Streaming Predominates, Do We Get Our Fair Share?

June 30, 2017

by Deborah Newmark, AFM Symphonic Services Division Director of Symphonic Electronic Media

Streaming is everywhere. It is on your smartphone, Apple watch, laptop, and any other device that connects to the Internet—including Wi-Fi in your car. Never has our recorded music been so readily available worldwide. While technologies continue to advance, making it easier to bring our music to the listener, artist compensation is not yet equitable to the billions being generated by the relevant industries. Advances have been made, both on the negotiated front as well as in Congress through the Digital Millennium Copyright Act (DMCA) and the Digital Performance Right in Sound Recording (DPRA), but there is still a long way to go to ensure musicians get their fair share.

What has already been accomplished?

Congress enacted the DPRA in 1995. Under DPRA, there are three categories of digital transmission: nonsubscription broadcast transmissions, which were exempted from any performance right; noninteractive Internet and satellite transmissions, which are subject to a statutory license; and on-demand interactive Internet transmissions, which are subject to the full exclusive right.

This amendment to the Copyright Act established a long-sought public performance right in sound recordings applicable to digital transmissions. The passage of the DPRA enabled US performers and owners of the copyright of recordings (usually record companies)—for the first time in the decades-long struggle between the broadcasting and recording industries—to collect a royalty when a recording that they owned, or on which they played or sang, “aired” in a digital format. 

Noninteractive streaming services must pay a compulsory, statutory license for the right to use our product. These include companies like Pandora, Sirius XM satellite radio, terrestrial radio stations that stream broadcasts, and others where the end user does not get to choose what they listen to (i.e., noninteractive). They pay royalties based on rates set by a copyright arbitration panel, which vary and are not always favorable to us. Royalties are paid into SoundExchange, which is a US collective for copyright holders (typically record labels and in the symphonic world, most often orchestra employers), as well as featured artists.

The orchestra employer has taken on the role as copyright holder for many of the recordings created in the past 10 years, at a time when our media agreements shifted to a model where the orchestra has to retain ownership and copyright. For the purpose of featured versus nonfeatured shares, the musicians of the orchestra are deemed the featured artists, along with any soloists and/or conductors. Symphonic featured artists and nonsymphonic, nonfeatured artist royalties are distributed through the AFM & SAG-AFTRA Fund.

How do we fare with interactive streaming services?

Apple Music, Pandora Premium, Amazon Music, Spotify, and Tidal are examples of interactive streaming services. These services provide choices for the listener through subscription-based systems. Featured artists are paid in accordance with royalty agreements made with the record labels. In addition, payments are made to AFM-EP Fund, the Sound Recording Special Payments Fund, and the Music Performance Trust Fund, based on existing terms in the AFM’s Sound Recording Labor Agreement.

What are the roadblocks to achieving fair compensation?

In the symphonic community, while we do receive upfront payments for the creation of the recorded product, the back end suffers. This is an integral part of the financial structure of our agreement. Primarily it suffers due to the fact that the symphonic employers, as owners of the copyright, often fail to enter into robust licensing agreements that will benefit both the musicians and the institution. The Integrated Media Agreement (IMA) provides for a 60/40 split of back-end revenue (60% to the musicians) derived from the exploitation of product on the Internet (and in other formats). If the employer doesn’t succeed in making the best deal possible, musicians suffer the loss of potential revenue.

A prime example of this, as a great, untapped resource, are fees paid to copyright holders from Internet videos where ad-supported streaming proliferates—like on YouTube. According to Robert Kyncl, the company’s chief business officer, YouTube paid $1 billion in revenue to the recording industry in 2016. Where is our share?

How is this revenue calculated?

CPM, RPM, and eCPM determine revenue. CPM is the cost per 1,000 ad impressions for the advertiser to pay when their ad is showcased. RPM is the revenue per 1,000 views. YouTube takes a 45% cut of ad revenue generated by a channel from total RPMs. eCPM is a formula for earnings/monetized playbacks x 1,000. YouTube analytics help explain how YouTube pays the copyright holder on advertisements once they reach 10,000 lifetime views. The IMA considers this back-end revenue, which is shared with the musicians and the employer.

In what other areas is the AFM at the forefront of seeking fair compensation?

The AFM is a member of the MusicFIRST Coalition that is working on getting legislation passed in Congress that will ultimately improve the working lives of musicians. Two pieces of legislation have recently been introduced.

The Fair Play Fair Pay Act (H.R 1836). The bill introduced March 30, 2017 by Jerrold Nadler, (D-NY), Marsha Blackburn (R-TN), John Conyers (D-MI), Darrell Issa (R-CA), Ted Deutch (D-FL), and Tom Rooney (R-FL) aims to ensure that all forms of radio, regardless of technology or platform used, would pay a fair market rate for music performances. The legislation also aims to restore fairness for artists whose songs were written before 1972 and end satellite radio’s special “grandfathered” below-market rate.

The PROMOTE Act: The Performance Royalty Owners of Music Opportunity to Earn Act of 2017 (PROMOTE Act) was introduced in the House of Representatives by Representative Darrell Issa (R-CA) to attempt to right a decades-old wrong. This effort was spearheaded by the AFM as part of the MusicFIRST coalition. Coalition Executive Director Chris Israel says, “The US is the only developed country where music creators have no say when it comes to traditional AM/FM radio stations playing and profiting from their hard work, but without receiving a dime. Congressman Issa’s PROMOTE Act addresses this glaring inequity by empowering music creators to seek fair compensation when their works are played on terrestrial radio.”

As you can see, these are complex issues in an ever-changing marketplace. The AFM has been and will continue to be at the forefront of finding ways to ensure fair compensation for our members. Successes thus far achieved show that when we stay vigilant in fighting for the rights of musicians and we remain united and support one another we can accomplish a great deal.

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