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CMU@TGE 2017: Where’s My Fucking Money? The Transparency Problem

By and | Published on Wednesday 28 June 2017

Suzanne Combo

We still have more reports to come on key sessions that took place at the CMU Insights conferences at The Great Escape last month. Today, the big transparency debate that took place as part of The Royalties Conference.

The need for more transparency in the streaming business has been a hot topic at music conferences for a few years now. Labels, distributors, publishers and collecting societies initially agreed that there needed to be more transparency for artists, songwriters and their managers, and then started insisting that they were now becoming more transparent. Which in some ways some are, though – from an artist perspective – there is still much more to be done.

As was discussed at the CMU Insights Royalties Conference by artists Dave Rowntree, Crispin Hunt and Suzanne Combo (pictured), respectively representing the UK’s Featured Artist Coalition, the British Academy Of Songwriters Composes & Authors and the International Artists Organisation. Annabella Coldrick from the Music Managers Forum provided a management perspective.

‘Transparency’ is a wide-ranging term, which can in itself be a problem. Tackling issues around transparency requires music creatives and their managers to be much more specific about what streaming information they feel they need and should have access to. At a basic level, it’s useful to distinguish between usage data, royalty data and deal information.

It’s usage data where most progress has been made to date, by both majors and independents. Hunt noted that he had explored the portals both Sony Music and Universal Music have developed to share usage stats from the streaming platforms with their artists, and that they both provide “a great deal of really useful information”, particularly when it comes to geographical data – where people are streaming your music – which can inform an artist’s live activity.

But even with usage data, it is still early days. Advances are being made all the time in this domain, Hunt accepted, “but I think there’s a lot more that could be done with this kind of data and how it is passed through to artists”.

The panel agreed that the digital platforms themselves had an important role to play here as well, in that they needed to further refine what data they provide to the labels, distributors, publishers and societies. And then the music companies need to further refine how they compile that data and share it with their artists and writers.

“We know Spotify provides a lot of good data”, Coldrick said, noting that it also provided artists and managers with some of that information direct via its Spotify For Artists platform. “I think Apple Music provides quite a bit of usage data too, but not necessarily so much detail, to the same level of granularity. With some of the other digital services, the data coming through is even more difficult to analyse”.

Of course both labels and artists want access to the best possible data from the digital platforms – which is to say enough detail to be able to see trends and inform marketing and business decisions, but not so much detail it’s impossible to navigate. So, where the weaknesses are actually with the platforms, if labels and artists could agree on how they would like to see usage data provision evolve, they could together put pressure on the streaming services to improve things their side.

Artist and managers could also put pressure on the streaming platforms to develop services akin to Spotify For Artists, so that they aren’t reliant on their labels and distributors to pass the data through. Though, at the same time, it’s useful to be able to see data from all the digital platforms side by side, which is where the good label and distributor data portals come into their own.

However, most managers will inevitably have artists working with different labels and distributors, meaning they are having to use multiple portals, in addition to any of the data channels provided by the streaming services themselves. And one of the problems is that there are no real data standards yet.

“The general problem here is that this is the Wild West at the moment”, reckoned Rowntree. “We’re in the very early days of all of this and so everybody is reporting different things in different ways. There’s no standardisation. It’s very hard to create useful tools without standards that are going to work on platforms across the board”.

“That will happen”, he added. “History shows us that the individual organisations will resist standards tooth and nail because they have a better idea, but it will be forced on everybody sooner or later”. Though, stressing once again that it was still early days for the streaming business, he reckoned that could be a decade away.

While Rowntree agreed that the way labels and distributors are presenting usage data is improving, he felt that some business partners are still holding some key data back. But not necessarily because ‘data is power’, possibly more for paternal reasons.

“You have an ongoing tug of war”, he said. “From artists and managers saying ‘it’s our data as much as it’s yours, tell us’, and the business partners going ‘no, I must protect you from all of this data; you won’t be able to understand it; you’ll be deluged’. But they forget, with the younger artists and managers, they’re 20 years old and know exactly how to deal with large amounts of data, and they are kind of laughing at this idea that they need to be protected from it”.

Nevertheless, with usage data there does seem to be a general willingness among labels, distributors, publishers and societies to share the information with their artists and songwriters. The question is whether they are able to share that data in a thorough but usable way.

Which comes down to what the streaming services are doing, what resources the business partners have to build their own portals, and the need for some standards across the industry. Though artists could and should be involved more in these conversations, rather than just suddenly being presented with a finished portal.

But while usage data is great, what about the money? What about royalty reporting? Again, portals are being built and some progress is being made, though standards vary hugely across the industry, and even the best could be better.

Says Combo: “Often you are told what you have earned from a service, but you don’t see the basis of the label’s calculation. You have no idea if any deductions have been applied, and if so, why they have been applied. You need to see everything that has happened at the label to the money it was paid by the streaming service”.

The complexities of record contracts – and especially older record contracts – make royalty reporting more confusing. If an artist is on a straight 18% royalty, then the label’s financial reporting portal could simply state what it received from a streaming service in one column, and then what the artist is receiving – ie 18% of the original figure – in the next column. And some labels do just that.

However, with some record contracts, and especially older record contracts, there are other complications which aren’t always clearly set out in royalty statements. Hunt explained: “I signed a deal in the 1990s. It was quite a good deal for the time, paying a 17% royalty. But then there are deductions. There is a TV advertising deduction, which can be applied forever because we were once briefly advertised on the television. That takes my royalty down to 8.5%”.

“Then there’s an international deduction. It’s not clear how that applies on streaming. But there’s a rumour that it applies because the servers of Spotify are based in Sweden. I’ve asked my label about that and they say ‘oh, we’ll have to have a look into that’. There was also a 25% packaging deduction in the contract. Does that apply? I worked out that, with all the deductions, in the end I’d be on about a 1.7% royalty. Which is only 0.7% better than Elvis Presley and Colonel Tom Parker”.

“In their defence, the record company has said ‘no no no, we don’t apply those kind of deductions to even legacy contracts on digital'”, Hunt went on. “But it’s really hard to find out exactly what’s going on, because it’s not clearly shown in the royalty reporting”. Which is to say, the label isn’t showing all of its workings out.

Though even where business partners are clearer on how they have worked out what an artist is due – or an artist has a simpler contract where the headline royalty is always applied – there remains the third transparency issue: artists don’t know how the streaming services worked out what to pay the label, distributor, publisher or society, because they don’t know the revenue share and minimum guarantee arrangements between their business partners and the streaming firms. Nor if the label is seeing any other kickbacks like equity, advances, fees or marketing support.

“If somebody is profiting off the exploitation of my music, it seems to me equitable and just that I should share in that”, stated Rowntree. “That’s a fundamental red line for me. If somebody’s being offered equity in exchange for my music being licensed to their service, I want my share of that. And if somebody’s being paid an advance on the royalties that are due to me, I want my share of that advance”.

The labels, distributors, publishers and societies often claim that they can’t share deal information with artists and songwriters because of non-disclosure agreements in their contracts with the streaming services. Rowntree: “It just seems to me that this idea that all this information is hidden behind NDAs, which I’m not allowed to penetrate, is deliberately obstructing my ability to check that what I’m being paid is correct. I don’t see that there’s any other industry on earth that would put up with this”.

One justification for the NDAs is that if the rates received by the labels et al were public domain, it would limit the ability of an artist’s business partners to get the best possible deal. Hunt conceded that this was a valid point, citing the example of two PRS streaming deals he had knowledge of as a board member of the society.

Still, the industry needs to bring artists and songwriters into the NDAs, Hunt added. “We’ve got to work out some way that the artists – or the people who have an interest in their work – can have some kind of penetration into the streaming deals; but we might have to sign NDAs at the same time. There has to be some way of doing that”.

Combo agreed: “We need to know that we are part of the investment. We deserve better treatment and better confidence from the labels, and from the collecting societies. We need to reconsider our relationships – we, the artists, are business partners of the music companies. And we are able to keep secrets if necessary”.

“These structures are already in place”, Rowntree reckoned. “When you send a representative into audit your major label company – to audit the royalties you have been paid – they already sign an NDA, so this already happens. These people should be able to then see and check the streaming deals. I don’t actually want to know the percentages, I don’t want the data myself. I just want to be satisfied that the accountancy firm that works for me is happy that things are going OK”.

Though Coldrick expressed one concern with artists – or auditors working for artists – signing NDAs with the labels. It’s usually bigger name artists who can afford to audit their business partners. If they find a problem with the streaming royalties they are receiving, the label often does a deal with the artist on the condition they don’t speak about the issue publicly. But the issue might be affecting all artists.

Coldrick: “If what you find is a big structural problem at the label, how do we fix that problem? Because what they’ll do, is they’ll do a deal with you, you’ll get paid, then you’re quiet. But what if the problem is affecting every single other artist on that label – the problem is, you don’t know. If you can’t expose or share those problems with the wider artist community, then you can’t fix the long term structural problems”.

While with usage data, there seems to be a general willingness across the industry to share information – the issues are ability, resource and standards – with royalty data and deal information it’s less clear cut. On the latter point, the majors in particular remain resistant to becoming truly transparent. So much so that the MMF, FAC and BASCA – along with the Musicians’ Union and Music Producers Guild – earlier this year called on the government to intervene.

“I don’t think anyone initially wants to leap to politicians to find a solution”, Coldrick stated. “Often that’s the very last resort, having to go into Parliament and say ‘actually there’s a really big problem here, it’s structural’. But we’ve tried, all our industry organisations have spent at least a year and a half – nearly two years – trying to negotiate a voluntary code of conduct by which all these issues would be resolved”.

“If you’re trading in an artist’s catalogue then you should have to be open and transparent about how you’re trading”, she went on. “You shouldn’t do deals that are against the interests of those that are creating the music that you’re exploiting. After a year and a half, we haven’t been able to find a voluntary solution to these issues that every label and publisher can sign up to, which is why we reached out to government”.

Hunt added: “There’s a big conversation that goes on within the music industry about ‘oh we don’t want interference, we don’t want regulatory interference with contracts between individuals’. But the truth of this is that it’s not contracts between individuals, it’s often a contract between four or five nineteen year old kids and a huge global corporation, and they can only rely on their lawyer, who has to do loads of deals with Universal. That’s not a contract between individuals”.

“We should not forget, and neither should the copyright industries forget, that copyright is itself a regulation”, Hunt went on. “Intellectual property is a regulation and it requires government to keep an eye on it. It’s a government’s duty to keep an eye on their regulations and how their regulations are employed. I think it’s utterly necessary for government to step in”.

This has already happened in France. Combo, who is also involved in the French version of the FAC, explained that a French government review of copyright law put the idea of a compulsory licence for streaming on the table, which could in turn secure artists both transparency and a better split.

A compulsory licence is the last thing labels and publishers want. “That’s why we succeeded in getting every stakeholder around the table to negotiate a voluntary code of practice”, Combo said. “Without this legal threat, it would have been impossible. We then negotiated long and hard, and signed a code two years ago”.

Many would argue that a compulsory licence would ultimately push the royalties paid by streaming services down, which isn’t in the interests of artists either, though the prospect of such an arrangement got talks going on a more proactive basis. Work relating to that code – on transparency and remuneration – is still very much ongoing, so in practical terms it is still to be seen if the French scheme delivers the goods.

Beyond the UK and France, transparency is also on the agenda in the wider European Union, with an article of the draft European Copyright Directive attempting to provide artists and songwriters with new rights to find out how their music is being exploited. It’s a good start, though Coldrick expressed concerns that the current draft provides too many get outs. And, of course, in the UK it’s still not clear whether the new European Copyright Directive will be implemented here.

Plus, Coldrick said, better transparency is just step one. “It would be great if we could get some decent transparency, but what if – as a result of that – an artist finds out they are being ripped off. Or – more importantly – they aren’t technically being ripped off, legally speaking, but they are being paid on very unfair terms, maybe with deductions from the physical era still being applied to streams. It’s all very well being able to see that better, but it’s then what can you actually do about it?”

The aforementioned copyright directive tries to deal with that too via a thing called the ‘contract adjustment mechanism’. Coldrick said: “Again, we don’t think the EU contract adjustment mechanism does what we would like it to do, but we would like to see some way to have the right for artists to review their old deals – to say are these terms modern and fair? So if those deductions are being applied, there’s a formal system to say ‘hang on a minute, this is outdated, it’s not right’, and to fix it”.

Check out all the reports and resources CMU has published around this year’s CMU Insights @ The Great Escape conferences here.



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