Here's a modest proposal for paying out royalties to artists for streaming music. This is THE problem confronting music today. Streaming services like Spotify, Pandora, Slacker, and now even Apple Music have become the easiest and best way for consumers to discover and play music, but they don't pay out much money to artists. And they don't pay out the right amounts to artists.
We don't know, but here's my proposal.
First consider the revenue side. Streaming services earn money from two sources, monthly fees and ads. The ads are mostly pay per impression. So every streaming service can easily compute the revenue they've earned from each subscriber.
Next, costs. The streaming services have operational cost, and they have to make money. Say they have a net margin of 50%.
And finally, the payout of royalties. Each streaming service already keeps track of how much time each user is listening to music (not ads, and not paused), and how much time they spend listening to music from each different artist. So here's the formula:
The Payout for each artist is the Sum of the Revenue from each subscriber times the Total time that the subscriber listened to this artist, divided by the Total time the subscriber spent listening to music. The M is the percent margin.
Some good things about this:
So it's easy, and it's fair. What do you say, Apple?