“The industry’s problem to solve is we’ve been addicted to promotion for the entire time that the music industry has existed. We’ve always given stuff away to sell something. But that mindset in the consumption world just doesn’t really stack up…”
The music industry’s view in the ‘value gap’ debate, at its simplest is ‘YouTube should pay higher music royalties’. Although the more complex version is ‘legislation should be changed to strip YouTube of its safe-harbour protection and thus put it in a position where it has to pay higher music royalties’.
In his appearance at the Slush Music conference in Helsinki, Beggars Group’s Simon Wheeler was talking about a different kind of value gap: the one between what labels and artists earn for streams of their studio recordings, and how they benefit (if at all) from the ‘promotional’ performances they record for radio stations, TV broadcasters, music blogs, YouTube channels and other media outlets.
“We have all these separate media partners who want to stay relevant to their audience, which I think is really important. So they’re looking at ways they can create more content: more output for their brands,” said Wheeler.
“And they want to go on-demand. They want to make it a catch-up service, or put it onto YouTube, or make it available as a podcast, or put it on their website or whatever else they want to do.”
The question for Beggars Group – although Wheeler stressed he thinks that all labels should be thinking about them – concern who owns the rights to these recordings, and how the revenues from them are shared between the media channels and rightsholders – and by extension the artists and songwriters.
The backdrop here is that historically, promotion of music and consumption of music were seen as two separate areas. Promotion, over there – be it magazine articles, radio sessions or videos on MTV – led to a purchase over here, likely an LP or CD in a store.
There may not always have been royalties from the promotion, but there was a clear and well-understood link to sales. But in the streaming age, Wheeler suggested that promotion and consumption “are all together in the same place” – mirroring comments made earlier at Slush Music by WMG’s Stu Bergen.
“Whether you’re listening to something on the radio or listening to a song on Spotify, for the end user they’re listening to music. There is no difference. Okay, on Spotify you can choose what you want to listen to and when you want to listen to it, but effectively it’s the same experience,” said Wheeler.
“And one of the things which we think about quite a lot is there’s only so much consumption time that you have: there’s limited amounts of time in anyone’s day for their music consumption: television, YouTube, radio, Spotify, Netflix all competing for a slice of your time.”
In this world, thinks Wheeler, a live radio session that’s been uploaded to YouTube by the broadcaster is competing for that listening time with the original studio recording. Which he stressed is not a reason to stop doing radio sessions, but rather a spur to think harder about the rights ownership and revenue-sharing questions in those cases.
“People say ‘Well we’re just going to put it on YouTube because it’s promotional’ and it’s like ‘I’m sorry? There is no more commercial platform than YouTube!’ Owned by one of the world’s biggest commercial companies, Google. So we can’t look at that as promotional,” he said.
“YouTube is the world’s biggest music service: the most amount of people, the most amount of music. If we give our rights or access to our artists to whoever it is – whether it’s radio, a blog, a YouTuber – and if we say that those rights are ‘promotional’ because you’re going to do something else [as a result] I think as an industry we’re running in to problems.”
“Someone watching something on YouTube doesn’t go ‘Oh actually, I’m just going to go off to Spotify and play the song because I liked that so much’. All they’re going to do is watch something else on YouTube.”
Which is where Wheeler’s belief that the music industry needs to kick its addiction to free ‘promotion’, while not forgetting that even in a world of platforms like Spotify, Apple Music and YouTube, there is still a place for these media partnerships.
“We still want to drive exposure for our artists. We still want to introduce people to our artists, to get them curious, turn them on to the music. We want to work with all these great media partners. Do we need to give the rights away for free? I would say we probably don’t,” said Wheeler.
“These are the kinds of more-sophisticated conversations we need to have. If you want to bring our artists in for a platform and record some of their work, we can talk about how you make it available, and we can talk about whether there’s some payments for rights, or if on YouTube there’s some revenue share to be done.”
He admitted that this can be a “tough conversation” particularly with radio and TV broadcasters, who in the UK and other countries have traditionally operated under blanket licences giving them access to the full catalogue of studio recordings, with set royalty fees.
“They’re important partners. But to give them rights that they then exploit for free? We’ve just got to work out between us how that’s going to work in future,” said Wheeler, who added that Beggars Group now has one member of staff whose entire job is essentially working on the terms of these partnerships.
“That’s our job, is to manage and be responsible for our artists’ rights. So we make sure every time they do a recording, they’re not creating work that people can make up a nice piece of vinyl on, or put it onto iTunes, put it onto Spotify, and sort of compete, and keep the revenue,” he said.
“We do make it very clear: who owns the recordings and what they can do with it. Sometimes it’s pretty fractious: people think ‘I’ve just paid to make this recording. Why can’t I do stuff with it?’ But it’s not like this type of model doesn’t exist.”
Where it exists is in partnerships with digital services like Spotify and Apple, who pay to record performances by artists, but then ensure the ownership remains with those artists and their rightsholders.
“It’s part of our own repertoire, it goes on the service and every time it gets played or viewed, then we and our artists earn the same as it would be if it was one of the studio recordings,” said Wheeler.
During the session, he also talked about the impact that streaming is having on Beggars Group’s wider roster of artists. While keen to avoid generalisations, he said that there has been a positive effect even for long-dormant artists.
“We’ve certainly opened a lot of artists’ royalty accounts over the past five years, which had been closed because there was no activity. There were no sales. The catalogues business, you have to be at a certain level before you’re selling anything to be really honest,” he said.
“Selling downloads opened it up a bit, but consumption – where once you’ve got that £9.99 or whatever the barrier is, you’ve got access to a wealth of stuff – it really does enable people to go deeper into the catalogue and explore more artists, or stuff they’ve forgotten about.”
“We’re certainly seeing that a number of our artists are getting paid where there were no royalties coming through before, so that’s clearly a positive thing. And we’re seeing the amount that streaming makes up of their royalty payments for some artists going up to 50%, 60%, 70% or even 80% nowadays.”
A few years ago, Beggars Group boss Martin Mills took a policy decision: that for older catalogue-artists who hadn’t released a new record for a certain amount of time, if they had an unrecouped balance, it would be written off.
“So that when the streaming royalties came through, they actually got paid something, rather than it just going to offset the unrecouped balance,” explained Wheeler, adding that the total amount of the write-off was “a really big number” – albeit one he wasn’t able to share.
“Martin said he’d made up his mind that he was never going to get that money back, so it was kind of gone for him. And then because he has very much an artist-friendly take on things, that was his way of saying now there’s actually some money coming through from listening, we are going to pay that through on a very generous streaming rate,” said Wheeler. “Hopefully it’s going to make some difference to a number of our artists.”
One of Beggars Group’s currently-active bands are Queens of the Stone Age, which signed with the company’s Matador Records label for their 2013 album ‘…Like Clockwork’, with the relationship continuing through their new release ‘Villains’.
Wheeler cited QOTSA as an example of an established band who have been able to reach new fans through streaming, which is paying off not just in royalties from those platforms, but in bigger, mixed-age crowds at their concerts.
“We did do a lot of work with Spotify to try and expose that act to a wider audience. And I think that really worked,” he said, while warning that streaming isn’t yet the pot of gold for most rock and alternative artists that it is for other genres.
“Maybe it’s the age of the users, maybe they’re not on streaming services as much as people who are into urban, hip-hop, pop or EDM styles,” said Wheeler.
“I think that’s an ongoing process, and I think we’re seeing it change all the time, as more and more people realise actually, it’s a sensible value proposition: If you’re a music fan, getting access to the world’s music for a monthly subscription of £9.99.”
Wheeler suggested that flexibility but also a willingness to stand up for its rights and artists will be key to labels trying to thrive in this environment.
“We can’t carry on doing what we were doing for that business now we’re in this business. The more we question what we’re doing, why we’re doing it and how we’re doing it – as an industry, that’s not just labels – it’s artists, managers, everyone involved – the better.”