A two-tier streaming market is emerging that disadvantages independent artists and labels, a new report from pan-European indie label trade group IMPALA confirms. That trend, IMPALA says, is “driven by market consolidation, opaque platform policies and emerging monetisation practices that increasingly favour scale over diversity”.
Although the new report reviews many aspects of the streaming business - revisiting IMPALA’s previous ten step plan to ‘make the most of streaming’ - a key focus is the introduction of payment thresholds by various digital services and the continued pushing of Discovery Mode by Spotify.
In the report “the damaging effects of streaming thresholds and de-monetisation of many artists are laid bare”, says Gee Davy, boss of the UK’s Association Of Independent Music.
“Streaming, for all of its promise of democratisation, is in some cases delivering the opposite taking income from those who need it most and redistributing it to the elite", she adds.
There are issues with the streaming business model that do need addressing, Davy says, but not in a way that prioritises the interests of the major players. “Oversupply, dilution and fraud must be addressed”, she explains, “but not at the expense of our emerging, diverse and niche music”.
In recent years, a number of streaming services have changed the way they allocate revenues to tracks each month as part of their revenue share business models, introducing thresholds that individual artists or tracks must meet before they are allocated any revenue at all. With Spotify, a track must get 1000 streams from 50 unique users in any one year to be allocated any money.
These changes were introduced to placate the major record companies, especially Universal Music, because the thresholds result in more revenue flowing to more popular tracks.
However, despite Universal referring to the introduction of thresholds as the ‘artist-centric’ approach, no artists were consulted about the changes, nor were any indie labels. IMPALA’s new report reviews the impact the thresholds have had on the indie community.
It says that numerous indie labels have “seen significant changes in the royalties flowing through to them”, with the changes having a bigger impact on “those that operate in less mainstream genres, those that represent non-English language music, and those operating in smaller regional markets”.
It adds that feedback received by IMPALA’s digital committee indicates “a more significant impact on classical, jazz and electro repertoire, and a possible larger impact on smaller territories”. Also, “size doesn’t necessarily prevent a label from being affected, with some big labels seeing a fair share of their catalogue being de-monetised”.
Some indie labels have benefited from the thresholds, with more money flowing to their catalogues. Or across their catalogues things balance out, because they have tracks that win and tracks that lose.
But many of those labels still object to the thresholds in principle, and to the wider streaming business model being changed in such a significant way without wider consultation of rightsholders - or, seemingly, much consideration being given to the impact of the changes on every genre and market.
While Deezer and Amazon have also introduced thresholds, it’s only Spotify that currently operates a scheme like Discovery Mode, where artists can inform the streaming service’s algorithm - basically tell it to prioritise specific tracks - in return for accepting a 30% discount on any royalties generated.
Although many object to the principle of basically paying Spotify to promote a label’s music, IMPALA’s report specifically criticises the lack of transparency about Discovery Mode, and in particular whether major labels have to take a similar hit on revenue in return for having Spotify push their priority tracks.
“There is currently a general lack of transparency around Discovery Mode”, the report says. "It’s unclear who is engaging with the programme, whether the major rightsholders are using it or gain similar benefits through other means, and how other interested parties are affected when it is utilised on a track”.
Combined, the report concludes, the thresholds and discovery mode are creating a two-tier streaming market, where things are set up to benefit the major rightsholders and big platforms to the detriment of independent artists and labels. That should not be able to happen, the report says.
“To prevent a future where cultural output is shaped by economic power alone”, it states, IMPALA “calls on digital services, rightsholders, regulators and policymakers to take shared responsibility for ensuring that the streaming ecosystem supports innovation, inclusivity and sustainable growth”.
Of course, the influence of the majors over a streaming business model that everyone has to work with will only increase as they become ever more dominant in the market, for example, through Universal’s controversial acquisition of Downtown Music Holdings.
IMPALA is urging European competition regulators to block that deal. Commenting on the new report, IMPALA Executive Chair Helen Smith says, “The question of market power comes out very clearly in this report as an underlying cause of many of the issues we see in the streaming market”.
With that in mind, Smith highlights and endorses another recommendation in the report, “that further concentration should be restricted and even reversed”.