Ruth Towse: “Dealing with Digital: Economic Organisation of Streamed Music”

Working Paper No. 01-2020

January 2020

The intervention of digital service providers (DSPs) or platforms such as Spotify, AppleMusic and Tidal supplying music streamed music has fundamentally altered the way that song-writers and recording artists are paid and the operation of copyright management organisations (CMOs). Platform economics has emerged from the economic analysis of two- and multi-sided markets, offering new insights into the way business is conducted in the digital sphere and is applied here to music streaming services. The business model for music streaming differs from previous arrangements by which the royalty paid to song-writers and performers was a percentage of sales. In the case of streamed music payment is based on revenues from both subscriptions and ad-based free services. The DSP agrees a rate per stream with the various rights holders that varies according to the deal made with each of the major record labels, with CMOs, with representatives of independent labels and with unsigned artists and songwriters with consequences for artists’ earnings. The paper discusses these various strands that contribute to understanding royalty payments for streamed music in terms of platform economics, with some data and information from the Norwegian music industry giving empirical support to the analysis.

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