Time for a serious artist living wage-royalty payment mechanism?
Last week Thom Yorke set the music streaming business on fire. Now the 30,000 strong musicians union in the UK has started a campaign focusing on fair royalty payments for songwriters and performers similar to that paid by terrestrial and commercial radio. Is this a good thing for the music business? I would argue yes for artists and managers and maybe not for some record labels…
I wrote an article about the streaming payments debate last week, which focused on the numbers – read low payouts even massive artists receive for millions of streams on Spotify. But let me be clear Thom Yorke can be a hypocrite sometimes.
Firstly, Yorke’s band Radiohead would not have the fan base it does today, little own the career he has without the 3-4 albums of investment in recordings, marketing and tour support his former label provided Radiohead with. Then he has the hide to berate the very same label system that made him and his band globally recognised. Yet I do believe it is right of him make a stand about what he sees as a machine that rips artists off even more and with the collusion of major labels.
One reason Spotify is the service picked on amongst the music streaming fraternity and no doubt globally recognised artists is that they in particular negotiated a special deal with the all of the key rights societies including PRS in the UK.
This sweetheart deal delivered Spotify a discounted royalty payment rate, which other streaming services rightly note presents a serious issue in respect of competition laws on both sides of the Atlantic. There are multiple other streaming music service including Deezer, rdio and many others which actually payout 2 – 3 times the royalties that Spotify does to independent artists because they do not have Spotify’s sweetheart deal.
Lets be very clear that the only reason Spotify secured such a deal was because the big four major labels at the time negotiated equity totalling upwards of 18% in Spotify. Now the clear conflict of interest arises when other streaming services are paying out 2 -3 times the amount that Spotify is to rights holders and artists. The issue being that the major labels will enjoy a nice payoff when Spotify goes for an IPO, which is a matter of when not if. They even enjoy nice upfront advances for every territory from all streaming services and yet pay none of this through to artists.
Now I’ve had heard cries of that is not true. Yet not one large global artist has stated on record that they received a royalty payment detailing the advance their rights holding label received. TMV reached out to a number of labels and the only answer we got was that “information is commercially sensitive and therefore cannot be divulged”. So essentially major labels have it two ways and win either way. Major labels show me a contract that clearly states you pay this revenue through to artists and we will change our stated view. The ball is in labels court to come clean and show the transparency that is expected of them.
Whereas nothing has changed for artists – they are still being screwed by labels in most cases, only this time labels also own the streaming mechanism in respect of Spotify and hence have a vested interest in ensuring low royalty payouts ot artists and that the Spotify IPO happens. They can then collect their nice payoff and not have to distribute that through to the artists whose catalogue they licensed to get them that deal in the first place. Sadly despite this it is Spotify who cops all the flack and the labels are no doubt rather happy with such an arrangement. Who wouldn’t be?
Lets be clear, music streaming does have a place in the evolving digital music ecosystem, however to date it is rather minor in respect of the royalties that get paid through to the creators of music, artists themselves. This debate needs to ensure a clear delineation is made between what Spotify has paid out to rights holders as a gross sum, and what artists are actually receiving from rights holders in respect of these Spotify payouts. As this is where the core of the issue lies.
TMV does advocate a fair and equitable royalty split should be negotiated much like publishing money is paid out with 50% going to the publisher and fifty percent going to the artist, with the label then taking its share out of the 50% paid through to it and the remainder being paid through from the label the artist. Afterall, without artists, labels do not have a viable business.
This brings me to my final point, which is taken from a comment on the article titled “Is Spotify Bad for Music?” in the Guardian (http://www.guardian.co.uk/commentisfree/2013/jul/21/spotify-bad-for-music-debate) newspaper. The quote sums it up perfectly in my view stating that just because Spotify has paid out over $500 million in 5 years “That doesn’t mean that Spotify doesn’t chronically underpay its artists. Spotify is a machine for getting investment, not a plausible business.” Does that mean it is bad for music? Not necessarily. However it does raise more questions than it answers.
If Spotify is not a viable business, and from a purely business perspective it clearly appears it is not. In five years of operation it has failed to deliver a profit. As artists are complaining of dismal payouts and it continues to receive increasing investment from Wall Street (Goldman Sachs and Coke Cola to name but a few) is it nothing more than a ponzi scheme concocted by the music business to help sustain major labels declining businesses? The reason TMV states this is that Deezer, Spotify’s only serious competitor in paid subscriber numbers is actually profitable.
I do use streaming services but make a consciences decision to not use Spotify due to clear conflicts of interests in respect of major label equity in the service and appalling royalty payouts to artists. Instead I use either Deezer which yes is part owned by Russian Oligarch Len Blatvatnik who also owns WMG. However at least Deezer pays out more than double what Spotify does per stream to artists. Rdio is also another great service albeit after the revelations that Skype, which owns Rdio, has been handing over user data to the NSA I have decided to stop using the service.
Moving forward lets keep it real and ensure artists receive fair and equitable recompense for enabling digital music services part owned by major labels to launch an IPO off the back of artists creative works. This requires consensus from all parts of the music business value chain.