Music Royalties: Am I Helping My Favorite Bands?

I have been using Rhapsody, from Real Networks for about a couple of years now, and began to wonder if I've been shortchanging my favorite bands of their hard earned dough. Rhapsody allows me to listen to pretty much anything I want all day for $9.99 per month. I don't get to download the music like Itunes listeners do, and that's OK. still, I wondered how much does Porcupine Tree get paid when I listen to "your blackest eyes?" it turns out that royalty models are varied and meager. in most instances, the band gets paid between one half of a penny to three cents per stream of a song.....

My research led me to one web site that was analyzing new ways to pay bands for their efforts:

Let's take a look at a specific example, Synchronicity, the final studio album by the Police, released in 1983. According to Last.fm, the online music community and listener-tracking site, 68,247 members have listened to the Police recently and tracks from Synchronicity have been spun 44,624 times. (No doubt a very small percentage of total listeners worldwide, but it's probably safe to assume that their collective listening habits mirror the total audience for the band.) As you might guess, the hit single "Every Breath You Take" is the most-listened to song on the album, accounting for 14,281 recent listens by Last.fm members. And "Mother," guitarist Andy Summer's sole songwriting contribution to the disc is the least popular with just 1,154 listens (sorry, Andy).

Multiply $9.99 by each song's percentage of total plays for all of the songs on the album and you get a price list that looks like this:

Synchronicity, the Police, Priced By Listening Habits

Song	Price $
Every Breath You Take	3.20
King of Pain	1.67
Wrapped Around Your Finger	1.41
Synchronicity II	0.90
Tea in the Sahara	0.80
Synchronicity I	0.41
Murder by Numbers	0.35
Walking in Your Footsteps	0.35
O My God	0.33
Miss Gradenko	0.32
Mother	0.26

Based on Last.fm listening statistics as of 1/26/2006

This isn't going to work. The first big problem is that the $3.20 price for "Every Breath You Take" would be unpalatable to consumers (and very likely to drive customers who would've paid 99 cents for the song straight to a file-sharing service). Also, it exceeds any price the major labels would consider for a single-song download. And for a band that was truly a one hit wonder, a single song might account for even a larger portion of the $9.99 album price. Then you have the potential problem of unpopular tracks being priced below the statutory mechanical royalty rate.

Clearly, a straight-line popularity pricing strategy isn't the answer. You might instead start with a minimum track price and adjust upward based on track popularity, or perhaps set a maximum price for the most popular track, say $1.99, and work your way down to price the remaining tracks.

Yet even with such modifications, there's another issue, a band might release a song on several albums -- on the original album, as part of a greatest hits collection, etc. While "Every Breath You Take" accounts for around 32% of the tracks plays of the Synchronicity album, in the context of the Police's greatest hits CD, it accounts for fewer spins. Popularity would have to be considered in the context of a band's entire catalog. The problem is, overall song popularity changes over time and very suddenly whenever a band releases a new album.

Finally, how could this method work for new releases? A record label might choose the "singles" from a new album before its release date, but there's no way to accurately predict which songs fans will, on average, listen to the most.

So I'm nixing song popularity as the basis for individual track pricing. Stay tuned for Part III of this series and a proposed pricing plan that would maintain the $9.99 album price, give the labels more money for the most popular tracks, yet still keep music fans happy.