Guest post by Monica Corton (@momusing), Executive Vice President, Creative Affairs & Licensing Next Decade Entertainment, Inc.
If you have any connection to the music biz, it’s been hard to ignore story after story of the pull out of Taylor Swift’s catalog from Spotify. As a music publisher, I have to say that I too share all of the frustrations that both Swift and Big Machine’s, Scott Borchetta have with the bad royalty structure that exists with regard to streaming music. Spotify is not alone in this and certainly not the worst player by far (some could point to Pandora for that). However, I feel that Borchetta and Taylor missed a watershed moment in helping themselves and the industry find a solution to this difficult problem. If Swift and Borchetta have an issue with the amount of royalties they are receiving from Spotify, why didn’t they negotiate for a special extra tier of payment (an increased price to customers of Spotify) for Swift’s catalog so that they could obtain extra income and still satisfy all of her fans who would rather stream her music hundreds of thousands of times than digitally download her album? We need tiered fees in streaming to become a reality if the streaming business is ever going to work from a royalty standpoint. We also need a higher royalty for masters and publishing and to reduce the amount of time that people have free access, but both of these probably could have been achieved with the popularity of Swift’s album, 1989. In fact, few albums could get a digital service to make such a radical change, but I think, Swift’s could have gotten it done.
This whole incident feels like Napster Part II. We all know that streaming is where people are going. It’s not a theory anymore; we are all seeing the change on our royalty statements. Album sales via physical and digital downloads are significantly down and the reams of pages of streaming royalties increase every accounting period. They don’t add up to anything of significance, but they are definitely taking up lots of space on statements. However, if we know our customers are trending this way, we have to find a business model that supports that trend or we risk pissing them off again ala Napster. In fact, the minute I read this story, I went on to the Internet to see the backlash and many were writing that if they couldn’t stream Swift’s music on Spotify, they planned on going to a Bit Torrent site to rip their own free copy. Is that what we really want here?
It’s hard for me to believe Spotify wouldn’t entertain a special royalty tier for Swift’s music and find a way to lock it in the paid only side. They had to know the backlash and bad publicity would be very harmful when it came to Taylor Swift. If a tiered streaming fee had been done, Swift/Borchetta would have gotten more money, probably not as much as selling physical copies and digital downloads, but more than the $500,000 she has been averaging from Spotify, and she would not have upset her fans. More importantly, she would have helped thousands of artists and songwriters who don’t have the juice to get this kind of change done. She would have really made a statement for changing the business model for all, in a much more positive direction which is what she discussed in an article several months ago.
We need Spotify to succeed. If the industry has a problem with the business model of Spotify (which we do), the goal needs to be to fix the business model through negotiation, not to destroy another potentially viable business. To clarify, I’m saying this without owning any equity in Spotify. I am all for fighting for songwriter and artist’s rights, in fact, I do that all the time, but I am also for finding a business solution to keeping the music echo system viable.
We need to be much more strategic as an industry in finding solutions to these complicated problems. When the digital services go out there and say they paid millions to the labels and publishers, they did do that with the majors, but they were in the form of advances against a sub par royalty structure. That money is sitting in unrecouped advance accounts, being very slowly released to songwriters and artists as the paltry royalty uses click in each quarterly accounting period. Everyone is telling the truth here, but the way the system has been set up is doing serious damage to the livelihood of creative people. I hope that all of the hubbub over this actually leads to some much more inventive business solutions, rather than a continued pull out from Spotify by other artists and songwriters.
Photo Credit: Shutterstock
If Taylor really wanted to make a difference she could go after the heart of the issue, the main reason for low royalty rates for songwriters and performing artists and the main reason that in spite of huge growth, the streaming companies are NOT profitable. That reason is piracy and THE COMPANIES WHO FUND IT. At its core, the piracy business model steals product from the people who create it, and gives it away, lowering its scarcity, and it’s value. But that does not create the MONEY. The money for the piracy industry is provided by the companies who PAY to advertise and the banks who enable the transactions and finance the piracy infrastructure. A SUBSTANTIAL amount to the revenue is provided by Fortune 500 companies who claim they have no control where their advertising dollar is spent. If she wanted to make a difference for everyone, this would be the problem she should be working to solve and those companies should be publicly named and asked to STOP enabling piracy. And then there are Google practices… They could put a serious dent in piracy to by just not allowing piracy web sites to show up in the search results. But they make money on that SELLING ADVERTISING. Advertisement revenue provides the cash that makes the piracy business model happen. Attack the problem at its source.
Streaming companies aren’t profitable because they don’t charge enough for the subscription and they let people use their systems for free for far too long. Piracy is also a factor as you point out. I would love to see penalties for companies who advertise on pirate websites, but we all know there is very little political will for that.
yet another 200mil+ net worth artist complaining about how they are not fairly “compensated” for their work? give me a fucking break..
You need to go back and take logic 101.
Sounds like sour grapes there, b. Forget the money for a moment. Look at the situation. I’m sure if you were pulling down the $$$ like TS, you would most-likely sound very similar. Without the TS’s of the world, a lot of these services would not be around. You can’t have a service with only unknowns. While unknowns are the building blocks, they aren’t the draw – for the most part. Remember, (probably) 90% of listeners are not sophisticated music lovers, they just want to hear the familiar hits. Nothing wrong with that. But to get the bulk of those listeners, the services need the drawing cards. If they can’t make the drawing cards happy, then they have nothing. So don’t hate the TS’s of the world. Come on – turn that frown upside down, big guy.
There is a Connection era v broadcast era story here. Performing Rights legislation and compensation was designed pre-broadcast, to protect the rights and incomes of performers going round the country doing shows.
Broadcast on radio, then TV suddenly made it possible to sell millions of copies – both by promotion and airplay – and for performers, managers and corporations to become very very rich from these micro-payments. People wrote a catchy but vacuous 3 minute song and made a lifetime income off the proceeds as Christmas will undoubtedly remind you.
These per performance payments also distort the advertising industry. Mediocre actors suddenly become millionaires and celebrities because they get picked for the very mediocrity as the face of the average Mum or Dad in a commercial.
First off, get out of your mind the false binary between purchase and Spotify. Spotify is a modern radio service and its remuneration should be compared to radio airplay (£75 per play on Radio 1 in the UK which has £10m listeners – 0.007.5p per play. That compares in order of magnitude with Spotify’s 0.008c)
We actually need a sliding scale the opposite way to that which Monica suggests here. One which pays x for the first thousand plays, then half x for the next ten thousand, then half x again for the next million. That creates diversity and secures a good income for performers.
But first we have to have the face-off between broadcast era companies and connection era ones – as exemplified by the Hachette and Amazon row. Broadcast companies are flexing their muscles to maintain their economic moat. But there are too many bridges being made for it to be sustainable over time.
But it will happen much quicker if the Connection Era companies are fair in their dealings. Spotify is hiding the fact that it hasn’t paid many artists and labels at all and is months if not years behind in the payments it does make. That creates resentment and push-back. Come on Spotify – play fair and we’ll all support your push for fairer pricing. Rip people off and we won’t.
This is a great article and something I find very relevant considering I am in the music industry. I believe that Taylor not only took her music off of Spotify because she and Big Machine are upset with the revenue streams (although I know they think they’re unfair) but also to create an even bigger buzz around her album. People have been talking about this all over social media and the web. Everywhere you look you hear about Taylor Swift’s bold move to remove her catalogue from the largest online streaming site. Although I don’t necessarily believe that she shouldn’t have held out for more money and helped change the industry, I think she did make an interesting business decision in proceeding how she did.
I think that Taylor Swift’s decision to pull out her album from Spotify is rational and normal (boring) judgement because she doesn’t need to provide her album for Spotify to make money. She could make more money to pull out her album from Spotify because her fun would buy her CDs. According to this interesting article, it is very important for music industry to have good relationship with appropriate streaming business. However, she just have decided not to get involved in a growth of streaming business. This is one of smart business decisions and I hope some songwriters or artists use streaming business efficiently to boost music industry.
Taylor Swift is right. Spotify is only in business because it’s the “lessor of evils”. But it’s still evil.
When Apple’s streaming service unveils, likely next year, that will be the potential game changer. iTunes has 200 users that have made purchases compared to 12 million paying Spotify users. Apple could easily dominate the market. It is certainly possible that if Apple pays a better rate than Spotify, everyone able will jump ship or force Spotify to pay a more competitive rate to the creators. It is also entirely possible that one year from now, not having your music on Spotify isn’t a big deal at all.
While I like this article and agree with most of it, I wonder what makes it “hard [for you] to believe Spotify wouldn’t entertain a special royalty tier for Swift’s music and find a way to lock it in the paid only side.” Any business of any kind would entertain the thought and have a bunch of meetings about it, entertaining and vetting all the options to see what works best in their favor, but at the end of the day, Spotify said “NO” (remember Taylor’s same music is getting streamed on Google play and Pandora). Spotify doesn’t want to be making any concessions right now. They’re about to go IPO and make (at last valuation) at least 10BIL for investors. Spotify doesn’t want a new business model for Spotify for at least the next 18 months until the investors have had time to sell their shares. They aren’t in the “music business” people, they’re in the “business of music”, i.e., they are distributors of something that makes money for them, they could be distributing anything, with this company it just happens to be music.
I think Taylor Swift did the right thing by pulling out the album from spotify..Its a good decision…She do not need to make money through spotify..He can make more money through his fans…