Why Songwriters Are Getting Left In the Cold by ASCAP and BMI…

Streaming royalty rates are easily the biggest issue facing songwriters right now.  So why aren’t ASCAP, BMI, or the NMPA fighting the labels over this?

The following guest post comes from Jody Dunitz, a former EVP at Sony/ATV Publishing, a current member to angel investing network Tech Coast Angels, and an advocate for songwriters.

Spotify is renegotiating its contracts with the labels.  It must have long-term deals in place before its impending IPO.  The streaming service currently pays the labels about 55% of its revenue.  The Wall Street Journal reported today that the labels are demanding more – at least 58%; Spotify wants to pay less.

Let’s not forget that the labels also own 15% of the equity of Spotify.

The overriding, most important songwriter issue is streaming royalty rates. The single, irrefutable reason that song rates are too low is because recording rates are too high.

While Rome burns, songwriter representatives dither.  ASCAP and BMI are going nuts over the DOJ’s “100% licensing” decision.  While that decision creates a big mess, returning to “fractional” licensing will do nothing to improve song royalty rates.  NMPA’s David Israelite is peddling the imprudent nonsense that Sony’s demand for lower mechanical royalties is an “outdated mindset that somehow if songwriters get less from the digital music services there will be more for Sony [and all other] record labels.”

It’s not outdated; it’s very relevant math.

Streaming deals are structured as percentages. There is never more than 100% of the pot to give away.  Some sources report that 83% of streaming revenue is already paid out for content costs.  After overhead, technology and maintenance costs, and profits to investors, the royalty well is dry.  The revenue pot may increase with more subscribers or higher user prices, but a bigger pot doesn’t change the relative royalty content shares.

Songs get more only if recordings get less.

The three major labels who dominate the negotiations with Spotify are sister companies with the three major publishers who collectively control 70% of the revenue-earning songs in the U.S.  The label side has substantially greater profit margins than the publishing side.  Hence, their umbrella corporate lords have no incentive to rebalance the royalty shares between recordings and songs.

The current negotiations between Spotify and the labels will cement the fate of songwriters for the next several years.  This is the fight that matters.  If ASCAP and BMI don’t find a way to pressure their publisher affiliates to pressure their label cohorts to shift royalty shares to songs, the Consent Decree skirmishes will be the proverbial rearrangement of deck chairs on the Titanic.

7 Responses

  1. Remi Swierczek

    The whole industry is on stormy waters and the biggest ship, UMG under Sir Lucian command, is the biggest contributor to ONGOING SUICIDE MODE!

    I hope the all will drift to equivalent of Bermuda Triangle and someone will be able to start from scratch.

    Let’s continue nonsense negotiations and stupid intro games with streamers or The Tube! Both business models are in TURBO MODE to shrink $200B of music obvious to imbecile to AT THE MOST $25B of subs and ads by 2025.

    Just Radio can do $100B in music by 2020 – tell it to Sir Lucian and his team.

  2. Versus

    Let’s not create an internal fight between songwriting and recording; that’s exactly what the tech overlords would love, that we sorry slaves expend our energy fighting among ourselves while tech rakes in the profit laughing all the way to the bank.

    Both songwriting and recording royalties need to rise to a reasonable level. That will only happen when:
    – piracy is brought under control so the market can normalize
    – negotiations and/or laws for better rates, ideally a minimum statutory streaming rate

    • Bob

      I see your logic on avoiding internal division but let’s not pretend everything is all rosy and nice. While the majors do segregate pub and recording they are still the same entities which shows in how they have kept the status quo going. The lopsided amounts going to recording are detrimental to small publishers and songwriters. Until this issue is addressed publishing royalty rates will only go lower.

  3. Versus

    So all of us in the music industry need to push together to make real change, in law, in enforcement, and in negotiations with tech.

  4. Troglite

    The whole premise of this article seems to rely on the assumption that revenue sharing is the only viable business plan.

    I reject that assumption.

    Revenue sharing is a way to share risk, which implies that the benefits will also be shared. The institutions and business that many musicians/songwriters have chosen to rely upon to protect their interests are taking more than their fair share of these benefits in the form of advances/guarantees and equity. So, I do think its fair to highlight these bad actors as part of an effort to helps musicians/songwriters hold them accountable. But, even if that type of manipulation is reduced, other significant problems that are inherent to a subscription-based revenue-sharing model would remain.

    I also think we should be discussing Apple’s recent proposal to move to a guaranteed minimum per stream rate. That would represent a much more meaningful change to this marketplace. Otherwise, it is quite likely that musicians and songwriters will begin to fight one another over the scraps in the 70% revenue sharing bin, as this article seems to be encouraging.

  5. TonsoTunes

    Given her apparent lack of understanding as to what is actually going of in the business, it’s easy to see why Ms Dunitz, is a former EVP at Sony/ATV Publishing.

  6. FarePlay

    “Streaming deals are structured as percentages. There is never more than 100% of the pot to give away.”

    Bingo. Can one imagine any other industry where the suppliers are asked to work at a loss because it is the only way that the distributor can survive?

    How crazy is this business that the largest vendor, Spotify, has no clear path to profitability and whose loses escalate as their business grows?