Attracting artists to music streaming platforms

• Explores revenue sharing rule used by streamers in the music industry. • Unclear whether streamer benefits from setting royalty rates to attract popular artists. • Artist's benefit from streaming music depends upon makeup of artists on the streamer. In this paper, we investigate the conditions under which it can be profitable for artists to distribute their music through a streaming platform. These conditions determine the royalty the streamer must award to artists in order to lure them to its platform. We find that the platform may exclude more popular artists when the extent of heterogeneity in the artist population is significant, namely when there is a big gap in the size of the artists’ fan bases. Our results also show that such exclusion is more likely when the negotiating position of the platform vis-à-vis the artists is weaker. A weaker position may arise, for instance, when subscribers value the variety offered by the platform to a lesser extent, when competition between the streaming platform and the digital music store is significant, and when perceived ownership results in a significantly greater consumer benefit when purchasing instead of streaming content. Our model accounts for a revenue sharing rule that considers an artist's share of streams on the platform when determining royalty payments. Interestingly, the benefit an artist derives from streaming her music is dependent upon the makeup of artists on the platform.