TMN Ask A Lawyer: Streaming explained
TMN Ask A Lawyeris a semi-regular column where our readers receive expert legal advice from a renowned entertainment lawyer.
:: ASK A LAWYER – BAND MANAGEMENT
:: ASK A LAWYER – BREACH OF CONTRACT
:: ASK A LAWYER – LABEL SHOPPING
:: ASK A LAWYER – P2P FILE SHARING
:: ASK A LAWYER – WHAT'S IN A NAME?
:: ASK A LAWYER – GIG CONTRACTS
Q: I've noticed a lot of artists complaining about streaming royalty rates. How exactly do streaming royalty rates work, are they still getting the mechanical and performance royalties that they would get normally?
A: The payment of royalties has always been a complicated issue. The problem with streaming is that it complicates a business that is already incredibly complex. Royalties prior to streaming consisted of payments for performances differing from payments for physical products. Now, different streaming services pay different rates in different countries. In addition to this, many of these rates are not disclosed.
For royalty purposes, there are two types of musicians: performers and songwriters. Performers hold the rights to a recording of a song – a master recording. Songwriters hold the rights to the lyrics and melody. They can only hold copyright for an entire song and cannot divide melody and lyrics into different rights.
Master recording copyrights are usually assigned to a label, while song copyrights are mostly assigned to music publishers.
Performance royalties are the fees users pay when music is performed in a public setting. The use of music by a streaming service such as Spotify falls within this class.
APRA AMCOS in Australia, is a royalty collecting society and “ … licenses organisations to play, perform, copy, record or make available … members music and … distribute[s] the royalties to … members”. ASCAP and BMI are similar organisations in the US.
So, here is where it gets even more technical …
The rise of streaming services such as Pandora are causing a monumental change in how the industry generates revenue, from selling ownership of music to simply selling access.
In the US, SoundExchange collects performance royalties for digital performances only. Streaming services such as Pandora pay a recording digital performance royalty to SoundExchange and a songwriting digital performance royalty to royalty collecting societies.
Mechanical royalties are paid to artists and writers when music is licensed but also when it is streamed via a service like Spotify. In the US, Spotify pays both performance royalties and mechanical royalties to writers and artists.
However, has anything really changed? Being compensated for sound recordings has never been an artists’ mainstay. Musicians have always generated the most revenue from merchandise, sponsorships and touring. It is arguable that streaming actually increases these forms of revenue. A big problem is that streaming is new and people are currently skeptical.
Another issue is that the royalty rates for a streamed song are smaller than for the purchase of a song. This is one of the main reasons that artists like Taylor Swift are adopting an ‘anti-streaming’ stance.
Advocates for streaming argue that revenues appear small because, at the moment, there are relatively few subscribers. However, if the subscriber base continues to grow, revenue should grow exponentially.
It seems that opinion is divided as to whether streaming is beneficial for artists and songwriters or detrimental … only time will tell.
Goodsell Lawyers is the only Australian music and entertainment law firm with a lawyer based in Los Angeles. It representsmany different parties in the music industry, such as artists, publishers, record labels, promoters and managers. It has worked with many prominent US booking agents, such as Paradigm in Beverly Hills. It hasalsoworked with many urban artists such as Chingy and T-Pain. Goodsell Lawyers also has experience with music and entertainment litigation. It is the only music and entertainment law firm in Australia that offers fixed fees for most matters.
To read more about Gene Goodsell and get in contact, visit the firm’s official website:http://www.goodselllaw.com.au.
Goodsell tweets at: @GoodsellLawyers
Submit your questions topoppy.reid@themusicnetwork.comor tweet them at us:@themusicnetwork
Jobs
