Tidal Direct Artist Payments: Fair Streaming Payouts

Tidal Introduces Direct Artist Payments and a New Streaming Model

Tidal, alongside numerous independent music distributors, has recently launched a system for direct artist payments. This move signals a potential shift in how Tidal approaches streaming payouts, aiming for a more equitable distribution of funds to musicians who don't achieve massive streaming numbers.

Initial Partnerships and Implementation

The company initially forged agreements with independent distributors including CD Baby, Equity Distribution, Stem, Symphonic, Tunecore, and Vydia. Beginning January 1, 2022, this new payout model will be expanded to encompass artists signed to major labels, not solely independent artists.

HiFi Plus Subscriber Benefits

Subscribers to Tidal’s HiFi Plus plan—priced at $19.99 monthly—will have up to 10% (approximately $2) of their subscription fee allocated to the artists they listen to most. However, this percentage is reduced for subscriptions purchased through Apple’s App Store, but remains unaffected for those using Google’s App Store, as confirmed by a Tidal representative.

Understanding User-Centric Payment Systems (UCPS)

This new approach exemplifies a user-centric payment system (UCPS). As outlined by Deezer, a streaming service exploring UCPS, this system allows fans to directly and transparently support their preferred artists, with subscription fees distributed based on individual listening habits.

Consider a scenario where you stream a 10-track album once on a platform like Apple Music, which pays roughly one cent per stream. The artist would earn 10 cents before distributor and publisher deductions. However, on a UCPS platform like Deezer or SoundCloud, listening to 10 albums from 10 different artists in a month would divide your subscription fee among those artists, potentially yielding more than 10 cents each. This mirrors the act of purchasing a CD – the value lies in the purchase itself, not the frequency of plays.

Tidal’s Fan-Centered Royalties Program

Tidal has collaborated with over 100 labels—both major and independent—to create what they term a fan-centered royalties program, which will be integrated into the HiFi Plus tier starting in January 2022.

The Limitations of Pro Rata Payment Models

Currently, dominant streaming platforms like Apple Music and Spotify utilize a pro rata system, distributing funds based on overall stream counts. However, the expansion of music streaming, intended to combat music piracy, hasn’t universally benefited musicians. Touring has become the primary revenue source for many, making the inequities of streaming payouts more apparent during the pandemic’s concert cancellations.

The Justice at Spotify Campaign

The Union of Musicians and Allied Workers (UMAW) initiated the “Justice at Spotify” campaign last year, advocating for the adoption of UCPS, increased payout transparency, and a minimum payment of $0.01 per stream. The UMAW estimates Spotify currently pays an average of $0.0038 per stream, a figure Spotify refrains from confirming, asserting that pay-per-stream isn’t a meaningful metric.

“We applaud Tidal’s move toward a more user-centric payment system, a shift we’ve been demanding since we launched our Justice at Spotify campaign in 2020, and one already adopted by Deezer and SoundCloud,” stated Joey DeFrancesco of UMAW. “User-centric is no silver bullet, and we still desperately need more fundamental changes in streaming royalties, but it is a step in the right direction.”

Payout Comparisons Between Streaming Services

Apple Music reportedly pays approximately $0.01 per stream, according to a leaked internal memo. Tidal is believed to offer similar rates, though the company hasn’t officially verified these figures. Spotify, despite having the largest subscriber base, generally provides the lowest payouts.

Spotify’s Explanation for Lower Per-Stream Rates

Spotify attributes its lower per-stream rates to its users streaming a greater volume of music compared to those on competitor platforms. Furthermore, Spotify’s ad-supported free tier may also influence its pay-per-stream metrics.

The Journey of Streaming Revenue to Artists

Streaming payouts don’t go directly to artists. Funds are first divided among record labels and publishers. The artist’s individual share depends on their specific industry contracts. Currently, the UMAW estimates an independent artist needs 283,684 Spotify streams monthly to cover a U.S. median monthly rent of $1,078.

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Spotify’s Investment in DistroKid and Subsequent Sale

Spotify acquired a minority stake in DistroKid in 2018, but recently sold two-thirds of its equity for €144 (approximately $163 million) in a quarterly SEC filing. This timing coincides with DistroKid’s partnership with Tidal, a service more focused on artist compensation, to implement policies advocated by the UMAW.

Doubts About the Impact of UCPS

Spotify questions the potential benefits of UCPS for artists. A study by the National Music Center in France suggested that yearly payouts would only fluctuate by “at most a few euros” for artists outside the top 10,000.

“We are willing to make the switch to a user-centric model if that’s what artists, songwriters and rights holders want to do. However, Spotify cannot make this decision on its own — it requires broad industry alignment to implement this change,” states Spotify’s website.

The Future of Streaming Payouts

Tidal’s partnerships and UCPS variation may prove more advantageous for artists. A $2 monthly bonus from users could accumulate significantly. However, industry-wide changes will likely require experimentation to balance fair artist compensation with the financial viability of streaming platforms.