By Casey Rae
I’ve talked a lot about Taylor Swift these past couple of weeks. She’s a bona fide superstar, and people wanna know what’s up with her decision to pull catalog from Spotify. But all the hullaboo has also created opportunities to discuss how the current marketplace works for artists who aren’t among music’s one percent. The musicians and songwriters I know are hardly lazy or entitled; they want to pursue artistic excellence and have that excellence rewarded. Everyone at FMC is delighted that artists are speaking up and helping to refocus the debate from the tired “content versus tech” binary. Because that leaves an awful lot of important stuff out.
News flash: the music landscape has changed. Once upon a time, there were just a handful of ways that fans could discover and experience recorded music, and now there are seemingly infinite opportunities. Previously, you might hear a song you liked on the radio, and your choice was either to wait for them to replay it, or go to the record store to purchase a physical copy. And you can still do those things, which is cool! However, the earlier system wasn’t without its disadvantages: including limited shelf space, and fewer chances for non-mainstream artists to be heard. The Internet changed all that, but it also complicated the picture. That said, we’ve come a long way—especially considering that there wasn’t even an iTunes store before 2003.
And now, the digital music space has evolved even further. There are currently any number of legal, licensed services that make it easy to access music. The downside is that the technology has evolved so much that it has thrown artist compensation out of whack. In the near future, on-demand streaming services like Spotify may end up overtaking downloads. For artists, this means an entirely different system for getting paid, and so far it seems to only reward those who operate at considerable scale, like major labels who own a ton of copyrights, or superstars that get gazillions of plays and have a lot of leverage.
Remember, not all streaming services are created equal. In the US, such distinctions are actually part of federal law. For example, Pandora is considered a non-interactive service, which means they are essentially radio. This allows them to operate under a so-called statutory license, which lets them play pretty much whatever they want, as long as they compensate the performers and labels according to a government-set rate. The statutory license is notable in the sense that it pays artists directly, and that money isn’t held against their debt to a label. Payments are collected and distributed by the non-profit SoundExchange, which has artist and independent label representation on its Board. (We’d love to see recording artists paid for plays on AM/FM radio—which is not legally obligated to compensate musicians—through this mechanism.)
Spotify and other services like Beats and Rdio are licensed completely differently. For the user, these services operate more like Netflix, where you get to pick what movie you want to watch, rather than having a DJ or algorithm pick for you. You can also make playlists, share songs and albums with other users, and even download to your devices for offline listening. For consumers, that’s a ton of value for a 10 dollar monthly subscription. However, there is no statutory license for these on-demand services, which means that they need to obtain all that music through direct negotiations. This can take an average of two years, gobs of up-front cash, equity arrangements with the labels and no certainty of securing catalog. This puts tremendous leverage in the hands of just three major labels, who are actually part owners of Spotify. And there’s not a lot of transparency in the deals struck between the big rightsholders and the platforms. More frustrating for artists on these labels is the fact that compensation is whatever their recording contract stipulates. If it was hard to recoup costs and earn royalties in the old system, it’s probably even harder in the new.
The question for artists and smaller labels is whether these new models will add up to meaningful revenue that can be reinvested in bringing more music to listeners. For on-demand streaming, it likely depends on how big you are. A major label with massive catalog will be able to make money of its superstars while monetizing back catalog, and the consumer gets a smorgasbord of music—either ad-supported or at a low monthly fee. For fans, it might be a new golden age. For the average artist, it means that budgeting for your electric bill just got more challenging.
There’s definitely a possibility that as these services grow, payouts might improve. We’d love that! And we like the idea of adding value to on-demand services through direct-to-fan commerce, like tickets, merchandise, limited edition vinyl, and so forth. But we should also consider other approaches, like tweaking the on-demand model by adjusting how much fans get for a monthly subscription. Maybe downloading and caching costs extra. Let’s also explore whether demand for higher-resolution streaming could encourage premium prices. The trick is to keep the legitimate services convenient and attractive enough to prevent people from seeking out unlicensed alternatives. We may also want to support the development of smaller, curated sites that appeal to fans of certain genres. Lastly, licensing reform may help ease frictions in obtaining catalog and also provide an opportunity to make artist compensation more equitable.
I like Taylor Swift (but I like Katy Perry more, sorry). However, there’s also a ton of life-changing music that I’ve enjoyed where the artists were not operating with mass-market ambitions. Ornette Coleman isn’t something I am going to listen to every day, but when I do it’s incredibly meaningful. What systems will work best for the next musical groundbreaker? It’s not just about earning royalties—performing artists have always struggled to make money there. It’s about up-front investment in pursuing creative excellence. Innovation can happen in music and technology. We should encourage both.
There’s never been just one business model for musicians. What we want is a chance at being able to grow using whatever tools we have—and this can look different for different artists at different stages of their careers. Musicians can’t be blamed for speaking up: we’ve been pretty open for a decade to the idea of “if we build it, the business models will come.” It’s high time to build the better business models into the system. We want more innovation, but we want the kind of innovation that cuts artists into the value chain, and doesn’t just reward the same companies that had all the cake in previous decades.
To do this, we need to come together as a music community instead of sniping at each other from the sidelines. FMC creates the space where these conversations and collaborations can happen. The rest is a matter of rolling up our sleeves and getting to work.