Transparency in digital music: ‘There’s a lot of work to be done…’


The second half of our ‘I Can See Clearly Now: Transparency in the Digital Age’ debate tonight in London took in Spotify, YouTube, label audits and data overload – you can read our report of the first half here.

It took the form of a panel of industry figures: Debbie Stones from PRS for Music; Brian Message of ATC Management; Phil Bird from Counterpoint, the event’s sponsor; Adrian Pope from PIAS, Mark Williamson of Spotify and Mike Skeet of SkeetKaye.

Pope kicked off the discussion with a pointed view about the difference between independent and major labels when it comes to transparency, noting that both sides have challenges.

“There’s very often a philosophical difference: a desire from the independent labels’ perspective to be more transparent,” he said. “Their challenge is more about operations and logistics and can they provide that transparency, even though they want to.”

Spotify has been the focus of many debates about digital transparency in the music industry since its launch in 2008, including its decision last year to publish a breakdown of how it pays royalties out to labels and publishers. Williamson was early into the debate tonight.

“We have a couple of things to do on Spotify’s side. The biggest thing we can do is grow, grow quickly and to monetise those users. It’s taking longer for streaming to take a hold than a lot of people expected even a couple of years ago… but the more we can raise that and drive a lot of money per user… that will help,” he said.

“Along the way there’s a lot of work to be done from everyone in the industry to ensure that as we change and shape this industry, we are all working to ensure the whole ecosystem benefits. It doesn’t work if only one side of this wins, whether it’s Spotify or the labels or the artists… It’s a responsibility of ours to endure that while putting this new model into the industry, we are also educating the industry.”

Does Spotify get frustrated by labels when it comes to transparency? He suggested one challenge is “years of distrust”, expanding on the idea: “That makes it extremely frustrating to get this understanding that here’s a model created for the modern internet consumer. It’s very hard to break down those preconceptions and myths that have built up,” he said. “This information still needs to be disseminated, and it’s still struggling to get through to artists themselves. That’s one of the big priorities that we have.”

Brian Message was asked what he’s looking for from streaming data when he goes in to audit a record company for an artist. “It would be nice to see right through to the nature of the deals on which people’s artists are based,” he said. “We don’t know the Spotify / Universal deal – how it’s structured. Forget the equity for a moment: what advances, pots or pools are there? What is the royalty based on? We don’t know.”

Skeet agreed on the audit challenges. “If it’s a major they’re effectively just taking a data dump down from a Spotify, an iTunes, a YouTube or whatever. There’s nothing really to compare it to, we’re just taking it on trust. Which defeats the point of an audit really!”

Pope talked about the “huge amounts of money” being invested by companies like PIAS and Kobalt (i.e. the artist and label services companies) in becoming more transparent, on this score. “We build portals, build analytics, make that stuff available. Often that same degree of transparency isn’t as immediately available from some of the major labels,” he said.

“It’s not just a label issue,” said Message, pointing to “nightmare Chinese walls” within PRS for Music. A neat introduction for Debbie Stones to give her views, suggesting that by their nature – direct payments to creators – collecting societies have to have a certain degree of transparency. “We have probably been one of the champions in making whatever regulation that is out there in terms of transparency meaningful to help us,” she said.

She admitted that creators have still been concerned about a lack of transparency among collecting societies, but claimed that PRS has to balance the desire for openness with respect for the commercial businesses of its partners.

“We don’t tell the world or our members what precise licensees pay… where we have some transparency is where they pay on a standard rate that is published, or we know enough about the deals to share in advance what might be called the fixed-point value,” she said, referring to other areas of PRS’ business.

“We haven’t been able to do that on online, partly because the services are so varied, trying to assess anything on a fixed-point value is difficult. But one of the things is this NDA culture… PRS can’t disclose all of those terms to its members directly. What it can do is where it’s paying out to its members, try and make the statements as transparent as possible.”

Phil Bird from Counterpoint talked about the flood of information coming from streaming services. “It’s basically a data tsunami… the challenge for a lot of companies is coping with it. And for some of the smaller companies this is a real challenge: it applies not only to labels, it applies to publishers as well. Software can only take you so far… You’re going to have to say what is valuable information and what is not valuable information?”

He suggested there needs to be a cultural shift within the music industry: “The key is how we all work together to make sense of it all, rather than operate in silos.”

At this point, the debate shifted to questions from the audience, and it turned out that many attendees wanted to ask about YouTube, its current battle with independent labels, and its not-so-public licensing deals with majors.

Message spoke up in YouTube’s defence, on one level: “It’s a difficult one, YouTube. If you look at it from a manager perspective, you look at the opportunities that YouTube offers… Nick Cave’s campaign, we had one viral video, we didn’t do any press and promotion… it worked really well because of what YouTube and particularly Google’s search facility provided for us,” he said.

“In terms of access to the fans and communities around the world, what that gives us is really fabulous. The campaign could never have happened if that infrastructure didn’t exist.” Will YouTube start blocking independent music as has been threatened in recent weeks though? “I quite hope that they do! It would be quite interesting to see what happens next!” said Message, although not as flippantly as that reads in print.

Bird suggested that the key to a fairer relationship with Google and YouTube is for the music industry to talk with one voice. “The entire industry has to talk to Google and YouTube and say ‘these are the standards that we want’. But the industry has to agree those standards first,” he said.

Williamson chimed in: “You can pull and drive your fans to services that you feel are paying you fairly,” he said. “We talk about artists having a right to pull their music. You do with Spotify… you get artists that pull their music off of Spotify but not off these other services.” In other words: YouTube. It will be interesting to see whether some of the artists who criticised Spotify publicly last year speak out against YouTube now.

Should there be legislation to force YouTube to be more transparent about its music deals and payouts? Should it be regulated as a monopoly, wondered one audience member. “There’s an irony in the music industry – which is full of monopolies – calling for Google to be regulated as a monopoly,” said previous speaker Gregor Pryor (of ReedSmith) from the crowd.

Google as a business raises a spectre for many other industries, not just the music industry. The very root of the issue is you can’t really control the way that the content gets up there. I don’t think that with the best will in the world regulators can really intervene in that unless they change the law. Google operates in a safe harbour, and that’s why it can act as it does.”

Apple recently bought Beats Electronics, in which Universal Music had a significant stake. It’s quite possible that Spotify will go public and Vevo will be sold this year too, triggering an exit windfall for major labels. How should those labels transparently deal with these profits, asked Music Ally.

“In an ideal world they divvy it up and give it to all the authors that are out there. More realistically,  they treat that as additional non-attributable income, they treat it as if it was one of the technology settlements they got from Napster, YouTube years ago. If Universal suddenly receive a ons of $1bn, that is pro-rated to whoever got played on that service during the period,” said Skeet. “Universal would still get the lion’s share, but everyone would get something. In the real world, they’ll probably keep the lot,” said Skeet.

Message. “Part of this whole plot is about changing a culture, it’s about trying to move into a new world where we do have some level of acting together, but that is going to require a lot of changes.”

Bird suggested that transparency could cut both ways. “What do the massive artists get in terms of advances, what kind of special deals do they get? There’s certain large legacy artists who also have to take responsibility for the new ecosystem that we want to try to create. Often they feel ‘I’ve retired now, I don’t have to worry about what happens in the music business now’,” he said.

“Everyone has responsibilities. Maybe give some thought leadership. The Beatles still aren’t on Spotify, if everyone believes in Spotify and the Beatles go on Spotify, it gives it the final endorsement: this is the streaming service for the masses. They’re still not on it. Why?”

All eyes turned to Williamson, who manfully fielded the question on Spotify’s behalf, pointing out that the service has recently added Led Zeppelin and Pink Floyd to its catalogue.

“These are huge artists with huge commercial catalogues, and they have these opportunities, whether it’s coming onto iTunes before other services… We’re always talking, and we want to get them on the service, but it’s going to take a lot of time,” he said.

“There are only a few catalogues in the world that command this type of exposure and hype,” he added, pushing back against suggestions that artists like the Beatles are simply looking for a big advance cheque before joining Spotify.

“It’s lots of things, how you reinvigorate careers, how you reach new people. At Spotify we need to be going to these guys and talking to them about how we can bring them to a new audience. That’s just as convincing as short-term commercial gain. It’s about saying ‘this is the future, and this is how you do it’. But we do need artist and industry support,” he said.

Williamson also criticised artists who have spoken out publicly about their desire to not join Spotify until it reaches a certain scale – we think the Black Keys are the biggest artist who’s talked in these terms, although Williamson was careful not to name names.

“Some artists are happy for others to go on the service in the early days, and they’ll come on when it’s all rosy. But it’s important that we get people to support the services that are legal, whether that’s Spotify or whatever format that is,” he said.

Williamson was also asked if Spotify suffers in comparison to YouTube, where songs are intrinsically more shareable – people can send a link or post it to a social network, and others can watch/listen without having to go though a registration process.

You can play a YouTube video anywhere in the world bar perhaps Turkey, China and Germany… whereas on the licensing front with Spotify, you have to sign in, so you immediately have a block on that virality,” he admitted, while pointing to Spotify’s integration with Facebook as a sign of its social ambition.

“Easier sharing of music? It theoretically should be very easy: you right-click, you get a link that can be played anywhere in the world. But there are certain restrictions that make YouTube better for sharing. For now.”

The conversation ended with a simple question for each panellist: what single thing would improve transparency in digital music? “Get rid of NDAs,” said Skeet. “Tailoring NDAs,” added Message, who doesn’t think they should be phased out altogether. Stones agreed on that point.

“Access to all the data,” said Bird, while Williamson quipped “I can’t tell you: I’m under NDA” before suggesting that “for me it’s a combination of understanding these models then data to back it up.”

Pope finished the debate with a longer thought: “It’s about fairness at the end of the day. One of the most exhausting parts of my last 10 years in building digital businesses has been the constant conspiratorial stuff that we’ve been talking about today: the minimum guarantees, advances to get deals across the line and so on,” he said.

“There shouldn’t be a distinction in value in a huge amount of stuff that is being sold. But in reality there is a huge amount of money going to some people and not others. If we can equalise terms through some utopian means, that would be fairer, and we can concentrate on getting good music out there.”

Written by: Stuart Dredge