Revolutionising the Music Industry: Spotify, NFTs, New Platforms and the Pursuit of Fair Remuneration for Artists -

Introduction

Once the silver bullet that would democratise music distribution and secure visibility for independent artists and musicians worldwide, the music streaming service Spotify has received growing condemnation in recent years. In this article, I will go back in time and discuss music distribution before the age of Spotify. I will talk about Merlin, a digital rights music licensing partner for independent record labels, Michel Lambot, and the 2004 MTV dispute. Finally, I will discuss Spotify’s falling streaming payouts for smaller, alternative, and unsigned artists, the apparition of music NFTs and new platforms, and the ongoing quest of musicians and artists for fair remuneration.

The pre-Spotify era, MTV, Merlin and music streaming

Before Spotify, music distribution relied heavily on physical formats like CDs and vinyl. These methods posed challenges such as limited access, high costs, geographic constraints, and piracy issues. Independent labels struggled to gain visibility and reach diverse audiences. The advancement of the internet, piracy, illegal digital downloads and services such as YouTube, caused growing losses for traditional music distribution. In 2004, MTV stopped paying independent labels for airing videos on television, saying that exposure on the platform was sufficient as a way of compensation, thereby not respecting their contractual obligations.

Michel Lambot and others recognised the need for a unified voice to advocate for fair treatment in the digital music landscape. More frustrations with major platforms, which tried to sideline independent labels, eventually prompted the formation of Merlin. An agency created to enforce the execution of deals and contracts maximising income for independent labels from digital services. Spotify’s introduction disrupted this model by offering a convenient streaming platform, providing instant access to a wide range of music while creating new revenue streams for artists and labels through streaming royalties.

When Spotify emerged as a new streaming platform, Lambot and Merlin seized the opportunity to ensure that independent labels had a stake in its development. Despite initial doubts, Lambot’s strategic vision led to a landmark deal with Spotify, establishing a precedent for equitable treatment of independents. This partnership not only propelled Spotify’s success but also demonstrated the value of diverse, independent content in shaping the future of the music industry. Through their collaboration with Spotify and other platforms, independent labels continue to play a vital role in shaping the digital music ecosystem.

The rise of Spotify owes much to the efforts of independent labels, spearheaded by figures like Michel Lambot and organisations such as Merlin who now have a seat at the table. Merlin today is a central licensing and rights body essential for anti-piracy protection for independents who want to leverage global efficiency to improve their business. Merlin’s annual payouts to indie labels have increased dramatically, up to $232 million in the year up to March 2016 and it is sometimes referred to as “the fourth major” next to Sony Music Entertainment, Universal Music Group, and Warner Music Group.

Spotify’s rise and growing condemnation

Supported by independent labels and changing consumer preferences, Spotify revolutionised how people consume music by introducing a legal and convenient streaming service. With over 574 million active monthly listeners as of 2024 globally, Spotify has become a dominant force in the music industry. However, the platform’s payment model is a subject of growing controversy. Moreover, ‘adult’ genres like classical,
jazz and blues still haven’t found their space on the platform.

While Spotify provides exposure to a vast audience, the per-stream payout is often criticised for being insufficient to sustain many artists financially. Moreover, starting in 2024, Spotify ceased payments for roughly two-thirds of tracks on the platform—specifically, any track receiving fewer than 1,000 streams over the period of a year. While these tracks will continue to accrue royalties, this change redirects those royalties upwards, often benefiting bigger artists rather than their own rights holders. Spotify pushed through these changes, because some labels or distributors were generating artificial streams with bots or click-farms fraudulently inflating an artist’s streaming figures, and siphon off royalty payments from Spotify.

Some independent artists, like LA-based musician Brandon Washington, express criticism regarding Spotify’s implementation of a minimum requirement of 1,000 streams for tracks to receive royalties. Washington believes this threshold is too high and argues that placing a numerical value on music undermines its artistic value. He acknowledges the issue of fraudulent streams but is skeptical about Spotify’s payment system and its implications for small, independent artists.

Amelia Fletcher, an academic at the University of East Anglia, shares similar concerns, emphasizing the validity of all artistic endeavours regardless of compensation. She suggests that Spotify should adopt a “user-centric model” where payments are distributed based on individual listeners’ preferences rather than total platform streams. The adjustment of Spotify’s royalty payment structure has intensified discussions about the need for a fairer remuneration model, especially for emerging, independent and unsigned artists and performers who are outside the musical mainstream, that is typically regarded as more eclectic, original, or challenging than most popular music.

Live shows, musicians unions and Covid-19

As streaming revenues decline, income from live performances becomes increasingly important for an artist’s financial stability. Income from live performances includes not only ticket sales, merchandise, and VIP experience, but also substantially enhances an artist’s visibility, often leading to increased streaming numbers and music sales. Many musicians depend on live performances for immediate income and view concerts and tours as crucial opportunities. These events allow artists to showcase their talent, connect with fans personally, and solidify their presence in the industry.

The Covid-19 pandemic highlighted the imbalance between stream revenues and live sales. Therefore, on March 15 2021 United Musicians and Allied Workers organised a worldwide action at Spotify offices holding a rally and delivering demands along with 28,000 signatures to each office. Actions happened in over 15 cities around the world, including Birmingham MI, Boston, Chicago, Los Angeles, Nashville, New York, San Francisco, Berlin, Madrid, London, Melbourne, Paris, São Paulo, and Toronto. While musicians’ unions persist in advocating for improved wages, the industry has also witnessed technological innovations and creative concepts emerging in response to the challenges faced by artists and musicians.

Digital Ownership, NFTs and Competing Platforms

Non-Fungible Tokens (NFTs) burst into the spotlight in 2021 after being around since 2014, as a way to establish ownership and authenticity of digital assets. NFTs are unique, blockchain-based tokens that represent ownership of a specific digital item. In the context of music, artists can tokenise their work, allowing fans to purchase and own a digital copy through the blockchain. The introduction of NFTs provides an alternative revenue stream for artists, potentially reshaping the music business model. Fans can directly support their favourite artists by buying NFTs, creating a more direct and personal connection between creators and their audience.

These unique digital identifiers, recorded on a blockchain, certify ownership and authenticity, with ownership transferable. The rise of NFTs attracted attention from celebrities like Elon Musk, and Mark Cuban, leading to a surge in popularity and a considerable market value. However, the NFT sector faced challenges as sales plateaued and trading volumes decreased two years after the initial surge. Issues contributing to the decline included environmental concerns related to the energy consumption of the Ethereum blockchain, criticisms over the lack of inherent intellectual property rights, and various scams and frauds within the NFT market. In May 2022, reports indicated a significant drop in daily sales and active wallets in the NFT market.

The NFT market’s fall prompted introspection and efforts to address its shortcomings. Marketplaces began implementing stricter rules and regulations, while creators and buyers became more cautious in their approach. While the NFT market is not dead, it has experienced a decline from its peak, with ongoing efforts to learn from past challenges and adapt for future sustainability. Despite the significant drop in sales in 2022, the Financial Times reported that Spotify dipped a toe in the NFT space, via a token-gated playlist starting with Universal’s virtual band Kingship.

A large number of NFT trading platforms remain. To name just a few: Royal, SoundMint, OpenSea, Rarible, NiftyGateway and Audius. In July 2023, the on-chain music startup Soundxyz, announced the public launch of its NFT platform for artists, along with a successful series of funding rounds led by Andreessen Horowitz, securing $20 million. Notable contributors include rapper Snoop Dogg and musician Ryan Tedder. During its closed beta phase, the platform paid out $5.5 million to 500 artists who collectively released 1,600 music NFTs.

Soundxyz allows musicians to upload their songs to the on-chain platform, selling them as NFTs on the Ethereum main-net and scaling network Optimism. Soundxyz aims to be an artist-friendly platform, fostering a social connection between artists and fans while allowing artists to retain 100% ownership of their music. The interface of the platform feels like a mix between Instagram and Spotify and emphasising inclusivity, it wants to become the next “homepage of music discovery”.

Equal Remuneration: Bridging the Gap

NFTs offer a novel solution by introducing a direct-to-fan model that enables artists to monetise their work more effectively. An amalgamation of platforms combining Spotify-like interfaces and NFTs could potentially bridge the gap between exposure and compensation, fostering a more sustainable and equitable ecosystem for musicians. Spotify faces scrutiny regarding its payment model, prompting discussions about fair compensation. Despite amassing over 574 million monthly listeners worldwide by 2024, Spotify’s payment model faces increasing criticism. While it offers exposure to a broad audience, the per-stream payout often fails to support artists financially.

To combat fraudulent streaming practices, Spotify halted payment for tracks receiving fewer than 1,000 streams annually. This change redirects royalties towards larger artists, sparking concern among independents like Brandon Washington, who argue that placing a numerical value on music undermines its artistic worth. Academics like Amelia Fletcher advocate for a “user-centric model” of payment distribution. These developments fuel discussions about fairer remuneration, particularly for emerging and independent artists whose work may not fit mainstream moulds.

It seems that organisations such as Merlin representing independent labels have forgotten the years of legal disputes with MTV about fair remuneration and exposure. Could it be that Merlin and Michel Lambot signed a deal with the devil in the form of a streaming service? Smaller, alternative, unsigned, and unrepresented artists have no choice but to sign up for mere exposure. Merlin and Spotify grew together. The former became the “fourth major” and the latter grew to be the world’s most popular audio streaming subscription service. Music NFTs show us that the debate is far from over, independent labels, Spotify and Merlin should reconsider payment models and compensation systems for smaller, alternative, unsigned and unrepresented artists, or the ever-evolving landscape of the music industry will do it for them.

One proposed solution that came forward was proposed by Soundxyz and involves integrating NFTs into the streaming model itself. Spotify could also do this and incorporate NFT-based tokens that represent ownership of specific songs or albums. This approach allows fans to support artists directly while providing a more equitable compensation structure. The combination of Spotify-like platforms and NFTs such as Soundxyz holds promise in addressing some of the challenges faced by musicians. By leveraging NFTs, artists would have the opportunity to diversify their income sources and gain more control over their digital assets.

Some questions remain regarding environmental concerns and counteracting fraud and scams, but the rise and persistence of NFT platforms highlights a crucial aspect of the ongoing conversation about the future of music and the pursuit of fair remuneration for artists, musicians and performers. One of these new platforms might eventually replace Spotify presenting both new challenges and opportunities for artists and musicians.

Author: Jan Brems

Jan Brems is a musician, singer-songwriter, and professional in the realm of international cultural relations. He studied International Relations in Shanghai, Cultural Management in Brussels, and carried out research on Cultural Policy in Burkina Faso. He has worked for a number of Museums and Cultural Organisations such as BOZAR, PILAR, Brussels City Museums and the World Music Label Muziekpublique. He worked for UNESCO assisting with a publication on the African film industry and the implementation of the UNESCO Aschberg programme for artists and cultural professionals and the European Commission executing social media strategies for programmes related to Culture, Sport, Education, and Youth.

Images

“MTV” – https://unsplash.com/photos/woman-sitting-wearing-roller-skates-and-jacket-while-holding-lollipop-lVhdxF2spAk

“Enough” – https://unsplash.com/photos/people-holding-a-signage-during-daytime-x15GAQNepcQ

“Spotify logo” – https://unsplash.com/photos/green-and-white-logo-illustration-JlO3-oY5ZlQ

“Protest drum” – https://unsplash.com/photos/man-in-white-and-black-shirt-playing-white-and-brown-drum-r9boesW87Uc

“Crypto symbols” – https://unsplash.com/photos/a-set-of-three-blocks-with-different-crypt-symbols-on-them-ZDModyhoUmE

“Boy singing” – https://unsplash.com/photos/boy-singing-on-microphone-with-pop-filter-ASKeuOZqhYU

“Content costs” – https://unsplash.com/photos/text-C07TpEdjD44

References

https://www.politico.eu/person/michel-lambot/

https://www.demorgen.be/nieuws/we-zijn-liever-spelers-dan-toeschouwers~b1afbaf2/?referrer=https%3A%2F%2Fwww.google.com%2F

https://3voor12.vpro.nl/artikelen/overzicht/2004/maart/independents-steken-gezamenlijk-middelvinger-op-tegen-mtv-en-tmf.html

https://3voor12.vpro.nl/artikelen/overzicht/2004/april/last-minute-deal-tussen-mtv-en-independents-over-videorechten.html

https://www.piasgroup.net/blog/can-spotify-business-convince-brands-pay-music/

https://www.piasgroup.net/blog/independents-have-no-less-opportunity-on-streaming-services-than-the-majors-2/

https://www.theguardian.com/commentisfree/2023/nov/30/spotify-smaller-artists-wrapped-indie-musicians#:~:text=Short%20answer%3A%20not%20enough.,living%20wage%20for%20most%20artists.

https://www.theguardian.com/music/2023/nov/22/spotify-announces-royalty-changes

https://weareumaw.org/make-streaming-pay

https://www.researchgate.net/publication/366295843_Analysis_of_The_Trend_of_Spotify

https://www.academia.edu/19671405/The_Ethics_of_Streaming_Music