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Thread: Spotify royalties: Wow.

  1. #11
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    Ok, I investigated this a good bit more and from what I can tell, her issue is related to royalty spits for songwriters. It appears that Artists actually get paid pretty well (relatively speaking) from Pandora.

    Pandora pays - as far as I can tell - 11 cents per stream which is, their legal assertion in court now, way above the rates that radio stations who simulcast pay. At that rate, they paid out a good bit of royalty cash for 3 million plays, over $300k ... but ... the songwriter / composer royalty split seems to be something along the lines of 1-to-12, in dollars. They don't negotiate with record labels, they pay rates set by the feds.

    That split would still - by my math - leave a lot more than $39 dollars unless there is a lot of something else going on there, like that smaller portion is being divided up in multiple other ways before it gets to the songwriter.

    Pandora's argument is that the 11 cents royalty rates are too high and frankly, they actually make a good case. Radio that simulcasts on the net pays (IIRC), $0.021 per stream and Pandora is seeking legal remedy to have a more uniform rate across the board. Obviously, radio won't want their rates going up to 11 cents so if there is to be any kind of "parity", Pandora's rates will have to actually go down.

    Another odd thing that I can't pin down completely. It seems that the royalty payments vary by the bandwidth of the broadcast stream. HD streams get more, low bandwidth streams - some of them - actually don't require any payment at all, bandwidth streams in the middle have rates less than HD. All of that additional minutia would seem to make a true accounting by an artist a "take their word for it" thing if there aren't any regular audits.

    Anyway, the songwriter from the OP here who got $39... well... Pandora adjusting that split much isn't likely to happen because (obviously) the people on the other side of the royalty split, the actual artist, isn't going to want to get less.

    Even if they did adjust the split a little bit, it would mean that what, she might have gotten $175 instead of $39? It's just, that royalty thing in this case, guided by that means, a really bad deal for songwriters. It heavily favors the "artist", which in most cases is probably the record label... which, when you think about it makes sense, that they would have the lobbying to make that happen.

    Anyway, one big thing I was missing with Pandora is that they actually don't require any permission from an artist to stream music. They are only required to pay the current royalty rates if and when they do.

    But I do have to agree with Todd. If you actually do negotiate (or rather, your record company who owns the rights to your music negotiates) a contract with Spotify that only pays the "artist" $0.007 a stream or whatever it is, they would certainly know that up front wouldn't they?

    I mean, unless their lawyers are just... not very good at reading contracts.

    P.S. When you add the additional factor that none of those companies seem to be actually turning a profit, the idea of better royalty deals in general seems rather bleak.

    My guess in those cases like Spotify, the only thing that actually makes any kinda of sense at all, is that record labels view it as just another additional revenue stream they don't have to work for, no matter how small, and the artist's deal with the label didn't have enough foresight to include any reasonable portion of that. I mean, label signs with Spotify and takes whatever they get and maybe gives the Artist a really, really, really, tiny sub-portion of that, like a Happy Meal's worth. Collectively though, across an entire roster, it may all add up to a bit more for the record label, for doing nothing much.
    Last edited by Lawrence; 11-23-2012 at 07:00 AM.

  2. #12
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    Quote Originally Posted by Lawrence View Post
    Another odd thing that I can't pin down completely. It seems that the royalty payments vary by the bandwidth of the broadcast stream. HD streams get more, low bandwidth streams - some of them - actually don't require any payment at all, bandwidth streams in the middle have rates less than HD. All of that additional minutia would seem to make a true accounting by an artist a "take their word for it" thing if there aren't any regular audits.
    Beginning in '09, the US Copyright Royalty Board began applying royalties to streaming net services based on revenue. I'm not sure if the rates have changed since then, but the ruling established a minimum that a streamer could pay - it was around 15 cents per subscriber per month for streaming only, around 30 cents per sub/month if the stream could be converted to downloads or listened to on mobile devices, and around 50 cent per sub/month if the subscription itself was able to be transferred to mobile devices. If the listener is not charged a subscription rate (Spotify, etc.), then there is no minimum rate - and that includes for services that are solely supported by advertising. Hence the fraction of a penny you would see at Spotify.

    In calculating what a streamer pays, it must determine its base revenue (subscriptions and advertising income), multiply that by a pre-determined multiple (11% I think), subtract performance royalties already paid, divide that by the number of songs it played during the accounting period, then multiply that figure by the number of times it paid a particular work to determine the royalty for that work. Along the way there are several exemptions and exceptions that can be applied. Clear is mud? I think they like it that way.

    .
    Last edited by Todd Robbins; 11-23-2012 at 02:55 PM.
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  3. #13
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    Quote Originally Posted by Todd Robbins View Post
    Read up on the DMCA and other bills passed by the US Congress between 1998 and 2008...
    Well, you are right on in that I haven't studied any of this stuff since about 2000. I used to pay a lot more attention but as retirement grew near it mattered less to me, personally. Even though I am passionate about these issues and others that have to do with the average working man, I've let my knowledge base slide.
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    Quote Originally Posted by Bill@WelcomeHomeStudios View Post
    Well, you are right on in that I haven't studied any of this stuff since about 2000. I used to pay a lot more attention but as retirement grew near it mattered less to me, personally. Even though I am passionate about these issues and others that have to do with the average working man, I've let my knowledge base slide.
    It just seemed that you were trying to make an apples-to-apple comparison between broadcast radio and internet streaming, even saying that "radio is, after all, streaming". Nothing could be further from the truth. Many moons ago, streaming was defined by the CRB for the purposes of this type of discussion as "the digital transmission of a sound recording of a musical work to an end user - (1) To allow the end user to listen to the sound recording, while maintaining a live network connection to the transmitting service, substantially at the time of transmission, except to the extent that the sound recording remains accessible for future listening from a streaming cache reproduction; (2) Using technology that is designed such that the sound recording does not remain accessible for future listening, except to the extent that the sound recording remains accessible for future listening from a streaming cache reproduction; and (3) That is also subject to licensing as a public performance of the musical work." Broadcast radio does not meet this definition, and is therefore not "streaming".

    Also, you say "streaming services are no different in performance than radio", and again, nothing could be further from the truth. When you broadcast an AM or FM signal, a theoretically unlimited number of local listeners can tune it in. OTA broadcasters do not pay a cost per listener, they pay for power at their studio and at their transmitter and anyone who can tune it in can tune it in. At a content delivery network service, your cost will be determined by the number of slots you require, your bitrate, and your disk quota, among other things - more listeners online at the same time means you have to pay more (per listener) to get them tuned in.

    This is just the basics, man...
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    Quote Originally Posted by Todd Robbins View Post
    Clear is mud? I think they like it that way.

    .
    No lie. It's seems about as clear as "credit stock swaps" and all that other complex stuff Wall Street created to baffle people.

    It seems to be (at least in part) intentionally designed to not be all that clearly understandable, which usually kinda means it heavily favors somebody.

    Thanks Todd.

    So I now wonder why Pandora chose that particular avenue instead of doing what Spotify does, since Spotify seems to pay much less in streaming royalites? Is it a case of - them not having to ask permission - that they just can have a much larger music library?

    Seems you need a PhD to understand it all.

    I think it's maybe fair to say that as relates to an actual "artist" seeing any large portion of - these - kinds of future revenues... "Rome is burning".
    Last edited by Lawrence; 11-23-2012 at 09:20 PM.

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    ... the other thing is the majors own at least a part of spotify. So even though the artists pay is pretty meager, the labels are essentially setting this up to be able to take their cut at the top (as shareholders) rather than being paid for performance. So if spotify "wins" the subscription war, the labels win even if the artists lose. Strange world.

    One equation I've always wanted to figure out is what is the RIGHT payment for a stream on a subscription service. Take a buck a song as a basic idea. How many plays on a streaming service should equal the payment of an outright purchase? 100?

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    If you calculate the number & value of single tracks downloaded per year versus the number of streams of music per year, the team I am working with came up with 2.5 cents per song/per stream as an equivalent value. Virgin Music Group did their calculation and came up with 2p (UK), so we are not very far off. As has been seen, that is not even close to what people have been getting, and the major labels get far better rates than the independents. Some reported rates seen by major label artists have been around .01 cents per stream. So how do we bridge that divide?

    Also, the breakdown of ownership in Spotify by major labels is; Sony BMG 5.8% Universal Music 4.8%, Warner Music 3%, EMI 1.8%, and Merlin 1% - so around 16% combined. Not significant, but nothing to sneeze at either...
    Last edited by Todd Robbins; 11-26-2012 at 03:00 PM.
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    Quote Originally Posted by Todd Robbins View Post
    It just seemed that you were trying to make an apples-to-apple comparison between broadcast radio and internet streaming, even saying that "radio is, after all, streaming". Nothing could be further from the truth....
    Also, you say "streaming services are no different in performance than radio", and again, nothing could be further from the truth. ...
    Alright, let me say it another way. For the end user, there is no difference between streaming music from an online service other than the ability to set up playlists instead of tuning in to particular shows that play what you like, and the ability of the service to hit a wider audience. Most people just use the 'station' or 'radio' function. and since (in the US ) the Telecommunications Act of 1996 with so many radio stations owned by so few companies, the individual stations are almost (and on some cases, -are-) satellite repeaters. Your examples create a distinction without a difference. My point is that no such distinction is needed. If it walks like a duck...


    And if you asked a songwriter or artist what the difference between a streaming on line music service playing their material and the radio or TV playing their material, I don't think that there is much difference to them.

    So my point is that if we legally treated streaming on line music services the same way that we treat broadcast radio, the whole darned issue would be a lot simpler. As to what the Copyright Royalty Board might decide, I'm not surprised that they would take a relatively simple issue and make it complex. (Some people can't help themselves. A labor contract at a 3,000 seat facility runs into hundreds of pages. A labor contract for a 20,000 seat venue in the same area is three pages.) But then, I'm a simple guy; raised in a simpler time when -everybody- wasn't so special, and exempt from existing rules like stoplights and speed limits.

    Last time I looked, the way that radio playlists were checked for royalties in the US had needed overhauled for a long time... but that is fodder for another discussion.
    Last edited by Bill@WelcomeHomeStudios; 11-26-2012 at 03:05 PM.
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  9. #19
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    Quote Originally Posted by Bill@WelcomeHomeStudios View Post
    Alright, let me say it another way. For the end user, there is no difference between streaming music from an online service other than the ability to set up playlists instead of tuning in to particular shows that play what you like, and the ability of the service to hit a wider audience. Most people just use the 'station' or 'radio' function. and since (in the US ) the Telecommunications Act of 1996 with so many radio stations owned by so few companies, the individual stations are almost (and on some cases, -are-) satellite repeaters. Your examples create a distinction without a difference. My point is that no such distinction is needed. If it walks like a duck...


    And if you asked a songwriter or artist what the difference between a streaming on line music service playing their material and the radio or TV playing their material, I don't think that there is much difference to them.

    So my point is that if we legally treated streaming on line music services the same way that we treat broadcast radio, the whole darned issue would be a lot simpler. As to what the Copyright Royalty Board might decide, I'm not surprised that they would take a relatively simple issue and make it complex. (Some people can't help themselves. A labor contract at a 3,000 seat facility runs into hundreds of pages. A labor contract for a 20,000 seat venue in the same area is three pages.) But then, I'm a simple guy; raised in a simpler time when -everybody- wasn't so special, and exempt from existing rules like stoplights and speed limits.

    Last time I looked, the way that radio playlists were checked for royalties in the US had needed overhauled for a long time... but that is fodder for another discussion.
    I am working with 2 groups trying to come up with solutions to what we have now in the worlds of digital downloads and streaming music. We keep banging our heads on the desk because we have people saying to us, "there is no difference...". Fact is, there is a HUGE difference, both in the way the laws are written, the way the entities are defined, and the way they operate.

    I am of the belief the tax code it America needs to be completely overhauled, just like you say the Telecommunications acts need to be, but the fact of the matter is I still sit down 4 times a year with my CPA and work with the rulebook that is on the table.

    So now that leaves us in the real world, where we have to operate within the confines of the rulebook on the table TODAY...
    Todd Robbins
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    Quote Originally Posted by Bill@WelcomeHomeStudios View Post
    And if you asked a songwriter or artist what the difference between a streaming on line music service playing their material and the radio or TV playing their material, I don't think that there is much difference to them.
    Again, I disagree. I think a majority of artists and songwriters would be familiar with the difference even between a radio play and a tv play where it would concern their licensing, publishing, royalty rates, etc. They also understand the difference between someone buying their record in a record store and someone downloading their record on iTunes, so grasping the difference between radio and streaming is extremely easy, and extremely common...
    Todd Robbins
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