Why Does Naver Cling to Its Monthly Music Royalty Settlement Method?

Consumers Pay Only Music Copyright Holders: Will the Existing Chart Top 'Proportional Distribution System' Issue Be Resolved?

[Asia Economy Reporter Bu Aeri] "I made a song, but the money is going somewhere else, and the money from my song should come to me. I should receive it~"

Naver recently selected the famous hip-hop artist Mamison to launch the 'Naedonnaedeut' campaign, which means "I hope my money goes to the music I listen to." Mamison is known for criticizing the music industry's 'manipulation of music charts.' On the 21st, Lee Tae-hoon, Naver's Music Business Leader, attended a seminar hosted by the Digital Economy Forum and advocated for changing the music royalty settlement method. Since the current 'proportional distribution system' is the cause of music chart manipulation, he proposed switching to an 'individual settlement' method. It is unusual for a specific company to actively address this chronic problem in the music industry.

◆ Introduction of Individual Settlement Method in Naver VIBE = According to the industry on the 22nd, Naver will introduce a new music royalty settlement method called VPS (VIBE Payment System) to its music service 'VIBE' within the first half of the year. VPS is an individual settlement system that pays money only to the copyright holders of the music that consumers listen to. The existing method is the 'proportional distribution system,' where more money is received by ranking higher on the music charts. Most domestic music sites such as Melon and Genie Music adopt the proportional distribution settlement method, which distributes the total revenue from users' streaming service monthly subscriptions and advertising fees according to each artist's streaming share.

Under this method, as long as a song ranks high, it can receive a large amount of music usage fees, making it difficult to resist the temptation of 'music chart manipulation.' Brokers used macros (automated repetitive programs) to endlessly replay songs to raise rankings and earn profits. In the proportional distribution system, the monthly subscription fee of a user who only listens to indie band music is also transferred to idol singers at the top of the charts, which has been criticized for exacerbating the 'rich get richer, poor get poorer' phenomenon.

Naver believes that the individual settlement method can solve these problems. It calculates the settlement by dividing the subscription fee paid by an individual user by the total number of plays and then multiplying by the number of times a specific song was played. For example, if a single account repeatedly plays a song 30,000 times through 'music chart manipulation,' the proportional distribution system counts all 30,000 plays for settlement, but the individual settlement method counts only the share of that single account since it was played only by one account.

Lee Tae-hoon, Naver Music Business Leader, said, "The individual settlement method can reduce chart manipulation because it can resolve the phenomenon where usage fees are concentrated on specific songs due to repeated plays," adding, "In the individual settlement method, mechanical repeated plays do not affect the settlement."

◆ Shaking up the market as a latecomer?= The music streaming market is growing with competition among Melon, Genie Music, and FLO. According to a survey conducted by the Korea Creative Content Agency last year with 3,000 respondents, 63.5% of music users preferred 'music streaming' as their form of music consumption. Naver is focusing on VIBE because it expects music streaming to be a new source of revenue.

Some speculate that Naver has other motives for focusing on the music royalty settlement method. Since Melon and Genie Music have already dominated the market, it is interpreted that the latecomer Naver is trying to shake up the market by promoting 'fair settlement.' According to the music industry, the domestic music platform market, which was worth 700 billion KRW in 2017, is growing to about 1 trillion KRW annually last year. According to data analyzed by the mobile big data platform company IGAWorks, as of March, Melon had the highest monthly active users (MAU) at 6.17 million, followed by Genie Music (2.91 million) and FLO (1.56 million). Naver VIBE's users are around 370,000.

An industry insider pointed out, "From Naver's perspective, creating an issue around music chart manipulation or music royalty settlement methods and having 'VIBE' mentioned alongside Melon and Genie Music brings significant promotional effects."

This content was produced with the assistance of AI translation services.