By George Howard and Jeff Price
In order for a business of any kind to succeed you must have metrics. You must, at minimum, be able to calculate both how much the business is spending and how much the business is making. The music industry today, in many respects, requires and rewards the artist who views herself as a business-owner/operator. Artists can (and we’d argue, should) be their own label, songwriter, and publisher. As such, artists can develop multiple revenue streams for their business. Downloads of the artist’s records generate income; usages of the song/master in film/TV generate income. Both of these streams of income are fairly easy to quantify. A download of a song generates roughly $.70, and income from usages in a movie/ad, while negotiated, are clear and precise.
An interesting note is that the music industry going digital has allowed this clarity. In the past, not only would a band not know its ”artist royalty” at a “penny rate,” but over 98% of signed artists never even saw a penny of band royalties beyond an initial advance. Via the internet and the digital industry, artists are, for the first time, able to clearly understand how much money they make when their music sells – and they actually get the money as opposed to having it kept to recoup against label expenses. The point is, for the past 60 years no one really gave a shit about the band royalty rate as they never got it, and so understanding it was moot. But now, for the artist–cum-label, it’s very real, and very important.
However, as we’ve discussed in recent articles, as we move inexorably towards a streaming-only music landscape, discerning income from this type of usage (streaming) is ridiculously complex. This complexity makes it difficult (if not impossible) to create a financial roadmap for a music entity.
Here, for instance, is a simplified “explanation” provided by a great company called RightsFlow of how income for interactive streams and limited downloads are calculated. RightsFlow has a product called LimeLight that allows artists to get mechanical licenses as well.
We understand deeply how complicated it can be to create a set of rules to govern transactions amongst a vast array of diverse market participants. There is, for instance, a compelling argument that a small broadcaster of music (a college radio station’s web site, for example) shouldn’t pay the same amount that a massive online presence should; and, thus, the artist shouldn’t receive the same amount for both usages.
There is now clarity to the amount of money the artist as label makes when the artist’s music sells; however, this same clarity does not exist for the songwriter when there is a public performance of a song. Add to this that it appears that the streaming of music is the future of this industry and that these music streams – both interactive, via services like YouTube, Mog, Rhapsody etc as well as non-interactive, via Pandora, Jango, Last.fm etc – are required by law to pay the songwriter for the public performance of the song. It is imperative that there is some simple transparent way to understand what is being paid. Add to this that the obtuse nature of income from public performance is, sadly, not limited to just digital transmissions. For example, how much money is a songwriter paid when his or her song is played on a TV show, in a restaurant, in an elevator, or on a FM radio station? In roughly twenty years in the music business, we have yet to hear anyone articulate with any type of exactitude what a songwriter can expect to be paid from these type of public performances. Again, yes, of course, it varies upon the scope of this public performance, but to not be able to even give a range is deeply troubling. Again, you simply cannot build businesses without being able to calculate revenue and cost.
Arguably, tracking terrestrial public performance is necessarily a less-exact proposition than tracking digital public performance – i.e. Pandora keeps track of what it plays in a database and can export a file, whereas your local mom and pop bar just plugs in an iPod and clicks play and does not keep track. The analog would be something akin to physical distribution as compared to digital distribution. It is simply far easier to track digital sales than physical. TuneCore, of course, understands this, and adjusted the model for digital distribution accordingly: charge a flat fee for a service, and account to artists with exacting accuracy. Your band royalty rate is clear, understandable and simple.
We must create a similar system for digital public performance for songwriters. It would appear that SoundExchange is on its way (not without some bumps) towards creating a system for accurate collection and distribution of digital performance income for the record label holders and lead performers of the song, but there appears to be a gap with respect to the songwriter.
SoundExchange — the new PRO on the block, when compared to ASCAP, BMI, or SESAC — operates with a degree of transparency that the others lack. Part of this transparency is due to the fact that the rates that SoundExchange collects — public performance from digital non-interactive streaming — are set by statute (meaning the government sets the rates). There is, of course, an argument to be had about the relative merits (or lack thereof) of this approach with respect to the ability to negotiate these rates.
In any case, as above, today’s artists must leverage all of their income-generating possibilities. This includes, of course, income that they, as writer/copyright holder of a song, are legally required to be paid whenever their music is streamed; either interactively or non-interactively.
TuneCore brought clarity to the record label and band royalty side. It would like now to bring the same clarity to the songwriter side and get as much of your money into your pockets as quickly as possible with a clear understanding of how it is calculated and what you should expect.
In addition, and just as important, songwriters (who are also acting as label and publisher) need a voice at the negotiating table, as these songwriters appear to have as much, if not more, market share then the old school guard.
We believe we need reform in this area if we’re to ever see true innovation in the music business. Smart external money will never enter a market where they can’t calculate revenue. More importantly, the millions of artists out there who, increasingly, are essentially small businesses – operating as label, writer, publisher, etc — were forgotten in the byzantine negotiations that resulted in the codification of the rates surrounding streaming.
Do your part. Become informed. Know your rights. Now more than ever, it’s essential to understand the various revenue streams that are due to the artist/label/songwriter/publisher. There simply is no alternative if you desire to continue to make your music, on your terms, in an ongoing manner.
As for TuneCore, it must step into the void and do its part to help organize these countless important voices in a manner that makes it impossible to be ignored
These are disruptive times, but from disruption comes true opportunity…for those smart enough, informed enough, and brave enough to take control.
George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: @gah650