Economic fairness and outdated models.
As I write this there’s an ongoing parliamentary enquiry in the UK regarding the economic effectiveness of the streaming services model for artists. At the same time some artists are expressing concerns about publicly criticizing their earnings from the streaming services for fear of reprisals by way of not supporting any new releases or catalog to the extent the artist would obviously prefer.
I’m also writing it in the midst of a pandemic that has destroyed most artists ability to make a living due to ongoing venue closures and safety concerns, that vaccines aside possibly offer little hope for change at least until the autumn of 2021.
In June 2020, Warner Music, the world’s third largest largest music company floated in the US, selling $1.9bn in shares and achieving a market value of more than $12bn. It’s owner, Len Blavatnik, had paid just $3.3bn for the company in 2011 as the music business approached its nadir.
In Dec 2019, Vivendi, which owns Universal Music, sold a 10% stake in the business for €3bn, valuing the company at €30bn. Vivendi is planning a stock market flotation of Universal Music by “early 2023 at the latest”.
This report below is by turns bewildering and encouraging, depending on where you sit regarding the general level of industry health and it’s ability to offer artists support and options.
Major labels are now generating over $1m PER HOUR from the streaming services.
I’m keen to write this without rancor or bitterness. If you google any public company’s report (Warner Music for instance) you can see the executive salaries. That will give you a guide as to overall industry standards and what senior employees at major record companies are being paid.
So the general health of the music industry itself is clearly positive and prosperous.
The record company divisions were built and navigated by successful and talented executives but, no more so than the work of artists. Without the recorded music and the artists themselves who’s work the labels generally control and own, there would be nothing to sell. Nothing to prosper from, nothing to pay generous salaries, nothing to leverage and sell for immense profits.
Of course record companies traditionally had to ‘find’ talent, support and nurture it, but we are living in times now where the old (sometime) model of finding raw talent and developing it are by and large long gone. These days the development is already done by the artist and their team in many cases. Distribution costs for music via the streaming services are virtually zero. The young employees who man the computers and spend their day inputting, checking, creating metadata, monitoring and running reports etc are paid relatively modestly. Major label physical distribution in the US has been consolidated (to disastrous effect) and operational costs in terms of field / sales staff are reduced. Yes, ‘marketing” folks exist to ‘service’ the streaming services, create playlists and generally look for ways to ‘influence’ curatorial decisions.
Set to this background of industry prosperity and the altered face of music distribution, artists are fighting it out with labels usually over whether a stream qualifies as a sale or a license and whether the artist can receive 40-50% of the net (or at source ) income versus a royalty, which in many cases depending on the decade the deal was done, can be as low as 6-12%. I’ll highlight an example of how this works, based on an actual royalty and income stream on my desk:
Spotify US:
Subscription service (not ad supported):
10,580 streams.
$38.60 accounted to artist as ‘revenue collected’.
$3.47 to artist based on a 9% royalty.
That’s $35.13 to the label, and $3.47 to the artist.
But what we all surely also know by now is the $38.60 itself is not representative of the total income received by the label regardless of the fact that it’s not a user centric model.
The majority of artist attempts to reclaim US rights under the 1976 Copyright Act are met with great resistance and little appetite to negotiate by labels who choose to argue the erroneous “work for hire” language amongst other things.
So when we talk about a ‘broken model’, what we seem to be talking about is not simply the effect of streaming income on artists livelihood and how the income flowing through is unfairly allocated, but how the business of selling music has changed over the decades, how certain labels insist on applying traditional physical royalty models into a streaming model that cannot reflect a fair return and whether there’s an element of tone deafness here in terms of label profitability, remunerations, and a reluctance to pro actively or otherwise engage in economic change. Which is where some Companies can justifiably turn around and say mind your own business, we can do what we want with our Company, we wouldn’t tell you what to do with yours. All valid in a strict sense, but artists did not sign on for this revolution. Many sensible artists realize and understand that streaming is a great thing. All that’s being asked is that if the economic model for selling music has changed so radically since many of these deals were done, it’s not unreasonable that the deal itself be adjusted to reflect that change.
From the heart of broken artists, share a little of the wealth please. Look after your artists past and present because you have had the opportunity to leverage their work as assets for your own gain. Treat the artists as your customers and not just assets, treat them as partners especially if they are still signed to the label or the commercial height of their work resides within the catalog. Treat them fairly and with respect especially now so. Billionaires can create The Giving Pledge and contribute to philanthropic causes. Companies (including Record Companies) can and do donate profits to various charities and causes. I would love to believe and hope we can consider models either temporary or ongoing that offer direct relief and pay respect to the artists who’s work is our collective livelihood. Let’s please also make it theirs. Let’s consider things such as long standing debt forgiveness, advances against catalog income during this torrid time, a fairer split of income overall and perhaps even profit sharing options. These things are not radical socialism. They reflect a starting point and decent moral recognition of a community which has given us our world and created art we cannot live without.