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Newsletter Editorial #118: The Digital Pie – Something’s Gotta Give… – MusicTank

Newsletter Editorial #118: The Digital Pie - Something's Gotta Give...

21 May 2015

The issue of fairness and transparency for songwriters in the digital landscape was one of the leading debates at last week’s Great Escape convention, bringing to a head concerns expressed by the increasingly vocal songwriter and publisher communities.

In the race to legitimacy, those crafting the raw material on which licensed digital services depend – the song – face transparency complexities of Gordian Knot proportions, and which show few signs of abating.

The prospects for any meeting of minds across the creator and digital services divide still seem a long way off and at times division between factions of the industry appear as great as those between the music and tech sectors.

The songwriter digital royalty debate centres on an historic split that sees labels claim a larger share of the digital pie in comparison to the songwriter/ publisher.  This differential is exacerbated by the fact that publishing is traditionally a low margin, high volume business – low percentages across a large number of deals – and further complicated by services having to do business with every publisher behind a given song in order to do the deal.

Whilst a typical 88/12 % split between labels and publishers of their share of the digital royalty pie understandably appears disproportionately unbalanced, the rationale behind it is that publishing’s ‘long tail’ should not be overlooked (at life of writer plus 70 years, this is longer than the copyright term in sound recordings) nor should a song’s multiple licensing potential over life of copyright.  Conversely, label investment in artists and promotion is typically far greater than that of publishers, thereby justifying the higher royalty rate.

Yet stuck somewhere in the middle is the humble songwriter; handcuffed by an inequality of bargaining power which sees ‘their share’ constantly eroded, and for whom there is no other income stream such as touring or merchandise.

The common denominator amongst all this is transparency in the nature of the deals being struck, the flow of money through the value chain and the sharing of user data.  Never has this issue been more topical than following this week’s sensational leak of the inner workings of Sony’s 2011 deal with Spotify…and at a time when rightsholder concern and outright skepticism of the streaming services model has never been greater.

Navigating a way forward is fraught with difficulties.  Labels aren’t going to relinquish any of their share unless forced to do so.  Currently, there is no more pie – the services’ margin is already squeezed.  Establishing a rate court, even if successful and the outcome favour songwriters, any increase from 12% won’t come close to parity with labels’ share – and there’s still the issue of how any such rate rise be funded.

Unsurprisingly, the only real hope is to grow the pie.  A combination of simplified licensing structures that are low cost and easy to engage (with a licensing regime that supports and encourages service innovation) and, in a world increasingly dominated by data, greater application and depth of understanding of what that’s telling us about consumption patterns is essential.  So it will also be interesting to see what comes of a new licensing hub proposed by PRS, GEMA and STIM that will combine data processing with frictionless front-end licensing for digital services, assuming it passes the competition commission’s scrutiny.

As well as evolving new platforms and services, innovation also helps fix inefficiencies in existing practices that in turn help grow the pie, and reduce the level of non-attributable ‘black box‘ royalties.  An example of this is the alleged £100m black hole identified by GEMA in the non-reporting of tracks used by DJ’s which may now be plugged and accounted for by innovations in digital cataloguing software attached to CDJs and mixers.

It is essential that such innovation benefits all, not just the gate keepers.  There’s no small irony that an industry which rightly and collectively calls for urgent review of safe harbour legislation is at times far from transparent or fair in dealing with its own…

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