Why Songwriters Are Getting Screwed by the Very People Claiming to Protect Them

Songwriters: News Flash! There’s No ‘S’ In ‘NMPA’.  But there is an ‘S’ in de ‘minimis’, ‘disingenuous’, and ‘screwed’.

The following guest post comes from Jody Dunitz, a longtime entertainment industry executive and investor.  On the publishing side, Jody is a former Executive Vice President of Sony/ATV Music Publishing.  

Marty Bandier, chairman of Sony/ATV Music Publishing, got it half right when he told Billboard Magazine:

“There’s no ‘S’ in ‘NMPA,’ but it does a great job of representing songwriters, too.”

To the contrary, in the interactive streaming realm, NMPA plays only on the publishers’ team.

NMPA’s David Israelite relentlessly claims that he is fighting “for songwriters to get the freedom to set prices in a marketplace”.  That songwriters have “to break out of the chains that [are] keeping our value down”.

“If you just put us on a level playing field, I’ll accept whatever the market says,” David humbly told Billboard.

In the cause for a greater share of streaming revenue, Israelite’s fight for songwriters takes the form of pleading for the publishers’ right for direct licensing.  In effect, allowing publishers to withdraw digital rights from ASCAP and BMI and negotiate directly with the services.

Israelite’s fight ignores the fact that Spotify already pays out 82% of its revenue (royalties plus advances).  That breaks down to 55% for labels, 12% in cash advances to labels, and 15% for publishers.

The remaining 18% goes to overhead and profits.

Allowing the publishers the right to negotiate directly can’t expand the revenue pool – it tops out at 100%.

Labels pre-empted “free market rates” and “level playing fields” long ago.  They’ve already locked in the lion’s share of all revenue.  And, completely locked out the songwriters.  The three major labels dominate the Spotify negotiations and share the same corporate parent with the three major publishers who collectively control 70% of the revenue-producing songs in the US.  Since the label side has substantially greater profit margins than the publishing side, there is no corporate incentive to rebalance the shares.

In fact, the de minimis royalty rate paid for songs is destined to endure for the long term. As Spotify readies itself for an IPO this year, it needs to beef up its profit profile. It seeks to lower the label royalty rate to 52%. In exchange, the labels seek more equity (stock) in Spotify and even larger cash payments.

These are financial benefits that are not shared with artists.  These are financial benefits that publishers would love too — and not share with writers.

Israelite’s lament for songwriters is disingenuous.

Direct licensing will not impact the royalty rate paid by Spotify.  And that’s the only type of money shared with songwriters.  The ‘marketplace’ as invaded by the publishers will not enrich songwriters. How magnanimous for Israelite to declare that he will accept, on behalf of songwriters, “whatever the market says.”

ASCAP and BMI are the only organizations chartered to serve both songwriters and publishers.  Digital rights are the linchpin that keeps ASCAP and BMI relevant in this fight.  Yet, they petitioned the DOJ to allow publishers to withdraw these rights and negotiate directly. What was the closed door publisher arm-twisting that led to that?

ASCAP and BMI represent the vast majority of US songs.  And writers are screwed without ASCAP and BMI as their agents who retain digital rights.  There is no level field for writers with publishers as their advocate.

 

Image by Atranias (CC0).

18 Responses

  1. Avatar
    Ari Herstand

    I agree. It’s a little confusing that you’re bringing ASCAP and BMI so prominently into this discussion about Spotify rates as the vast majority of royalties Spotify pays out to publishers/songwriters are in the form of mechanicals (which ASCAP and BMI have nothing to do with). Yes mechanical royalty rates are set by the US government and yes that should change – maybe that’s what Israelite means by “free market.” But yes, if there wasn’t a statutory rate I could very well see Israelite and the NMPA advocate for 50/50 payments (mechanical for composition to publishers / stream royalty for sound recording to labels) for strictly their clients and then the indie songwriters are left completely out of the equation. At least now the services are required to pay every songwriter equally. If Israelite is willing to fight for ALL songwriters (not just those signed to publishing cos part of the NMPA), then I’d applaud the efforts – but I’d like to see the language and proof that the new precedent will help all songwriters and not just the major publishing companies.

    Worth mentioning that when he discusses Facebook licensing he’s primarily talking about synch (which has nothing to do with mechanicals or performance royalties and ASCAP and BMI also don’t have anything to do with synch).

    • Avatar
      Anonymous

      An interactive stream includes both mechanical and performance royalties. In fact, their use is primarily considered a public performance. The only mechanical aspect of the use is that to stream a song from one place to another, there are ephemeral (temporary) copies that get stored for a fraction of a second on some Cisco server out in Timbuktu before it gets sent to the user. Those ephemeral copies require a mechanical license, in addition to a performance license for the stream. As such, ASCAP and BMI are very much involved with streaming, and should be prominent in this discussion.

      Limited downloads (aka tethered downloads), on the other hand, only have a mechanical component, as their use is not considered a public performance.

      • Avatar
        Someone Who Understands

        To be perfectly clear – and it’s not just nitpicking, the details REALLY MATTER, here:

        Under U.S. copyright “law,” (to be dealt with, in a moment) royalties for an interactive stream DO include both mechanical and performance royalties. But In the U.S., they are not considered primarily public performance and the justification for the mechanical aspect of the use is NOT the ephemeral copy necessary.

        The current royalty scheme that includes both mechanical and performance payments for interactive streaming is really the a product of a negotiation between labels, publishers and digital services and is otherwise not a part of U.S. copyright law, per se. You won’t find that referred to anywhere in the actual Copyright Act. The labels and digital services agreed to have mechanicals paid on interactive streaming much more as an acknowledgment of the “displacement” that an interactive stream represents for a potential sale of a mechanical copy, than because of the ephemeral copy.

        While there is an argument that streaming services engage in mechanical reproductions to deliver their streams, that is NOT unique to interactive services. Non-interactive services engage in the exact same process of making ephemeral server copies to deliver their streams, as well. In addition, the U.S. Register of Copyrights has said that all of these necessary copies should have “no value” and the agreement between the music publishers and labels and digital services says that those copies have no value.

  2. Avatar
    Anonymous

    Good article. I think it’s easy to forget that publishers and songwriters are not the same, and what may be good for the NMPA’s constituents may not necessarily be good for the songwriters in general. The NMPA-Spotify settlement was a good example of this.

  3. Avatar
    A-J Charron

    A bit of a correction that nobody ever seems to want to make. 55% DOES NOT go to the labels. It goes to distributors and aggregators. They then pay labels whatever amount of what they make (there is no way for us to know how much they make). I’m very tired of everyone setting up the labels as the bad guys while nobody even mentions distributors and aggregators. They aren’t doing this for free.

    • Avatar
      Paul Resnikoff

      I think you’re confusing two different payouts. Major labels get paid directly. They’re not working with CD Baby or someone.

      • Avatar
        A-J Charron

        No I’m not confusing two different payouts. Saying that labels get 55% is a generality; major labels are not the only ones getting paid. All Indy labels have to go through a distributor to get onto streaming. Completely independent artists generally go through aggregators, although some use the services of distributors. Of that 55%, anything that goes to a non-major, goes to distributors and aggregators who then pay the labels.

  4. Avatar
    so

    Publishers and songwriters have been making a fortune for decades from radio while labels and performers get zero. Are we going to do something about that inequity too while we’re at it?

  5. Avatar
    Lex

    Once again, thanks to Jodi for exposing the fraudulent and toxic NMPA, which is nothing but the lobbying pit bull of the three multinationals whose business model is sue and divide settlement by market share rather than enumerate and properly compensate the songwriters whose work they exploit.

  6. Avatar
    Hector A. Gonzalez

    Can you give us an article on digital distributor The Orchard (A Division of Sony Music).

  7. Avatar
    Eric

    If any organization truly cares about songwriter profits they would be attacking major label for a piece of minimum payouts and advances.

  8. Avatar
    John Smith

    Is the 15% publisher payout by Spotify confirmed somewhere ? I always thought it’s significantly lower than these 15%.