One could also mentioned some sort of tiered payout scheme or a non-linear minimum after a certain amount of plays plus a percentage above that. Likely something that Spotify will experiment with over the years.
If they start doing it the way OP suggests, they DRAMATICALLY increase the number of pools of money they manage (and thus, would need to audit). They'd now be managing (number of copyright owners) * (number of subscribers) pools of money, which is a lot more. Additionally, they likely have some errors in their data, and the impact of an error in this scheme is huge.
tldr: It's too much work for too little money. Improved technology will not change anything because it's a finance process problem, and finance processes have to be regularly audited. The more complicated it is, the more expensive it is to audit.
Pools of money is not really a relevant metric. They collect all the subscription premiums and pay a portion of them out according to their contractual agreements.
Pay(artist_i) = 0.7 * sum_j [ premium(viever_j) * ratio_ji ]
is not that much harder to do.
I agree that auditing would be more complicated, but usually one does selective audits anyway. I doubt this would be a show stopper.
The confusion on the receivers' side would increase massively though. As someone else has pointed out, there would be a lot less correlation between #plays and payout.
(To be clear, I have no real opinion on whether this would be a better schema.)
But yeah, there are many reasons its not calculated this way. Revenue predictability is another reason - companies like to be able to forecast revenue and that's hard if revenue has only a tenuous link to the other KPIs you use to run your business (which is the point you made).
Honestly, the current payout scheme makes more sense. Is it totally fair to the labels? Maybe not; but the labels it's most unfair to aren't making enough under either scenario for it to matter much. Would it really matter to an indie label if their monthly payout was $20 instead of $5? Once you get bigger than a few hundred listeners, the law of large numbers kicks in.
Unless they are doing something special, they are actually just taking a bucket of money and sending it to SoundExchange or ASCAP/BMI (for the US at least) and letting the do the actual distribution. ASCAP/BMI are very used to distributing payments based on plays (they do it for radio, concerts, etc.).
It would really just be a matter of including the play counts for each song every month.
It's an interesting trade-off: "punishing" artists with fans who only listen to a small amount of music, but who are dedicated to that artist vs. artists with fans who listen to a LOT of music.
My gut is that very few artists are getting "screwed", and those who are represent artists with very few streams (at which point the net revenues are very small and who cares about the difference between 2 cents and .7 cents). For most "edge cases" like the one in the article, there's a user on the opposite end of the spectrum who would balance them out.
That's my hypothesis, anyway.
Even if the indie artists created their own service, several orders of magnitude less people would listen to it.
> My gut is that very few artists are getting "screwed"
Huh? How does that follow?
My gut is that a LOT of artists are getting screwed for exactly the reasons mentioned in the article.
This payment scheme isn't an accident. It favors the big, popular copyright holders to keep them off of Spotfy's back.
Of course, those big copyrights are also who bring in the majority of revenue for Spotify.
The article makes the hypothesis that people who listen to "indie" music also listen to less music. I don't think that's true.
(I don't have hard evidence to back up the counter-factual, but neither does the author in proving the hypothesis. He just sets up a straw man example, then bashes yoga studios, Daft Punk, and the idea of a subscription model as a whole.)
Also, isn't a big chunk of Spotify owned by the major labels anyway?
