A number of prominent members of the songwriting community will descend on Capitol Hill today to lobby lawmakers that streaming music platforms (not to mention many other businesses that play music, from restaurants to hotels to local coffee shops) should pay out more of their revenue to publishers and songwriters. Of course songwriters deserve their fair share, but are they are pointing their fingers at the wrong culprit?
First, let’s acknowledge that artists and record labels earn exponentially more from streaming than songwriters and publishers, so it’s only natural for songwriters to balk at the state of affairs in music streaming royalties.
Spotify reports that it has paid over $3 billion in royalties, and Pandora recently announced that it has paid out a total of $1.5 billion. But in unpacking the problem, one realizes the tension between songwriters and the digital platforms is misplaced.
The frustration for songwriters and publishers is that they don’t know where that money is going. There is no transparency and no way for songwriters to track what they are earning from royalty payments.
Professional rights organization like ASCAP or BMI divvy up the money among publishers and songwriters. But songwriters contend that very little of the money collected makes its way to the people who write the tunes. And that is a travesty, especially when BMI and ASCAP have recently achieved record revenues. If streaming companies are paying out billions toward royalties, yet songwriters and publishers don’t feel they’re getting remunerated to the extent they should, where’s all the money going?
So then why are these innovative services the target of such vitriol? Because music streaming is the new kid on the block of this industry, and it’s easier to go after their revenue than it is to challenge the large, multi-national record labels that are taking the lion’s share of royalties paid by streaming services. The irony, of course, is that the three major music publishers and the three major record labels happen to be owned by the same corporate parents.
But simply trying to squeeze more money out of the streaming sites will create unintended, negative consequences for the music industry and consumers. It will chill innovation and deny consumers new features and services which, in turn, generate even more royalties for songwriters and artists – and in order to keep their businesses viable, streaming services may be forced to limit the amount of music they play, which will have an extremely negative impact on artists.
There is also another very real benefit to both artists and record companies from streaming services, one that you don’t hear enough about. The entire music ecosystem has been fighting online piracy for two decades due to the real effects piracy has on musicians’ revenue streams. A recent Zogby Analytics survey commissioned by CALinnovates indicates that streaming platforms help curb piracy, especially among the younger demographic most likely to turn to Internet thievery for free music. According to the survey, 54 percent of those age 18-34 said streaming sites had made them less likely to pirate songs and music.
There is an old adage in politics to “follow the money.” This theory should apply here. It’s time to scrutinize just how much money is flowing from the music that’s been created to the labels, the publishers, the composers, the artists and yes, the streaming services. Let’s get a definitive sense of where these billions are actually going. Once we do, hopefully songwriters and artists alike will get accurate and transparent answers from the major labels and major publishers, who are the real decision makers regarding where the royalty dollars actually go.
The answer is not to simply saddle emerging technologies with higher royalty rates that will inevitably deter innovation, limit consumer choice, and ultimately harm artists and songwriters. We need a balanced music ecosystem that works to the benefit of everyone.
Montgomery is the executive director of CALinnovates,which brings together stakeholders in the technology and startup communities with government leaders to ensure a careful and considered approach in policies impacting the dynamic high-tech sector.