Why “Labels Don’t Pay Their Artists” Is a Myth…

artistshare20092014

The following statement comes from Adrian Strain of global recording industry trade group IFPI, and specifically responds to Berklee School of Music and Rethink Music’s recent report that artists are routinely underpaid on royalties by an average of 20-50%.

IFPI response to the Berklee College report

The recent Rethink Music report contains useful information on the complex economics of the modern music business.  The report highlights many principles around securing a fair value for music that are important and which IFPI and its member companies would agree with.

Unfortunately, the report also contains too much inaccurate information, unsubstantiated assertions, and consequently unfair criticisms of record companies.

In particular, the report omits certain key points which means that it gives an incomplete picture of what is happening in the industry.  According to IFPI’s independently verified data in a strong sample of 18 markets, artists’ revenues have declined less than industry revenues overall.  Artist payments fell by 6 per cent over the last five years to 2014, considerably less than the 17 per cent decline in industry revenues.

This means that payments to artists by record companies as a share of revenues have increased by 13 per cent over the same period.

Here’s an excerpt from that report:

The rise of streaming services has also prompted wider discussion around the issue of artists’ royalty payments in the digital environment.  In order to better inform this discussion, IFPI conducted research in 2014 to obtain an accurate picture of how royalty payments have changed as the market has shifted from physical sales to digital channels.  

Industry data compiled by IFPI from the three major companies, covering local sales for locally signed artists in 18 major markets outside Japan and the US in the five year period to 2014 shows that while sales revenue fell 17 per cent, total artist payments – in the form of royalties and unrecouped advances – declined much less in real terms (down 6 per cent) and increased significantly as a share of sales revenue, by 13 per cent.

Over the five year period, the data shows that total payments by record companies to local artists totaled more than US$1.5 billion across the 18 markets.

Significantly, the market with the most positive trend in artist remuneration has been Sweden, where paid streaming predominates, accounting for 68 per cent of total industry revenues. In Sweden, payments to artists over the five year period rose 111 per cent against a 47 per cent increase of corresponding sales revenue. Furthermore, the IFPI data shows that in the majority of markets where subscription services account for more than 30 per cent of revenues, artists have benefited from the growing sales and are receiving more money and a larger share of the revenues.

Overall the results of the IFPI data collection process suggests that, across a substantial sample of markets, remuneration to local artists as a share of sales revenues has seen a significantly more positive evolution than the trend in overall sales income.

It also suggests that, in particular, paid streaming services have had a positive impact on overall payments to artists.

At the same time, upfront record company investment in A&R and marketing has not significantly diminished (see IFPI’s Investing in Music report).  According to IFPI data, the proportion of record companies’ income invested in A&R and marketing slipped marginally from 28 to 27 per cent between 2008 and 2013.

The real problem for artists and record companies is that some of the largest digital services in the world claim to be exempted from copyright and do not pay a fair market value for music to artists and labels. That is where the real problem lies and which policymakers need to address.”

8 Responses

  1. GGG

    Yes, labels all pay their artists everything they’re owed all the time. People have just been suing their labels for decades because it’s fun to sit in court.

    Reply
  2. Name2

    An accurate headline would be “Industry trade group denies claims of underpayment.”

    A headline in a shitty industry-mouthpiece megaphone would be to adopt the conclusion of the canned PR as fact, and purport to be publishing an article telling you why it is so.

    Reply
  3. JTVDigital

    Now your new friend from IFPI may be able to share some details on the following:
    – how many % of signed artists did not recoup their advances? (+ how many % most likely never will)
    – what is the average artist royalty share on sales in recording deals?
    …which would explain where this feeling of “not getting paid” comes from.

    Reply
  4. DavidB

    Note that the IFPI study includes unrecouped advances in ‘artist payments’. It is arguable how far this is justified. If much of the advance is used to finance the production of the record, and maybe some part of publicity costs (e.g. videos), it should not be counted as artist’s income.

    Reply
  5. There is something...

    The fact that artist’s revenue share is up doesn’t invalid the fact that they don’t’ get all of what they should get.

    So what’s your take on the infamous Sony-Spotify contract Mr. Strain ?

    Reply
  6. Musician Who Understands

    Wow.

    What a self-damning piece. Mr. Strain ought to think a bit more about what he’s saying before he publishes something like this, again.

    [i]”According to IFPI’s independently verified data in a strong sample of 18 markets, artists’ revenues have declined less than industry revenues overall….

    Here’s an excerpt from that report:

    Industry data compiled by IFPI from the three major companies, covering local sales for locally signed artists in 18 major markets outside Japan and the US in the five year period to 2014 shows that while sales revenue fell 17 per cent, total artist payments – in the form of royalties [/i][b]and unrecouped advances[/b][i] – declined much less in real terms (down 6 per cent) and increased significantly as a share of sales revenue, by 13 per cent.”[/i]

    So, you are still keeping artist unrecouped, and you are counting those unrecouped advances as part of your overall “payments to artists.” Not just royalties.

    But we all know what recoupment is about. Indeed, the very BEST position a record company can be in, financially, is to be making profit on the product, while the artist is unrecouped. All cash profits in – and no payments to the artist out.

    And we’re not even taking into account the completely unethical fact that after recoupment, the artist doesn’t gain any better position with respect to their exploitation. Even after recoupment, the label retains all rights and continues to only pay royalties, not a share of profits.

    Finally, I note that the informing study was explicitly limited to [i]”local sales for locally signed artists in 18 major markets outside Japan and the US”[/i]

    Translation: “We specifically excluded the outright theft that is inherent in the internal accounting for international sales – and we also avoided the two biggest markets where these unethical financial scams occur most regularly.”

    Gee, thanks!

    This bit is interesting, too:

    [i]”Significantly, the market with the most positive trend in artist remuneration has been Sweden, where paid streaming predominates, accounting for 68 per cent of total industry revenues. In Sweden, payments to artists over the five year period rose 111 per cent against a 47 per cent increase of corresponding sales revenue. [b]Furthermore, the IFPI data shows that in the majority of markets where subscription services account for more than 30 per cent of revenues, artists have benefited from the growing sales and are receiving more money and a larger share of the revenues.[/b][/i]”

    But hey, let’s continue the DMN jihad against streaming and subscription services, anyway. They just don’t pay “enough” right?

    Reply
  7. Anonymous

    “Industry data compiled by IFPI from the three major companies, covering local sales for locally signed artists in 18 major markets outside Japan and the US…”

    Outside the two largest market music markets on the planet? IFPI’s response is utterly disingenuous.

    Reply
  8. Rick

    Glad this is all becoming obvious to DMN readers. And glad Paul didn’t try to spin this or hide it. The evidence is just too obvious now that streaming isn’t a problem, its labels and publishers. Their propaganda is finally wearing off and I hope all artists wake up and begin to fight the real enemy.

    Funny how he also said, “claim to be exempted from copyright.”

    No one is “claiming” that. They are or they aren’t. These companies didn’t write the laws, they just follow them. Regardless of how outdated or ineffective those laws are. Much like the mysterious formulas used by ASCAP/BMI to calculate payouts.

    Reply

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