Back in July, Spotify CEO Daniel Ek caught flak for saying it was no longer enough for artists to record “once every three to four years” — they needed to pump out more product if they wanted to make a living streaming their music on his platform. As the man paying them, he would know.
Streaming via platforms such as Spotify, Apple Music and Pandora accounted for 79.5 percent of the US$8.8 billion global music market last year. But this latest reordering of the music business has left many artists struggling financially. While these platforms generate huge revenues through advertising and subscriptions, they pay out negligible amounts per steam, and only a portion of this ends up in creators’ pockets. For example, Spotify pays US$3.18 per 1000 streams and Apple Music US$5.63 per 1000. Worse still, Spotify has proposed a new feature that will enable artists and rights holders to boost specific tracks in its recommendation algorithms provided they agree to a lower royalty rate for those streams. It could become a race to the bottom.
The shortcomings of streaming have long been offset by live music. The argument went: while streaming paid poorly, at least it helped artists expand their audiences so they could make a living touring. The pandemic has killed that argument, at least for now — and many must be wondering how they’ll keep head above water.
Part of the answer might come from China. On several streaming platforms under the umbrella of China’s Tencent Music — QQ Music, Kugou, and Kuwo, as well as WeSing, a karaoke app — micropayments from fans help compensate artists where royalties fall short. This has partially allowed artists to do some smaller-scale selling every time they release new music. In part, it’s given them a digital tip jar. And it’s not been all small change either.
Whereas western streaming platforms wrestle with profitability, Tencent Music’s operating profit in 2019 was US$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 from a commission on one-off payments given to artists by listeners, called micropayments. These can be straight-up donations, or given in exchange for virtual goods. For example, a listener can send a few dollars as a sign of appreciation for a live stream performance. They can also customise their app with an artist skin, and purchase behind-the-scenes content or a pre-release streaming block for a new recording. In 2016, pop singer Jay Chou sold limited-time early access to his Bedtime Stories LP for US$3. The platform can then drive fans to engage and spend more, such as offering buyers raffle tickets to win artist merchandise. With Bedtime Stories, Tencent Music published leaderboards showing how many times fans had purchased the album—and the winner exceeded 400.
There’s no reason why Tencent Music’s model couldn’t be applied beyond China. Most of us want a deeper connection with our favourite artists, and we’ll part with money for it. That’s why we splash out on concert tickets. That’s why more than 100,000 people paid at least US$1 to watch Erykah Badu stream from her living room in April. That’s why top creators on WeSing pocket more than US$7,000 per month in tips alone.
In the West, however, the on-demand streaming model has ruptured the audience-artist relationship. There’s no longer a traditional exchange of a recording (vinyl, CD) for money; instead, platforms such as Spotify have become gatekeepers, and music has become more like a utility: unlimited supply for a monthly charge. We listen to curated playlists with the creators demoted to the background, their work consumed by a detached and disengaged audience. With its micropayment features, Tencent Music bridges this gap, and provides artists with a toolkit to build and, more importantly, monetise fan loyalty.
Skeptics might say the Tencent model wouldn’t work in the West because there isn’t the same culture of tipping over the internet. In China, online tipping is referred to as “da shang”, and it’s been common practice for nearly a decade, normalised for anything from live streams to literary works. However, Western platforms such as Anchor and Twitch have been successful in adding micropayment features to podcasting and gaming, and the same could work for music.
Social media platforms such as Facebook have capitalised on this desire for an interaction to amass billions of global users, and billions of dollars, without rewarding artists for their efforts for their own contributions to these networks. Not only are artists not rewarded, they must invest in advertising to reach the followers they attracted to their page in the first place.
A toolkit in the West is materialising, though. Bandcamp, the independent-focused online music store, has offered the pay-what-you-want model for years. Artists set a minimum purchase price for goods, but leave you free to add more. And during the pandemic, major streaming platforms have started to tip-toe toward this model. Spotify, for one, has launched Artist Fundraising Pick, which allows listeners to make donations via artists’ profiles. That it’s enabling a kind of one-off payment over the platform is encouraging, but it’s not enough, because there is neither a direct exchange nor an extra incentive to trigger action. One manager Slate spoke with reported none of his three artists, one of which generates more than a million streams a month, had received a single donation.
On Patreon, on the other hand, around four million fans, or patrons, subscribe to their favourite creators in return for rewards such as exclusive songs, physical merchandise, or private lessons. There are no micropayments per se, but the platform is monetising the direct artist-audience channel, becoming a digital incarnation of a fan club. Between mid-March and late May, the collective value that patrons paid to musicians on Patreon increased by more than 60 percent, and the total number of musician accounts grew by 200 percent.
One major barrier for Patreon is that it is an isolated ecosystem separate from where people listen to music. For enough people to pay, it must be convenient; that’s how Spotify monetised music at a time when piracy made it available for free. It’s a lot to expect listeners to jump to another site, but Patreon does provide a foundation that could feasibly be integrated into a major streaming platform.
None of this is to say it’s as easy as wrapping up Tencent and rolling it out globally. (Nor, again, does this relieve streaming platforms of their responsibility to properly reward artists for their music.) It’s somewhat of a leap to assume a seamless adoption of micropayments in the West, but given our current system’s shortcomings — and as Spotify continues to prioritise podcasting at the expense of musicians whose work it’s long relied upon — they present an alluring revenue source for musicians globally.