While there has been significant discussion of late over how streaming services pay artists and labels, the means by which publishers and songwriters are compensated has been shockingly absent from the conversation.
Guest Post by Annie Lin of Loudr
When Taylor Swift objected to Apple's plan to offer free trials at the expense of artists and labels, she sparked a national conversation about the economics of the $6.9B worldwide digital music market. The debate, which played out over a weeklong news cycle, primarily drew attention to the question of how streaming services like Apple Music pay performing artists and labels. Left out of the discussion, however, was the equally pressing question of how songwriters and song owners are compensated for the same types of music use.
Artists and Labels Versus Publishers and Songwriters
It's not unusual for songwriters and song owners, known also as music publishers, to be overlooked, since many assume that they are always one and the same as artists and record labels. Music copyright laws are complex, and it's not common knowledge that there are two separate rights associated with each track in your music collection: the right to the song itself (lyrics, melody, and song structure) and the right to the actual recording of that song.
Record labels own the rights to recordings, and music publishers own rights to songs. While recordings are usually owned by just one label, it's not uncommon for a song to be owned by two, three, or more publishers, each of which holds a percentage and collects a share of the royalties generated by the song. These are called "the splits", which sometimes are 50/50, and which sometimes look like this:
Artist: Katy Perry
Songwriters: Esther Dean, Katy Perry, Storleer Mikkel Eriksen, Tor Erik Hermansen, Sandy Julien Wilhelm
- Downtown Music 14.1%
- Peer Music 25%
- Sony/ATV 33.34%
- Ultra Music 2.5%
- Warner-Chappell 25%
The Extremely Fragmented World of Music Publishing and Mechanical Rights
For a track to be made available on Apple Music, Spotify, or Google Play, someone has to negotiate deal terms with the label in order to offer that recording as a stream or download. By contrast, someone does not necessarily have to negotiate deal terms with the publisher to offer the underlying song as part of that same stream or download.
Instead, a music service can secure the license -- a mechanical license, the license needed to make copies of the song -- by serving the publisher with a legal notice and paying the publisher a fee. The right to make a copy of a song is statutory under Section 115 of the Copyright Act, which means that a publisher can't deny the license or demand a higher royalty rate than what is set by law. (If you're curious, this statutory royalty rate ranges from nine cents per song per download to less than one cent per stream, with streaming royalties based on a formula that takes into consideration factors such as the number of users and the licensing fees paid out by the service to labels.)
The task of identifying song owners, serving them a notice, and paying them a nominal fee seems like it should be simple, but is at scale a byzantine research project. No single comprehensive database of song ownership metadata exists, which means that identifying the owner of any single song requires a hunt-and-peck search across multiple limited proprietary databases. Moreover, song ownership and splits may vary over time since song interests are bought, sold, or traded like real estate. Multiply that search by the number of songs streamed, downloaded, or made available at any given moment, and you have the headache of mechanical licensing for streaming services today.
Data Can Help You Get Paid
Technology has made it possible to offer massive quantities of music to millions of users at once, making metadata more important than ever. Yet the lack of comprehensive song metadata means that sometimes the information needed to identify and pay a publisher often is not available.
When royalties cannot be paid to a publisher, the funds languish indefinitely in a kind of royalty purgatory, not recognizable as revenue, and yet not payable to anyone in particular. These funds, known also as so-called "black box" royalties, are difficult to trace and yet more difficult to claim, given that each country may adhere to differing regulations, may establish varying eligibility requirements for collection, and may (or in the case of the United States, may not) designate a single governmental entity to collect the royalties. In light of these barriers, it's no surprise that the owners of sound recordings often end up with as much as five or six times more revenue than the owners of the song, according to a July 2015 report published by the Rethink Music Initiative at the Berklee Institute of Creative Entrepreneurship.
Songs form the foundation of all recorded music, so it's important for publishers and songwriters to be compensated, and for music users to be able to identify and compensate publishers and songwriters. Short of a massive structural reform of the Copyright Law, which has been discussed in a recent report but not yet implemented, the fastest way for a publisher to get paid for streams and downloads today is to get accurate song metadata into the right hands. For publisher in the business of administration, this means adapting catalog information to industry standard formats like the Common Works Registration (CWR) or Digital Data Exchange (DDEX), and sharing catalog information with business partners. For the artist who writes songs and thus also happens to be a publisher, this means registering song information with a performing rights society like ASCAP, BMI, or SESAC, or considering the option to have an administration company like Songtrust deliver the song metadata everywhere it needs to go.
The digital music industry has been focused on making music available to consumers, rather than on building systems to improve how publishers and songwriters are paid. Given the increasing importance of metadata and data standards in music, this is a space that calls for innovation as well as collaboration between publishers and technology companies. The exchange of music ownership metadata will facilitate and complement the exchange of information about how music is licensed, as well as represent a step toward transparency in digital music.
Annie Lin is senior counsel at Loudr. She's also a former touring musician and CDBaby artist who has worked in music rights for more than a decade. When she's not working at Loudr, she can usually be found at various rock shows and record stores in San Francisco.