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Songwriters Getting Paid as the Robots Listen

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There are a few options for businesses to legally play music on premises, whether that business is, say, a nightclub, restaurant, or hair salon. An in-store music service like Mood Media (formerly Muzak) can supply channels of pre-cleared tunes for a subscription fee. These services are like radio in most cases, as the business won’t be able to choose any particular song that’s played. The business could also just play music by friends and enter into a direct licensing agreement with each songwriter. That would be a huge hassle and dramatically limit the available catalog.

The most popular option is to pay for the compulsory licenses offered by the performance rights organizations – PROs like ASCAP, BMI, and SESAC. These licenses allow the business to play songs represented by each PRO. A few factors determine the fee, such as venue capacity, and the business usually obtains a license from all the PROs. For one thing, it’s a lot of work to determine which PRO represents a song the venue wants to play, and the music customers would like to hear are distributed amongst all the rights organizations. Paying fees to all creates full coverage and the freedom to play whatever you’d like.

A venue’s requirement to get a compulsory license is one of the most misunderstood aspects of music publishing. The venues themselves especially misunderstand this requirement. I’ve spoken to many business owners who don’t understand why they have to pay for such a license. The phrase “it’s nothing but a shakedown” is used on more than one occasion. But the simple fact is this: if your business is profiting off of someone else’s music – and playing music to enhance your business qualifies – then the songwriters should get a cut of some sort.

There is another argument made by business owners that I find harder to dispute. Nightclub owners often argue that the fees they pay to the PROs aren’t going to the songwriters whose songs they are playing. This statement is often true. Presently, the PROs have no way to track the songs played in their licensed venues. The businesses could submit a list of all the songs played in a day, but no one is going to do that. Instead, the PROs pool the collected fees and distribute the royalty to songwriters they assume are the ones getting played the most. In other words, popular songwriters, for the most popular songs.

I can empathize, as I DJ’ed hundreds of times exclusively at underground clubs and very few of the songwriters I played (if any) ever saw a penny. I’ve heard tales of clubs in some territories tackling the problem by having the DJs write down all the songs from their sets. I guess it’s the thought that counts, but this is obviously an unreliable and haphazard solution.

There’s a change coming, though. Advances in audio recognition are making song tracking in venues possible. Using technology popularized by the likes of Shazam, songs get identified and, in turn, the appropriate songwriters paid. From a story in Complete Music Update:

Collecting societies PPL and PRS For Music have confirmed that they are expanding a pilot project to test the use of music recognition technology in clubs, pubs, bars and hotels to monitor what music is being played in those spaces.

Peter Marks {CEO of UK clubbing chain The Deltic Group} has welcomed the pilot, saying: “Music is the very heartbeat of our business and it’s in our interest to see that talented artists are rewarded for their creations. With online streaming and other digital technology, it’s increasingly difficult for songwriters and musicians to make a living from their creations, so anything we can do to help and attract and support the latest local talent has to be a good thing”.

I believe GEMA in Germany has also been testing this out.

The ramifications are enormous and welcome; accurate tracking in venues (and eventually across other outlets such as radio and sporting events) will create a great benefit for non-mainstream songwriters.

It remains to be seen if US PROs might look to adopt this technology. The fact that there are multiple PROs in this country may prove to be a stumbling block. A device that listens, identifies songs, and sends data to the PROs would have to be installed in every participating venue. It would be a hassle if each PRO had its own device for every business to install. Could they agree on one shared device? Part of me thinks it unlikely as the US PROs are fiercely competitive. That said, the recent news of ASCAP and BMI collaborating on a musical works database gives us a glimmer of hope.

The US is often the country left behind when it comes to advances in rights management. Let’s hope our industry is proactive in embracing this technology solution to a longstanding problem.

All Is (Not) Fair In Love and Streaming

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Complete Music Update:

Artist managers argue that they need to know more detail about the deals done between the labels and the streaming services, so that they can properly audit the streaming royalties their artists receive. This would allow them to better understand the streaming business and advise their clients on which platforms to champion. They could also then be reassured that the value of the booming streaming market is being fairly shared between all stakeholders within the music community, ie artists and songwriters as well as labels and publishers.



Noting that the new deal struck between Universal and Spotify – and the pending deals due to be agreed with Sony Music and Warner Music – continue to shrouded in secrecy, the CEO of the Music Managers Forum, Annabella Coldrick, said: “The news that Spotify and Universal have struck a new licence deal to help support continued streaming growth is welcome. However the lack of transparency around the terms of such deals means it is still impossible to properly understand and verify the flow of money from fan to artist and ensure those who create the music share in the growth in its value. Transparency is essential and should be baked into any new deal, not hidden behind NDAs”.



Music Tech Solutions:

The same criticism could equally be made of non statutory direct agreements by digital aggregators like CD Baby, Tunecore. LyricFind, Pledge Music, the Orchard and Loudr, each of which offer varying degrees of transparency of their own books, much less the deals they’ve made with digital services on behalf of the artists, songwriters, labels and music publishers appointing them as agents for relicense of music.



It would be very simple for aggregators to disclose the terms of their deals or to at least summarize them so that artists or songwriters who are considering who to sign with could compare payouts. It’s fine to tell people what their royalty split, flat fee, or distribution fee might be, but the assumption is that the revenue stream being shared is identical from one aggregator to another.



A related hot topic I encountered on more than one occasion at last week’s Music Biz 2017 conference was access to data, and how this varies from deal to deal. For example, it’s well known that the majors have negotiated access to more detailed ‘play’ analytics from Spotify (such as listener retention, more demographic options, and so on). And a plausible rumor is that the majors have negotiated others not have access to this information, giving preferred partners a leg up. Herein lies the danger of a few companies becoming the sole distribution portals for music streaming.

Mechanical Royalty Rates Revisited

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America’s Copyright Royalty Board yesterday got around to thinking about what the country’s mechanical royalty rates should be for the next five years.

Mechanical royalties – paid to songwriters when recordings of their songs are copied and distributed – are covered by a compulsory license Stateside. Which means songwriters and music publishers are obliged to license third parties making and distributing those copies at a statutory rate, so that rate-setting processes like this one are rather important.

Traditionally the main customers of mechanical rights have been record companies, which need a license from the relevant songwriter or music publisher every time they press a CD.

In the US, unlike in Europe, it was the label which paid the mechanical royalties on downloads too, so that iTunes didn’t have to worry about making sure the owner of the song copyright was paid their share of any income.

However with streams, where both the mechanical and performing rights of the copyright are exploited, it is the digital platform that is the licensee and which therefore pays the mechanical royalties directly to the writer or publisher (or not as the case may be, as those songwriter lawsuits against various streaming services have demonstrated).

Discs and downloads also remain a decent part of the recorded music business for now of course, but – after a bit of a stand off – the US record industry reached a deal with the music publishers on mechanical royalty rates last year. Which means that the CRB hearing is very much focused on the rates paid by the streaming services, which are, after all, where all the growth is in recorded music these days.

The tech giants are expected to argue to reduce the amount they pay, while the National Music Publisher’s Association and the Nashville Songwriters Association International will lobby for an increase.

NMPA wants songwriters to be paid each time their song is played, or each time a user purchases a subscription. It also wants to share the profits from the sale of technology and subscriptions that include access to music.

The US government has been setting mechanical royalty rates for over 100 years, beginning in 1909 when Congress determined that the rights would be subject to a compulsory license. This means that anyone can record a songwriter’s work for a fixed rate without permission or approval. Congress used to set this rate, but has since delegated the task to the CRB judges. The current rates were set over ten years ago when digital streaming was just starting to take off.

DJ Set Monetization Platform Dubset Gets Monetized

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We haven’t heard much from Dubset in a while. Like all good start-ups, they’ve been biding their time collecting cash. Via Hypebot:

Dubset Media has scored a $4 million Series A funding round, led by Cue Ball Capital. Founded in 20o8, the company had previously closed two funding rounds for undisclosed rounds from investors including Rhapsody and Three Six Zero.



Dubset’s MixBANK technology identifies musical recordings used in mixes and remixes, determining the appropriate rights holders (a DJ mix could have as many as 100 different rights holders), and simultaneously clearing the mix or remix across all rights holders. That enables record labels and music publishers to set permissions for access via a simple rules-based system which enables catalogs to be efficiently monetized and precludes the need to conduct time consuming searches and initiate claims.



Music Business Worldwide:

Dubset enables record labels and music publishers to set permissions for access via a rules-based system which aims to prevent the need for time-consuming searches and initiate claims.



Last year, the company signed agreements with Spotify and Apple Music for its system to be used on their platforms – potentially allowing user-generated/amateur remix content to be uploaded onto the services for the first time.



We’re still waiting for this technology (or something like it) to make serious waves in the monetization game.

Previously and Previously.

YouTube, Unpaid Royalty, and Missing Metadata

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The New York Times:

In a persistent problem for the online music business, large numbers of songs have missing or incorrect data about their songwriters and which music publishers represent them, leaving what is widely estimated to be millions of dollars unpaid. The publishers’ association has made a series of deals to address the problem, most recently with Spotify.



On Thursday, YouTube, which is by most estimates the most popular destination for music online, announced that it had reached a settlement with the National Music Publishers’ Association, a trade group, over the complex issue of unpaid songwriting royalties.



The agreement with YouTube {estimated to be worth more than $40 million} will give participating publishers — the companies that traditionally manage songwriting rights, which are separate from those of recordings — access to a list of songs for which YouTube has missing or incomplete rights data. YouTube will then pay any accrued royalties from a fund it has set aside for this purpose.



Again, the services get the all the blame but messy data collection and management within the industry itself is a major part of the problem.

Previously and Previously.

Ad-Supported Optimism

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Pitchfork:

When asked about the near future of free music streaming, Robert Kyncl, YouTube’s chief business officer, tells me, “What’s next is more ad revenue coming into it.” For instance, the advertising conglomerate Interpublic Group recently revealed it was shifting $250 million in TV ad spending to YouTube. Kyncl suggests advertisers could increasingly take money off traditional radio, too, and put it on the service’s clips. The record industry’s business model always differed from TV and radio in that fans bought specific songs or albums, but now it’s being tied into that same advertising-based model through free streaming.

“The music industry as a whole hasn’t earned that much from advertising, and now that’s changing,” Kyncl says. The reason industry coffers haven’t previously spilled over with ad revenues is partly a quirk of U.S. copyright law. Unlike in some other nations, radio broadcasters here pay royalties only to the songwriters, not the labels that own the recordings. But on-demand streaming service providers like YouTube and Spotify must pay both types of royalties. So, according to Kyncl, as listening goes from analog to digital, the music industry can look forward to a bigger share of the revenue from a larger market. In other words, labels—and artists who own their own master recordings—have gone from “monetizing only the super fans, by selling them CDs and LPs and tapes, to making money through ads from everybody that enjoys music,” he explains. “And that’s a big deal.”

Who’s To Blame For Music Startups’ Bleak Outlook

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David Pakman in Medium:

(The) bleak outlook for profitability among standalone digital music companies is a direct result of the high royalty rates incumbent upon startups who wish to license digital music for use in their apps. Whether you negotiate voluntary agreements or avail yourself of the existing compulsory licenses, you will not turn a profit. At least, no one ever has. The few that refused to pay these rates were often sued out of existence.

The end result of these perilous market conditions is that the only companies who can afford to be involved with digital music are the internet giants prepared to subsidize their digital music services with profits from their other businesses. The high royalty rates and up-front cash advances required by the record companies prevent profitable, sustainable businesses from emerging. As a result, the recorded music businesses is left only with these giants: Amazon, Apple, YouTube and, to a lesser extent, Spotify and Pandora.

But this is a “crisis” of their own making. Many of us argued for years that it was in the industry’s best interest to create a healthy ecosystem of hundreds or thousands of successful companies, all enjoying successful businesses around music. But those arguments fell on deaf ears, and instead the industry fought repeatedly to raise royalty rates over and over again, despite evidence that not a single company ever achieved profitability.

In my mind, it would have been in the best long-term interests of the recorded music business to enable the widespread success of thousands of companies, each paying fair but not bone-crushing royalties back to labels, artists and publishers. But the high royalty rates imposed upon startups, even after clear signs over the past 19 years that the strategy killed companies, has prevented a healthy ecosystem from emerging. It’s a bed the music industry made for itself, and now it is left to lie in it.

On the other hand, via Hypebot:

The indie music community has embraced Bandcamp and its suite of direct to fan monetization tools. And unlike most music tech startups, Bandcamp, which launched in 2008, has been profitable “in the now-quaint revenues-exceed-expenses sense” since 2012.

Bandcamp grew 35% last year, according to new stats just released by the direct to fan music platform. Fans are paying $4.3 million to artists monthly using the site, including 25,000 records a day.

Subscription-based music streaming “has yet to prove itself to be a viable model, even after hundreds of millions of investment dollars raised and spent,” the company wrote in a blog post. "For our part, we are committed to offering an alternative that we know works.

Update; There’s now a rebuttal to the original piece, via Medium’s Cuepoint:

More and more artists have chosen to go independent, direct to consumer, self-release their art. Stuff like Blockchain is exciting. If the labels are so impossible to deal with, then shouldn’t the investment be in platforms that will succeed in a post-label world? Shouldn’t the new startups, or the established players, be investing in content and talent development directly with artists, in a more substantial way? Shouldn’t they just take their great ideas and bypass the stubborn major labels?

Update 2; via Music Business Blog:

The music industry is in a transition phase. In such periods, the old and new worlds co-exist and collide. There are statistics that both sides of any argument can hold up in their defence, in fact they can often hold up the very same numbers to support opposite perspectives. Similarly, the comparisons you chose to benchmark with, can paint entirely different pictures. Such is the nature of transitions of human and business behaviour. For example, 83% of Spotify’s gross revenue going to rights is clearly too high and unsustainable, yet $0.00098 per song going to artists is also clearly too low and unsustainable. Something needs to give, for both ends of the value chain.

Maybe if/when Spotify gets to 50 million subscribers it will feel it has enough clout to compel rights holders to rethink licensing economics. Perhaps it will take Spotify getting to a 100 million to make that happen. Perhaps it will never happen. But if it doesn’t, the economics of streaming will remain so broken that only companies with ulterior business objectives will remain viable players, enter stage left streaming’s Triple A: Apple, Amazon and Alphabet (Google). The labels need to ask themselves whether that is the streaming future they want…

Apple Music and Dubset: Good News For SoundCloud?

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Billboard:

Apple has announced an agreement with Dubset Media Holdings that will allow Apple Music to stream remixes and DJ mixes that had previously been absent from licensed services due to copyright issues.

Dubset is a digital distributor that delivers content to digital music services. But unlike other digital distributors, Dubset will use a proprietary technology called MixBank to analyze a remix or long-form DJ mix file, identify recordings inside the file, and properly pay both record labels and music publishers.

Licensing remixes and DJ mixes, both based on original recordings, is incredibly complex. A single mix could have upward of 600 different rights holders. According to {Dubset} CEO Stephen White, a typical mix has 25 to 30 songs that require payments to 25 to 30 record labels and anywhere from two to ten publishers for each track. The licensing has been done in-house at Dubset. Thus far the company has agreements with over 14,000 labels and publishers.

*In many ways, Dubset is like any other distributor. The {streaming} service pays Dubset for the content. Dubset then figures out which label and publishers to pay. It retains a percentage of revenue for the service and pays the creator (the remixer or DJ) a share of revenue. *

Apple is just the start, says White. “The goal is to bring this to all 400 distributors worldwide. When you think about unlocking these millions of hours of content being created, it’s significant monetization for the industry.”

Much of the coverage I’ve seen, such as this article in FACT, assumes that Apple Music will use this alliance to go after SoundCloud. I have my doubts. For one thing, user-generated content isn’t really Apple’s bag (and adding this to the already muddled Apple Music interface would just create more headaches for casual users). My guess is that Dubset’s involvement is related to Beats One (and the inevitable Beats Two, Beats Three, etc) and making the station(s)’s sets ‘on demand’. Presently any radio sets that are on demand will have to consist of 100% pre-cleared music. I bet Apple would love to create more on demand content from the Beats station(s) without restricting their celebrity guest DJs. They would also be able to integrate featured guest DJ sets in Apple Music’s curated ‘For You’ section. Based on the timing of this announcement, I’m wondering if we might hear more at Apple’s event next week … there are rumors of a much-anticipated Apple Music overhaul.

As for SoundCloud, this news bodes well rather than being “ominous”. Apple doesn’t have an exclusive deal with Dubset, as the company openly aims to bring this technology to “all 400 distributors worldwide.” Having a huge corporation like Apple be one of the initial adopters will do a lot to convince others to come on board. What the technology accomplishes, once accepted throughout the industry, should do much to push ‘remix culture’ forward as it goes legit. And SoundCloud, who already dominate the niche of user-generated mixes and content, could end up coming out on top. Dubset’s tech, after all, seems to solve most of the problems that rightsholders have with SoundCloud’s service.

Harry Fox Agency In The Crosshairs

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Techdirt:

One of the key questions that came up following the reporting on {Spotify’s royalty lawsuit crisis} is the Harry Fox Agency’s role in all of this. HFA, an organization that was set up by the publishers themselves is supposed to be responsible for managing compulsory licensing for the vast majority (though not all) of popular songwriters (remember, HFA is about compositions/publishing, not sound recordings). But it’s beginning to look seriously like HFA just fell asleep on the job and didn’t bother to do the one key thing it was supposed to do for all these music services: file Section 115 NOIs.

So, given that, it sure looks like HFA didn’t do the one thing that it was supposed to be doing all along, and that’s… going to be bad news for someone. The big question is who? All of the lawsuits have been against the various music services, but without being privy to the contracts between HFA and the music services themselves, I’d be shocked if they didn’t include some sort of indemnity clauses, basically saying that if music isn’t licensed because of HFA’s own failures to do its job that any liability falls back on HFA.

And, if that’s the case, HFA could be on the hook for a ton of copyright infringement. If it’s true that it’s basically been ignoring the fairly simple NOI process for a lot of artists, then that’s going to be a major scandal – but one that seems a lot harder to pin on the music services themselves.

Digital Music News:

Sources {have} pointed to an effort by Music Reports to ‘seize the moment of incompetence‘ at Harry Fox Agency, or HFA, a staunch Music Reports competitor in the mechanical licensing space.  As the mechanical licensing agency for Spotify, HFA has been receiving heavy blame for the current Spotify royalty crisis, specifically for failing to send proper paperwork to artists, maintain a robust rights database, or create a system to fix its existing database issues.

The Music Reports ‘claims database’ would offer a possible solution to that mess, at least as it relates to this specific license.  More importantly, it would save Spotify from having to build the damn database: according to details tipped to Digital Music News, an out-of-court solution forged by the National Music Publishers’ Association (NMPA) would see Spotify paying a one-time penalty for the non-payments, while also creating an interface for artists that would match all mechanical royalties to their rightful owners.  And, share that data back to HFA.

As details of the NMPA resolution emerged, a number of industry executives wondered why Harry Fox would be exonerated, while leveraging Spotify to build its core database.  HFA’s former ownership by the NMPA has also drawn criticisms of cronyism, and Apple has already started to move away from the company (and towards Music Reports).  Meanwhile, the Agency’s lowball $20 million purchase by SESAC is now being viewed a bit differently: according to some insiders, the soggy price tag carried serious liability costs, the worst of which may lie ahead.