OH MY GOD. The deals between the majors and the streaming services.
The thread many of you requested. It gets a bit sticky, tricky and puzzling, but that’s the point.
The thread many of you requested. It gets a bit sticky, tricky and puzzling, but that’s the point.
The themes of this story: a lack of transparency and accountability for artists and a system that disdains the relationship between artists and their fans.
What makes telling this so hard is these deals are hidden behind NDAs for “reasons of commercial confidentiality”.
What makes telling this so hard is these deals are hidden behind NDAs for “reasons of commercial confidentiality”.
You won’t be surprised that I think this is bullshit. It is a serious flaw of the present system that the scrap for minor advantage between labels is paramount. Forget fair remuneration or helping artists understand their audiences…. Priorities you say.
Streaming deals are typically ‘Revenue Share Agreements’. No two are the same - each label and distributor has their own thing going on... Let me explain.
Instead of a user’s money going to what they listen to, all monies are put into one big pot each month. Then the streaming service identifies what percentage of overall listening came from each label’s catalogue in that month.
They then split up the pot based on those percentages:
the service sets aside a chunk of money for a label or distributor based on what percentage of overall listening their catalogue accounted for (in that month).
the service sets aside a chunk of money for a label or distributor based on what percentage of overall listening their catalogue accounted for (in that month).
Then, in the deals they strike, the labels and distributors have negotiated a share of that designated chunk, and payments are made.
We believe these arrangements generally sit in the 52-57% range.
We believe these arrangements generally sit in the 52-57% range.
So, to simplify it, think of a service that has received £60 total. One label owns 50% of all the music played, so the service knows £30 is the chunk of revenue relating to that label. Then, if that label has a 50% (revenue share) deal with the service, they get to take home £15.
So the per-stream rate in your royalty statements is the money your label got minus whatever they leave with the service, divided by the number of streams your label got that month.
For labels and distributors, as well as monthly, it’s split up by country and product type (free, premium, family plan etc).
But artists are not provided with this information (by all labels all of the time), so it can be really tough to understand the impact things like country and product have on the rates we see.
The whole system is based on ‘market’ or ‘consumption’ share and that’s a big feature of much of what is wrong with streaming. The bigger the label, the bigger their share, because the better contract terms they are able to negotiate.
Of course, we’re not allowed to see any of the internal calculations of this, but it means one artist on one label will earn a different amount for one stream to another artist on a different label.
So there is no level-playing field in terms of per-stream earnings, it relates neither to the quality or the popularity of your work. The only movement in pricing is the negotiating power of your label or distributor.
But as no artist can see any of this stuff, no artist is in a position to make a fully informed decision when picking which label or distributor to work with.
And it’s not just the revenue share agreements that might differ. Some labels negotiate ‘minimum guarantees’ into the deal too. For example, a minimum rate per stream.
This means that when they’ve done all the maths, if their per-stream rate comes out below their guarantee, they get topped up. This is again something that is based on negotiating power, is invisible to artists and we’re unsure how it is accounted to us at all.
A further twist: the labels are, in fact, paid in advance based on their last set of results. At the end of a contract period, if the service calculates the total amount a label’s catalogue has got is less than what they’ve been advanced, any overpayment stays with the label.
This over-payment is known as ‘breakage’. Breakage does not have to be accounted to artists because it does not relate to any specific tracks, but labels assure us that they do, nevertheless, share breakage money with artists. Though quite how that works isn’t entirely clear…
And, here’s the kicker, rather than sharing out those kickbacks with all the artists, they are most likely distributed based on consumption share/how much your music is consumed/popularity. So if you’re doing well already and there’s any breakage, now you’re doing even better.
There are more complications…
We know from streaming deal contracts (that have been seen) that there’s marketing fees that we don’t know the size of (or really what they’re for);
We know from streaming deal contracts (that have been seen) that there’s marketing fees that we don’t know the size of (or really what they’re for);
there’s advertising space which doesn’t have to be used by a label (and can be sold on); and there’s equity - giving labels shares in the platform, which they can then sell for profit.
The majors did commit to share the profits from their Spotify equity with artists. Though as usual, it’s not entirely clear how that worked. However, we believe they did this based on consumption again…..God if you’re doing well in this system, you seem to be doing REALLY well.
So, how we get paid depends on deals we can’t see, policies we’re not told about and systems no one seems to fully understand.
How exactly do public companies that specialise in raising revenue from copyrights not need to supply at least some of this information to their share-holders? Are they ever *truly* audited?
There is very little transparency in streaming and without transparency it is near impossible to get accountability. There is no general reporting obligation to artists. Artists may well have audit rights in their contracts, but often can't afford to exercise them.
Even the superstars with fancy accountants, when auditing, will usually hit an NDA along the way, and, if they find a problem that affects all artists, they are normally banned from telling anyone else.
What if they told us what they had paid each label per track per month? Then at least we could see if that agreed with what the label reported. Why not direct reporting to songwriters too? This seems like something that could not only easily be done but easily regulated for.
Could regulators also formalise a form of ‘Royalty Compliance’ and auditing rights for artists into copyright law? Article 19 of the new EU Copyright Directive seems to be pointing the way:
"Member States shall ensure that authors and performers receive on a regular basis, at least once a year, and taking into account the specificities of each sector, up to date, relevant and comprehensive information on the exploitation of their works and performances from the..
..parties to whom they have licensed or transferred their rights, or their successors in title, in particular as regards modes of exploitation, all revenues generated and remuneration due".
Could this be something that also requires the publication of the policies of each label (and publisher or collecting society) on things like breakage, the profits from equity sales or what happens to unallocable income? We might learn to trust *that* system
As stated, this crock is based on the principle that the higher percentage of overall listening, the bigger the share of streaming income, but also, a secondary principle, that all and any extra revenues should also be shared based on consumption/popularity.
This doesn’t just reward success, it swells it; distends it. The business argument for this behaviour is always ‘market share is always the best analogy for how money should be shared when we don’t know where it should go’. But is it?!?
Though already enormously wealthy global corporations with dominant market share coming to this conclusion and going to great lengths to reinforce it in the system is, perhaps, unsurprising.
In the creation of this methodology no thought was ever given to how emerging talent could be supported as they grow; how niche music needs to be funded by its fanbases;
how the system should reflect regional variations in culture. And, certainly, no thought was given to giving a music fan a direct relationship with the music and artists they listen to.
Yes, some services have buttons that allow fans to buy tickets or t-shirts. But those always feel like mere add-ons. Streaming services seem to view any direct-to-fan functions they add mainly as a way to make nice with artists.
If they saw direct-to-fan as a way for them to share in extra revenue streams, they might do the bloody obvious and make the artist-fan relationship a bigger part of the streaming experience.
I wonder why they don’t? Could it be that most of their dealings are with labels who are rarely involved in merchandise or ticket sales in any active way?
So we’re left with a system that massively remunerates the aggregation of copyright ownership (good to be a major label these days) and doubles down on rewarding popularity (good to be Ed Sheeran these days).
It’s certainly not built for the development of an artist, their fanbase or for realising all the value therein. Nor is it built for fostering national or regional economies. It is shrouded in secrecy and fails to provide artists with the tools and transparency that you’d expect.
Or certainly not expect in our modern digital world.
And we haven’t even pulled focus to look at the logical vanishing point of this 'revenue share' model of payment. If revenues plateau (as they inevitably do) and the totality of streams keep rising exponentially, the value of all our music can ONLY go down…. Well done everybody.
Regional economies need this rethinking. @MayorofGM @sadiqkhan @FionaHyslop @DanJarvisMP @MayorJPalmer @ElisThomasD @MetroMayorSteve @MayorJD @BenHouchen @MayorTimBowles @andy4wm @shainshapiro @wef
Both consumers and many tens of thousands of small businesses are let down by this unwieldy monopsony power. Time to change your tune @CMAgovUK. Keep money in UK PLC instead of sending it to hedge funds based in LA and SF.
Time for a regulator with teeth hey @The_IPO?
