Tidal: Tracing Steps Toward Fair Streaming Payouts

Last Thursday, Tidal and DistroKid, a prominent independent music distributor, announced a direct artist payments system. This cooperation suggests that Tidal is moving toward experimenting with streaming payout models that are thought to distribute cash more fairly to musicians who don’t get hundreds of thousands of streams on any given day (IE people who aren’t Taylor Swift or Lil Nas X).

If you’re paying for your subscription through a service that takes a cut, like the Apple or Google app stores, Tidal offers its Hi-Fi Plus plan (which costs 19.99 per month) with up to 10% (about 2) of your monthly payment going to your most-listened-to artist. That proportion decreases if you pay for your subscription via a service that takes a slice, such as the Apple or Google app stores. Tidal has similar arrangements with independent distributors CD Baby, Equity Distribution, Stem, Symphonic Distribution, Tunecore and Vydia.

This is an example of a user-centric payment system (UCPS), which is typically preferred by musicians. According to Deezer, a streaming service that uses UCPS, this method enables individual fans to more directly and openly support their favorite artists since their subscription charge is dispersed across the artists they listen to. So, for example, suppose you listen to a 10-track album only once on an app that pays out around one cent per stream, such as Apple Music.

Then the artist earns ten cents (and that’s before distributors and publishers take their cut). However, if you listen to ten albums from ten different artists on a UCPS platform like Deezer or Soundcloud in a month, part of your monthly subscription fee is shared among those ten musicians, suggesting they’re earning more than ten cents each.

It’s comparable to purchasing a CD; it doesn’t matter how frequently you play it; what matters is that you bought it in the first place.

According to Tidal, the company was informed that a comparable UCPS would become available to its HiFi Plus level beginning in January 2022. The platform says it worked with over 100 labels — both major and independent — to establish what it calls a fan-centric royalties program.

Pay-per-stream is the most common method of paying for music streaming. Currently, major streaming services like Apple Music and Spotify pay per play. However, despite the fact that music streaming services have expanded in popularity as a result of the crisis, musicians have not seen much improvement. Because touring is now the primary source of income for musicians, it becomes even more obvious when concerts are canceled owing to an epidemic and revenue continues to be inequitable through streaming payments.

The Union of Musicians and Allied Workers (UMAW) has launched a campaign demanding Spotify adopt UCPS, increase transparency about payouts, and pay 0.01 per stream under its Justice at Spotify initiative. According to the UMAW, the platform currently pays an average of 0.0038 per stream, but Spotify itself does not disclose this figure because pay per stream is not a useful metric to evaluate.

“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,” said Joey DeFrancesco in a statement to TechCrunch on behalf 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.”

In comparison, Spotify pays out 0.01 per stream on average, as revealed in an internal communication leaked earlier this year. Tidal is said to pay around the same amount, although the company hasn’t confirmed these figures. But Spotify, which has the largest number of paying subscribers among the three streaming leaders, pays the least.

Spotify claims that, unlike other streaming services, it may pay less per stream because Spotify listeners listen to more music than users on competing platforms. Also, unlike Apple Music or Tidal, which offer a free tier financed by advertising that might skew their pay-per-stream metrics, Spotify provides a free tier that is subsidized through advertisements.

Payouts are not directly distributed to the artist; rather, they are shared across an artist’s record labels and publishers. An artist’s earnings per stream is determined by their industry contracts. However, according to the UMAW, an independent musician would need to accumulate 283,684 Spotify listens each month in order to pay a monthly rent of 1,078—which is more than half of what it presently costs!

In 2018, Spotify took a minority stake in DistroKid, but just last month, Spotify’s quarterly SEC filing revealed that it sold two-thirds of its equity interest for 163 million. It’s rather odd timing for DistroKid to strike a deal with Tidal, a more musician-friendly service, to implement the UMAW’s demands right now.

Spotify thinks that user-centric payments would not be particularly beneficial to musicians. According to a research from the National Music Center in France, yearly compensation for artists outside the top 10,000 may vary by “at most a few euros.”

“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,” says the platform’s website.

In conclusion, while Tidal’s deals with independent distributors — a form of UCPS — may be appealing to artists, it is worth keeping in mind that other streaming services have already implemented similar models without issue. So, maybe the model of Tidal’s contracts with independent dealers – a type of UCPS – might work better for musicians.

A 2 monthly bonus per user for being their most streamed artist may add up over time. However, platform-wide modifications like these could require trial and error to figure out how streaming platforms can run their businesses while also paying musicians fairly for access to their music.

“It’s a step in the right direction for streaming subscription money to directly support artists actually being streamed — and as a Tidal subscriber myself, I’m happy to learn about this step. That said, a 2 a month bonus — only to one artist per user, and only to artists signed up via [independent distributors] — is not going to add up for too many musicians and feels gestural,” Sadie Dupius, a UMAW member, told. Dupius fronts bands like Speedy Ortiz and Sad13.

“I’d be curious to know how many self-distributed artists are the #1 most streamed artist for any subscriber per month in general. It also excludes artists with label distribution, who also need fair streaming royalties, especially when they’re splitting 50% or more of those royalties with a label. It would be great to see more of this subscription fee proportionally divvied up to more music workers, regardless of how their songs are distributed.”