AFM-FIM Conference: Musicians Are Entitled to a Fair Share of the Streaming Pie

October 2, 2018

Ray Hair  -  AFM International President

In recent years, the rise of streaming as the preferred model of digital distribution and consumption has radically transformed the media marketplace. Worldwide, digital revenues and audiences have accelerated toward both advertiser-supported and subscription-based consumption models, benefiting digital service providers, copyright owners and producers, and other stakeholders. If current trends hold, the number of paid music subscribers worldwide will rise from more than 149 million today to 200 million by the end of this year.

In the global business of media production, distribution, and consumption, there is no shortage of news about the rise of online streaming services and their impact upon the relationship between consumers and traditional media—radio and television broadcasts; cable and satellite TV; physical recorded product such as vinyl, compact discs, and DVDs; and even the motion picture box office.

More and more, streaming platforms have become the central nervous systems for businesses and consumers, rallying digital content markets toward phenomenal growth. Globally, sound recording industry revenue grew 8.1% in 2017 to more than $17 billion. More than half of that came from digital consumption.

In the United States, label revenue from recorded music increased 16.5% in 2017, to $8.7 billion, driven by streaming revenue from Sirius XM, Spotify, Apple Music, Amazon, and Pandora. Digital revenue was up 43% from the previous year, and accounted for nearly two thirds of US music industry revenue.

Across the horizon, on the audiovisual side of the content consumption equation, are traditional broadcast television, cable TV, movie theaters, and online giants Netflix and Amazon. The generational difference in consumer preferences has seen subscribers to Netflix and Amazon rise as young people shy away from traditional TV broadcasting and cable.

In fact, a recent survey by marketing agency Hearts and Science suggests that TV broadcasting and cable businesses are in trouble, with nearly half of US adults aged 22 to 45 indicating they didn’t watch any broadcast TV or cable in 2017. The number of cord cutters abandoning cable is accelerating, with daily viewership in decline. At US movie theaters last year, Americans bought fewer movie tickets than in any previous year over the last 20 years. Increasingly, consumers are waiting for movies to be released online and heading to the theater only for films they think they need to see theatrically.

But consumers aren’t digesting less video entertainment each year. It’s the reverse. People are watching more—on their laptops, smart phones, and Internet TVs, with consumption driven by cost, choice, and convenience. The lower cost of Internet, the increasing diversity of content available from Netflix and Amazon, and the convenience of being able to watch online whenever you want, rather than making an appointment to watch a program on traditional TV, have contributed to this transformation from old media to new.

Then there is the “Value Gap”—a term popularized by the European states to describe the tiny fraction YouTube pays rights-holders for per-stream royalties compared to Spotify, Apple Music, and other streaming services. Because of copyright law loopholes in the US and abroad, YouTube lets users upload whatever they want and shifts the burden of content management to rights holders, instead of directly licensing content. YouTube is expected to generate somewhere around $15 billion in advertising revenue in 2018. Parent company Google topped
$110 billion in ad revenue in 2017.

The economy of streaming media is booming, but are the artists who create the music—featured and nonfeatured alike—receiving their fair share of the pie? Digital revenue in the entertainment and media industry worldwide totaled $616 billion in 2013. That figure is expected to rise to $1 trillion this year.

Hey Google, YouTube, Netflix, Amazon, and everybody else up (and down) the digital food chain, here’s my question: How rich do you have to be before you think you can afford to treat musicians fairly? Really, I’m serious.

Against the dramatic rise in industry revenue and profits, what can musicians and artists, their union representatives, and rights management organizations do to address the glaring disparity between those who create and those who exploit? We make all the music, while somebody else makes all the money. Why?

To address these important questions, the American Federation of Musicians and the International Federation of Musicians (Fédération Internationale des Musiciens/FIM) will present an international conference entitled The Economy of Streaming Media on October 2 and 3, in Burbank, California, adjacent to Local 47 (Los Angeles, CA) and the AFM’s West Coast Office. This historic AFM-FIM conference will bring together representatives from around the world—major and independent record labels, union officials, US and foreign collective management societies, composers, motion picture and TV producers, and more—to discuss the rapidly evolving market of global digital media.

How can digital media be a profitable business for all stakeholders? What are the roles of collective management societies? How can we solve the value gap for performers? When will the 2012 Beijing Treaty improve audiovisual royalties for musicians and artists? I’ll have a report for you next month on conference discussions about these and other critical issues affecting the livelihood of professional musicians.

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