Music artists have long since complained about receiving too little compensation from streaming services. Publishers and songwriters will soon receive up to 44 percent greater royalties from works used on popular streaming options such as Pandora, Spotify, and Apple Music.
The increase in payouts stems from a recent ruling made by the United States Copyright Royalty Board. Beginning this year, payouts will be determined based on a percentage of a service's revenue. In 2018, the rate is set at 11.4 percent of total revenue. This amount is divided between all artists who are owed royalties based on number of track plays.
Over the next five years, the percentage of revenue shared with songwriters and publishers increases roughly 0.9 percent annually. In 2022, the rate tops out at 15.1 percent. If streaming services write off a large portion of their content acquisition costs as expenses in attempt to lower measurable profit, there are separate rates based on a percentage of total content costs to ensure artists are paid appropriately.
Under new guidelines for compensation, there are no limits on how much content creators can earn. Additionally, there is a 1.5 percent per-month late fee given to distribution services if artists are not paid on time.
One area of contention among music creators is the introduction of free trials. The royalty rate for free trials and promotional offerings remains at zero. Any plays received from users taking advantage of free trials do not count towards any profit sharing for artists.
As the costs rise for distribution and streaming services, it is likely that subscription prices may be increased to compensate for additional expenses.