Warner Music Group will now distribute artist royalties according to individual users

Warner Music Group has become the first major label to adopt a ‘fan-powered’ royalty model, Mixmag has confirmed. The new system, which follows in the footsteps of SoundCloud, will distribute royalties according to how many individual users listen to an artist's music.

SoundCloud announced in 2021 that it would be the first music platform to direct fees from its paying subscribers to the artists they stream. The company describes the new model as “a more equitable and transparent way for independent artists who monetise directly with SoundCloud to get paid.”

Under the old pro-rata model - which is still adopted by streaming services such as Spotify and Apple Music - artists get paid based on their share of total streams on a platform. The streaming service usually takes away around 30 percent of this revenue in "overhead costs."

This traditional model has been criticised by smaller and up-and-coming artists, who claim that it allows huge global names to generate vast amounts of revenue, leaving little for the majority of artists who have not achieved similar success.

Statistics show that the fan-powered model allows 60 percent of independent artists to earn more royalties compared to using the traditional pro-rata model.

When SoundCloud officially launched their new model in April 2021, chief executive officer Michael Weissman said: “Many in the industry have wanted this for years. We are excited to be the ones to bring this to market to better support independent artists.

“Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fan. Fans can directly influence how their favourite artists are paid.”

The reforms come after the UK’s competition watchdog launched a market study into the fairness of streaming last October. World-renowned acts such as Radiohead, Elbow, and Nadine Shah gave evidence, and MPs stressed the need for a “complete reset” of the music industry to address the “pitiful returns” received by artists.

In April 2021, over 150 artists – including Paul McCartney, Kate Bush, Damon Albarn, Chris Martin, Noel Gallagher and Wolf Alice – signed an open letter to Prime Minister Boris Johnson asking to help reform the streaming economy.

Mix Magazine reports that under WMG's new fan-powered royalties system, or FPR, "each fan's subscription or advertising revenue is distributed among the artists they listen to, rather than being pooled under the traditional pro-rata model the music industry has been using for over a decade.”

Warner Music Group's chief digital officer, Oana Ruxandra, says "The evolution of the music industry brings new ways to create, consume and monetise," Mix Magazine reports.

Ruxandra adds: "As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximised. SoundCloud has been an amazing partner in connecting artists and fans, deepening our relationship will allow us both to proactively build for the future."