Last month, Universal Music Group (UMG) head Lucian Grainge expressed the belief “that the economic model for streaming needs to evolve” as part of “the industry’s next big shift.” Now, UMG has partnered with Tidal “to explore an innovative new economic model for music streaming.”
The Big Three label and the Block-owned music platform, which in November of 2021 unveiled a free tier and “direct-to-artist payments,” formally outlined their innovation-focused plans via a general release.
While the specifics of the tie-up remain to be seen, the companies’ detail-light announcement message acknowledges a mutual goal of better rewarding “the value provided by artists” on streaming services. Driving home the point, the release makes clear that “there is more desire from all parties to look at how to best economically align fans’ interests with those of their favorite artists.”
Consequently, Tidal and UMG are poised to “research how, by harnessing fan engagement, digital music services and platforms can generate greater commercial value for every type of artist” – undoubtedly with an emphasis on every type of artist that’s signed to Universal Music, of course. Said research is expected to “extend to how different economic models could accelerate subscriber growth, deepen retention, and better monetize fandom.”
Addressing the partnership in a statement, Tidal lead (and longtime Square/Block exec) Jesse Dorogusker indicated that the UMG collaboration will take precedence over an existing “fan-centered royalties investigation.”
“We are setting aside our current fan-centered royalties investigation to focus on this opportunity for more impact,” the former Apple higher-up Dorogusker communicated. “We’re thrilled to partner and learn along the way about the possibilities for more innovative streaming economics. This partnership will enable us to rethink how we can sustainably improve royalties’ distribution for the breadth of artists on our platform.”
And in comments of his own, UMG EVP and chief digital officer Michael Nash reiterated his boss’s initially mentioned remarks concerning streaming reform.
“As the digital landscape continues to evolve, it’s become increasingly clear that music streaming’s economic model needs innovation to ensure a vibrant and sustainable future,” Nash relayed in part. “Built on deeply held, shared principles about the value of artistry and the importance of the artist-fan relationship, this strategic initiative will explore how to enhance and advance the model in keeping with our collective objectives.”
Needless to say, it’ll be interesting to follow the progress and results of the UMG-Tidal investigation into alternative streaming-compensation models.
But it’s hardly a secret that the current “pro-rata” model, under which Spotify and others pool revenue and then pay royalties based upon each creator’s share of total on-platform streams, heavily favors the major labels and artists who rack up billions of plays. Moreover, the Big Three already wield far-reaching influence when it comes to commercially significant playlists and potentially game-changing promotional initiatives.
The points (as well as Universal Music’s substantial streaming income at present) are worth bearing in mind as UMG and Tidal set out to explore “the possibilities for more innovative streaming economics.” Besides the streaming platform’s aforesaid exploration of engagement-centered payouts, SoundCloud has adopted a “fan-powered” system that compensates artists for users’ actual listening. Last July, Warner Music Group became the first (and, as it stands, only) of the majors to adopt SoundCloud’s model.