Newsletter #136: Spotify, Streaming Radio and Artists' Digital Rights

18 Jun 2018

Credits: Kahll/ Pixabay

It’s somewhat surprising just how little mention has been made about Spotify’s recently expressed ambitions to compete with radio, in terms of what this means for artists.

This Bloomberg piece considers Spotify’s battle line advancing to take on radio (and podcasts), and Troy Carter’s interview for MBW includes mention of Spotify ‘pinching’ radio’s audience. Little wonder then, that BBC controller, Bob Shennan has openly declared the need for radio to reinvent itself.

Here in the UK where artists enjoy broadcast performance royalties, the basis on which they are paid for broadcasts – equitable remuneration – means the artist/ label share of these royalties is split equally, 50:50, with artists receiving their share directly from PPL. These payments are not subject to the terms of their label recording contracts – it’s an immutable, equal split that sees more money in the pockets of artists, than from streams of the same track via on-demand services such as Spotify.

Of course, the end-game for Spotify in pursuing the radio market lies in its potential to convert freemium users into paying subscribers, and competing for a share of lucrative radio ad spend to bolster its revenue – $16bn in the US alone in 2017. It isn’t about competing with radio per se. Or rather, it didn’t seem to be until stories surfaced about it including news and political commentary programming, therefore broadening its audio output, in pursuit of growing its market share.

Nevertheless, it once again raises issues around artist/ writer remuneration, and highlights subtle differences in legislation that have a profound impact on the creative’s bottom line.

As we know, streaming royalties are calculated (and paid) entirely differently due to a number of factors, not least, the fact that the interactive nature of streaming means it isn’t subject to equitable remuneration (as is broadcast radio), but is instead subject to the Making Available right.

We put this topic under the spotlight a couple of years ago, publishing this Making Available paper by Fiona McGuigan, which conveniently timed with our publication of an MMF paper, It’s Just A Click Away: How Copyright Law is Failing Musicians, which detailed the issues around the distinction between rights that determine royalty payouts and structures across different platforms.

These are technical reads, but worth the effort to understand the differencies in royalty structures between traditional broadcast, digital downloads and streaming).

So with Spotify’s aspiration to supercede radio, what are the implications for artists’ royalties? Given that all players in the market appear to view on-demand streaming as a form of radio, can artists look forward to some form of re-calibration of equitable remuneration for interactive services?

Well the short answer is almost certainly ‘No’, because of the technicalities of interactive rights, not to mention that this would involve re-engineering aspects of WIPO’s Performances and Phonograms Treaty, 1996 requiring agreement across WIPO member states (191 at the last count)…

So it’s welcome news for artists (and musicians) that the Fair Internet for Performers campaign, backed by campaigners including the Musicians’ Union, is seeking a change in performers’ rights, to fix the current imbalance musicians are subjected to in the streaming domain. Coming at it from a slightly different angle, what is being sought is a change such that the Making Available right becomes an exclusive right as well as an equitable remuneration. Facing heavy opposition from rightsholders and streaming platforms (who would have a reduced royalty share), the hope is that this achieved through an amendment to a Digital Single Market copyright directive.

However, with Brexit looming, it would be a brave stake to bet on there being a favourable or timely outcome, nevermind the intense counter-lobbying by those wishing to maintain the status quo.

Where it does become more interesting, however, is with the prospect that broadcast royalty rates be part of negotiations between artists and Spotify, should artists choose to licence directly and not through a label.

Asked at our Artist Economics of Streaming event back in 2014 whether Spotify had plans to ‘do a Netflix’, and become a content producer, Spotify’s then Director of Artist Services, Mark Williamson rebuffed any suggestion that this might be the long game. Questioned on whether Spotify then had any intention of entering the manufacturing process and become a label, his answer was clear:

We monetise them [users] through advertising and convert them to subscription. That’s our role – it isn’t to make the music or to be the label.”

Pushed further on direct licensing, however, drew a response that we now know to be prescient:

“Artists need to think whether they’ll get more going through a label or whether, through the use of our tools, they wish to connect with fans directly.”

Leaving aside the wider issues of the merits of artists going it alone without the administrative backing of a label, and the ability or otherwise of individual artists to administer their catalogues globally, whether through the European Parliament or artists dealing directly with rightsholders, this does perhaps represent a long overdue opportunity for a recalibration of artists digital rights.

 

Editorial by Jonathan Robinson