Music Business

Fair Music Transparency Report [Followup]

DownloadIn a followup to an earlier post, this article explores how, in spite of living in an age where music is more accessible than ever before, the commercial end of the business has a long way to go as far as getting artists the money they deserve.

Guest Post by Allen Bargfrede on Rethink Music
This should be the golden age for the music industry. More music is available to more people at more times and in more ways than ever before. Creators and musicians can easily reach a public of billions, using a plethora of digital services and social media platforms. Estimates note that if subscription services continue to grow at their current rate, by 2020 the global recorded music industry will be larger than ever. Meanwhile, advances in recording technology have made it easier than ever to record and release music.

However, while the technology for the creation and distribution of music has evolved significantly, the back-end of the commercial recorded music business has not moved forward quite as quickly. The result of this technology misapplication, as we noted in the release of our Fair Music report last month, is a spectacular mismatch of frameworks that leads to opacity and frustration. When further combined with (i) business practices of black-boxes and NDAs that prevent complete royalty audits by artists, (ii) the need for a comprehensive copyright ownership database, and (iii) confusion about payout calculations by digital services, the lack of an adequate royalty infrastructure has led to a lack of transparency about what happens in the confusing value chain between consumers and creators and many questions about where the money generated by music services ends up.

One analogy I’ve been using a lot recently is that of Malaysian Airlines Flight 370. If already available airplane tracking technology had been implemented before the flight left Kuala Lumpur last year, we wouldn’t be spending years and hundreds of millions of dollars examining the Indian Ocean, resulting in nothing more than a “flaperon” inadvertently found on the French island of Reunion, some 4000km from the Australian search area. Despite all of the costs and the public outcry from families of the victims, little progress has been made in the adoption of such technology in the 16 months since the aircraft’s disappearance. Similarly, the deployment of already existing technology into the music industry could answer a lot of questions, and provide for more fluid licensing of music and faster payment cycles for creators, but it hasn’t happened yet on any widespread scale.

We’re not saying it’s easy to implement this technology — as a matter of fact, any industry with legacy business models faces significant challenges (and costs of investment) as business models progress and change. The time needed for the development of appropriate output standards and the sheer costs of technology infrastructure mean that updates do take time. But we want to inspire our industry to move in the right direction instead of remaining stagnant.

Our recommendations, including a decentralized rights registry and the investigation of the blockchain payment system, could go a long way in helping to improve this licensing and payments process. One glance at this infographic shows just how complicated a royalty structure can be in today’s environment:


Royalty workflow for Beyoncé’s “Baby Boy”

With a decentralized registry, it would be much easier to locate the owners of the song to obtain a legal license to use it, and blockchain could make it easier to automatically distribute the money earned to the six writers and ten publishers involved. Further, all parties should work to ensure that the creators not only receive their payments, but that they have access to as much data as possible. As David Byrne noted in his recent New York Times op-ed, data on who listens when and where can be of great value to artists, and should be shared with them. This is all a part of our recommended Creator’s Bill of Rights, which we encourage all parts of the music ecosystem to sign.

Some have questioned the role of digital services in this debate. It is important to remember that most online music services pay 70% of their revenue to rights holders (except YouTube, who should be encouraged to pay more than their current 50%), and we believe that this technology for distribution is a good thing. It is impossible to put the “Internet genie back in the bottle” — let’s not forget that the main source of industry woes 5 years ago was piracy — and at least a business model has evolved that has people paying for music again. The services must, however, be transparent and pay creators fairly — part of the reason we also recommend a “fair music certification” for those who meet a specified level of transparency. They must also stop using creative techniques, such as Pandora’s attempted purchase of an FM station in South Dakota, to lower their royalty rates. Further, while it may be beneficial for labels and publishers to have equity stakes in digital services, this arrangement is not fair if the eventual payouts are not shared with the artists and writers who created the works that power the services.

Digital services should also allow independent creators to directly upload their works, bypassing aggregators and allowing for one less step in the payment cycle. In fact, Tidal, despite their terrible public relations campaign, has shown themselves to be more artist-friendly than most by already facilitating this and paying higher rates to rights owners than any other services we reviewed in our research. And record labels continue to have an important role in the ecosystem as well, serving as filters to develop breakthrough artists, and supporting them through funding and through marketing, something at which they excel. We, however, strongly encourage them to adopt more transparent relationships with their artists.

Rethink Music additionally supports all of the recommendations of the U.S. Copyright Office in their February 2015 report. We strongly believe artists and labels should be paid for terrestrial radio play, as already happens in most of the developed world, and encourage passage of the Fair Pay Fair Play act. We think the consent decrees for ASCAP and BMI need review, and that compulsory licensing of works for new media needs to be further studied and the ramifications reconsidered.

The release last month of our report has attracted a lot of attention, and in that regard has done exactly what we wanted to do: shine a spotlight on the fair and ethical treatment of musicians who pour their heart into their creations. There has been a lot of online debate about the findings of the report, and we understand and accept that some people and organizations may disagree with several of the conclusions. Fair Music’s intention is not to point fingers at any particular entities, or to engage in any subjective conclusions based on any underwriter or supporter who provides donations for the well-being of the college’s students, specifically Kobalt Music Group’s backing of Rethink Music. (In fact, Kobalt is already well known for their support of a transparent music environment and has generously helped to fund both scholarships for Berklee songwriting students and all of our Rethink Music projects and events, such as our annual Rethink Music Venture Days in Europe, since 2014, long before any investment by Google in Kobalt. Any rumors of Google’s involvement or influence on Rethink Music or the findings of the report are absolutely false.) We continue to welcome all feedback on our findings, positive or negative.

So, what is Berklee’s interest in this? As the world’s largest school of contemporary music, we believe it is important for our graduates to have a viable music industry ecosystem, and this is the principle on which I founded the Rethink Music initiative in 2009. As my friend Jim Griffin once said, “The music industry is the only industry that circles the wagons and shoots inward.” I believe that this industry can only survive and thrive when we stop to think of sound recordings, musical compositions, and digital services, and instead think of just “music.” How can a product that is universally enjoyed by the 7 billion people of our planet create so much joy yet cause so much critique? Let’s use the passion for music that we all hold to create a better environment for it.

On that note, our Fair Music project has a Phase Two, where we will actively explore the recommendations made in the report, and consider comment from all participants. We invite all music industry stakeholders, including labels, the RIAA and IFPI, and digital services to engage with us as we move into Phase Two and work to architect the next generation music industry. As part of this, on October 2, we will host a day-long public forum at Boston’s District Hall, where we review input from stakeholders and use facilitated workshops to drive our next steps. Invitations have already been issued to artists, labels, publishing organizations, and various digital services to participate, and we encourage them to attend and make their voice heard. More information and registration for the event is now available at

We hope this initiative will make a difference, ensuring that the world continues to be able to enjoy beautiful music made by creators who are fairly compensated. In turn, music can be a positive example for all creative industries, leading the way forward in the digital age. We must continue to rethink music.

See you in October!

Allen Bargfrede
Executive Director, Rethink Music

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1 Comment

  1. Are you suggesting that a publishing mechanical royalty is owed for plays on non-interactive streaming services like Pandora and Sirius XM? If so, this is incorrect and further confuses an already confusing topic. Please clarify!

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