Tag: streaming

Can Streaming Ever Work for Songwriters?

Yesterday, David Lowery’s The Trichordist published an article by singer/songwriter Blake Morgan—one which the Huffington Post apparently refused to run.  In the piece, Morgan describes meeting with Spotify executives to whom he tried to explain that their product isn’t Spotify itself but is in fact music.  “And by the way,” Morgan said, “stop calling your subscribers ‘users.’ They’re not ‘users,’ they’re listeners––our listeners in fact. You’re the ‘user.’ You’re using our music to monetize our listeners for your profit.”  This apparently confused and frightened the Spotify exec, who became defensive with an arrogance familiar to anyone who follows the internet industry. “You don’t get it at all!” the guy declared before leaving in a huff.

The night before reading Blake’s story, I met with a group of musicians in New York, and one songwriter showed up with a stack of papers in his hand. These were notices of intent (NOI) filed by a single entity on behalf of all the major streaming platforms for the purpose of obtaining compulsory licenses for use of dozens of the writer’s compositions. Based on reporting by Chris Castle, I wrote for the union publication Allegro back in March about major platforms doing this—using their overwhelming computing power to mass-file NOI, exploiting a loophole in Sec. 115 of the copyright law, in order to essentially blanket license all compositions for streaming platforms.  This living example of the songwriter with physical notices in hand hit home for me.  The songwriter explained that if he goes to the notice-sender’s website and fills out all the forms, there might be as much as $50 in it for him as compensation for thousands of streams of his work across multiple platforms.

American songwriters are unique among copyright holders because they are the only creative artists subject to a combination of compulsory license (i.e. anyone can use their work if they pay the license fee) and a consent decree, with roots in the early 20th century, whereby a federal rate court determines what the license fees will be for various uses, including public performances.  And because the average rate for a digital public performance is $0.005, this is why millions of streams are worthless to songwriters, despite the fact that streaming has largely displaced their other sources of revenue.

With Spotify poised to announce an IPO this year and make Daniel Ek and his colleagues even wealthier than they already are, a New Year’s Eve lawsuit with a price tag of $1.6 billion was filed by Wixen Publishing against Spotify for its unlicensed use of  hundreds of songs, including famous writers like Neil Young, Tom Petty, Stevie Nicks, and Donald Fagen.  The complaint alleges that 21% of the 30 million tracks on the platform are being used without mechanical licenses, and this number seems reasonable given the available anecdotal evidence and the grounds for previous litigation.

In the Lowery/Ferrick class-action suit for this same failure to license, Spotify’s defense amounted to claiming an intent to pay the license fees but for the lack of an efficient means to locate the songwriters due the royalties.  That suit settled for a modest $43 million fund, amounting to just a few dollars per infringement. Then, in response to a pair of lawsuits filed in September last year, Spotify came very close in its initial motion to asserting that streaming services were not even subject to mechanical licenses.  This drew immediate fire from the music world, notably National Music Publishers Association CEO David Israelite who said that Spotify was asking for a fight with “all songwriters.”

Fast-forward to the end of 2017, and the event that triggered Wixen’s 11th-hour litigation was the release just before Christmas of a draft bill titled the Music Modernization Act.  Sponsored by Representatives Doug Collins (R-GA) and Hakeem Jeffries (D-NY), the bill reflects about 4-5 years of legislative work trying to secure the interests of music-makers in the streaming market—even if, as Blake Morgan describes, the bros at the streaming companies don’t understand that they’re in the music business.

The MMA is endorsed by multiple music rights organizations, including NMPA, ASCAP, BMI, SONA, RIAA, A2IM, and several others.  The proposed legislation addresses a number of issues have long divided musicians and streaming platforms by creating a new digital licensing collective that has been compared to SoundExchange by some observers.  But the reason the bill triggered the Wixen lawsuit is that, if passed this year—and this seems feasible—the law would foreclose any new lawsuits over mechanical licensing infringements (including past infringements) because its core agreement is predicated on a blanket, compulsory license in exchange for an improved system of royalty distribution.

Key improvements include a new database funded by the digital platforms that would, in principle, more accurately identify and locate songwriters and composers to receive; and a new rate-setting process that is expected to raise the overall rates paid to songwriters.  Nevertheless, as written to date, the bill contains three areas of concern for songwriters. These have been publicly noted by Rick Carnes, CEO of the Songwriters Guild of America, though my understanding is that other parties share some of these concerns, and they will be raised as amendments to the bill are proposed in coming weeks and months. The issues Carnes raises are the following:

First, the immediate end of all litigation for past infringements seems to unfairly limit the remedy options for independent and small-publisher rights holders.  Carnes says he fully understands the need for a safe harbor in exchange for collective licensing going forward, but “why are songwriters who have seen their works infringed hundreds of thousands of times in the past having their right to sue for damages cut off arbitrarily on January 1, 2018?”

Second, the board overseeing this new digital licensing collective would currently comprise eight publisher representatives to two independent songwriter representatives.  Carnes argues that representation should be 50/50 just like the board overseeing SoundExchange.

Third, as written, the bill calls for royalties collected and held for songwriters who cannot be located to be distributed on a market-share basis, mainly to the major publishers. Carnes says that it is naturally the independent and small publishers who are most likely to fall through the cracks in the new system, which he describes as “enshrining” a longstanding problem even in old systems whereby music creators are often not properly compensated through royalty-collection practices.

Meanwhile, despite Spotify’s prominent role in this narrative, the reality is that YouTube is the most-visited platform for music streaming, and that platform pays a songwriter about ten percent of what Spotify pays (think $24 for a million plays), when it pays at all.  Presumably, any number of tracks a listener will “discover” on YouTube will be unauthorized uploads by users and are, therefore, outside the system that compensates artists even the paltry tip-jar money they’re due.  I mention this by way of saying the market itself remains volatile and dynamic, and we should be no more surprised to see Spotify suffer a Pandora-like fall from grace than to see it retain its dominant position.

I am hopeful that issues raised by Rick Carnes can be addressed as the Music Modernization Act moves through the process so that thousands of songwriters, whose names you’ll never know, can begin to benefit from the future of the digital music marketplace—whatever that future may look like. The bill certainly represents the first significant legislative attempt to make streaming work for musicians, but it would be an unfortunate irony if the independent voices—the ones who first advocated the democratization of the internet—were the ultimate losers going forward.  And we, as listeners, would lose as well.  Meanwhile, kudos to independent voices like Blake Morgan just for reminding the tech geeks with so many dollar-signs in their heads that without the music, movies, TV shows, etc. nobody would give a damn about their bloody apps.

Image by TurboMotion

Is Adele an anomaly?

According to Peter Kafka writing for re/code, the fact that Adele has broken all-time records with sales of her new album “25” while simultaneously rejecting streaming services is too much of an oddity to provide any guidance for music professionals vis-a-vis their business models.  Kafka writes the following:

“If you are looking for big lessons in Adele’s success selling more albums in the last week than anyone, ever, don’t. She’s the definition of anomaly.”

He raises a valid question—one I certainly can’t ignore, having criticized many Internet industry pundits for citing exceptions in order to prove rules on a variety of topics.  And nobody can deny that megastars like Adele are rare individuals; but this has always been true of megastars, which is not quite the same thing as saying that their business models have always been radically different from smaller stars or middle-class creators. The business model that sold The Beatles and The Kinks was fundamentally the same; the Beatles were simply more popular and, therefore, sold more recorded music.

In truth, though, I think the significance of Adele and Swift boycotting these services scares the hell out of people invested in the streaming future because it just might reveal how naked the emperor really is.  Looking at the top ten tracks on Spotify this week, I see several artists—in first place is Rihanna—who could theoretically do just fine, or better, without that service’s nickels and dimes.  And as for the “music discovery” argument, I see that tracks in 5th and 7th place are both from the soundtrack for a film called Fifty Shades of Grey, which means these songs had a decent shot at discovery via a rather old model.

So, it seems that the real question is whether or not some portion of contemporary artists really can learn anything from Adele or Swift (or Prince) even if most artists cannot realistically expect to achieve that level of popularity. After all, streaming is financially nominal to all artists and songwriters, so the risk in keeping music off these platforms—especially for the purpose of windowing the release of a new album—isn’t necessarily as high as pundits like Kafka might suggest.

David Lowery, frontman of the bands Camper Van Beethoven and Cracker (both typical, middle-class bands), and founder of the artists rights blog The Trichordist, offered me this insight when I spoke to him about the relative value of streaming:

“Camper Van Beethoven earns more from sales of live albums and oddities not available on streaming services than the albums available on streaming services even when calculated at source.  And Camper Van Beethoven as an obscure, cult band works more like a “new” band than you would think.  We rely on new discovery as well. But when a single sale of one album provides as much revenue as 7,000 free streams on Spotify/YouTube  it makes more sense for us to pursue sales in a grassroots manner and sustain the business by putting the money into new works.  I know. I’ve tried it both ways. My free streaming critics may be unwilling to admit this but  I’m pretty good at business.  I’ve made a profit every year as a musician and my tech credentials are generally better than my critics. Remember in 2005, many pundits were declaring MySpace the future of the music business.  That’s ten years ago.” 

To date, the argument from from the pundits of “conventional wisdom” has been that artists less popular than Adele can’t afford not to be on Spotify, et al because that’s where prospective fans are hanging out. The implication is that even if these platforms are not revenue providers, it’s either swim in the stream or go over the falls into obscurity.  As Paul Resnikoff of Digital Music News writes in a recent post:

Artists like Ari Herstand told fellow musicians that they were compromising their careers if they didn’t go where the fans were; vitriolic pundit Bob Lefsetz called you an idiot for challenging the emerging status quo.  And this of course goes beyond Spotify: YouTube, Soundcloud, Rdio, Pandora, Apple Music, and half-a-dozen other big platforms are woven into this stained fabric.

But it seems that the digital music market has generally fostered two things:  false hopes for many new creators and billions of dollars for the peddlers of false hopes. As such, there is now such an overabundance of works—even great works—that obscurity can only be the status quo for most artists. Meanwhile, the paths to market cannot logically be “discovery” through digital platforms and social media alone; there’s just too much stuff out there.  So, it’s entirely possible that all consumers, even digital natives, relate to music, discover music, and share tastes in music in similar ways to their pre-digital forebears. Yet, in regard to a star like Adele supposedly “living” where the real fans are not, Kafka makes the following odd statement:

“If you still insist on looking for lessons, you might head in this direction: We live in a pop music, track-and-hook world, but Adele lives in her own world, and it turns out lots of other people do, too. And an educated hunch is that many of those people are women, and/or older* than the people who camp out at Spotify and YouTube, and many of those people are happy to pay for a thing they like if it is convenient, which buying songs from iTunes (or even at an actual store!) can be.”

I’m not sure how educated that hunch really is.  For one thing, I believe the age range of Adele fans is actually quite broad.  Her songs are played on my terrestrial radio station and my teenage daughter’s station, which is not true of Taylor Swift, who also successfully snubbed streaming, but whose fan base almost certainly comprises a majority of digital natives. Additionally, while age demographics among Spotify users are hard to find, one source I located states that 55% of its 75 million users are women, and I have to imagine some of these women fit the profile of the Adele fans Kafka presumes to describe as outliers. (As a side note, I’m not sure why Kafka mentions purchase via iTunes, when “25” is available for download.)

Above all, Kafka is guilty of the same fallacy that pundits like Bob Lefsetz, and even like John Seabrook in this recent article for The New Yorker, tend to promote. And this is the fallacy of believing that the axiomatic statement “streaming is the future” is beyond all question.  Although there is plenty to love about streaming technology itself, I think the business as it exists today is well within the boundaries of question. After all, one cannot confidently call a revenue-free model “the future” without some reasonable doubt.

We are from the 80s. We are not afraid of these machines.

Kafka also seems determined to emphasize the fallacy of the digital divide—as though the truly contemporary consumers are cruising Spotify and YouTube, while their decrepit, technologically challenged parents are (snort-laugh) buying CDs.  Of course, I’d point out that the more time a prospective music fan has to “camp out on Spotify and YouTube,” the younger they probably are and, therefore, the less likely they are to be buying anything on their own. Also, most digital natives are the children of us Gen Xers, and we are not our parents who still have (snort-laugh) AOL email accounts; we are in fact the earliest adopters of all this fabulous technology that people are convinced has metamorphosed the millennial music consumer into some unfathomably wired creature.  Yes, streaming is convenient and cool, but it’s not quite so revolutionary as it is sometimes made out to be. And if the business models never provide real revenue for the music makers, it could still fail plenty before it truly succeeds.

Still, Adele actually is an anomaly, though not necessarily the way Kafka describes.  As David Lowery explains on The Trichordist, 1% of the artists today earn 77% of the revenue. And so, he writes:

Perhaps the larger irony here is that those who sought to destroy the major labels through piracy have only empowered them. The major labels now not only capture the larger share of revenue from recorded music but also as a result they also capture the most favorable deal terms (including equity shares) from the digital service providers (DSP). The net result being that indie and DIY artists who once accounted for a robust middle class of musicians have been pushed down into the realm of hobbyists. Of those few, rare indie/DIY outliners that manage to flourish none of them will get equity stakes or the same terms that the major labels do from the DSP’s.*

This is the harangue many of us have been on for years:  that piracy can only lead to wealth consolidation and destruction of the middle-class creator for the same reasons devaluation of human labor will always cause harm to the middle-class workers in any business sector.  Meanwhile, pundit Bob Leftsetz loves to cite the relative success of superstars in his many rose-colored editorials, which come very close to saying that complaints about piracy or predatory business practices by streaming services only come from musical “losers.”  As cited in this older post of mine, Leftsetz writes:

Superstar talent may make less money off recordings than in the past, but the live business far exceeds the money it once made. And then there’s sponsorships/endorsements and privates and sync and so many avenues of remuneration that no one who is a superstar is bitching.

Skipping the bullshit about alternative revenue sources, which professional artists have criticized to death, what will Bob say about his sanguine superstars if many more of them decide to follow Adele’s lead and tell services like Spotify to get stuffed? Or at least to wait their turn like the tertiary delivery platform they deserve to be?  And this brings us back to the central question:  How major does a musical artist have to be to tell Spotify and Pandora to get stuffed and not suffer for it? If no artist is leaving real money on the table, then what does any artist of any size really have to lose?  How badly do the investors in the streaming future want to find out?

*This should not be misconstrued as a generic indictment of labels. For a nuanced perspective on related issues, as well as a debunking of another piece by John Seabrook, see Chris Castle’s piece here.

Is Taylor Swift a Strategic Guide?

Taylor Swift’s new album 1989 is the first and only to go platinum this year.  And the year is just about over.  At the same time, Swift is making headlines because her label Big Machine (a label she and her family own) has pulled all of her albums from Spotify and other streaming services.  As David Lowery’s artists rights blog The Trichordist has been pointing out this week, streaming company representatives and Internet industry cheerleaders have revealed some rather sexist overtones in their criticisms of artists like Swift, Adele, and Beyonce for their strategic decisions to restrict streaming of their tracks. Certainly, this kind of response is SOP by the brash, young boys of Silicon Valley, who like to tell everyone, especially silly girls, that they just don’t understand new business.  The arrogance of male money losers lecturing successful female entrepreneurs is something to behold, but let’s move on…

What I find particularly interesting are the lessons to be learned from the brief report on NPR this morning in which Sam Sanders describes Taylor Swift’s ingredients for success. I say this because all of the tactics employed by Swift are consistent with a marketing strategy that blends the best of the digital age with the best of pre-internet business models.  Taylor Swift does the following:

  • Create a product people actually want.  Check.  Clearly.
  • Connect with fans via social media.  Check. Swift is a long-time user of Twitter and responds directly and personally to her fans.
  • Promote like mad.  Check.  Swift is constantly self-promoting with live appearances.
  • Tour.  Yep.  Got it.
  • Give people a real reason to buy your product.  Check. Read on…

As Swift explains, 1989 did an exclusive deal with Target that has three extra songs and a unique photo collection.   This is a real-life example of the often vague suggestion that artists need to “add value” or “give consumers something they can’t get online.”  But right there is the trick, isn’t it?  Swift did add value by creating a limited edition CD with extra stuff for her most ardent fans, but the other component to get people to buy the album was — and this is really mind-blowing — to not make it available for free right away.  Genius, right?  This is not to say that infringers have not uploaded files from the album to YouTube, which is a whole other problem.  What this story really makes me think about, what I am always thinking about, is the middle-class band or singer/songwriter, partly because that’s where I think some of the best music is produced.  People can speculate all they want about whether Big Machine is providing  a guide to success for other major artists; but my question is what do artists do who aren’t quite so huge as Taylor Swift?

For instance, I recently discovered a band I like after attending AmericanaFest 2014 in New York City.  It was clear their fans had showed up because everyone crowded around me knew the lyrics to the songs, but I did wonder if these fans were album purchasers, streaming listeners, concert attendees, or all of the above.  I happen to know through an industry source who knows this band personally that they are very typical of the middle-class band today in that their album sales are a loss leader used to promote touring and that they have to tour constantly to make any kind of living.  This colleague explained, “This is one of those bands that’s just over that line of making a living, playing just big enough venues to make it work; go one notch below them, and you’re pretty much operating at a loss.”

Now, this band is doing more or less everything Taylor Swift is doing as well as everything the know-nothing web gurus tell them to do.  They use social media, sell tee shirts, tour constantly (leaving families behind); and of course they’ll never be as popular as Swift or Beyonce and are unlikely to get invited on the Today Show to promote a new album.  And that’s nothing new. But in a pre-internet market, this middle-class band would be doing pretty well, still working hard, but not operating quite so on the edge of survival.  And while nobody may care, they ought to for selfish reasons alone.  Because the longer a band like this continues to work, perform, and experiment, the higher the probability is that both they and society will be the beneficiaries of some new song or album that becomes a favorite hit that lasts for decades.

There are hundreds or thousands of artists who match the profile of this band, and if all of them are surviving (or not really surviving) on touring and merchandise alone, their days of playing are likely to be more limited than their predecessors simply because they’re mortal.  Album sales are a form of passive income, and passive income translates into time — time to spend writing a new song or experimenting with a new sound rather than booking a tour or approving the design for another stupid tee shirt.  So the question is whether or not a band this size should take a page from Swift’s playbook, pull or limit its tracks on streaming services and effectively force, rather than beg, their fans to buy CDs or digital downloads or even vinyl?  Would there be the backlash against the artists that so many predict?  I sometimes wonder.  Certainly, the owners of Spotify and Pandora would like us to think so.  But of course, if the options are zero income or mere drippings from streaming that don’t sustain, more than a few artists may be willing to find out.