October 6, 2016:Eight things we learned about ‘dissecting the digital dollar’ in music

A year ago, the Music Managers’ Forum (MMF) published its initial Dissecting the Digital Dollar report, exploring the impact that digital music in general – and streaming in particular – is having on the musician and management communities.

That first report provided a structural overview of the digital landscape: how music is licensed, how royalties are collected and how they are paid through. Now the MMF has published part two: a more qualitative study based on roundtable discussions in the UK, US, Canada and France with artists, songwriters, labels, publishers, lawyers, accountants and managers.

The second part is more qualitative, based on roundtable discussions in the UK, US, Canada and France with over 200 stakeholders (artists, songwriters, labels, publishers, lawyers, accountants and managers) about what it all means and what is at stake in digital music’s future.

The report looks at how revenue is divided, raises the issue of equitable remuneration for performers in streaming services, how transparency could be achieved, the future of safe harbours and the role the CMOs will play in shaping how streaming evolves.

Rather than rehash the report or skim through the executive summary, instead we are presenting the key talking points at the launch of the report this morning in London.

#1 Paid subscriptions are the industry’s saviour…

Chris Cooke (CMU Insights and report author) said that there was, for the most part, consensus among everyone they spoke to that it is paid streaming, rather than ad-supported streaming, that will pull the recorded music side of the business out of the hole.

“It is paid-for streaming that has enabled the music market to return to growth and the consensus was that, for the foreseeable future, it is the paid-for streaming services that are going to ensure that recorded music continues to grow in the coming years – and that everyone can benefit.”

#2 … but the labels are taking too big a share

The problem within this, according to Cooke, is that labels are taking the lion’s share of income and claims that they are the primary investors and risk-takers in new music are starting to hold less water.

There was a growing feeling among the other stakeholders that they want the current splits to be altered, especially as they are seen to disadvantage heritage artists, session musicians and songwriters because of current or historical deals working against their interests.

“It came across as no surprise that everyone except the record companies represented in the room felt that the current division of revenue is not fair. In terms of how the money is shared that comes in from streaming services, the labels get by far the biggest cut. Significantly. Record companies in the room insisted that they continued to be the primary investors and risk takers in new music,” he said.

“Nobody was actually disagreeing with that. The managers, the artists, the songwriters and the publishers in the main accepted that fact. However, they were not convinced – as many of the labels were arguing – that the risks the labels are taking are as high today as they were in the physical era and that those risks, if anything, actually becomes less as the streaming market matures and those initial infrastructure costs the labels had start to [decline].”

#3 There is anxiety over how advances are split

Advances are already a much talked-about element of the licensing agreements between streaming services and labels. But the MMF found people also worrying about what will happen if and when Spotify goes public – particularly how the windfall from the equity held by labels will be distributed throughout the ecosystem.

Lip service is one thing, but actions are another, according to Cooke. “In recent times, many labels have already made commitments. Many of the indies signed up to WIN’s Fair Digital Deals Declaration and the majors have issued their own statements on this. The managers welcome that and acknowledge that.”

Managers remain unclear as to how any of this will translate into a share of income coming through to their artists.

#4 The new breed of manager wants a flat per-stream rate for all

The old industry was fixated on market size and using that to leverage preferential rates. The new breed of managers feel this is wrong for streaming and Cooke say they are calling for a more altruistic payment system.

“Some artists and managers, particularly the younger managers, felt that in the streaming space everybody should be paid the same per stream rather than everybody having their own deals and getting paid a different rate. What they were saying was that how much you earn should be based on how often you get played, not on what deal your label or distributor or society did two years ago […] Really the only way that could be achieved would be through the collective licensing system.”

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#5 Data is still a mess and it’s up to the collection societies to fix it

In an age of the ideal of transparency on the one hand and the Byzantine world of micropayments one the other hand, data sets need to be improved. Cooke says that the responses they got back was that this was fixable but the collection societies needed to be more proactive and take the whole issue by the scruff of the neck.

“Everyone agreed that data needs to be improved. Many of the managers, not all, seemed to think the collecting societies should be leading on this because they have the best data already; not that it’s perfect data, but they are sitting on data so the societies should be leading on this,” he said.

“Actually a number of managers acknowledged that certain societies already are leading – name checking some like PPL and PRS, where behind the scenes good things are happening. One of the issues is to get the song collecting societies and the recording collecting societies to work together. The single biggest issue is working out what song is contained in what performance and that requires the two bodies of data to come together.”

#6 Managers don’t know if YouTube deals are good or bad

A lack of transparency means that managers don’t know if YouTube deals are good or bad as they have nothing to compare them against

It is, we suppose, like trying to measure two bits of fabric without a tape measure and in the dark. The fact that YouTube deals and subscription service deals are caught up with NDAs, managers are left flummoxed, says Cooke. Are the payments they get from one good or bad if properly compared against the other?

“Some of the younger managers for whom YouTube and SoundCloud are really important marketing channels did acknowledge that sometimes there is a tradeoff; and perhaps more importantly than that, many of the managers who felt that this was an issue the labels and publishers were right to be campaigning on […] The single biggest issue for the managers is the lack of transparency around the whole streaming ecosystem. That would include the specifics of the deals that have been done […] The labels, publishers and societies in the room admitted there are transparency issues.”

#7 A lack of transparency can lead to inaccurate statements

Jon Webster, president of the MMF, claimed that all manner of bizarre and unfounded complaints over streaming are being made by some managers who either cannot access the right information or who choose not to research things properly.

The MMF has created a checklist for managers to run through before complaining about or debating the streaming income they and their artists receive.

“This year I got so fed up with people going, ‘I earned $13 from 8m streams on YouTube’ that we published a checklist asking them to answer various questions: which country, which time period, mechanical or performance, publisher and so on. I sent that to people and I have never had a reply,” said Webster.

“These people are [clicks fingers] taking figures out of the air. As we always say – there is money in streaming without any doubt. The question is how it all flows through. That’s our job – to tell people to ask these questions. You are a modern manager so you need to know these things.”

#8 Exclusives and windowing won’t stop, but the MMF wishes they would

Annabella Coldrick, chief executive of the MMF: “We have taken quite a public line on that recently and said that we don’t agree with exclusives. Our view has always been to let fans consume music [anywhere] as long as they are doing it legally and there’s fair remuneration going back to the creators. Some managers will [do exclusives] and managers will do what they feel is best for their artists; but as an organisation we feel it is better to have the music out there and legally and if they are paying £10 a month for a service the last thing we want them to do is pirate the music.”

Jon Webster: “Managers will always do what they consider to be the best thing for their artist so our job is to try and educate all the people involved in making those decisions as to the pros and cons of making them. Personally I have always argued against all sorts of windowing. I don’t think someone on a Tidal subscription is necessarily going to switch to Spotify and pay that extra money [to get certain albums].”

Eamonn Forde
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