What the major record companies really think about the economics of music streaming – Music Business Worldwide

” Music’s fast modification provides the chance to optimise designs for mutually helpful and sustainable success, if approached effectively. We feel that whether a user centric model is used is eventually a matter for the DSPs (who will have to invest considerable sums in changing royalty reporting systems )and the artist community (as some artists will win from an altering model and some will lose).”Like other music companies, we do hold some financial equity in Spotify.”Finally, it is worth keeping in mind that the financial investments we made in Spotify have actually likewise yielded considerable dividends for our artists and distributed independent labels– we have to date shared more than$250m from the profits of our sale of Spotify shares straight with artists and dispersed labels, neglecting whether their accounts may be recouped or unrecouped. Listeners today prefer to access music through streaming rather than through physical CDs.

Senior executives from Spotify” href=”https://www.musicbusinessworldwide.com/companies/spotify/”>Spotify, Apple” href=”https://www.musicbusinessworldwide.com/companies/apple/”>Apple and Amazon” href=”https://www.musicbusinessworldwide.com/companies/amazon/”>Amazon were grilled reside on electronic camera by British political leaders today in the final session of a UK Parliamentary questions into the economics of music streaming.


Advertisement

Yet just as this final act of the Parliamentary Committee’s examination played out(with a few of the panto-drama we’ve now concerned expect), something probably a lot more substantial was taking place in an unloved corner of the web. In recent weeks, the UK arms of the significant record business– Universal Music UK, Sony Music UK, and Warner Music UK– have actually filed written submissions with this Parliamentary Committee, setting out their views on a number of streaming’s most fiercely-debated talking points.Each of these submissions was published online today(February 23). And each responded to specific set of concerns delivered by UK political leaders to the majors– just as comparable submissions from the likes of BMG, Hipgnosis Songs Fund, and Beggars Group did formerly. MBW has rifled through each of Universal, Sony, and Warner’s submissions to see what > we could discover.This is what we found out, in 3 parts … 1)User-centric licensing In the composed submissions, the Parliamentary Committee asks the majors:’Can you clarify whether your companies support user-centric payment systems, and if not, what alternative > payment systems were being mentioned?’Here are the responses … Universal Music UK”The concern of fair compensation for all music creators

is necessary to our mutual success, Sony” href=”https://www.musicbusinessworldwide.com/companies/sony/”>so wetake the conversation around streaming’s payment design extremely seriously

.”We invite any proposal that maximizes fairness


and openness and supports market growth.”” Music’s rapid modification provides the opportunity to optimise models for equally helpful and sustainable success, if approached appropriately. We are committed to getting it.”We welcome any proposal that maximizes fairness and openness and supports market development.” Sony Music Uk” We are agnostic regarding whether a user centric model


Sony Music Entertainment” href=”https://www.musicbusinessworldwide.com/companies/sony/sony-music-group/sony-music-entertainment/”>is used as

it is not indicated to alter the pool of cash offered to the labels/artists. We feel that whether a user centric design is utilized is eventually a matter for the DSPs (who will need to invest significant sums in changing royalty reporting systems )and the artist community (as some artists will win from an altering design and some will lose).”It is incredibly important to comprehend that a shift in reporting method will not increase the quantity of money artists are paid in the aggregate.””However, due to the useful implications of such change for numerous stakeholders, we believe it would need extensive and concerted effect assessments

in order to develop an industry-wide support. It is incredibly essential to understand that a shift in reporting methodology will not increase the amount of money artists are paid in the aggregate. “It will just shift cash from some artists to other artists. Artists who lose in this circumstance are not most likely to see this as a more equitable way of dividing payments and thus our company believe it is extremely essential that the whole artist community weigh in on this shift prior to it is thought about.” Warner Music UK”We have actually explored the idea of a user-centric design and have regular discussions with digital services about it. It is constantly our goal to make sure that any company model executed is dependable, fair, transparent, and underpinned by precise information for rightsholders and artists.”A user-centric design would not alter the general royalty pool and our analysis suggests that any changes in the allowance of payments to artists would not be substantial. “”A user-centric model would not alter the overall royalty swimming pool and our analysis recommends that any changes in the allocation of payments

to artists would not be significant.”A user-centric design would be far more complex and administratively troublesome for digital services to execute as it would require an incredible quantity of data– it is most likely that digital services would want to pass off a few of the associated costs to rightsholders and therefore to artists.” 2)Major label shareholdings in Spotify The Committee asked the 3 significant record companies to describe what they would say to those “who are worried that the various shareholding arrangements in between Spotify, your business and your parent business might lead to anti-competitive impacts, such as when it concerns licensing, playlisting, etc?”Remember: Warner Music Group offered all of its


shares in Spotify for just over half a billion

dollars back in 2018, while Sony sold 50 %of its Spotify shares for$768m that exact same year.Universal continues to own the entire stake it bought in 2008, which is approximated to currently be valued at over$2 billion, and perhaps even over$3 billion.< img class ="lazyload"src=" https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-80×44.jpg"data-srcset="https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-80×44.jpg 80w, https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-160×89.jpg 160w , https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-320×178.jpg 320w, https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-418×232.jpg 418w, https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-648×360.jpg 648w, https://www.musicbusinessworldwide.com/files/2021/01/UniversalMusicUK-836×464.jpg

836w”data-sizes=”auto” > Universal Music UK”Like other music business, we do hold some monetary equity in Spotify. Our shares are not voting shares.”As we have actually stated previously, and consistent with our technique to artists’compensation, if we need to sell those shares in the future, we have willingly dedicated to share those proceeds with artists.


“”We do not contribute in the business’s governance; we do not hold any board seats and our monetary equity confers definitely no impact over Spotify’s licensing, playlisting or any other of Spotify’s strategic and functional decisions.”As we have said previously, and consistent with our technique to artists ‘settlement, if we should offer those shares in the future, we have actually willingly devoted to share those earnings with artists.” Sony Music UK”Our shareholding in Spotify is nominal(it is less than 3 %)and we have absolutely no control over the company organisation and/or running of Spotify and do not have a location on its Board.”We need to date shared more than$250m from the proceeds of our sale of Spotify shares straight with artists and dispersed labels, overlooking whether their accounts may be recouped or unrecouped.””The quality and the popularity of our catalogue, the effort of our artists and teams, and our continuous investment in creative and company capabilities help us in our often long and challenging negotiations with services like Spotify

, where we are focused on obtaining maximum value for making use of our recordings, while at the exact same time building sustainable designs to secure a healthy longterm business. Our company believe that succeeding on both these fronts is crucial for us to stay competitive and bring in talent.”Finally, it deserves noting that the investments we made in Spotify have actually also yielded considerable dividends for our artists and distributed independent labels– we have to date shared more than$250m from the profits of our sale of Spotify shares directly with artists and dispersed labels, disregarding whether their accounts might be recovered or unrecouped. “We have equity in other DSPs too and will share proceeds from equity holdings we have obtained in relation to licensing activities in a similar manner to Spotify if we ever have a positive cash event. ” Warner Music UK

“WMG does not presently have an equity stake in Spotify nor does Spotify have an equity stake in WMG. There is no conflict of interest or anti-competitive impact.

“WMG does not presently have an equity stake in Spotify nor does Spotify have an equity stake in WMG. There is no conflict of interest or anti-competitive impact.”

“We did acquire an equity stake in Spotify in 2008 which we sold in 2018. We shared the proceeds of that sale with our artists as if it were income from our licence contract with Spotify.

“When we held an equity stake in Spotify it had no influence on our behaviour and it did not appear to have any influence on Spotify’s behaviour.”


3) Streaming as a ‘sale’ vs. a ‘rental’

The Parliamentary committee asks the labels to discuss in composing “specifically why streaming ought to be categorized as ‘offering'”– i.e covered by the providing right. The point the committee is getting at is whether a stream should count as a “sale” or a “rental”.

The difference here is necessary. The license for a “sale”– as a stream is currently defined in the UK– is worked out straight between the DSPs and labels.Defining a stream as a “rental” would make a stream more akin to a broadcast, for example music used the radio or TELEVISION. The licensing for that is administered in the UK by collection society PPL” href=”https://www.musicbusinessworldwide.com/companies/ppl/”>PPL (the British equivalent of SoundExchange). Advocates for Equitable Remuneration argue that a similar blanket license for streaming (i.e having royalties collected and dispersed by PPL) would be fairer for artists.Here’s what the majors had to say: Universal Music UK”On streaming services, a sound recording is offered to the consumer electronically in a way that they can pick which track to listen to, when to start listening to it, whether to listen to the

entire song, avoid it, pause it, rewind it, or save it and re-listen to it. “Even streaming services that restrict the performance on specific gadgets for marketing moneyed users (e.g. a Spotify user on mobile), permit users to listen with unrestricted functionality on other devices (e.g. PC, TV etc).

“The reason for introducing the unique making offered right at the global level in the first place was to ensure that rights holders can authorise online utilizes that have the very same commercial effect as the circulation of copies in the off-line world.”

“International Agreements (especially the WIPO Performances and Phonograms Treaty, WPPT) to which the UK is party, and global copyright law, offer a clear and express legal responsibility for countries to ensure that rights holders and performers can authorise or prohibit this type of electronic transmission.

“In fact the factor for introducing the exclusive providing right at the international level in the very first location was to ensure that rights holders can authorise online uses that have the same business effect as the circulation of copies in the off-line world.”


Sony Music logo

Sony Music Uk “In the streaming world you can access any song on that service at the time and place of your choosing and you can avoid, stop briefly or cancel any stream you get. Accordingly, streaming clearly falls within the legal definition of the making readily available.”Broadcasts do not manage any interactivity to the end user because the user can not influence the transmission of the music which can be listened to at a given time; he or she can only select to shut off the station if the piece broadcast is not to his or her preference.

“If streaming was dealt with as broadcast and artists got direct a material share of the fees payable, the balance payable to the label would not be enough to preserve investment in brand-new signing, A&R and marketing.”

“If streaming was treated as broadcast and artists received direct a product share of the fees payable, the balance payable to the label would not suffice to maintain investment in brand-new signing, A&R and marketing and so would materially reduce the chance to alleviate its threat on the majority of signings which do not succeed and in regard of which we are unable to break even.”


Warner Music UK “Because of its interactive nature, streaming plainly falls within the definition of the’ making offered ‘. From the perspective of the user’s experience, the offering right is essentially the internet age form of what was previously a sale.

“Because of its interactive nature, streaming plainly falls within the definition of the ‘offering’ right.”

“An individual listener can pick what to play, when to play it, avoid forward or replay, create their own curated playlists, show whether they like a particular track (which in turn notifies algorithmically generated playlists based upon the listener’s listening history), and obtain album or artist details and credits as needed.

“Most premium streaming services allow their users to download tracks to their own devices to listen while not connected to the web. None of these interactions are possible by means of broadcast where every listener hears the same track at the exact same time with no possibility for individual selection of or interaction with the content.”

“Commercially, streaming is substitutable for and has mainly changed physical goods and downloads. Listeners today prefer to gain access to music through streaming instead of through physical CDs.”Music Business Worldwide

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: