Music and Royalties: We Are Starving Ourselves (Part 4 of 4)

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Clearly, the music business is far from perfect and has weathered some dramatic issues in recent history. However, music still maintains an important role in life, culture and entertainment. Some music lovers are beginning to realize the shift from music ownership to music accessibility changes their experience with both the artists and art itself. For example, a recent article in the Wall Street Journal asks readers to question the fundamentals of their music streaming experiences. “Music is supposed to endure…It is possible to form a relationship with an album or artist on a streaming service – but you may have a hard time finding it again in the sea of other things you’ve also marked Favorite…And if I ever decide to drop my streaming service – or it goes out of business – what happens to my musical life?”1 These thought provoking questions and others have sent some listeners digging for their old iPod’s buried in their storage closets to use MP3’s again. Vinyl sales have begun to make a moderate resurgence in the market, but prove to be costly and time-consuming to manufacture. In the music publishing world, boutique online companies are opening their doors to artists to give them tools to promote themselves. MusicSpoke, for example, provides artists with a platform for digital sales and gives artist more control than traditional publishers. Equally as important, MusicSpoke composers receive the majority of the proceeds from the sale of their work. 2 Another shop, based in Fort Worth, TX called The Music Bed, enables artists to submit their work to an online database, where filmmakers are able to select music from their catalog. The Music Bed is a full service licensing platform that makes quality music easily accessible and artist-friendly. 3 These innovative companies are setting an example for creating hospitable environments for artists to sell and feature their work in advantageous ways.

To conclude this series, the following direct quote taken from Spotify’s website captures the modern spirit of new musical giants towards royalty payments. “Again, we personally view “per stream” metrics as a highly flawed indication of our value to artists for several reasons. For one, our growing user population might listen to more music in a given month than the month before (resulting in a lower effective “per stream”), while generating far more aggregate royalties for artists. As with any subscription service, our primary goal is to attract and retain as many paying subscribers as we possibly can, and to pass along greater and greater royalties to the creators of the music in our service. Theoretically, another service could generate higher effective “per stream” payouts simply by having users who listen to far less music. We believe, however, that our service and the lives of artists will both be best if the World’s music fans enjoy more music than ever before in a legal, paid manner.” 4 Reading between the lines of business jargon, Spotify asserts itself as completely justified and celebrated in comparison to piracy criminals. The measuring stick of success has tumbled down, falling past mediocrity, and now resides just above the darkest depths of humanity. Gone are the days when corporate icons strive to achieve new ethical heights or provide a beacon of hope for equality and respect. The new normal, simply put, is just to beat out the criminals. As long as patrons contribute to a music industry led by corporations that barely scrape by ethically, each and every listener actively robs themselves of a world where creations are accurately rewarded and people are respected. Unfortunately, the world seems hopelessly addicted to instant gratification. The nectar of limitless content is too sweet, and it is doubtful whether people are strong enough to wake up from this trance of free.

 

 

1 Fowler, Geoffrey A. “Apple Music Is Here, But Is Streaming Right For You?” http://www.wsj.com/articles/apple-music-is-here-but-is-streaming-right-for-you-1435625669

2 MusicSpoke. “About Us | MusicSpoke.” http://musicspoke.com/about-musicspoke/

3 MusicBed. “MusicBed About Us.” https://www.musicbed.com/about

4 Spotify, Inc. “Spotify Explained.” http://www.spotifyartists.com/spotify-explained/

Music and Royalties: We Are Starving Ourselves (Part 3 of 4)

Music within Television and Film

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Within the entertainment industry, music plays a vital role, along with television and movies. These industries cross-pollenate with each other to create a web of highly controlled media products. Control, in this sense, is another word for money. For example, it is highly advantageous for a record label to negotiate a song into a television studio’s episode. The record label is able to work with a reputable entity that pays well and provides an additional outlet of publicity for the song. The Weeknd, one of today’s most popular groups, was able to catapult themselves into global stardom with their inclusion on the soundtrack of the movie 50 Shades of Grey. Although many have mixed feelings about the movie, its success is certain after making $81.7 million in the first three days of release.1 The studio released The Weeknd’s single “Earned It” before the movie, which helped garner publicity and generate excitement about the movie. However, this type of success is rare at best, with most movie projects struggling in an over-saturated market.

 

Both television and film have been affected by the digital age, with some companies resorting to selling streaming rights for their products at a reduced price. Internet piracy and leaked footage have also taken their toll on industry giants. In turn, this negatively affects the studio’s budget for any given television series or movie. The publicity gained from inclusion in a television series or movie is no longer accompanied by a guaranteed large payday for artists. Even when a song lands a coveted feature spot in television or film, the preverbal “slice of pie” is cut up several more times. A quote by John Mackey sums up the drastic inequality that causes dissonance within music business entities. “I’ll say that again. If you are a published composer, you keep 10% of the list price on a set of music. When I told this to somebody in Hollywood once, the reaction was, “wait, that’s backwards. The agent gets 10%; you get 90%.” Not in music publishing. A very established composer might get a great deal and see 12% or maybe even 15%, but that’s unusual.”2 He goes on to explain how exactly the money is split between the publisher, seller and artist. “Granted, the publisher doesn’t get all of the other 90%. The music store keeps 40-50% of it. But the fact is that if you publish a piece through a standard publisher and the retail price is $10, the music store gets $5, the publisher gets $4, and the composer receives
$1. But if you’re self published and you sell the sheet music directly (rather than through a music store), you get the full $10. Even if you sell it through a music store, you’ll see $5, which even by my music-school-level math education, is better than $1.”5 These types of facts and figures explain why many people feel that the music business fails to accurately reward each entity with the appropriate compensation percentage.

 

Lang, Brent. “Box Office: ‘Fifty Shades of Grey’ Explodes With Record-Breaking $81.7 Million.”

2 Mackey, John. “Advice For the Emerging Composer: Publishing, With Guest Blogger John Mackey.”

Music and Royalties: We Are Starving Ourselves (Part 2 of 4)

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Behind every Hollywood star or professional athlete, there is a team of people working full-time to make sure they are a success. The same is true in music, with the artist’s success being directly related to the quality of work by their record label, agent, songwriters and publishers. This work deserves adequate compensation, which has proven more difficult to attain in recent history. Using a contract, artists often sign away rights to songs to gain financial and promotional support from record labels and publishers. These entities are suffering from the negative financial impact of streaming and the decline of purchased music. This trickles down to songwriters and A&R managers, who earn their negotiated percentage from a smaller amount of total profit from their song. Faced with pennies on the dollar, in comparison with royalties from purchased music, record labels have been forced to adapt in the harsh financial climate of the digital age. Downsizing only accommodates so much savings, and costly new investigative departments have sprung up to combat use of songs without permission on platforms like YouTube. Some findings from these investigations can lead to sizable awards in copyright infringement lawsuits, up to $150,000.1 Recently in 2008, Viacom launched a landmark copyright infringement case against YouTube, totally $1 billion in claims. However, these cases require expensive lawyers and often take years to accumulate data, testimony and evidence for a trial. Music business companies are faced with a choice between the lesser of two evils; either allow copyrighted material to roam free across the internet or suffer exorbitant costs in an attempt to police – essentially – the world.

An answer to this dilemma appeared in the form of music streaming, which serves as a low-cost alternative to piracy. However, music streaming services justify absurdly low royalty payments, because they feel their only competition is online piracy. Before the turn of the century, an album sold for a certain price to consumers, regardless of what month it was or how many people purchased the album. Looking back, this process appears to be surprising straightforward. It provided a relatively reliable way to quantify how successful and valued an album was to the public. Today, payments to an artist from streaming services cannot possibly be an accurate reflection of how global listeners value a certain piece of music. Instead, compensation for an artist has become a fluctuating number that is affected by several factors outside the quality or popularity of the music. Royalty payments are beginning to appear more like irregular dividends from a risky stock investment in the New York Stock Exchange, affected by a multitude of macroeconomic factors. The new truth for recorded music has become fluctuating, obscure compensation for an artist’s physical recordings. Just take a look at the following formula used by Spotify!

See below for explanations of each item.

I’ll save you from doing the math. The “Artist Payout” is pennies on the pennies of a dollar. How viable is it for artists to be dedicated full-time to producing music if the payout amounts to so little? If legislation does not change, the creative heartbeat of this country could be at risk. This year, the U.S. Copyright Office released a 245 page report outlining issues and their proposed changes to ancient royalty legislation, most of which was written in the early 20th century. The question is, will these proposed changes be passed in time to save a starving industry.

1 Levy, Mark, and Saba Siddiqui. “What’s Legal YouTube. Fair Use Vs Copyright Laws.”

Image Source: Spotify, Inc. “Spotify Explained.” http://www.spotifyartists.com/spotify-explained/.

Music and Royalties: We Are Starving Ourselves (Part 1 of 4)

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In recent times, the music industry has been rocked by change in both how music is being recorded and the mediums in which it is distributed. There are more avenues that ever to release creative content, yet many artists find today’s market to be the most challenging it has ever been. Record labels are redefining their roles in the industry, while major publishing houses fight an onslaught of online piracy. Television shows and movies are paying exorbitant fees to include chart-topping hits in their latest upcoming project, only to find that most of these tracks are declining in popularity by the release date. Movie soundtrack albums are dwindling, while composers fight for extremely limited and controlled positions within film scores and television soundtracks. It seems ludicrous for an individual to surrender themselves to the music industry without some serious hesitations. However, wherever there are people, money is always exchanging hands. The 21st century music landscape is full of people and the opportunity for profit, but fierce business and listener apathy have left many players in the music business reeling in a panicked scrounge for their measly cut.

Several new corporations in the music industry have arrived with astronomical success, including Pandora, Rdio, Spotify, iHeartRadio, and Apple Music. They all differ in price, platform, and software, but together, comprise the biggest names in music streaming. The business model for streaming services is complex to say the least. For some streaming services, the vast majority of their users pay absolutely nothing at all for their services.1 Companies provide these users with periodical advertisements, and include other limitations on their experience. Some streaming companies will eliminate off-line music storage, prevent skipping forwards or backwards in a playlist, and limit user choices within the application. Paying customers are enrolled in a subscription-based fee, usually monthly, that provides seemingly infinite access to music of any genre. They are also afforded an off-line storage mode that functions exactly like a purchased track on iTunes, as long as the subscription is active. Other companies like Rdio provide streaming of terrestrial radio stations, eliminating the need to listen to a certain station in their geographic area. With all this musical variety in a “payment optional” system, the clear winner of this industry innovation is the general listening public, besides of course, the top executives within their respective musical empires. However, history illustrates that every good thing comes at a price, and in this case, the artists, record labels, songwriters, and publishers are paying a very dear cost.

The music business revolution is having a tremendous negative impact on how artists are being compensated for their work through royalties. For example, at Spotify, one of the world leaders in music streaming, the business pays different royalties for the same song every month. To provide an illustration, consider the song “Hotline Bling” by Drake. “If Spotify users stream more music in August than July, but the same amount of Drake, Drake would see a smaller check for the same play count. This could even happen despite an increase in Spotify’s monthly revenue. If Spotify’s monthly revenue is flat, but Drake’s stream count grows faster than total track volume, he could be paid less per stream but generate more revenue. If revenue increases, Drake could see greater royalties, even if stream count drops.”1 In addition, Spotify employs a complex formula to compute a royalty figure that differs by country and their currency value, advertising and subscription revenue, number of premium subscribers, and an artist’s popularity. The formula for an artist’s popularity is found by multiplying Spotify’s monthly revenue in a given country by an artist’s popularity (artist’s streams divided by total streams) by seventy percent to publishing owners by the artist’s royalty rate. Although the formula includes multiplying four numbers, the final total is often exceedingly tiny. The average stream payment is between $0.006 and $0.0084 per stream.2 After reviewing this arduous process, it is clear that the money an artist receives from streaming services has very little to do with the actual value of their product.

 

1 Nussbaum, Daniel. “5 Reasons the Music Business Is in the Toilet – Breitbart.” http://www.breitbart.com/big-hollywood/2015/07/28/5-reasons-the-music-business-is-in-the-toilet/.

2 Spotify, Inc. “Spotify Explained.” http://www.spotifyartists.com/spotify-explained/.