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

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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 Investf(see IFPI’s Investing in Music report)ing 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.”


One Response

  1. Esquire

    Who can deny there is substantial unattributed income and that artist contracts specifically exclude paying artists unattributed income?

    Wring the ambiguity out of the reporting process and unattributed income is substantially if not completely reduced. The remainder should arguably be escheated (as lost property) to the state’s Attorney General, removing the incentive for unattributed income completely.