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Secrecy around streaming still making it too difficult for artists to know if they’re getting a fair deal

By | Published on Thursday 27 April 2017

Labels and publishers may now be sharing more usage and royalty data with artists, songwriters and their managers, but there are still gaps in that information which make it hard to know if royalties are being paid fairly and correctly. So who still needs to be more transparent, and about what exactly?

As part of this year’s Global Creators Summit at Canadian Music Week in Toronto, CMU Insights presented a series of sessions on the streaming market. Based on the ‘Dissecting The Digital Dollar’ reports CMU Insights produced for the UK Music Managers Forum, representatives from the digital market, collecting societies, artist management and entertainment law spoke. The audience heard a detailed breakdown of how streaming services are licensed, conversations about ensuring that the streaming business works for all parties, and a discussion about ongoing transparency issues.

For the final session of the day, CMU Business Editor Chris Cooke was joined by Canadian artist managers Graham Stairs and Jake Gold, entertainment lawyer Angelika Heim, and CEO of the UK Music Managers Forum Annabella Coldrick. They discussed the issue of transparency in the streaming business, what is changing and what remains problematic.

Laying out the concerns of managers and artists, Coldrick stressed that “it’s not transparency for the sake of transparency and data for the sake of data”, but that managers need a certain amount of information to audit their client’s income, and assess which business partners and digital platforms are in their artists’ best interest. And that means having a full understanding of the business of streaming, including usage and royalty data relating to their artist’s tracks and songs, but also information about the deals done between labels and publishers and the streaming services.

Getting some of that information is a good start, but what managers really need is the full picture. “When we talk to the labels they say, ‘look we’re sharing all this marketing data, we’re sharing all this information about what is being streamed and where'” Coldrick said. “But it’s being able to understand the full flow of money all the way through the chain that really matters”.

“It’s an increasing problem as streaming becomes more dominant”, she added, because a lack of information is furthering distrust between artists and their business partners. “We know that where artists are self-releasing, or they’re working with certain indies, they can understand how things work throughout the value chain and they therefore have trust in the way streaming is operating”, she continued. “But in many cases, artists and managers can’t see that information, they can’t see all the different terms of the deal, so trust is lacking”.

As previously reported, attempts were made in the UK to reach an industry-wide voluntary agreement on issues like transparency via trade body UK Music, talks which involved the majors, but negotiations have fallen flat. “We went through seventeen different drafts of the code of conduct and it came to nothing”, she said. As a result, the MMF and other music creative groups in the UK have moved on to lobbying politicians in London and Brussels on this issue.

“It’s not that managers in the UK want to leap to regulation”, she said. “Managers are very entrepreneurial and would like the market to find a solution. But we’re now getting to the stage where we’re having to look at potential backstop legislation to bring about transparency and the ability to ensure that modern digital contracts really are modern and that older artists are not stuck on legacy contracts with unfair terms”.

When it comes to labels and publishers sharing key data and information, some of that is about willingness to share, and some of it is about the ability to share. Managers recognise that the vast amount of usage and royalty data coming in from streaming has posed a big challenge for labels used to reporting more modest CD units to their artists.

Gold recalled: “I had an artist signed to an independent UK label where we had a 50/50 net deal. Which meant 50% of all profit came to us. So transparency was always part of the deal, because every dollar spent I got to see with back up”.

The label was willing to be transparent, but streaming created a different challenge. “When I got the first royalty statement that included streams it was [thousands of pages] thick”, he continued. “And it got to the point where they literally stopped sending royalty statements and they had to create a portal so you could view you royalty statement online, because it was too big to attach, because there were all these micro transactions happening”.

“Now, was I going to go through every single one of them?” he added. “My thinking was, if they say they’ve collected this much money and I’m going to get half of it, I’m going to have to go with that. That’s a key problem – you can ask for transparency, but how are you going to audit them?”

Many labels and publishers have since invested in ever more sophisticated reporting platforms, making it easier for them to provide streaming usage and royalty information to managers, and to help managers navigate that data. Though the quality of those reporting systems varies greatly across the industry, and even with the best there is still room for improvement.

There remains the issue of managers not knowing how any one streaming service is calculating what is due to any one label or artist. That problem endures because of the non-disclosure agreements in the deals between the labels and publishers and the streaming services.

“As a lawyer, I respect that there are confidentiality provisions”, said Heim. “As a lawyer, I don’t necessarily want other people to know what I got for my clients. There are many different reasons why there might be confidentiality provisions. One of them is the label or publisher wants to have a leg up on their competition. They want to know everyone else’s deal, but they don’t necessarily want them to know theirs”.

However, the secrecy creates challenges when it comes to the label/artist relationship. “My job as a lawyer is to get the best deal as possible for you, so I care about the money”, she went on. “I work with the manager and artist to make sure that your artistic vision is also going to be respected by your partner, but at the end of the day I want to know about the money”.

In the streaming age, the NDAs hinder the process of understanding the money. That said, Heim continued, in the same way some labels and publishers have worked on how they report streaming and royalty data, some are now reaching out to try and given a little more clarity on the way the streaming deals work, within the constraints of the NDAs. Sony Music Canada has made some effort in this regard of late, she added.

Allowing managers to understand how the streaming service knows what to pay the label is key, Coldrick stressed once again. “There’s amazing amounts of information out there, but it’s being able to understand what Spotify paid the label. Some managers have occasionally been able to see what’s gone from Spotify to the label, and some of them have said that actually it’s been reassuring. They’re signed to an indie and they’ve seen that what’s been paid from the streaming service is what they are paid their share on”.

However, she added, “I hear stories from others that what’s been paid by Spotify to the label is a lot more than what the artist received, which is to say, the artist didn’t get the share they were due under contract, which might be 15%. So something happened – deductions were made – before the artist royalty was calculated. But what and why? The lack of transparency means artists can’t see that”.

Artist’s record contracts can also be complex, of course, and labels may be applying contractual discounts and deductions to streaming income before the artist’s royalty is worked out. But a lack of clarity – over both what the streaming service paid the label and what discounts or deductions were then applied – means managers often can’t see what is going on; and whether discounts and deductions are being applied fairly, especially on pre-digital contracts where terms written with CDs in mind are being applied to streams.

Picking up on that, Stairs noted: “One of my artists is, for want of a better word, a heritage artist, who signed a deal in 1978 before any of this stuff existed. It’s interesting now, we’re having a conflict, shall we say, with one of the majors in the UK about how they’re interpreting that contract with things like packaging deductions on digital sales”.

However, the panel was keen to acknowledge improvements that were being made, especially in the way data is reported and shared. Gold noted that in some ways the industry was dealing with its new royalty and reporting issues faster than with the old ones, by making sure it utilises new technology.

“Before radio was fingerprinted, they kept logs and the performing rights societies had to trust their logs”, he recalled. “So it ended up being a sample, and we were paid out as a sample, before we were able to fingerprint the audio and get accurate reporting. It that took decades to get to that point. So I think in a lot of ways we’re moving way faster than we ever were before”.

Issues still remain though, especially when it comes to accessing information about the streaming deals, where willingness as well as ability is still an issue. And it may require a change in copyright law – like the transparency elements of the European Copyright Directive – to address those problems. Though artists and managers being unified in their demands for clarity, both in public but also directly with their business partners, could also bring about the desired change.

“Having these conversations and having the stakeholders who are making the deals hear what’s being said, it will pressure them to make changes”, said Heim. “The truth is, if you have an artist that’s in demand, they’re going to look at [the policies of labels courting them]. Do I like the public face of the person who’s going to be representing me? And when that starts happening, there are going to be changes. I am optimistic”.



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