A collaboration between Portishead and SoundCloud has shed light on a new royalty distribution system that proponents argue could help level the playing field for working musicians. Under SoundCloud’s “fan-powered” royalty model, unveiled in March, a listener’s subscription or advertising revenue goes directly to the artists to whom they listen in a given period of time; that’s instead of the “pro-rata” model typically used by Spotify and other streaming services where money is pooled and divvied up to rights holders based on their market share.
Advocates of the new royalty approach, also known as “user-centric,” have long argued that it would raise incomes for a class of professional musicians beyond the biggest stars, and a 2017 academic study from Finland supported this view. SoundCloud’s fan-powered royalty plan is exclusively available for the nearly 100,000 independent artists who monetize directly through SoundCloud—artists signed to major labels and independent labels are already subject to existing licensing deals—so data about the model’s impact has so far been scarce.
SoundCloud has now outlined how at least one song has fared under the fan-powered model in comparison with the traditional pro-rata pool system. On July 8, UK trip-hop pioneers and psych-rock veterans Portishead made their cover of ABBA’s “SOS,” previously streaming only as a music video, available via SoundCloud. Streams from the track earn revenue through SoundCloud’s fan-powered royalties with proceeds benefiting charity. In less than a month, “SOS” earned more than six times the revenue it would have under a pro-rata model, according to a statistic SoundCloud provided to Pitchfork. In other words, it represents more than a 500 percent increase.
A SoundCloud representative said in a statement that “full aggregation of market-live payout data is pending over the coming months,” as the company is in the midst of launching its system. “The model is tracking as expected and the Portishead stat is a strong confirmation of the model’s design—fan engagement is driving meaningful revenue.”
“[The fan-powered royalty model] is a real opportunity for people who want to support artists,” Portishead’s Geoff Barrow told me over the phone. “I didn’t expect huge amounts of people to listen to [‘SOS’]. It was more about getting the idea out that you could stream music and it could make money…. It’s the difference between being able to order a pizza and someone actually paying the rent.”
Barrow heard about fan-powered royalties through the #BrokenRecord campaign, a UK movement that led to a parliamentary inquiry into whether platforms such as Spotify and Apple Music are fairly redistributing their revenue.
Tom Gray, founder of #BrokenRecord, contends that, along with boosting revenues for professional musicians writ large, the user-centric model also stamps out streaming fraud, because fraudulent streams would no longer count toward the share of a revenue pool. Gray also maintains that the fan-powered system could eventually give artists more precise data on their fan’s listening habits, which could help them with selling merchandise and planning tours. Regional, specialty, and local-dialect music would also generate more revenue under user-centric, according to Gray. “Which is what I would describe as good for culture,” he told me over Zoom. “You might start to see labels investing in things that aren’t pop again, because they want to build a wider, deeper catalog.”
The user-centric model has critics. Spotify’s former chief economist Will Page, UK indie-label group the Association of Independent Music, and others have argued that “user-centric distributions would increase administrative and operational costs due to increasing complexities,” according to a recent UK government report. But the report adds that “these would likely be well within the current processing limits of modern computer systems (which nonetheless continue to improve anyway).”
Read “Is There a Fairer Way for Streaming Services to Pay Artists?” on the Pitch.