'Spotify are selling adverts, not music': how to stream ethically

In September, independent singer and songwriter Miri earned £44.30 in one week for 1,772 streams of her music on Sonstream, a new streaming service based in Stoke-on-Trent. “Although that doesn’t sound like a lot, for me, that’s money towards food and electricity,” she says. Her equivalent earnings on Spotify would have been less than £5.

“It was such a pleasant surprise and also highlighted to me that if streaming was fixed, then maybe I wouldn’t have had to go through emergency funding when the pandemic hit,” she adds.

Artist compensation was already volatile before Covid-19 made touring impossible, and while streaming is up 20% during the pandemic, that does not mean much for many artists.

In the payment structure used by the big streaming services, the money you spend on a subscription is not paid directly to the artists you are playing. Instead, the money forms a giant overall pool, and is paid out to artists in accordance with the number of streams they accrue, even if you personally never listen to them. You may hate Ed Sheeran’s music, but you are still paying him for it.

A recent poll by the Ivors Academy and Musicians’ Union found 82% of respondents earned less than £200 from streaming across the whole of 2019. The parliamentary inquiry into streaming prompted more shocking revelations: the Mercury prize nominee Nadine Shah said her streaming revenues do not cover her rent, and the songwriter Fiona Bevan said she earned just £100 from co-writing a song for Kylie Minogue’s No 1 album Disco. The committee subsequently warned streaming companies not to interfere in its investigation after witnesses expressed fear of reprisals from them.

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In the face of these intractable institutions, several streaming startups are offering more generous propositions than the current average per-stream rate across Spotify, Apple Music and Deezer of around £0.004.

The pay-as-you-go platform Sonstream charges listeners around 3.3p per play of a track, with 2.5p going directly to the rights holder.

The Berlin-based co-operative Resonate is pioneering a “stream-to-own” model: it charges listeners for the first nine plays of one song, the cost amounting to the average price of a download. After that, users own the track and have unlimited plays.

Audius in San Francisco is developing a system that allows artists to set a per-stream rate or monthly subscription: 10% would go to the Audius network, and the rights holder would keep the rest.

Fans, as well as musicians, are keen to find an alternative to the current system: in a YouGov survey by the #BrokenRecord campaign, 77% said artists were not paid enough from streaming. The overall potential market of consumers keen to back fairer business models is sizeable. According to Rob Harrison, director at research at the campaign organisation Ethical Consumer, 70% of the population make ethical choices as long as it is not very expensive or inconvenient to do so.

The question is whether these new platforms can offer a financially viable alternative when the industry leader Spotify has famously never generated an annual net profit, despite boasting 144m premium subscribers as of September 2020, and generating total revenue of £1.76bn in the three months before. The loss comes down to company investment and royalty payouts; so how can significantly smaller platforms such as Sonstream, which has around 1,000 users, survive?

“The problem is that Spotify don’t treat music as its product – they are selling advertising, not music,” says Sonstream’s founder, Seb Clarke, who is running the platform on a £350,000 investment. “Because we don’t have any middlemen – labels, advertisers and marketing agencies – if we hit over 30k users, we actually start going into cash-in-the-bank status.”

Resonate has 1,500 members but can currently handle 2m monthly users, a figure it hopes to reach within two years, and Audius has raised nearly $10m (£7.4m) of investment.

One obvious barrier to scale is the size of the catalogue. Spotify has 60m tracks; Resonate has 14,000, Audius 200,000 and Sonstream just over 1m. And none of the smaller platforms have licensing deals with the major labels – which can be prohibitively expensive for startups – meaning they are largely populated with independent music rather than the latest Taylor Swift album, for example.

This is not an issue Deezer faces – the service has around 56m tracks and licensing deals with all the majors. The company is trying to set up a “user-centric” payment system, whereby individual streaming subscriptions go to the bands and artists that each subscriber actually listens to, not the market share model. Yet even this relative behemoth cannot drum up the widespread support that it needs.

“We need all the labels on board,” says Alexander Holland, Deezer’s chief content and strategy officer. “Unfortunately it’s not possible with just a proportion. We continue to have conversations with the labels, but progress takes time.”

YouGov’s survey found 64% of respondents would support a user-centric model However, it also showed that if it cost more, the results were split – 45% would still be willing, while 45% would not.

It leaves consumers in a bind. Fans clearly want their favourites to thrive. But, as Clarke says, there is little incentive for major record labels – whose executives will face the select committee next week – to enact change when they jointly generated more than £700,000 an hour from streaming in 2019. “Small artists are very attracted to what we’re doing but the major labels are quite happy with the current ecosystem,” he says.

Bevan says she gave evidence to the select committee to try to help the next generation of songwriters sustain a living. “I work with a lot of songwriters and when I go and give a lecture at a university, it’s really hard for me to say, ‘Yeah, you should be a songwriter, it’s a great career’ because I can’t see how, at the moment, it’s possible to survive on it.”