Opinion Streaming services

The pro-rata model aggregates individuals’ streaming Will Page

Te music industry’s successful transition to a streaming-led market offers many lessons to book publishing, not least around royalty payments

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works on certain platforms in the future. As “the first to suffer and the first to recover” from digital disruption, the music industry’s response to the launch of illegal P2P file-sharing service Napster in 1999 commited a full decade to fighting piracy, all the while spending millions on litigation and losing billions in revenue. In contrast, the past decade has seen the industry beat piracy by embracing a superior legal alternative: streaming. Thanks largely to the success of Spotify, record labels have now recovered those losses and seen global revenues increase by over $1.5bn last year to reach $19.1bn. Streaming makes it easier to access and consume music—it’s more efficient than buying an album and, above all, it’s more convenient than stealing one. Some 300 million people pay a monthly fee to access music legally today. Estimates of the number of subscribers to audio and e-books are around a tenth of that figure.

Equal opportunities

However, all this money pouring into the music industry is not necessarily of unqualified benefit to artists, as authors, agents and publishers should note. Consideration of more “money in” (collection) should arguably be less compel- ling than more “money out” (distribution) when looking at the long-term health of publishing as a creative industry. Just as the music industry is currently assessing the merits of the “pro-rata” and “user-centric” models of distribution of income from streaming, authors and publishers would do well to join the debate.

Will Page is the former chief economist at Spotify. Pivot will be published in 2021 by S&S UK. He is speaking at the “Arts and the Cultural Economy in the Digital Era” seminar at 10 a.m. today, on The Arts+ Stage in Hall 4.1 M53.

activit and subscriptions in a given market, and allocates revenue pro-rata. If an artist accounts for 1% of all streams, they are allocated 1% of the money. The model is simple and efficient, but it also produces anomalies. Under pro-rata, the artist is simply competing for your time: those who create music that is listened to more will be paid more. If, say, you only listened to classical music once or twice last month, a large share of your monthly payment will go to artists who were streamed more intensely. This has led to contentious headlines such as “Your Spotify and Apple Music subscriptions pay artists you never listen to”.

Under user-centric, a subscriber’s monthly payment is ring-fenced to ensure that only the creators of the music they stream receive their money. If you only streamed Drake last month (which some of his fans would have done), the net royalties from your subscription would go only to him.

he book industry can learn many lessons from how the music industry turned its fortunes around, but it should not overlook what makes them distinct. You listen to a song over and over, but you will rarely read the same book twice (children’s titles being a notable exception); while music moves to the rhythm of the composer, words move at the pace of the reader. Nevertheless, music’s tale of the past two decades leads to a debate that will influence how authors are paid for access to their

Publishers must first consider which premises and conclusions are transferable from the music industry’s ‘money in, money out’ debate

A royalty quandary In the book industry, there is an unavoidable trade-off between fairness and efficiency when distributing royalties that are gathered collectively via bundling or subscription. Collective management organisations (CMOs)—who collect licence fees and payout royalties—have for more than a century had some success in geting this balancing act right. For example, a CMO (governed by its members) may choose to cross-collateralise the “money in” by allocating a proportion of revenue from classical concerts so as to distribute the “money out” to pop concerts. This is not only because deceased classical composers need the money less, but because living pop composers (whether they need the money more is the topic of another conver- sation) are able to argue for a larger allocation of revenue. Anomalies such as these are just the tip of the iceberg. If publishers are determined to adopt an “all-you-can-eat” bundle for digital formats, they must first consider which premises and conclusions are transferable from music’s “money in, money out” debate. And when an industry moves from monetising transactions (selling physical CDs or books) to monetising consumption (subscribing for access), what happens when nothing is consumed? It’s an inconvenient truth that an awful lot of books are purchased but not read.

While the average length of a song is roughly four

minutes, the time it takes to read a book will vary. If a book is rarely read twice, perhaps the time spent reading should be factored into how authors are paid from the all-you- can-eat bundle. The book industry will also need to ask about the impact on the distribution of “money out” of a frequently accessed commercial genre title, as opposed to a niche but seminal one-off volume.

With e-book sales flatlining, and the emergence of applicable streaming models, it is hardly surprising that the industry is contemplating a pivot towards the all- you-can-eat model, both to retain readers’ and listeners’ atention, and to get more “money in”. But that is only the beginning. The book industry should focus more on how the music industry strives to balance fairness and efficiency in geting the “money out”.


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