Streaming has made the use of music transparent. YouTube shows the number of views for each video; Spotify outlines the number of times a sound recording has been played. Yet this transparency has not resulted in comprehensible rates of pay. Recording artists compare these figures with their royalty statements and find the results confusing.
There are two main factors that affect their recompense. First, there are the deals that are struck between record companies and streaming companies. The methods of payment are complex and there is no uniformity. Second, there are the artists’ recording contracts. If the contract is old, streaming will not be explicitly referenced. Moreover, streaming is not something that can be easily reconciled with existing contractual categories. Is it equivalent to a record sale or to a radio broadcast? Should it be considered as selling or licensing the artists’ recordings? The answers can make a fundamental difference to royalty payments.
The European Union is aiming to legislate for change in both areas. Its parliament has recently voted in favour of a new Copyright Directive. Streaming companies are addressed by Article 13, which outlines measures for ‘certain uses of protected content’. This Article is largely targeted at YouTube, which has thus far enjoyed ‘safe harbour’ provisions, meaning that it is not financially liable for user content that infringes copyright. Record companies have argued that, in citing this protection, YouTube has forced them to accept inferior licensing deals. At every possible opportunity over the past few years the BPI, the RIAA, the IFPI and other trade bodies have spoken of a ‘value gap’ between the income that the recording industry derives from YouTube, which is calculated on a share of total advertising revenue, and the higher rates it receives from Spotify, which pays a fixed minimum fee for each song streamed. Article 13 aims to close this gap by forcing YouTube ‘to prevent the availability on their services of works’ that have not officially been licensed.
Articles 14-16, meanwhile, aim for ‘fair remuneration in contracts of authors and performers’. Article 14 seeks better accounting information. Article 15 states that ‘performers are entitled to request additional, appropriate remuneration from the party with whom they entered into a contract for the exploitation of the rights when the remuneration originally agreed is disproportionately low compared to the subsequent relevant revenues and benefits derived from the exploitation of the works or performances’. Article 16 offers a ‘dispute resolution mechanism’, stating that if conflict arises in relation to the previous two articles, the warring parties ‘may be submitted to a voluntary, alternative dispute resolution procedure’.
There has been much debate about Article 13 and whether it will ultimately benefit the record industry. It has been argued that YouTube works differently to Spotify and that in penalising the grassroots, quasi-legal promotion and creation of music (memes, cover versions, etc.) the industry could cut off a valuable promotional tool. It has also been suggested that, in retaliation for the removal of safe harbour provisions, YouTube might walk away from music and in the vacuum a more a pernicious form of digital piracy could rear its head. There has also been debate about the benefits of Article 13 to recording artists. As Mark Mulligan has pointed out, the ‘value gap’ is not really their concern. It is instead ‘about how much labels, publishers and PROs get paid’. He adds that none of these entities ‘are talking about changing the share they pay their artists and songwriters once Article 13 is put into action. That particular value gap isn’t going to be fixed’.
This leads us back to Articles 14-16, the sections of the Copyright Directive that aim to address performers’ digital rates of pay. There has been campaigning in this area too. Fair Internet 4 Performers (FIFP) has demanded ‘fair remuneration in contracts’. They are disappointed with the Copyright Directive, however, having sought a different set of measures. The Directive has its roots in Towards a Modern, More European Copyright Framework, a communication issued by the European Commission in 2015. Among the proposals was a promise to investigate ‘contentious grey areas’ in EU law. The most pertinent issue was whether streaming should be classified under the ‘making available’ right, which is how record companies have interpreted this form of income, and/or whether it should considered in the same manner as performers’ other ‘communication to the public’ rights, whereby recording artists are guaranteed non-recoupable ‘equitable remuneration’. The licensing income from communication to the public rights has tended to be split 50/50 between record companies and recording artists. FIFP believe that 95% of performers will be better off if streaming is not exclusively a making available right. Hence they demand that recording artists also ‘enjoy an unwaivable right to receive equitable remuneration’.
The European Commission has failed them. When the first draft of the Copyright Directive appeared in 2016, there was no specific mention of streaming and the making available or communication to the public rights. This contentious area was not probed let alone resolved. Instead, there was the loose wording of Articles 14-16, which FIFP described as ‘staggeringly’ ambiguous, ‘weak’ and ‘based on the wrong assumption that contractual remunerations are fair by default, leaving performers with the burden of proof and the obligation to go through complicated, long, costly and uncertain procedures in order to try and redress an imbalanced situation’. Conversely, there had been no mention of ‘safe harbours’ or the ‘value gap’ in Towards a Modern, More European Copyright Framework, yet the Copyright Directive was now targeting YouTube via Article 13.
In a further twist, several leading recording artists have chosen to associate themselves with the record companies’ ‘safe harbour’ crusade, rather than strengthen the Copyright Directive in respect of ‘fair remuneration in contracts of authors and performers’. Signing an open letter on behalf of 'over 1,000 artists', Paul McCartney has pronounced that ‘the value gap jeopardizes the music ecosystem’. It is here, rather than in legislation for recording contracts, that he seeks justice, stating that ‘We need an Internet that is fair and sustainable for all’.
Why would big name artists choose to wave the safe harbour flag rather than promote the contractual interests of 95% of performers? One answer is that they have been effectively press-ganged. The lobbying around Article 13 has been intense. The record labels have made it their priority and in return there has been concerted campaigning from YouTube/Google. To win this battle, the record companies have used a familiar tactic. They have employed their artists to speak up on their behalf. This has lent their campaign some glamour and made it appear more worthy. In contrast, the FIFP campaign has had less funding, lower awareness and consequently a reduced star quality.
A second reason why superstar artists such as McCartney are not supporting FIFP is because they are in the 5% of performers who would not be better off under FIFP’s proposals. As I detailed in my previous post, the suggestion of an unwaivable, CMO-administered, equitable remuneration right would benefit artists who are receiving a royalty rate of 20% or less for their streaming income. Those artists who have rates above that, and those who have the hope of getting rates above that, are not as likely to welcome the FIFP deal. This is not to say that it is a bad proposal. It would result in a wider distribution of royalties, one that is not as biased towards blockbuster acts. It would also guarantee all recording artists a share of streaming income that is non-recoupable from their record company advances. Session musicians would benefit most from the FIFP idea. At present these performers receive no royalties for streaming income. They would do, however, if streaming were classified as an equitable remuneration right. Those who stand to benefit the least are the major stars.
The different ways of interpreting streaming income could potentially set performer against performer. Already we can see their organisations taking different stances. The UK’s Musicians’ Union is in favour of unwaivable equitable remuneration rights. This is not surprising, as they probably lean more towards session musicians than they do towards featured artists. In contrast, the Featured Artists Coalition (FAC) – the representatives of signed artists in the UK – has offered only qualified support for FIFP. Their hesitancy is captured in a forthcoming article by Ananay Aguilar, which addresses the campaigning that has surrounded the Copyright Directive. She interviews a representative of FAC, who stakes out the organisation’s belief that exclusive rights are ‘stronger and better in an effective market’ than unwaivable rights, but concedes that ‘Music is not an efficient marketplace and, therefore, the security of compensation through remuneration rights at a lower level is more attractive to most artists than the ability to exploit and negotiate individually on their exclusive rights’. It is FAC’s vision, however, that ‘in an ever-improving market, if digital lives up to its vision of transparency and the ability to actually see what’s going on’ there would be no need for the FIFP’s demands. Session musicians would undoubtedly disagree.
We are entering new territory. Copyright law has previously been employed to balance the vested interests of record companies and publishers. It has also been used to balance the interests of record companies, broadcasters and performers. It could now be brought into play to balance the interests of different types of performer. Yet this is old territory as well. The victors in each case are those who are most effective at lobbying. It is a game of power and association.