News January 21, 2021

Anger as major labels justify low artist royalties for streaming

Anger as major labels justify low artist royalties for streaming

Associations representing artists have lashed back at comments made by the CEOs of the UK operations of Universal, Sony and Warner during a parliamentary inquiry into the low royalty rates for artists from music .

Music streaming in the UK brings in more than £1 billion (A$1.176 billion) in revenue with 114 billion music streams in the past year.

Out of every $100, between $52 and $55 goes to labels, and between $10.50 and $13.31 for publishers and songwriters.

Recording artists can be paid as little as 13% of income generated, and songwriters even less.

The issue was front and centre at this week’s hearing in UK Parliament by the Digital, Culture, Media and Sport Select Committee.

The first session in December was with artists such as Nile Rodgers, Nadine Shah, Radiohead and Elbow.

Shah testified that the money she earned from streaming (and touring last year) was so meagre she had to move back in with her folks.

Her Kitchen Sink album was streamed 675,000 times, which translated to 657 sales.

The committee asked the CEOs to respond to Shah’s comment.

David Joseph, chairman and chief executive of Universal Music UK & Ireland responded that artists with a “relatively small” but “passionate” fanbase had been hard hit by the pandemic.

But it was “not possible and not logical” to instantly replace the money they would have made through other income streams such as streaming.

Tony Harlow, chief executive of Warner Music UK, said an artist could receive £1,000 ($1,769.41) from one million streams on Spotify.

But those like Ed Sheeran and Pink Floyd who generated 10 billion streams last year earned “multiple millions”.

Joseph suggested that plenty of artists who are not yet household names in Britain can still earn £100,000-plus ($176,925) a year from streaming.

The three argued their cut was a fair reward for the risks involved in developing artists – Joseph said Universal signed 100 new acts in 2020) – recording, marketing and distribution.

Jason Iley, chairman and chief executive of Sony Music UK and Ireland, revealed UK labels spend £20 million ($35.3 million) on A&R and £20 million on marketing.

Sony invested £2 million ($3.5 million) in an unnamed rap act, and most advances were over £200,000 ($353,806), he claimed.

The hearing had its tense moments. When Joseph suggested artists “seem to be very happy with the investment, very happy with advances” that major labels were currently spending on them, John Nicolson of the Scottish National Party cut him off.

“They’re really not, I think you’re living in cloud cuckoo land if you really believe that. You’re a very unhappy industry; artists are not happy. [Though] I’m sure the very rich artists are happy.”

Committee chair Julian Knight reprimanded Joseph for repeatedly failing to answer a question around Universal’s 2017 licensing deal with Spotify.

It left the door open for lower royalty rates if certain revenue targets were met, and the committee wanted to know how the deal impacted artist earnings.

Joseph didn’t want to answer for “competitive reasons”, but agreed to provide a written answer.

At the suggestion the majors were operating like an “oligopoly”, Iley clained he saw more competition today than in the past 30 years.

Responses

Response from various trade bodies was swift and irritated.

Naomi Pohl, deputy general secretary of the Musicians Union commented: “Of course, if recorded music revenues were paid out fairly to artists then we might not have seen over 20,000 applications to hardship funds in the first few months of the crisis.

“Recorded music must play its part in sustaining the livelihoods of the musicians and songwriters.

“We can’t have labels announcing record profits while our members are quite literally unable to put food on the table. The system is broken and it needs to be fixed.”

David Martin, CEO of Featured Artists Coalition said: “The label heads spoke of their corporations as artist-centric, with artist success and satisfaction at the centre of their business models.

“These are warm words but I now look forward to them demonstrating the sincerity of these claims by taking action to properly engage and remunerate the artist community.

“They must review how streaming rewards artists, how to distribute revenues fairly and how to ensure that the creators, who make their global music groups billions of pounds in profit each year, aren’t in a position where they cannot pay rent.”

Annabella Coldrick, CEO of the Music Managers Forum urged labels to begin dialogues with their artists and managers on making streaming payments more equitable.

Graham Davies, CEO of The Ivors Academy (“champions of music creators”) accused the major labels of resisting necessary change. It is unfair that streaming leaves the majority of creators to have to perform live, sell merchandise or seek donations to make ends meet, he said.

“There is enough money in streaming to go around, the problem is too much is going to the labels.

“Paying more of streaming royalties to publishing will pay more to creators. This is the change we need.”

Other options have been the adoption of a user-centric payment system, rather than divvying it up from a pool.

Music Business Worldwide this week reported on an alternative provided by San Francisco start-up Audius that’s raised nearly US$10 million from investors for a blockchain-based digital streaming network that connects fans directly with artists and exclusive new releases.

The platform aims to allow artists to set the rate for their own work and capitalise on data that shows them who their superfans are.

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