THE BLOG

Catching the Big Fish in the Stream

08/12/2014 17:09 GMT | Updated 07/02/2015 10:59 GMT

Just over a year ago I wrote a piece entitled 'Spotify - Friend or Foe?' At the time some well known artists had expressed their dissatisfaction with the (relatively) new streaming model, claiming that the money paid to them for the streaming of their music was pitiful. I defended Spotify on the basis that their business model - in respect of the money that they pay to rights-holders - was pretty much in line with iTunes and considerably more favourable than Youtube. Furthermore, I pointed out that the more likely cause of an artist's discontent with streaming royalties probably had more to do with the contract that they had with their major record label. Most of these contracts continue to pay artists royalties for streaming as though a stream were a sale, which typically equates to only 10 - 15% of what the label receives from the streaming service.

Well, clearly I'm either nowhere near as widely read as I would like, or I just failed to get my point across coherently (possibly both), as the dissatisfaction expressed by the artist community has not diminished and recently spiked with the news that Taylor Swift was to withdraw all of her catalogue from Spotify. Of course, the irony of this move was clear to see inasmuch as all of her catalogue was still free to listen to on Youtube who, as I said, pay a much lower royalty than Spotify. Nevertheless, Ms Swift enjoyed extensive media coverage as a result of this move and physical and download sales of her album soared, hmmm.

I recently attended an international gathering of artists' (both featured and non-featured) representatives in Budapest to discuss the whole issue of streaming services. Speaker after speaker spoke of the difficulty that recording artists have in trying to make a living from the royalties that they receive from streaming. However, very few of the speakers were blaming the streaming services themselves. The blame was heaped firmly at the door of the major record companies who, allegedly, employ all manner of tricks, wheezes and sleight of hand to avoid paying artists a fair share of the money that they receive from the streaming services.

The conference called for a 50/50 split between artists and labels on streaming income. Not unreasonable when you consider that there is already a 50/50 split for public performance and broadcasting income collected from the radio stations and anyone else who plays recorded music in a public place. This fairer split is thanks to a right often referred to as the Equitable Remuneration Right. The great thing about this relatively new right (only granted to performers in the UK in 1996) is that it is unassignable; in other words, it can't be snapped up by the record label, and the money the right generates can't be used by the label to recoup its costs.

Unfortunately for artists, the right that the record labels apply to a stream and a download is the Making Available Right and guess what, that right is an Exclusive right assignable to the label. In fact the label even assumes ownership of the right when there is no mention of it in the contract that the artist signed.

Let's pause here for a minute, here's a challenge for you dear reader, can anyone out there think of any other contractual relationship where one of the parties can assume ownership of something that isn't mentioned in the contract and didn't even exist at the time that the contract was signed? Well, that's the music business for you.

In Spain, the government has chosen to implement the Making Available Right as both an Exclusive Right (assignable to the record company) and an Equitable Remuneration Right (unassignable) which means that in theory, artists would receive a payment from the very first download/stream regardless of whether they owed the record company anything. This is one way of ensuring that artists receive a fairer share of the money that the streaming services pay to the rights owners and it makes sense. Streaming is, to all intents and purposes, a sophisticated form of radio. It doesn't feel like a sale in the way that buying a CD, vinyl album or even a download feels like a sale so why the hell should it be paid as a sale? Governments that care about their performer communities need to see that the Making Available Right as currently applied to streaming and downloads is failing performers.

On a separate but not unconnected matter, I am hearing a growing chorus of concern over the way that Spotify calculates payments to the rights owners. Currently, Spotify pays out on the basis of the number of streams overall. In very simple terms, if Calvin Harris got 90% of the streams in any given period then 90% of the money would go to Calvin Harris's rights owners and the other 10% would be shared between all the other acts. That sounds fair enough I hear you say and on the face of it, it is, but, when you drill down a bit it isn't. For instance, if I have a premium Spotify account and in any given period all I listen to is one act (not Calvin Harris, sorry Calvin) then I would think it only fair that the share of my £9.99 that Spotify pays across to rights holders (just under 70% of the £9.99, let's call it £7.00) goes only to the rights holders for that band, but that is not the case. In fact, under the greatly simplified example that I set out above, Calvin Harris's rights owners still get 90% of my £7.00. This arrangement penalises niche acts with hardcore fans and, just doesn't feel right for the consumer. If you went into a record shop and bought a CD - I know, it doesn't happen very often any more - of your favourite band and you found out that the money you paid was mostly going to the act that sold the most records that week and not your favourite band then you would be rightly miffed. Unfortunately, the current Spotify model works just like that.

Streaming is going to be a dominant force in the music business for a while to come and the inequities that currently exist need to be rectified. Artists need to get a fairer share from all digital, and consumers need to feel confident that more of the money they shell out is going to the artists and musicians that they love.