That’s according to Pandora founder Tim Westergren, who was stumping for lower royalty rates on Tuesday in San Francisco. And part of his complicated pitch was that successful artists are making a lot of money off the Pandora platform. ”There are artists making more than $2 million from Pandora,” Westegren told attendees at SF Music Tech Summit during a morning discussion. ”And, many artists are making more than $100,000.”
“You’d be surprised at how many artists are making more than the average household income in America. We’re talking about making a living on Pandora alone.”
Westergren estimated an ‘average household income’ at $50,000, enough the pay the bills in many cities. But outside of those details, the underlying message is this: please don’t kill us, labels, SoundExchange and publishers, because we’re good for artists.
So, ugh, lower rates so they can pay more? Westergren noted that Pandora is now spending all of its resources on advertising products and advertising sales to satisfy royalty obligations, not on programs that would empower struggling artists. ”The prospect exists for Pandora to actually activate fans for bands traveling around the country trying to bring people into clubs,” Westergren told interviewer Jon Healey, an LA Times journalist.
“But the development on that kind of technology is suffocated, because we spend every last penny trying to develop yet another ad product. And one of the invisible consequences to this kind of rate is that it stifles innovation, and a big piece of that innovation could directly impact the plight of the working artist.” [DigitalMusicNews]
Add Live Nation chairman Irving Azoff to the list of people who think it’s harder, not easier, for artists to make it in the music business these days. And according to Azoff, part of the problem is that it’s easier to make music than ever before, with less monetization, a stark contrast to the ‘golden age’ of the 60s and 70s. ”Basically then versus now, you’d have one hit record and you could come to Los Angeles and sell out three days at the Staples Center – then it was the Forum, but now it would be Staples Center,” Azoff recently told interviewer Jude Apatow at the ‘Grill’. ”Now, one you can’t get a hit but if you do get a hit, you get to open up for somebody at a club.”
“I regularly tell people that it’s way different, way more difficult now.”
And instead of getting signed, the new lottery card is… the Voice? ”In those days, no one would consider going on a competition music show,” Azoff relayed. ”Now you watch the Voice and hear all these kids say, ‘this is the greatest opportunity of my life,’ and yet, you’ve got 64 contestants on the Voice. We’ve had 10-11 years of American Idol, so you’ve had 100 or 110 top ten people, andyou can count on your hand the number of careers that have sustained off of that.”
“So that just tells you that even with the massive exposure of network TV, how hard it is to make it in the music business.”
But what are the culprits? ”Theft and choice, and also, it used to be very expensive to record a record, now you can do it at home,” Azoff said. ”Music is now the soundtrack of people’s lives, but it has way less monetization.” [DigitalMusicNews]
The following guest post comes from longtime music industry attorney Steve Gordon.
If Apple wants to launch their much anticipated, Pandora-like music service, they must negotiate directly withSony/ATV for public performance rights. That’s the word on the street, and if true, a dangerous turn of events. The reason is that until recently, performing rights organizations — ASCAP, BMI and SESAC (the “PROs”) — offered blanket licenses on behalf of almost all the publishers, including all the majors. This dramatically changes that, with negative repercussions for songwriters.
So why is Sony/ATV — now the largest publisher after taking over the administration of EMI Music Publishing — doing this? After chatting with Marty Bandier, the company’s chairman, the New York Times reported that this is “simply an effort to obtain a higher royalty rate for [Sony/ATV] writers.” (Bandier was quoted as saying “This wasn’t us not wanting the service. We want the service. It’s like oxygen. We just want to be paid fairly, no different than the NFL refs.”)
The truth, though, is that songwriters signed to Sony/ATV and EMI Music Publishing may never see a dime from Apple under a direct agreement. Here’s why:
I. Publishers Generally Don’t Share Negotiated Advances
Individual music publishing contracts vary depending on the bargaining power of individual writers or the negotiating skills of their lawyers (among other reasons). But almost all agreements have a provision similar to this one:
“In no event shall composer be entitled to share in any advance payments, guarantee payments or minimum royalty payments which Publisher may receive in connection with any sub publishing agreement, collection agreement, licensing agreement or other agreements covering the Composition.”
This clause was taken from a “model” contract from a book of entertainment agreement forms. Under this provision, if Sony/ATV extracted an advance from Apple, none of those monies would be payable to their songwriters. In fact, Sony/ATV has already negotiated an advance from DMX, another digital music service that provides stores, restaurants and other venues with background music via the internet. DMX paid Sony/ATV an advance of $2.7 million dollars, and in exchange, Sony accepted a much lower royalty rate than that charged by ASCAP and BMI.
In fact, DMX subsequently used that lower rate to successfully persuade the ‘rate court’ to reduce the amount that DMX pays ASCAP and BMI for songs controlled by other publishers (the rate court fixes the rates when the PROs and a music user cannot agree). This was another blow to the writer members of the PROs.
II. Publishers Generally Don’t Share Royalties from Collective Licenses
In addition to the clause quoted above, many music publishing contracts have a provision that states that no royalties from collective licenses, i.e. licenses covering other works as well as those by the songwriter, are payable to the writers. Under this clause, a songwriter would not see any royalties from Sony’s deal with Apple.
III. Many Writers are “Unrecouped”
Writers do not receive royalties from publishers until they earn enough money to pay back the advances that they received from the publisher. Yet most writers, especially those at major publishers such as Sony/ATV, are unrecouped because they never earn enough money to repay their advance. In fact, many writers never see another dollar from the exploitation of their songs except from the checks they receive from ASCAP , BMI or SESAC. That’s because all these organizations pay the writers 50 percent of every dollar that comes in after deducting a relatively small administration fee (generally around 10 percent), and they pay that to the writers DIRECTLY. If they paid the money to the publisher, the publisher would use that money to pay itself back for unearned advances.
It is worth noting that the oldest PRO, ASCAP, was actually created by powerful writers such as Irving Berlin, and they initiated a system that would guarantee fairness to writers.
It gets worse. Because a major reason, if not the only reason that Sony/ATV is withdrawing from the PROs in regard to digital licensing, appears to avoid having to pay its writers anything. And not, as they claim, to make more money for them. EMI already withdrew its digital rights from the PROs, and Sony/ATV will follow suit, effective January 1st, 2013.
If this becomes the standard operating procedure for all the major publishers (Universal, Warner/Chappell, as well as Sony/EMI) with other digital music services such as Pandora and Spotify, it could result in a major blow to the livelihood of many songwriters and composers. [DigitalMusicNews]
Deezer, the Paris-based music streaming service, has secured $130 million in what is being called the largest-ever funding round for a startup in France.
The fundraising – led by Access Industries, the Len Blavatnik-owned U.S. company that bought Warner Music Group last year – should help drive the Spotify-like service as it makes a push to launch in more countries.
Deezer, which is popular in France but has been slow to reach audiences abroad, went live in Canada, Australia and New Zealand in April.
“This investment comes at the right moment to change the scope of ambition,” CEO Axel Dauchez told the European edition of the Wall Street Journal. “We have proved the model. We have proved that in some countries that have never monetized before we are currently generating revenue for the music industry.”
In December, the French company was dramatically outpacing Spotify in its user base – with 20 million users to Spotify’s 12.5 million, though the Swedish service has far greater brand recognition internationally.
But unlike Spotify, which now has a sizeable U.S. userbase, Deezer said last year that it plans to bypass the U.S. and Japan from its list of countries, claiming it’s “due to market saturation and low growth forecasts” and the fact that the two represent “only” 25 percent of global music consumption.
Spotify initially sidestepped the U.S., too, while the company negotiated partnerships with American record labels.
However, the Swedish service never specifically snubbed the U.S.
For Deezer, it remains unclear if its plans have changed. [YahooMusic]
U.K. indie record label XL’s profits climbed to a whopping $67 million in profits in 2011, thanks to Adele’s blockbuster 21 album, now approaching 10 million in sales in the U.S. and more than 24 million worldwide, as reported in U.K. trade Music Week. According to company filings, XL’s bank balance climbed from £3m to £32m ($51.4 million) during the year. The company paid an £8.5 million ($13.6 million) dividend to co-founderRichard Russell, while Beggars Group chairman Martin Mills, a vociferous opponent of the recently approved merger of UMG and EMI as a member of IMPALA, received a similar payout. (10/15a) [HitsDailyDouble]
