The debate over songwriter compensation is unlikely to end anytime soon — though fast-evolving technology will play a big role in the discussion moving forward. Case in point: Audoo is working to improve songwriter pay by optimizing performance data from public establishments. The resulting changes could be dramatic.
Songwriter compensation has become a particularly hot topic in 2022. In the wake of multibillion-dollar bets on song rights, the imbalance between publishing and recording payouts has assumed greater importance. And the late-August announcement of a long-sought royalty-rate hike on streaming services is part of a years-long battle over who gets what.
With signs pointing to a streaming plateau ahead, Hipgnosis Songs founder and CEO Merck Mercuriadis recently reaffirmed his bullish vision for the segment. But songwriter payouts remain a touchy subject.
“When I presented [the Hipgnosis] investment case to the financial community, I told them that this was going to be a great way to make money, because Spotify and streaming was going to go from having 30 million paid subscribers to having 100, 200, 300, 400, now we’re at 500 million,” said Mercuriadis. With that rise, Hipgnosis’ hit-heavy holdings are poised to enjoy a material revenue jump.
But Mercuriadis warned that shorting songwriters could come with a cost. Recent dips in Spotify’s subscriber growth, far from being indicative of a plateau in the wider music streaming market, only reflect deficiencies in the company’s business model and approach to songwriters, Mercuriadis relayed.
“I think what is plateauing [for Spotify] is because of the negative stance that they’ve taken on songwriters – and because of being preoccupied with some other things. I think Spotify perhaps isn’t going to end up with the same share of the global market that I expected them to have.”
Meanwhile, National Music Publishers’ Association president and CEO David Israelite promptly touted the 15.35 percent headline royalty rate that streaming services agreed to pay songwriters and publishers during the 2023 to 2027 stretch.
“This historic settlement is the result of songwriters making their voices heard. Instead of going to trial and continuing years of conflict, we instead move forward in collaboration with the highest rates ever, guaranteed,” Israelite stated of the deal.
Conspicuously absent from these and other streaming-focused assessments is a mention of accurate data captures, which could well be the most important component of songwriter compensation in the contemporary music industry.
Audio-recognition companies including Audoo have arrived on the scene with the ambitious goal of delivering technology to identify every song played in public spaces — and assure that music professionals receive the entirety of their owed pay. It’s a simple concept, but one that is far from being actualized.
Instead, methods for counting public plays are shockingly outdated. The song-recognition model currently utilized by performance rights organizations (PROs) centers on extrapolating play data from estimates and limited samples. Royalties are distributed accordingly — often to the benefit of superstars and the detriment of those without a massive following. Earlier this year, DMN joined forces with Audoo to bolster their vision of improving song IDs and resulting payouts.
“In the U.S. last year, across all four PROs, I think there were less than a few thousand samples. What are they distributing between them a year? $3.5 to $4 billion. And they’re doing that off of small samples. You’ve got to get your data set bigger – you’ve got to get it accurate,” Audoo founder and CEO Ryan Edwards told Digital Music News.
Employed on a global scale, a reliable data-capture infrastructure for public establishments – from small restaurants that occasionally flip on the radio to department stores that play music for the better part of 24 hours per day – would paint a far clearer picture of actual consumption.
“We’ve seen that in a U.K. test where an artist saw a lot of streams. She had about 2,000 followers on Instagram, and she’d never earned a [performance] royalty in her life. We reached out to her and said, ‘Hey, we just wondered how much you’re earning? Because this is what we do.’ And she said, ‘No, I’ve never ever received a royalty payment.’ She’d been PRO registered for two years.
“Can you spot [the use of tracks] if every nightclub suddenly starts to play a song that’s never been played, or hasn’t been played recently? We can inform that, and that’s what this data will do,” Edwards continued.
Now, Audoo is looking to make the fully automated (and far more accurate) logging of public plays a reality with its inconspicuous ‘Audio Meter.’
The four-year-old company last spoke to DMN about the hardware – a compact product that plugs into any standard outlet and then identifies and recognizes any song played – and its broader objectives back in March. That followed a nearly $10 million funding round to close out 2021 and a partnership with Japanese PRO JASRAC.
Since then, Audoo has recorded several high-profile victories in its quest to reshape the song-identification process, including a July agreement with Sydney-headquartered PRO APRA AMCOS. To start, the pact has brought the Audio Meter to businesses in Adelaide, Brisbane, Sydney, Melbourne, Canberra, and Auckland.
That same month, Audoo partnered with entities including the Music Venue Trust (which represents hundreds of grassroots venues in the U.K.) on a campaign called “Recognize the Music.” As its title suggests, the initiative aims to bring reliable and accountable music recognition technology to public establishments. Edwards told us that the undertaking is achieving the desired result, prompting some participating businesses to register with PROs for the first time.
“We had thousands of sign-ups in less than a week,” Edwards said of Recognize the Music, which has framed the Audio Meter as a straightforward way for business owners to compensate their favorite acts directly. “We also have a toggle switch to see if they [public establishments] have a license. About 30 percent didn’t!”
“I think the PROs struggle to market particularly well to new potential licensees,” Ryan continued. “Whenever we have articles, anything about us as a business or about the campaign, people are like, ‘Oh my God, I didn’t know I needed a license to play music. Where do I go?’”
With several European PRO deals in the works, the continued onboarding of clients, and conversations with stateside performance rights organizations, Audoo intends to keep delivering the use of Audio Meter globally.
The big vision is also a granular one. If every song played is properly identified, then every rights owner, artist, and publisher is paid properly. That could actually mean more for some superstars who are currently overcompensated by their PROs. Or, it could translate into smaller paychecks for others. But at least the checks would be closely aligned with reality.
According to execs, every identified play – and every bolstered paycheck – is a step towards making songwriter compensation as accurate and equitable as possible in the long term. That’s good news for artists who aren’t getting paid properly, but also a big step toward crafting better valuations around song catalogs.
After years of high-flying music acquisition prices, that’s also good news for investors looking for more accurate valuations.