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How royalties can rebalance a fairer music funding model

The ongoing Covid-19 pandemic has hit the pause button on the ‘live’ global music scene, with many in the industry now turning to new alternative funding streams in keeping their music ambitions and hopes alive. Although musicians and their teams have suffered heavy losses, government-initiated relief funds for artists around the globe has eased the financial burden on the music industry. In the US, for example, close to $20 million has already been raised for struggling artists. Spotify has also collaborated with several organisations to support the global music community, contributing a collective $10 million in donations, as part of the Spotify Covid-19 Music Relief project.

The need for these relief efforts is indicative of the overwhelming dependence artists have on touring and live shows. Yet, there is hope for the music industry with digital music revenues projected to reach one billion US dollars in the UK alone by the end of 2020, while US streaming music revenues grew 12% to $4.8 billion in the first half of 2020. This begs the question: why have artists been slow to reap the benefits of the new digitalisation of music? Despite streaming services proving an important utility to artists, perhaps it is time for musicians to take back more control of their music rights and revenues.

Herein music royalties provide the solution. By opening up music royalties to investors, the music industry can offer up a new sustainable funding revenue model to the benefit of artists, publishers, and record labels alike. For investors and music fans it offers a gateway to a constantly evolving market that is largely immune to geo-political and macro events.

With streaming services under close scrutiny lately, prospective changes to copyright law and royalty negotiations are looming. While the industry may correct itself to remunerate artists more equitably, no one can predict how long this will take. Instead, the funding vacuum ought to be filled by fans, through redirecting the flow of revenue back to artists by investing in their music royalties. With the promise of diversification and returns for investors and much needed liquidity for artists, this could be the next catalyst that lights up a more equitable and sustainable funding model for the music world.

Vanity investments for the new era
Avid music fans will already be well acquainted with vanity investments, where making money isn’t the only primary motive. So in the same way an artist may absorb the full expense of publishing and promoting a particular project, a musical zealot will spend their time and energy supporting their favourite artist purely for the enjoyment in the music and their association with the artist. Record labels have built an important part of their business model on this premise, with the most obvious expenditure for fans being live performances, estimated to constitute approximately 28% of the average musician’s income.

It is time for musicians to take back more control of their music rights and revenues

Merchandise sales are another avenue for vanity investors. With that said, where merchandise can be invaluable for fostering connections between artists and their fans, they represent a paltry 2% of the average artists’ revenue stream. In today’s funding model, support on social media is the only remaining option, which can actually have a significant impact. An article from Pigeons & Planes featured statistics from Indify, which aggregates listener data, social metrics, and online trends to identify emerging musicians.

Outside of streaming and purchasing physical copies of music, there are currently very little alternatives available for music fans to support artists. While committing to a streaming service is a necessary requirement for most musicians in today’s music industry, the uneven distribution of funds and the deferred payments don’t always allow artists to kickstart new projects or make their own career decisions. The artist is ultimately the supplier of the music, so it is about time we  see them have fairer access to funding models.  What if you could dedicate your funds directly to the artist of choice, cutting out the intermediaries and with the promise of a return?

Music royalties unleash new funding alternatives
Music rights have several characteristics that enhance their value as an asset class. Should a song find its way into an advertisement, a film soundtrack, or perhaps repurposed by another artist in a sample, this will boost the generated royalties. Copyright ownership continues seventy years after the last living recipient has passed, making for a substantial long-term investment. Posthumous record sales often boost the value of an artists’ catalogue too. For example, the famous artist behind “Bowie Bonds” had his first #1 album featured on the Billboard top 200 chart following his death in 2016.

Previously, music royalties have been very much a private market between the artists, record labels, catalogue owners  and publishers. Now, with the advent of streaming and the incremental role of smart devices, platforms such as the Hipgnosis Songs Fund are making strides in opening up royalties to the masses. Vanity investors can now convert their funds into royalties investments, underpinning the success of their favourite artists, with the added appeal of returns. Also on our own platform, Anote Music, music fans of all genres have committed their money to acquire music rights, with some of them receiving approximately 8% in returns on their investment within less than three months following the  investment platform’s official launch.

How to fix the flaws in a traditional business model
During the pandemic-induced hiatus, some of the shortcomings of various streaming services were exposed using the #brokenrecord and #fixstreaming twitter campaigns. This is reminiscent of a similar campaign, Sleepify, which saw American funk band, Vulfpeck, receive $20,000 in streaming royalties from an album with nothing on it. Despite Spotify’s recent efforts to support struggling artists, this loophole in Spotify’s royalty calculation model exposed how little control artists have of their own music royalties, not least their future finances.

Enabling fans to redirect their funds towards their favourite artists can offer artists a chance to diversify and manage their revenue streams

On a similar note, while publishers make the world of music go ‘round, artists have on occasion proclaimed their dissatisfaction with the way copyright ownership is managed. Examples include Kanye West’s latest outburst, Prince and his infamous debacle with Warner Bros, and Paul McCartney’s lawsuit against Sony to regain copyright ownership over music by his former band, The Beatles. These intellectual property disputes also reflect unease in the current music industry.  A new funding model that is transparent and unties publishers, artists, and record labels is therefore the ticket to correct the perceived imbalances weighted against artists.

Many new projects driven by the likes of blockchain and other modern technologies  are already embarking on the mission to unite the music industry (publishers, musicians, online streaming services, music fans and catalogues). Some investment platforms offer music royalties of artists through the auctioning of music catalogues, based on the future expected earnings of the music royalties. By offering up music royalties in this way, artists can access a potentially vast  liquidity pool to free up cash, while retaining 100% artistic  control over their music rights.

All these new initiatives are a welcomed sight for a traditional industry which has been struggling to find answers to its current flaws.  In example, there is an estimated $2.5 billion worth of unpaid music royalties tied up globally, either unclaimed or unpaid. Paperchain is circumventing it by turning streaming data from Spotify, YouTube, and others, into digital assets. Correspondingly, opening up music royalties as a viable alternative serves by democratising funding in the music industry, and allowing artists to retain more control over their creative rights. It is a collective effort of the music business and emerging technologies, that so far is proving a unifying force in the music industry. And if you’re doubtful just ask Massimo Benini, CEO of Irma Records, or prominent Polish musician Tomasz Lubert on how they felt about the process.

Time to welcome music royalties as an innovative solution
Until the playing field has been levelled, the funding model of the music industry will continue to cause a divide between right holders, and online streaming services.  An equitable, balanced and fair funding model is long overdue for the industry. An impetus is emerging from this pandemic that will prompt fairer treatment of music artists, in terms of copyright ownership and the problematic funding model. Music royalties as a way of investment for fans just might be the answer to addressing these problems.

The availability of smartphone technology, the ever growing passion for music and the low entry barrier means almost anybody can invest in music royalties. Enabling fans to redirect their funds towards their favourite artists can offer artists a chance to diversify and manage their revenue streams, rather than relying solely on a publisher or record labels. Equally, this could address issues of intellectual property, considering that new revenue streams could produce material detached from a specific publisher. In this way, investing in music royalties could foster a fundamental change to the current funding model of the music industry. It is time the music industry once again became united – with music royalties being the answer.


Marzio Schena is co-founder and CEO of ANote Music, the European marketplace for investing in music royalties.

Cisac expels controversial Spanish member

The International Confederation of Societies of Authors and Composers (Cisac) has voted to expel Spanish society SGAE for a one-year period, following the society’s failure to convince the body of its “commitment to reform”.

The decision to expel SGAE, known as the Sociedad General de Autores y Editores, was made at Cisac’s annual assembly in Tokyo. The expulsion follows Cisac’s resolution to undertake a sanctions process against SGAE in December, “in view of the society’s breaches of Cisac rules”.

The expulsion is set to last for one year but “can be adjusted or lifted at any time”, provided that the Cisac board of directors concludes that SGAE has made sufficient progress towards implementing its requirements. Cisac recommended a series of changes to its rogue Spanish member following an in-depth investigation which concluded in May last year.

“Today’s vote to proceed with the sanction of a one-year expulsion follows an in-depth analysis of recent reforms set in motion by SGAE’s new President, Ms Pilar Jurado,” reads a Cisac statement.

“Further important technical work and changes are needed and expected by CISAC to ensure SGAE’s compliance with the Confederation’s professional rules”

“While a number of welcome changes have been proposed, they have not yet been approved by the SGAE General Assembly. Further important technical work and changes are needed and expected by CISAC to ensure SGAE’s compliance with the Confederation’s professional rules for member societies.”

SGAE appointed Spanish soprano singer Pilar Jurado as president in February following a vote of no confidence against former chief José Ángel Hevia, who held the position for just three months.

Jurado states that “Cisac is giving SGAE the opportunity to decide its own future”, and called on members to support her proposed reforms in the General Assembly in order for the society “to leave this situation behind us”.

Earlier this week, minister of culture José Guirao demanded SGAE produce a detailed outline of the steps it would take to comply with regulations. Failure to do so would result in intervention from the court.

SGAE has been at the centre of a scandal known as the wheel, or ‘la rueda’, for a number of years. The scam, which saw SGAE members and TV execs create “low-quality music” to broadcast on late-night TV, allegedly brought in several millions in performance royalties over the years.

 


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PRS for Music relaunches Major Live Concert Service

UK performance rights organisation (PRO) PRS for Music has announced the launch of its upgraded Major Live Concert Service under the new brand MLCS™ by PRS.

MLCS™ by PRS is an online tool that shows local tariffs across global territories.  The aim of the service is to aid arena and stadium-level PRS members performing overseas to negotiate “full and fair royalty settlements”.

The tool offers a pre-tour royalty calculation service, details of headliner and support splits in each country – allowing for accurate forecasts of royalty streams throughout the tour – and provides a post-tour royalty reconciliation feature.

Upgrades to the service include fixed payment terms and further reduced administration fees, as well as a range of new technological solutions and streamlines processes.

Special administrative rates have been implemented for the MLCS™ programme, including local rates of 8.5% in some key territories. PRS for Music now charges an administration fee of £125 per set-list per event for members using the service.

“We acknowledge representing the world’s top talent comes with expectations, and we need to be in a position to offer a service that meets those requirements”

The PRO also states it is working on eradicating “promoter kickbacks” in some territories, and that it provides “full transparency to artists on all aspects of the royalty collection and distribution process” as part of the service.

“We acknowledge representing the world’s top talent comes with expectations, and we need to be in a position to offer a service that meets those requirements to be given the privilege of continuing to collect their concert royalties,” states Sami Valkonen, director of international, PRS for Music.

“We’ve taken on board feedback from several of our key member representatives and are committed to making MLCS™ a proposition that further solidifies PRS as the go-to provider of major concert tour copyright management.”

In 2018, £21 million was collected across 60 countries on behalf of nearly 200 PRS for Music members via the service. The tool was used for Ed Sheeran’s record-breaking ÷ tour and world tours by Bruno Mars, Rogers Waters, U2 and the Rolling Stones.

 


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Music Modernization Act passed by US Senate

Campaigners are today celebrating the unanimous passing of the Music Modernization Act (MMA) by the US Senate. The bill, which now awaits reconsideration by the House and a signature from the president, aims to initiate a complete overhaul of the way music is monetised in the US.

Recognising the “momentous day”, National Music Publishers Association (NMPA) president and CEO David Israelite says: “The Senate vote marks a true step forward towards fairness for the people at the heart of music who have long been undervalued due to outdated laws.”

Included in the 185-page bill is the CLASSICS Act (Compensating Legacy Artists for their Songs, Service and Important Contributions to Society Act). Under current laws, only artist recordings made after 1972 have a federal right to be remunerated when played on digital radio. The CLASSICS Act would see SoundExchange establish royalty payments for music made pre-1972.

“[Today] creators of music moved one step closer to getting paid more fairly and industry forces that fought to maintain an unfair and harmful status quo were rebuffed”

Also included in the MMA is the Allocation for Music Producers Act, which will recognise music producers and engineers by writing them into US copyright law. Studio professionals will be provided with a “consistent, permanent” process for collecting digital royalties for their “contributions to the creation of music.”

Commenting on the passing of the Music Modernization Act, Michael Huppe, president and CEO of SoundExchange, the sole organisation designated to collect and distribute royalties by the US Congress, says: “[Today] creators of music moved one step closer to getting paid more fairly and industry forces that fought to maintain an unfair and harmful status quo were rebuffed.

“Now, SoundExchange’s 170,000-member community has just one word for the House of Representatives: Encore.”

 


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