At a time of immense obfuscation over streaming royalties and artist gripes about payments, Beggars Group was one of the few labels to make its rates public. It paid 50% to artists, but intoned that was a temporary measure until the streaming market hit a certain point. It appears that certain point has now been arrived at.
Speaking at the MusicTank The Artist Economics Of Streaming event in London tonight (7th April), Beggars’ head of digital Simon Wheeler explained where the label currently is. “In the last six months, the market has really rocketed,” he said of streaming, adding that it now accounts for around 40% of Beggars’ global digital income, far ahead (he believes) of the industry average here. “However, we have always been clear that if and when the streaming market grew to be a significant part of the business, as now is becoming the case, we would have to review that, since the economics of the investments a record label makes do not, in our experience, allow for the artist to be paid 50% of the net, let alone 50% of the gross, as we have been doing.”
What will that new rate be? Exact details are not being made public, but he hinted at what it could be. “It will be between a standard royalty [rate] and 50%,” he said. “And knowing [founder and chairman] Martin Mills, as I do, I am sure it will be more generous that most other deals out there […] We’ll aim to find the right balance between ensuring the best possible rate to our artists and continuing to provide our full range of global services and resources to our artists.”
This comes as David Byrne recently made public what he makes from streaming via his deal with warner Music Group – an identical 50%. Wheeler explained how the company decision was arrived at after its head of finance worked out (tongue in cheek) “on the back of a fag packet” the impact of carrying on paying this rate as streaming grows and other forms of revenue decline.
“All the costs that a label incurs – A&R, marketing, promotion, distribution etc. – need to be recovered from sales income,” he said, “and as the market share of streaming grows, that income must also bear its share of those costs.”
He added that processing the payments from a multitude of streams comes at a cost and this has to be factored into the company’s bottom line. “What scares us around streaming is the volume of data,” he said. “It is billions of lines of data. I have never known so much data. I don’t think it will double in a year. I think it will increase tenfold.” The resulting sharp increase in server costs “scares the life out of our IT department” he said. “I’ve never seen an electricity bill as a hard cost before!”
Also speaking at the event, Billy Bragg expressed his disappointment that Beggars (who he called “a shining beacon” for the industry and artists) was being forced to change its stance here. “I am struggling to understand if you revenues are up why you need to reduce the royalty,” he said. “Is there not an economy of scale here?”
Bragg had also pondered at the start of the evening, “If Merlin’s revenues are doubling year-on-year, why aren’t artists feeling the benefit in terms of increased payments?”
While Wheeler was positive about subscription streaming services, he opened both barrels on YouTube. “If YouTube launches a subscription service and it eats Spotify and Rdio, you’ll look back at these times as great days,” he cautioned. “They want to eat all the other music services and our business. That’s their plan.” He said the record industry was “caught out” in the early days of YouTube and didn’t realise the video site would become so big, initially thinking it was just about licensing music for a video of “a cat on a skateboard and then it became the biggest music service in the world”.
Bragg backed him up by saying, “If you want to talk about artists getting angry about the use of their music, YouTube is the place we should be looking at.”
Wheeler concluded, “We got caught out and that needs addressing. Otherwise they will eat our dinner.”