Music Business

5 Omissions From Berklee College/Rethink Music’s Report

Use-marketing-automation-for-transparent-campaignsBerklee College of Music/Rethink-Music/Kobalt Music put out a report criticizing various rights/publishing organizations within the music industry for not providing artists with sufficient transparency or pay, although this article posits that the report should have delved deeper.


Guest Post by David Lowery on

I love transparency.

Last week Berklee College of Music/Rethink-Music/Kobalt Music released this report on transparency and fair pay in the music business.  The report eviscerates the record labels, publishers, and performing rights organizations for failing to provide the proper level of transparency and fair pay to artists.

While we can agree with some aspects of Berklee’s Kobalt Music-funded report, Berklee’s report doesn’t even mention the opaque deals and revenue calculations used by many of the ad supported music services.  Berklee’s report only looks at downstream royalties–what the services pay to rights owners–not upstream royalties, the revenues earned by services that those downstream royalties are based on.

For example, Google will not disclose the revenue that its YouTube subsidiary generated last year but Morgan Stanley estimates that YouTube generated nearly $6 billion. Almost as much as the entire US recorded music business. How much was paid back to YouTube’s “partners”, the songwriters and performers?  Berklee wants us to focus on the royalties that get paid out by rights owners rather than the monies paid to the rights owners.

ContractSongwriters in particular are paid on a formula based on a percentage of advertising revenue. How do we check if we are getting paid correctly if Google doesn’t publicly reveal those numbers and if songwriters can’t audit those advertising revenues? I’m not saying Google is necessarily underpaying us but how could anyone check?  This is like labels not disclosing manufacturing records.

For this reason we’ve compiled a list of five additional points of transparency that Berklee College of Music/Rethink Music/Kobalt Music should incorporate into their report.

1. Congress should amend the copyright act to include an audit right for all compulsory licenses.  Many find this unbelievable but it’s true. There isn’t one?!! Digital services often take advantage of these federally mandated licenses but artists usually have no right to audit these services.   This is just patently unfair.

2.  Digital services like Spotify and digital aggregators should clearly distinguish between the revenue generated from the free ad-supported tiers and premium tiers when accounting to artists.  As we have reported the free tier of Spotify pays 1/7th the premium tier.   Transparency on this issue would allow artists to make informed choices as to whom they should license their music and under what terms.

3. Digital services should stop insisting upon non-disclosure agreements with artists. What could possibly be less transparent than an NDA?

4. All ad supported digital streaming services need to come clean on the “acquisition expenses” they deduct from the advertising revenue before they even begin to divide the pie between the service and the rights holders.  Artists should be able to audit these expense since they significantly shrink the pie before artists get paid.  Are these expenses 20%? 30%?  We’ve heard rumors that on some services it’s as high as 50%! Who get’s this revenue?

Business-of-Music5. Digital services should disclose how much money they have “black boxed.”  Further like SoundExchange they should periodically publish a list of artists for whom they are holding revenue but have been unable to locate.


P.S.  Maybe we should demand transparency on funding sources and conflicts of interest on these types of reports.  For instance:

Report Funding by Kobalt Music.  Kobalt Music is a Google Ventures company.  Google owns YouTube.  Maybe that’s why they didn’t mention Youtube.  Google runs the ad networks that serve ads on these services.  Maybe that’s why they didn’t mention the ad acquisition costs.

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  1. Yes, indeed, good points. Interesting to read this now, as I was just watching a great discussion on the subject of transparency at Midem 2015:
    Technological advances promise increasing power to independent labels and artists.

  2. David raises some very interesting points and proposals here, all of which we are eager to discuss and explore further. Diversity of opinion and perspectives in this serious debate is critical.
    As the world’s largest college of contemporary music, we believe it’s important for our graduates to enter into a viable music industry ecosystem. This is the principle on which Rethink Music was formed in 2009 and the Berklee Institute for Creative Entrepreneurship, which now houses Rethink, was launched in 2014.
    For Fair Music, we spoke to many people and organizations and gathered data from many different and diverse institutions and individuals. We understand and accept that some may disagree with aspects of our report and we welcome any information that may contrast and supplement our findings. The report’s intention is not to point fingers at any particular entities but to bring to fore issues (and propose actions) we believe are critical for the long term viability of our industry.
    Our findings were not in any way influenced by any underwriter or donor to Rethink Music, BerkleeICE or the college. We invite all music industry stakeholders, including record labels, performing rights societies, technology firms, streaming services, and organizations like the RIAA, and IFPI, to engage with us as we move into Phase Two of the Fair Music project and work together to architect a robust, equitable, and profitable music industry for the 21st century.
    A healthy industry requires debate, dialogue and ultimately the collaboration and bias towards action of all stakeholders.
    Panos Panay,
    Founding Managing Director

  3. Here is an idea: maybe…just maybe, as has been stated in other articles, Technology firms, and streaming services aren’t in the MUSIC BUSINESS, but in the aggregation business. (not the same interests) And to add, this is just HOSTEL takeover of the MUSIC BUSINESS…..Tech just inserts themselves into the music stream…hope that adds to the conversation.

  4. It appears that a system that serves the common good of all the components that make up the ‘Record Industry’will have to be developed despite the current industry controllers. The labels and publishers are the beneficiaries of the post ‘digital age’ mayhem and they see there is little to be gained from establishing a model that is fit for purpose (transparent)and serves the creatives as well as the corporates. The de-facto solution will probably be developed in parallel to what are the current supposed business models until the tipping point is arrived at. Traditionally aspiring ‘Stars’ seek fame and fortune and should Apple and/or Google secure a top notch A&R team then it could be goodnight to the ‘BIG THREE’

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