Maximize Your Income from Recordings

January 10, 2019

Alan Willaert  -  AFM Vice President from Canada

Pour la version française cliquez ici.

I am pleased to report that the General Agreement for Commercial Announcements (Canada) has been ratified. While there have been some delays in editing, I expect printing and distribution to take place shortly. I would like to thank Local 149 (Toronto, ON) Executive Director Michael Murray, rank-and-file members Chris Tait, Jane Heath, and Nicola Treadgold of Local 149, as well as Director of Administration Susan Whitfield and Electronic Media Supervisor Dan Calabrese from the Canadian Office for their diligence, patience, and foresight. Without these folks, such an excellent result would not have been possible.

A recent report out of the United Kingdom indicated that the music industry is losing $2.65 billion per year due to improper licensing by small businesses. Globally, the amount is certainly much higher.

The study, conducted by Nielsen Music and published via licencing service Soundtrack Your Brand, found that small businesses, such as shops, restaurants, or public venues, were only correctly licensed 17% of the time. The other 83% do not properly obtain a “public performance” licence, but rather incorrectly believe that personal music accounts, through services such as Spotify or Apple Music, can be used for background music in a business setting.

Interviews were conducted with approximately 5,000 businesses in the UK, US, Sweden, Spain, Italy, France, and Germany. The results estimate that 21.3 million of the world’s 29.4 million businesses use consumer music services. An average of $8.33 per month is lost from each business that circumvents proper licensing. In addition, if they are using a free version of the streaming service, then musicians, songwriters, composers, and labels are all losing more than $100 million per month.

The report elaborates that the average person is quite aware that they cannot use their Netflix account, for instance, to open a cinema. Yet, while music has similar copyright restrictions, there seems to be almost no hesitation to access and share music. Whether this is a behaviour learned in the Napster era, or a general feeling of entitlement, it’s clear the music industry has failed in proper messaging. Moreover, copyright laws in general, when it comes to music, are widely ignored and seldom policed.

As if that wasn’t a serious enough blow to the potential income for musicians, the streaming services themselves are still under fire for what is generally deemed an unfair method of distribution. We all know the stories of the stars who lament they were paid $10 for 100,000 streams. Well, it’s worse for lesser-known musicians or back catalogue.

According to Rolling Stone, for Spotify alone, the monthly active user base has risen to 191 million, with 87 million of those being subscribers, representing an increase of 1,300% since 2013. For musicians, it’s still pennies rolling out the front end of a big machine, where billions are flowing into the back end. The debate, however, is shifting from how much musicians are paid to how they are paid.

Along with other streaming services, Spotify currently pays rights holders on a simple pro rata model. In other words, they pool the money available for distribution and divide it based on the track popularity. Using the intensely streamed Canadian artist Drake as an example, in a month when his songs account for 2% of all streams, 2% of all distributable revenue will go to Drake. Is this fair? Well, maybe not.

As an alternate example, if a premium subscriber paying $9.99/month was to listen to nothing but another Canadian artist such as The Weeknd, the distributable amount (approximately $6.99) would be dumped into the pot, of which 2% goes to Drake. If a user-centric model were employed rather than the pro rata model, in this particular case, all of the $6.99 would go to The Weeknd. The subscriber would also know that he is supporting the artist of his choice, as opposed to lining the pockets of mega-stars.

A real-world study with stats provided by Spotify found that songs streamed by the top 0.4% of artists would garner them 9.9% of the money. In the user-centric model, that 0.4% of artists would gather 5.6% of the total booty. The 4.3% difference would go to the remaining 99.6% of the artists. Succinctly, this system favours artists with a smaller number of streams, and is considered more equitable.

While there are other arguments that attempt to demonstrate that the difference is not so staggering, it’s certainly clear that the current model isn’t working. It is one of the reasons why our recording musicians have to tour and sell merchandise to make ends meet; recording sales (i.e., streaming) aren’t paying.

As I have said before, the music industry is complicated. Musicians must take advantage of all revenue streams in order to survive—don’t count on just your songwriter royalties and publishing and don’t count on just Neighbouring Rights. Your statutory payments afforded through copyright law are only half of the puzzle. By filing contracts on your recordings, you take advantage of what the AFM has negotiated through contract law. Pension, the Special Payments Fund, and in particular, money earned through new use, significantly add to the total amount available. Find out from your local how to participate and cash in. It’s the right thing and the smart thing to do.

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