The current model of music streaming is truthfully rather simple: all of the money generated by the streaming service is divided by the total streaming plays, and the money is proportionally distributed to creators. The “pro-rata model
” is what the current system is called, but how exactly did we get to it? For that let’s go back to 1997.
While early online experiments gave away MP3s—or in the case of David Bowie, even digitally sold an entire album—legalized music streaming didn’t take real shape until MusicNet and Pressplay launched in 2001 in response to the peer-to-peer file-sharing of Napster. The services were ultimately unsuccessful, as it only took a couple months post-launch for artists to realize an issue stood in front of their collective class. A singular subscription fee for music, while a steady check for labels, rather quickly depreciate the value of recorded music for artists and put all the power in the hands of labels. The New York Times in February 2002 reported
just how unhappy artists were with this new arrangement. Major artists quickly phoned their lawyers before the first paycheck was sent out by either platform. Ultimately both platforms fell apart and an early digital confrontation was averted, but that didn’t stop major labels’ continued drive towards this goal.
When YouTube arrived in the mid-2000s, it was eventually corralled into negotiating contracts with major labels in order to host the most popular content on its platform, music. This oligopolistic strong-arming by major labels occurred with the emergence of each new streaming service, ensuring the royalty setup would be pro-label, not musicians. The pro-rata model would continue to populate subsequent platforms from the 00s until present day. Artists have known the deck was stacked against them for well over a century, and while streaming—and, broadly speaking, the internet—was allegedly going to even the playing field, it in fact has only heightened inequality in music. Thus, I cannot advise enough against viewing user-centric streaming as a magic solution to fundamental power imbalances within the industry.