tech innovation continues to disrupt the music industry time and time again, in the midst of this, it seems compensation for artists continues to fall by the wayside.

Streaming on platforms like Spotify, Apple Music, and Pandora accounted for 79.5 percent of the $8.8 billion total global revenue for recorded music last year. But … while these platforms generate monumental revenue gains through advertising and subscriptions, they pay out negligible amounts per stream, and only a portion of this ends up in creators’ pockets.

For platforms like Spotify and Apple Music, about 70% of the revenue goes to music rights holders which, sadly, is often not the artist. Further to this, a report from Citigroup shows that in 2017, artists only received 12% of the total revenue made by the music industry.

 To make it even worse, Spotify has proposed a new feature that will enable artists and rights holders to boost specific tracks in the platform’s recommendation algorithms provided they agree to a lower royalty rate for those streams. 

What can be done to properly compensate artists? We can look over to China’s Tencent Music for a few ideas. Whereas western streaming platforms wrestle with profitability, Tencent Music’s operating profits in 2019 were $664 million. What’s interesting is that only around 30 percent of Tencent Music’s revenue comes from subscriptions, music downloads, and advertising revenue; the lion’s share comes through a commission on one-off payments given to artists by listeners, called micropayments.

For example, a listener can send a few dollars as a sign of appreciation for a live stream performance. They can also customize their application with an artist’s image, and purchase behind-the-scenes content or a pre-release streaming block for a new record.

It’s somewhat of a leap to assume a seamless adoption of micropayments in the west, but against a backdrop of our current system’s shortcomings, and as Spotify continues to prioritize podcasting at the expense of musicians whose work it’s long relied upon, they present an alluring revenue source for musicians globally.

In the meantime, we must support artists in any way we can. We can do this by becoming active listeners. Subscribe to their Patreon page, if they have one, and consider buying your favorite releases in physical or downloadable form. If you enjoyed an album, consider adding a tip.

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