Monthly Archives: November 2014

Streaming roundup: A summary of who said what

Published 11/18/2014

By Howard Druckman

With Taylor Swift pulling all of her music from Spotify – and her fellow hit country artists Jason Aldean, (and Big Machine record company labelmates of Swift) Brantley Gilbert and Justin Moore following suit with their new albums – there’s been an avalanche of comment from all quarters. Following is a summary of the most notable ones.

In an interview with Yahoo, reported in Rolling Stone, Taylor Swift herself said, “Music is changing so quickly, and the landscape of the music industry itself is changing so quickly, that everything new… feels to me a bit like a grand experiment. And I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists and creators of this music. And I just don’t agree with perpetuating the perception that music has no value and should be free.”

Rolling Stone also reported the comments of Scott Borchetta, President of the Big Machine, in a radio interview with Motley Crue’s Nikki Sixx. Borchetta said, “[Spotify] can’t be endless free. Give people a 30-day trial, and then make them convert. Music has never been free. It’s always cost something and it’s time to make a stand and this is the time to do it.”

R&B Singer-songwriter Aloe Blacc wrote in Wired magazine, “I believe policymakers will one day recognize that a system that allows digital streaming services to enjoy enormous profits while music creators struggle is imbalanced and broken.”

U2’s Bono, speaking at a Web Summit Conference in Dublin, was reported in The Guardian as saying, “The real fight is between opacity and transparency. . . For this new model to be successful and to take root, there has to be some kind of fairness… fair models of distribution. And I think when that happens, the music business will be a rising tide that lifts all boats.”

Speaking at the same conference, Adele’s manager Jonathan Dickins was reported in Billboard magazine to have said, “Streaming is the future, whether people like it or not. Within five years it will be ubiquitous… For an artist that needs discovering, anyone who has got a real good album, but is very niche, I think streaming is great for them. Taylor Swift probably looks at it and thinks, ‘There is an element of cannibalization. I am a brand. People know who I am and I want to protect the record sales.’ And that’s fair enough… Whatever it is, the power of being able to say no, fight for your rights and be the gatekeeper to these opportunities, is key.”

Time magazine, meanwhile, quoted a few entertainment and music industry analysts. According to Russ Crupnick, an entertainment analyst at NPD Group, “If you say ‘Hey, I don’t want to be on streaming because I sort of object to the way it tastes,’ you’re kind of ignoring where the whole audience is.” Mark Mulligan, a long-time music industry analyst and co-founder of MIDiA, said “Ultimately, Taylor Swift’s music going off Spotify is a short-term tactical thing. It’s all about selling 1989 and also selling back catalogue. That’s not a long-term strategy, but it can work for her in the here and now.”

David Lowery, on The Trichordist blog, said, “Spotify is not paying sustainable rates for the cost of goods. Look – it’s like this, if something cost you $100 to make, and someone else sells it for $10… it doesn’t matter that you are getting 70% of the gross, you’re still over 90% unrecouped on a per-unit basis. This is the problem with Spotify, is that it undervalues the true cost of goods (including R&D, etc).” Lowery also said that the streaming business model can be fixed with windowing and pay gates.

Daniel Ek of Spotify said: “Our whole reason for existence is to help fans find music and help artists connect with fans through a platform that protects them from piracy and pays them for their amazing work… Piracy doesn’t pay artists a penny – nothing, zilch, zero. Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists… If that money is not flowing to the creative community in a timely and transparent way, that’s a big problem. We will do anything we can to work with the industry to increase transparency, improve speed of payments, and give artists the opportunity to promote themselves and connect with fans… You can’t look at Spotify in isolation – even though Taylor Swift can pull her music off Spotify (where we license and pay for every song we’ve ever played), her songs are all over services and sites like YouTube and Soundcloud, where people can listen all they want for free.”

Dave Grohl told Rolling Stone that he personally doesn’t care, as long as people listen to the music.

In a recent report, Fair Compensation for Music Creators in the Digital Age, released by the International Council of Creators of Music (CIAM), key findings about the structure of the digital streaming market included that music is undervalued by digital music platforms, split in revenues between the different sets of rights holders is imbalanced to the detriment of music creators, and licensing deals with streaming services lack transparency. The study concluded that a more balanced business model is needed in order to ensure the sustainability of digital distribution services for music and guarantee a fairer remuneration to all rights holders, and suggests that a negotiation process between all stakeholders is the way forward.

SOCAN CEO Eric Baptiste said in a recent blog post, “I welcome music streaming services of all types, and stand ready to support Canadian-based and international services so that they may thrive here in Canada. On one key condition: they must fairly compensate all of the creators and other rights holders responsible for the music that is the very lifeblood of their business. Yes, all creators and rights-holders, including authors, composers and music publishers, as well as the record companies and the artists they represent.”

What do you think?

Streaming requires new business model for record companies

Published 11/5/2014

By Terry McBride

Streaming is the future of music consumption.

In Nielsen and Billboard’s sales numbers for 2013, streaming music increased 32 percent over the previous year, to 118.1-billion track streams. Overall music sales dropped 6.3 percent to about 1.5-billion tracks, albums, and videos. Digital music sales (downloads) dropped too, by 6 percent, about the same rate.

The Recording Industry Association of America recently announced that revenue from streaming-music services overtook that from the sale of physical CDs, and came in just a hair behind total physical sales. The RIAA also said that streaming now accounts for 27 per cent of recording industry revenues in the first half of 2014, versus 20 per cent the year prior.

About 35 percent of the revenues of my record company, Nettwerk Records, already come from streaming, and that amount is only going to grow in the coming years.

When music is streamed online, songwriters in North America are currently being vastly underpaid for the music they create, some thousandth fraction of a penny for each streaming play (though, as SOCAN CEO Eric Baptiste pointed out in his last SOCAN blog, there are reasons for this).The same is generally true for the artists, and the non-major record companies whose music is being streamed, which is why streaming is not yet offsetting the decline in physical sales and downloads in North America.

The solution to this problem is for record companies to seek a percentage of the revenue earned by the streaming companies, rather than a penny rate “per play” (or in this case, “per stream”). The solution must also create equitable deals between the labels and their artists to ensure that the artists are fairly compensated after such negotiations.

There’s a great deal of generational resistance to this idea. Past generations are strongly invested in the attitude that rates of remuneration for recordings have to be set by a governmental regulatory body. But in the online world, where borders are becoming more and more meaningless, where a song streams to one person at a time rather being played to hundreds of thousands of people via a spin on radio, and where streaming companies’ revenues are dwarfed by many orders of magnitude when compared with traditional media such as TV and radio, the only practical way forward is to abandon penny-rate regulations and negotiate percentage deals directly with the streaming companies. In addition to payment for access to their music, major labels are already obtaining equity in music streaming companies.

This approach can work. In fact, it already has. Nordic European countries are seeing growth from streaming music, and their artists are earning a significant portion of their living from it. The Norwegian recording industry reported that streaming revenue was up 66 percent in the first half of 2013. Streaming revenue accounted for two-thirds of total music revenues in Norway. It’s been a similar story in Sweden, Finland and Denmark. Sweden’s music industry is now back to double-digit growth, even though about 90 percent of the music consumed there occurs via streaming.

By comparison, if the penny-rate mentality doesn’t disappear sooner rather than later, the North American record industry will continue to shrink annually at a rate of five to six percent. In fact, one of the reasons Nettwerk has been able to prosper in the face of this continuing decline is that 90 percent of our income comes from outside of Canada.

The writing is on the wall. The old way needs to go. The record industry has got to get moving, and moving fast, to adapt to the new reality of music streaming.

Views expressed in this and all posts on this blog are not necessarily those of SOCAN.