As the battles rage on in Washington over the recent DOJ ruling for 100% licensing of compositions and the Songwriter Equity Act continues to sit in purgatory in the halls of the do-nothing Congress, it’s time we rethink how to approach songwriter royalties. Because clearly, relying on the laws to properly compensate songwriters is a losing (and timely) battle. By the time they figure it all out, many songwriters will have packed in their guitars for non-starvation careers – like working at Starbucks.
I want to make something very clear from the get go. I am not a tech basher. I am not a doom and gloom musician-blogger. It is the greatest time to be an independent musician in the history of the music business.
But this isn’t about indie musicians. This is about songwriters.
Many of my fellow DIYers are now confused. Because so many of us are both – musician/songwriters. But there are hundreds of incredibly talented songwriters who are not Artists with a capital A. In that, they aren’t touring, gigging out much, releasing music under their own name or band name, but rather, are writing songs every day with the hopes of getting them cut by Artists with a capital A.
Now, let’s look at the problems which we’ve all heard about. Even people completely outside the music industry have read Kevin Kadish’s “My Song Was Played 178 Million Times and I Was Paid $5,769” piece or Aloe Blacc’s “Streaming Services Need To Pay Songwriters Fairly” where he stated “In return for co-writing a major hit song, I’ve earned less than $4,000 domestically from the largest digital music service.” But unfortunately these stories got completely convoluted and lost in translation where publications (including Digital Music News) mistakenly reported that Kadish’s plays occurred on Spotify. (They were actually on Pandora – a radio service which calculates plays completely differently). But everyone just reads the headlines. This headline initially said “178 Million Times On Spotify.” Spotify has been the default “bad guy” whenever the royalty debate occurs.
But, as recently revealed by Mark Mulligan, Spotify is actually paying out about 82% of their revenue, in part, because of massive guaranteed payments (estimated at $1.6 million A DAY) paid directly to labels for the rights to use their catalogs on the service. Talk about a shakedown.
And with Spotify paying out so much of their total revenue, they clearly are not the problem. But they have taken most of the flack and have gotten such a bad name over the years that many are still boycotting the service on principle. Last night while I was in a writing session, my co-writer/producer (not an Artist) pulled up a YouTube video to search for a Bee Gees song to reference. I said “still haven’t jumped on the Spotify train yet huh,” to which he replied “I can’t support Spotify. They don’t pay.”
But YouTube pays WAY less. Publicly, they state that they pay out 55% of their ad revenue to “rights holders,” but really most of that goes directly to the major labels as well.
But as one indie label revealed from their royalty statements, YouTube is only paying about $.000012 (yes four fucking zeros) per stream, whereas Spotify (on their same royalty report) paid an average of $.0037 (combined paid and free users) per stream. But, again, to reiterate these were payments to the label. Songwriter royalties are paid to publishers from streaming services and they are MUCH less.
So, tell me again why you’re mad at Spotify and not YouTube?
We’ve all heard of the 9.1 cents per download/sale mechanical royalty rate owed to songwriters. Cost per stream is much lower (about 1/10 the amount paid to labels/artists). So in the above example, Spotify is paying about $.00037 per stream for mechanical royalties.
And YouTube doesn’t pay mechanical royalties altogether because it’s video and only requires synch and performance licenses. And really, YouTube is able to hide behind DMCA Safe Harbor clauses so any user can upload any song without a synch license and publishers only get paid if the video/song is caught by YouTube’s Content ID and then monetized (slap an ad on it). Far from a perfect system. But the royalty rate, rest assured, is well below the $.000012 paid to labels. Some estimate around 15% of that.
+How To Legally Release Cover Videos On YouTube
You can rage on over low royalties paid by streaming services, but why?
Spotify is paying out anywhere from 70% – 82% of its total revenue to rights owners (publishers/labels/songwriters/artists). YouTube is paying 55%. Apple is paying 70%. Pandora is paying 50%.
Do I think YouTube and Pandora should pay more? Yes, of course. But, what does that even mean? Pay more to whom? How? For what purpose?
The problem with the entire songwriter royalty debate is that most partaking in the debate haven’t a clue what they’re talking about.
A typical conversation goes like this:
“Songwriters need to get paid more!”
“Yeah! From who?”
“Spotify!”
“Yeah! Fuck Spotify. How do we get them to pay more?”
“We need better laws!”
“Ugh, our government sucks.”
“Yeah.”
Long silence.
“Oh have you heard the new Justin Timberlake track?”
“No.”
“I have it right here” (cues it up on Spotify).
“It’s a banger!”
No one ever talks about a current business model that actually pays songwriters really well: synch licensing.
For most commercials, TV shows, film, and trailer synch placements the up front license fee to use the song is split 50/50: Label/Publisher or Artist/Songwriter.
So, if the commercial pays $100,000 for the song, typically $50,000 is paid for the use of the composition and $50,000 is paid for the use of the recording.
It’s time for songwriters to demand equal pay across the board!
Why does an artist/label deserve 10x more than the songwriter/publisher? These rates are completely outdated. Sure, at one point in time, the label covered all costs of an artist’s development and put tons into marketing and only made money off of record sales.
Now that labels aren’t really developing artists anymore and are, more times than not, striking 360 deals (where they take a cut of every part of an artist’s career from touring and merchandising to sponsorships and even meet and greets), they have no justification to demand 10x more for record earnings. Especially because they’re getting huge guarantees from most streaming services!
Well, the government set the horribly low mechanical royalty rate of 9.1 cents per download and an insanely complicated formula to calculate streams.
The problem with relying on the government to set the royalty rates is that the rates are decided based on how convincing the lobbyists are (and how generous the parties are with campaign donations). Our government is a completely fucked system. Congress rarely does what they believe is right, but what they believe will earn them the most campaign money. Because Google, Pandora, etc have the most money and lobbyists, they are able to influence congress a hell of a lot more than songwriters.
So, what’s the solution?
Stop waiting for government to set the rates! Don’t look to outdated revenue splits for ‘how it should be.’ It doesn’t need to be what it is.
Just because labels are required (by law) to pay 9.1 cents per download to the songwriter (for the mechanical royalty) doesn’t mean they can’t pay more. Hell, they’ve been getting songwriters to agree to LESS for years under the slimy “controlled composition clause.”
Keep it equal across the board:
$100 is earned from downloads/streams, $50 goes to the publisher (songwriter), $50 goes to the label (artist). $100 is earned from radio royalties, $50 goes to the publisher (songwriter), $50 goes to the label (artist).
I know I know, it sounds simple and reasonable but just can’t work right? Well, it can. Here’s how:
So, the reason synch licenses are typically 50/50 is because you can’t use a song without negotiating with the label and publisher for a rate to use the song. And oftentimes they have Most Favored Nations clauses where each side will make no less than what the other side is making.
Sales / Streams:
Ok, so how does this work for sales and (interactive) streams (like from Spotify and Apple Music) when the government sets the mechanical royalty rate for songwriters? Simple, make the label make up the difference. Labels pay producers all the time based on record earnings (on top of their fee). Oftentimes from the first dollar earned (no expenses need to be recouped). So if a song earns $100,000 and the producer has 5 points, the producer earns $5,000. Oftentimes the producer makes more than the artist up front (because the artist needs to recoup all expenses and the advance). If the songwriter is currently making about 10% of the royalties from mechanicals, the songwriter should demand an additional 40% from dollar one on record earnings (50% total). Yeah, you’re laughing right now “labels will never agree to this!” Well if every songwriter bound together and refused to co-write with a label’s artist unless the label agreed to pay them 50% of the song’s earnings, shit would change. Time to start a songwriter’s union?
Yeah, the major labels are the most stubborn and will be the last to come around to this, but let’s not forget that you don’t need a major label to have a music career these days. On the contrary, in the new music business you are better off without a major label.
If all the hit songwriters starting only writing for indie artists, the power structure would dramatically change. Indie labels (and DIY artists) would be much more willing (initially) to agree to these kinds of breakdowns.
I know you’re saying that the labels (and DIY artists) are funding the promotion and creation of the song. There are recording and marketing costs that the songwriter doesn’t need to pay for so why should they make money when the label/artist isn’t? Good question. The answer is, it’s not black and white. Be reasonable. Whaaaa?
It ain’t hard.
Major labels have boat loads of money and if they’re making advances from streaming services and getting a cut of the entire artist’s career, they can’t claim they can’t afford this. They can. Songwriters should earn from dollar one (no expenses off the top).
If an indie label is covering recording costs, then sure, take those off the top before anyone earns anything. Totally reasonable.
If a DIYer is funding the record and putting money into marketing, then it’s totally reasonable to deduct those expenses before any royalty splits happen.
But, all you artists (and attorneys negotiating major label deals) out there, don’t you dare let the labels deduct songwriter royalties from your meager royalty rates. These newfound songwriter royalties should not have to be recouped by you. If the label is taking 88% of your money, they sure as hell can afford to pay your co-writers (and YOU if you’re also the writer) their fair share.
Radio Royalties:
Radio is a bit more difficult. Currently, digital radio pays about 10x more to SoundExchange (who then pay labels and artists) than the PROs (which then pay publishers and songwriters). This is what the Songwriter Equity Act is looking to fix: the ability for the PROs to negotiate higher rates. Pandora is said to pay 50% of their total revenue for royalties. Well, they should be paying more. If Apple, Tidal and Spotify are paying at least 70%, Pandora should be paying 70% or more. How to get them to do that? Well, that’s another topic for another article. But at least it’s something to work towards.
But, remember, when we’re discussing Pandora, we’re talking about radio. And terrestrial radio (AM/FM) doesn’t pay artists/labels anything for performance royalties. This needs to change also. So when Kevin Kadish talks about his Pandora plays, he’s talking about what ASCAP paid him from Pandora. He didn’t mention how much he earned from terrestrial radio. The entire system needs to change. We need to work towards 50/50 across the board.
But Then Won’t Artists Lose Out?
The thing is, artists have the platform and the fan base. They will always be able to find a way to make money. They can tour, sell merch, get sponsorships, go direct-to-fan. Songwriters don’t have this luxury. Also, artists don’t need to make less for songwriters to make more. Major labels do.
If the labels really believe they are supporting creativity, start to pay songwriters more.
It’s time to reimagine the possibilities and solutions. Any questions?
Any thing but raising the end price for the consumer, right?
Ari, a song is worth more than a dollar, an album is worth more than a meal. the belief that it doesn’t is worth changing. every thing else is just more BS. the problem is that artists don’t have control over their own product’s price.
Taylor swift’s song should cost less than an anonymous avant-garde jazz band’s piece.
the belief that only artists that sell hundred millions can make a living is simply horrible.
And yes,
F the government, F spotify, F youtube, F them all, F apple. they all engineered this system to be exploitative. let the artist decide how much his song should cost, get rid of all the vampires, problem’s gone.
The problem with each artist deciding how much their song should cost (I.E. a laissez faire music industry) is that the giants (I.E. Max Martin&Co) could afford to undercut everyone. Artists/labels (especially indie) couldn’t afford to cut anyone’s song except for the giants. This only compounds the problem of an industry “mainstream” where a handful of flavor-of-the-month artists are recording songs all written by the same half-dozen writers, produced by the same half-dozen producers.
Even a dollar a song would be far better than the current streaming model, which is a death by a thousand micro-payments.
that’s right
Ari,
So many questions, as I’m a performing singer/songwriter just learning how this all works.
I’m about to join ASCAP because I’m veering over into music/audio for TV/film/games to survive as a musician, even though I’d love to just keep writing pop/folk/alt songs from my heart and either record and play them for my growing audience or license them to other artists.
I’ll keep this to one question: Why don’t PROs pay streaming and sales? I could Google this, but I’m asking here because as I read your article and try to understand, I wonder why there can’t be a new kind of PRO that collects streaming, sales, and radio – and does so across the board in a 50/50 fashion?
Articles like this are why I support you on Patreon ( http://www.patreon.com/aristake )
– John Kyle
http://www.johnkyle.com
Thanks John! In short, there are two kinds of a songwriter royalties: Mechanical royalties which come from sales and interactive (meaning you can choose the song, like on Spotify) and Performance royalties which come from anytime there is a “public performance” of your song – like on radio (Pandora and AM/AM), live at shows, jukeboxes, TV shows, etc. Performance royalties are collected and paid out by PROs (ASCAP, BMI, SESAC, SOCAN). Mechanical royalties are sometimes paid via HFA, Music Reports or directly to publishers from labels.
Ari, I’d like to chat briefly with you offline about your (Oct 2014) article about ASCAP, BMI, SESAC and the Bauhaus Coffee Shop. My email: [email protected]. Thanks!
John, what do you mean by “across the board in a 50/50 fashion”?
Are you talking about a PRO (or, by the time you throw everything in, a general licensing agency more like HFA) that licenses both the publishing (lyrics/composition) and master (sound recording) rights, and pays out income 50/50 to the publisher/writer and label/artist?
Issue number one: I do not deserve an accurate report and feedback on my sale and streaming, cross validated by relevant authority / ies. Issue number 2: everyone can earn from my songs except me. Why? Simple because I am an indie or unsigned songwriter or artist.
Very good article ! Biggest problem here (at the moment) is that most of the large music publishers also have an affiliated (big) label-brother. So increasing the share for the publishing-people would reduce the share of their label-colleagues. In terms of turnover the latter ones usually have more pull, and are not that much interested in moving part of “their” income over to the publishers.
Hi Ari –
Good article. This is not the silliest idea ever heard in the music industry. Sounds very reasonable, in fact. I agree the mechanical rate of 9.2 cents per song sale is outdated, given the trend away from sales.
The problem you may run into is with FM Radio. As we know, terrestrial doesn’t pay artists, only songwriters. Currently they pay out about $500M a year to publishers/songwriters. You mentioned they “should” pay artists as well, but getting them to do so is another story, esp. given the pesky problem of a $20B or so of crushing debt they’re currently under.
So, do you think songwriters could be convinced to split their $500M of FM radio royalties 50/50 with artists, if artists would do the same for them in sales/other areas?
thanks for the article,
Mike C.
I just got through sending out our yearly Royalty checks to ASCAP,BMI, SESAC etc. These fees are paid a year in advance, not at the end of the year. There is absolutely no accountability as to what songs we play or artists we play. We are a non commercial Educational Radio station. WHO is getting our money? I was a member of ASCAP for over 30 yrs as an Artist. Made so little money. I was told to write better songs by some guy on the telephone. When I asked for a list of payouts I was told they did not have to provide one. They are Not for Profit so they HAVE to. Who pays for all the lavish parties? It is a joke and the Congress gets huge kickbacks from these groups to continue. If I play your song on our station you should get paid for it not some hip hop crack head. We have no control after we write that huge check.
Ari,
I appreciate your perspective in this article and am completely on board with most of your ideas. On a practical level, however, any suggestions for how an aspiring songwriter such as myself should prioritize between wanting to get paid something–anything–for my songs and simultaneously understanding that professional songwriters are currently undervalued in the music industry and will remain so until we act collectively to promote our own best interests? I have already turned down a publishing offer and withdrawn from ASCAP out of principle, because I believe songwriters deserve better, but meanwhile I’m not getting any younger working my 40-hour-a-week clerical job 🙂
I agree that the streaming splits have to change but something along the lines of 70% to label/artist and 30% to Publisher/Songwriter is more realistic.
Because labels are the only entities consistently spending money to make records and market artists, they deserve a bigger slice of the royalties. Plus, there’s no way to calculate an accurate 50/50 net split between labels and publishers after deducting the label expenses without auditing the labels, which would be impractical and costly.
Big time songwriters won’t work with indie and DIY artists (at least with their “A” material) until the majors’ grip on Top 40 radio and popular playlists is loosened significantly (which ain’t happening anytime soon).
While some star producers can certainly demand payment from record one without recouping their fees and/or recording expenses, most producers need to agree to a recoupment of their producer fees and/or recording expenses before they start getting paid retroactively from record one.
I understand where you’re coming from when you say labels do deserve a bigger slice of royalties. They consistently spend money to make money. BUT, you left out the cut for the streaming service itself. Personally, I it should be:
20% – Streaming service
45% – Label/artist
35% – Publisher/songwriter
Just a little clarification regarding the difference between majors and indies. I’m on board with you here in regards to songwriters getting paid – we should be paid. And all this nonesense on the majors getting these – let’s call it what it is – kickbacks or deals from streaming and YouTube needs to stop but it won’t. However, here’s when I deserve more as an Artist/Indie label whether I wrote the song or not. I paid for EVERYTHING, the recording, the musicians, the promotion, etc. I took all the risk and put out all the money and as you mentioned towards the end of the article I do NOT receive a single penny from the broadcast radio side as the artist/label. I have no problem spliting the master/sync 50/50 for placement deals. I think it makes life a hell of a lot easier for all. But to assume my fanbase is somehow goint to save me is just not reality. I currently have a song that I wrote and released as the artist that has spent the last 17 weeks on the most requested list on an internet radio show that is played on various stations around the world to a healthy amount of listeners. So that means the fans are requesting it but I sincerely doubt I will ever see a single penny on either the artist side or the writer/publisher side for two reasons. These stations aren’t paying the royalties they should be and my fans are happy to listen to the song on the station each week. Is it all part of the big music promo game, sadly yes, but it shouldn’t be, especially if the station is selling advertising – just like broadcast radio – if you are using my song and taking money for ads then you should be paying me. Target doesn’t get their product for free and neither should you. You are correct, it all needs to change. The biggest challenge is people’s lack of understanding on how musicians/writers/performers are paid. I appreciate the article and how you are breaking things down but don’t lump an indie artist/label in with majors and think that we can afford to split everything evenly when we are putting out all the money, taking all the risks AND doing all the promo.
dhenn–there may be more common ground between Artist/Indie labels such as yourself and non-Artist songwriters such as myself than appears at first glance. Like you, I put together my own projects and take on all the risk. I cannot speak for all of the non-Artist songwriters out there, but from my experience it’s now expected of us by publishers and music supervisors alike. I pay the vocalists, producers/engineers, and musicians up front to produce demo and master sound recordings of my songs. In fact, I am the only person who has worked on any of my projects who has never actually been paid on them, with the single exception of a tv commercial job, where they actually paid me just to submit something that was not ultimately chosen. And like you, I need to figure out the promo for my work. So as far as that goes, any 50/50 split you and I would share in terms of royalties, I would absolutely expect to split the expenses 50/50 with you as well. I also agree with you that it is completely unfair that artists are not paid performance royalties for radio, and I am 100% behind that changing even if it means songwriter royalties are reduced. I guess the real question is how much of this type of give-and-take are artists and songwriters willing to give each other to advance all of our interests.
Except that I would be creating a new recording of any song I didn’t write to release on my own label, so again would not split 50/50. But if we wrote something together that was for tv/film production and split the costs absolutely. However, I have also run into the situation where a publisher owns a song like Winter Wonderland, which they can and do charge a fortune for on the sync side and there is no way I can request that kind of money on the master side. There is no one answer and 50/50 across the board isn’t the solution to the problem.
I agree with you–there is no one answer. I am most interested in finding out if there is enough common ground between songwriters and artists to take collective action in finding solutions. Unfortunately, I am not seeing a lot of evidence in support of that idea at this time. To your example of the publisher charging a fortune for songs like Winter Wonderland, I would counter by questioning why we still have a compulsory licensing law that allows you as a label to re-record my original composition without my permission. If I write the song and produce my own master, then I should not be forced to license the composition to others whose recordings will compete with mine in the marketplace. The royalty rate I am supposed to be paid in that scenario is little consolation, as I had no say in it. I can see that each of us has our own interests and perspectives that will have to be taken into account, but I hope we can at least agree that we are both undervalued in the marketplace.
A label guarantee is fine for what it is, but may bankrupt the labels if piracy is not brought under control, and prices are then able to be set properly for streaming services.
Free unlimited ad-supported streaming is unworkable in the current model; the ads apparently do not pay enough for the services to pay a reasonable rate.
Interesting article!
Seems like requiring the parties to actually negotiate sync licenses is the most meaningful difference. You can change the number and % of the splits all you want, but 1/10 of a penny is still 1/10 of a penny.
That said, i love the spirit of this article. Of course, efforts to improve laws should continue. But relying exclusively on the government plays into the hands of Big Tech as they rely on the slow pace of those changes and their ability to lobby for loopholes they can exploit to their favor.
I’ll add my own spin on Ari’s theme. First, let me explain my view of the marketplace in rudimentary terms. At this moment in history, i really think there is more than one “music recotding industry”. There is the legacy “analog” industry… which includes major labels/publishers. There is also an emerging “post-digital” industry. Most of the activity that is discussed on DMN reflects efforts by individual companies to bridge these two music industries. Majors labels have used their legacy catalogs to ensure they own a piece of the emerging post-digital industry. But post-digital players like Spotify also forced the all you can eat subscription model onto those major labels because they didn’t believe they could compete effectively if they remain restricted to new releases by a limited selection of artists.
No one would design the marketplace for music recordings we have today. It evolved over time as the result of individual parties pursuing their own narrow interests, often in a manner that harms or limits opportunities for other parties. Its serms almost impossible to fix now because any improvement for one party requires someone else to accept a sacrifice.
To complicate things even more, the transition from the legacy recording industry to the digital industry has torn down the walls between true professionals, amateurs, and amateur professionals. All three are often found on the same platforms, at the same price point, and with relatively subtle differences in production quality.
With that all of that in mind, i personally hope to see a new generation of services enter the marketplace that begin to decompose the all you can eat subscription model into individual pieces. Freeing ourselves from the influence of the major labels and publishers will require leaving their catalogs behind. We desperately need a GREAT service for new music discovery. In order to be freed from the shared subscription revenue model, we desperately need alternative monetization strategies like pay as you go or micro-subscriptions. Similarly, we need new pure play services that are targeted to the unique needs of amateurs and professionals instead of intermingling them as if they were the same.
I would love to see some type of bitcoin or blockchain technology used in ALL electronic music – I presume there would be pitfalls … but it would cut piracy, and IMHO, help ASCAP/BMI, etc. count EACH spin! Just my thoughts.
This is socialism at it’s best. Government getting in our business. This reminds me of Walmart employees complaining about their wages. The answer is simple, but hard to implement. Don’t get involved if you don’t want BS. If you don’t want labels, pubs, gov, fans, etc. stealing your music, then don’t release it. It’s that simple! Copyright laws are stupid, they do not prevent piracy!
They’ve been around since the 1700’s and have not prevented anything. People just sue keep suing each other and causes stress and frustration. Which leads to another issue, artists lack entrepreneurship skills, which is why the labels and pubs screw them.
Don’t get involved in spotify, pandora, youtube, FB, etc, if you’re gonna complain like a little girl, read the friggin’ contract before you sign anything.
thinkingmusician.com
A songwriting union is the best idea to come out of this article. This could be extended to be an artist and songwriting union where common interests and minimum fees are agreed and collectively bargained for in negotiations with both the music providers (Spotify, You Tube etc) and music facilitators (record labels). This of course would only work if songwriters and artists were to go on strike. What would a strike look like: no live performances, no music on TV, no music on streaming services. How could this be achieved? It would have to have legal muscle but most importantly of all it would need all songwriters and artists to unite from Paul McCartney to Kanye West to the newest struggling songwriter. Will it happen? Unlikely. Since I see no evidence the legacy songwriters who have earned untold millions during music’s golden era have any inclination to give anything back other than soundbites.
Ari, what do you make of this?
http://blog.audiam.com/2017/01/jeff-price-responds-to-bob-lefsetz.html
Radio royalties for songwriters got reduced this year as well. The ONLY hope for non-performing songwriters to make a living is by writing songs that get played on terrestrial radio and become hits. Terrestrial radio hasn’t changed that much. You can still make good money from radio airplay, in fact outside of licensing fees it’s the only realistic way to hope and pray to make money in modern times if you’re a commercial songwriter. The odds are slightly better than winning the lotto, so get to work! Someday songwriters are going to have to get a cut of artists touring/merchandise etc, Once terrestrial radio and record companies are no more… there is no other way. Deals will have to be made between artists and songwriters.
I’m gonna start a blog, JUST so I could write profanity laced articles