This was written by Kobalt Music CEO, Willard Ahdritz.
Why should music, which is beloved by people in every culture, across every language and corner of the globe, be anything less than an economic powerhouse? Today, live ticket sales have hit an all-time high. Music publishing values and revenues have increased. Tech companies are investing in music by the billions. And, perhaps most importantly, more people have legitimate access and choice, in both platforms and music, than ever before. And for music creators, one global hit can unlock millions of revenue streams from billions of transactions and micro-payments that add up to more demand and music usage than ever before.
We are so close to the golden age of music. But we’re not there yet.
While technology has improved consumers’ access to music, the music industry has not embraced technology to improve royalty tracking, collections and payment to the songwriters creating the music itself.
Yesterday’s antiquated infrastructure, which much of the industry still employs, was not built to handle the enormous volume and complexity of data that digital music requires today.
And with the meteoric growth of streaming platforms, devices and emerging markets, the challenge of managing rights and collecting royalties from around the world is only intensifying.
One hit song today can generate up to 900,000 distinct royalty payments, and just one of those could be from Spotify in the U.S., for billions of individual streams, that then have to be accounted for and paid out to each of the song’s different writers.
Over 75% of those 900,000 royalty lines come from streaming services (i.e. YouTube, Spotify, Pandora, Tidal, Rdio, etc.), each delivering data in different ways, for different time periods, using different calculations, across different geographies. Since 2004, this volume of royalty lines has grown by almost 2,500%. And with the announcement of Apple Music last week, plus Spotify’s bullish determination to grow, and the number of new services jumping into the game, the volumes of data to come from streaming will be staggering. Streaming will impact the music industry more than any format we’ve ever known.
It’s no surprise then that the music industry’s outdated back-end accounting systems are not capable of processing all of this complex data in an efficient or timely way.
Simply put, the back-end pipes of the music industry are broken — something the general public doesn’t realize, until a major talent pulls their catalogue from a streaming service in protest. Consumers love their instant access to music today, but few know that it takes up to 2–3 years for songwriters to get paid for their work, losing as much as 60–70 percent of their money in transactional costs along the way. And then when you factor in the opaque royalty statements that songwriters get, it’s clear that the creators are the biggest losers in today’s music ecosystem.
Remember, this is a songwriters’ salary we are talking about. And not just the superstars, but thousands of writers you’ve never heard of creating your favorite songs. Just imagine if you didn’t know when or how much you were getting paid or how much the middlemen were taking out of your paycheck. When I speak with young music students and aspiring songwriters, I sense their fear and uncertainty about the future of their careers. And it’s not the fault of the streaming services; the fault lies with the music industry’s general lack of investment in technology, its inefficient, outdated collections structure, and a broad disregard for trust and transparency.
Fortunately, there’s hope. In addition to the work we’re doing at Kobalt, there are several technology-focused companies working to better serve music creators. Apple’s acquisition of MusicMetric and Spotify’s purchase of Echo Nest are both signs of the companies’ support for cleaner and deeper data delivery to licensors and artists. PledgeMusic delivers a great deal of value to artists seeking up-front investment from supporters, as well as delivering crucial data around fan engagement. Next Big Sound (recently acquired by Pandora) is capturing an impressive array of information about new music uses and the relationships between artist and audience, as well as between bands and brands.
And now, the media are taking notice too. I’ve seen more news coverage on songwriters getting paid in the past six months than I’ve seen in the past ten years. People are finally talking about this critical issue, which is an important step in resolving it once and for all.
All of this is music to my ears, signaling a shift toward an industry that embraces a higher standard of respect for the rights of artists and songwriters, as well as a real commitment to technology as an opportunity, rather than an obligation.
One thing should be clear: where technology is developed and proper systems are in place to rigorously track, collect and report royalties, there is hard evidence of tremendous growth. For example, our back-end integration with YouTube allows us to monetize over 2 billion video streams per month. This is money Kobalt clients didn’t even know they were missing a few years ago. Some of our songwriting clients are seeing a 140 percent increase in revenues once their content is added into our advanced global collection system, KORE. With systems to catch incorrect or missing metadata, we can be proactive about mistakes in tracking, collecting, and reporting. On average, Kobalt clients receive 20–30% more money, 2–3 years faster than the traditional publishers. Now, imagine what that uplift could look like if these efficient systems were applied throughout the industry.
Which is the key reason why we recently announced AMRA, the first global digital music collection society — to apply the efficiencies and increases we’ve achieved in music publishing to the collection society framework, an integral piece of the revenue chain for songwriters. If we can fix the pipes throughout the industry, the upside for songwriters is enormous.
In addition to new infrastructure, I also believe that we need to see a greater commitment to transparency and data integrity across the board in order to build a healthy industry. This is what the GRAMMY’s recent Creator’s Alliance is aiming to achieve, and it’s exactly the commitment that Kobalt was built on.
History has shown us that transparency is the single most important factor for success in any environment; whether it’s in politics, business, or society. It’s been my fundamental philosophy at Kobalt since day one: Transparency creates trust, which drives liquidity, which ultimately drives volume. Not coincidentally, the music industry could use all three of those right about now.
Technology is the key that opens the door to real transparency, enabling us to track, report and share our data like never before. As an example, our Kobalt Portal gives our clients full access to all of their data and analytics, in real time, around the world. No trick mirrors, no hidden corners. Each Kobalt client has a login, enabling them to drill down into every type of transaction and usage of their content anywhere and everywhere. We show them everything, which may sound obvious in today’s day and age, but it’s unheard of in the music industry. Total transparency!
So here we are — at the dawn of this golden age of music. For me, the way forward is clear: every player in the music industry must commit to work with technology, not against it. Let’s embrace transparency and prioritize trust. It’s our responsibility to build a future where all songwriters, artists and creators get paid fairly and trust the music industry.
That’s the future of music.
Willard Ahdritz is the CEO of the royalty collections company, Kobalt. Kobalt handles admin publishing, label services and all around royalty collections.