Fairness and Advantage in Future Music Markets

A debate is being conducted by the stakeholders in the future of the music industry, about who should get paid, how much, and by whom. So much devilish detail is being left out that an intelligent observer would get a very distorted view of the present, and that is no basis on which to build a future.

So what is missing, and why does it matter?

First, the spotlight on streaming shades all the other ways that musicians can make money, as recording artists, composers, and performers. It might indeed be that apart from public performance and synchronisation, streaming becomes the overwhelmingly dominant way that recorded music gets paid for. But there is a long way to go yet, and short term advantage over the transition (if there is indeed a clean and substitutional transition) could translate into long term advantage for the winners. ‘Winner takes all’ is not great for music, which benefits from innovation and diversity as much as the rest of civilised life.

Second, it’s easy to miss the fact that there are many parties between the artist and the streaming royalty, all negotiating their share as best they can. An appearance of transparency can hide as much as it reveals. An artist might agree a 10% royalty from a record company in return for a recoupable investment in their career, in cash and effort. That same record company might agree a 20% royalty with another artist, because there is more competition for their recording rights. Another artist might use a DIY platform that pays out 100%, but have to borrow the money to record the music and hire their own team (or really do everything themselves in their spare time). In a debate about fairness the percentages are meaningless, unless there is coercion or bad legal advice when these agreements were made.

Third, the famous ‘black box’ exists because some income from selling the right to use a catalogue of music is inevitably unattributable to the subsequent actual use of a piece of music. This is evident at every layer between performer and audience, and it can be dealt with contractually, using proxy values if necessary. If particular companies get a reputation for growing the black box at the expense of attributable revenue in order to retain a larger share of the profits, they will have to compensate by growing the attributable revenue even faster or they will find musicians migrating to where they get a better deal. There’s enough ‘unfair contract’ case law in music to serve as a warning to record labels and music publishers which set out to rip off musicians.

Fourth, and a more subtle point, is a concern that the mechanisms for calculating how the music owners, and ultimately the musicians, are going to get paid is inherently unfair. This appears in two forms; one in which stakeholders in a single payment (for instance composers) argue that they should get more of that payment, and the other over whether large pools of money from subscriptions should be considered aggregates of individual subscriber payments, or a single collective payment for the totality of the music offered and used. Neither yields easily to an argument based on fairness, and both are re-distributative. In particular the latter overlooks some very critical points. The service has to provide the music in advance, with the payout being partly for the opportunity to listen, whether it’s taken up by a particular individual or not. Services also have to consider consumer satisfaction, which might just as easily be driven by lots of listening to a wide range of music as by the ability to increase royalty payments for any particular recipient. Artists with very broad appeal will do very well in all cases, but other artists whose audience is more open-eared and experimental might well turn out to be critical for the long term health of the music industry.

It could easily be that the music industry as a whole is at a great disadvantage to its technology driven partners, whose users naturally enough want to upload and download without a debate about fairness and legality. Certainly in recorded music a very heavy price is being paid for the transition from physical to digital, and consumers and the new music services and device makers are capturing a lot of the new value created. Within the music industry however, there are warning signs that those who arguably already benefit most will try as hard as they can to embed their advantage. It should be a warning to us when ageing and wealthy musicians are presented as the future of the music industry, or asked to argue for fairness in the way all musicians get paid.

Here’s just one example:

“Why is someone who pays 9.99 Euros a month just to listen to ABBA in the same basket as my daughter, who streams thousands of songs?”

The answer to me is obvious. As an industry we need to help new artists get discovered and supported, and we need to develop young and paying customers for music. Helping more money go to the creators of 40 year old sound recordings will achieve neither of those aims; instead let’s choose discovery of new music, and more music, as the way we judge whether the market is working, and fair.

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