Our friends at Royalty Exchange round up and analyze the top news stories of the last fortnight in music royalties.
Week ending April 6th: Here’s How The Labels Might Share Their Spotify Stock Windfall
Sony Music Sold 17.2% of Its Spotify Shares, Worth $250M+ (MBW)
As Spotify Trading Begins, Labels Fret Over When to Sell, And How To Share Profits (Billboard)
This week brings us to the crossroads of an issue long debated in the music industry:
When Spotify goes public – when, how, and with whom will the major labels share their profits?
The answer is beginning to unfold, as it was reported Sony Music cashed out $250 million of their 5.71% ownership in Spotify.
After this sale, Sony is now said to have approximately 4.7% in Spotify (estimated around $1 billion), while both Universal and Warner Music Group have approximately 4% each (estimated around $900 million each). It is also important to note that all three majors have publicly declared they will share these profits with their artists and independent label distribution partners.
The major music publishers did not obtain Spotify equity, so unfortunately, the songwriters are not part of this profit sharing conversation.
So then, who gets what from the labels profits?
The Billboard article gives some great insights and questions that I will attempt to answer and speculate on:
“How do you pay an artist who might have been generating a lot of streams when the label first got the shares, but isn’t streaming at all nowadays?”
“Do artists who signed after the label negotiated for and received shares of Spotify deserve a share of the proceeds?”
“What do you do with artists that have left the labels?”
“It’s a highly complicated situation. We might need to go out and find an independent third party who is seen as objective and fair to come up with the fairest way to proceed with how to share these funds.”
“…some sources suggested that the funds should basically be treated the same way streaming revenue is treated in each artist or label contract.”
First, no one knows exactly what is in each artist’s contract except those with the privileged information. However, we do know that revenue generated under “licenses” is split 50/50 between the label and artist. The labels signed “licensing” agreements with Spotify, so streaming revenue could be paid as such, but that’s not necessarily true for all.
Treating this the same way as streaming revenue under the artist contract could cause problems, because these Spotify equity profits are not attributed to individual artists, streams, etc.
An independent third party administrator with their own fair and transparent distribution method of the profits is more likely in my opinion. For example, a big name that comes to mind is the alternative dispute resolution attorney, Kenneth Feinberg. Mr. Feinberg is best known for distributing victim settlements in tragedies like 9/11, the gulf oil spill, and Virginia Tech massacre. [READ MORE]
And now other headlines from the week…
- As Streaming Fules Music Industry’s Growth, More VC & Finance Veterans Move In (Billboard)
- Sir Paul McCartney, Bruce Springsteen, Amongst 89 New Artists Backing US Classics Act (MBW)
- Record Deal Advances Skyrocketing, If You’re A Hip-Hop Artist (Hypbot)
- “Despacito” Sets YouTube Record As First Video to 5 Billion Views (Variety)
Week ending April 13th: Licensing Mixup Could Cost Online Concert Footage Archive $30 Million
Music Publishers Win Major Copyright Fight Over Streaming of Legendary Rock Concerts (The Hollywood Reporter)
If you’ve spent much time on the internet, you may have heard of Wolfgang’s Vault.
For a decade, it was a popular source of legendary live concert footage and live recordings, which the Wall Street Journal called “the most important collection of rock memorabilia and recordings ever assembled.”
At one point, all of it was entirely free to the public. Eventually, the company began charging a $39/year membership fee and, of course, entered some legal troubles with the music industry.
In 2009, it signed licensing deals with all three major record companies, and to cover musical compositions, the company claims to have all necessary “compulsory licenses” in place with music publishers.
This “compulsory license” is mandated by the U.S. government and compelled upon music publishers and songwriters for the use of their compositions in sound recordings. This “compelling” upon the music publisher and songwriter means that anyone can get a music license and pay a fixed rate for on-demand streaming, without the direct permission of music publishers.
This particular license, however, is only valid for compositions reproduced and distributed to the public via audio recordings. It does not grant a license for any exploited “audio-visual works” (i.e. concert video footage).
That is the crux of this week’s story regarding some 200 unlicensed songs in Wolfgang’s online concert footage. The legendary videos were purchased from the archives of the famous concert promoter Bill Graham.
Over the course of his career, Bill Graham captured these live performance recordings and videos, but without the consent of artists. The judge’s decision clearly states, “…there is undisputed evidence that the three performing artists… Keith Richards, David Byrne and Michael Stipe – could not recall consenting to the recording of their performances.” Wolfgang’s argument that the compulsory licenses covered the concert video footage in addition to the audio recordings was rejected by the judge (who also questioning the tardiness of actually obtaining the licenses).
That is because the use of music in videos requires the direct permission of the music publisher. This is referred to as a “synchronization license.” This license is a free market negotiation between the copyright owner and the music user. No government regulation means no “compelling” is taking place. In other words, Wolfgang’s compulsory licenses were not enough to cover the concert videos. [READ MORE]
And now other headlines from the week…
- Music Modernization Act Introduced in Congress With Bipartisan Support (Billboard)
- British labels’ 10.6% revenue rise is ‘fastest since Britpop’ (Music Ally)
- Spotify acquires music licensing platform Loudr (TechCrunch)
- CAN APPLE MUSIC AND AMAZON CATCH SPOTIFY’S SUBSCRIBER BASE BY THE END OF 2018? (MBW)