Black Lives Matter

The music busines is responding to the death of George Floyd and its reignition of the Black Lives Matter movement. On 2 June it held ‘Blackout Tuesday’ in which many companies and organizations ceased business activity for one day in order to ‘disconnect from work and reconnect with our community’ and seek ‘an urgent step of action to provoke accountability and change’. Affirmative action has followed.

            In the first instance, there has been a funding pledge from entertainment companies and artists. The major labels, Universal, Sony and Warner have between them committed $225m, which will be used in support of black charities and to address ‘internal’ and ‘institutional’ change. YouTube has announced a £100m fund dedicated to ‘amplifying and developing the voices of Black creators and artists’. Stormzy had donated £10m to black British causes.

Secondly, there has been a semantic rethink. The One Little Indian label has changed its name because of ‘the violent history of the terminology’, the US Recording Academy has dropped the term ‘urban’ from two of its awards, and more broadly there are a number of labels who are rebranding their urban divisions. ‘Urban’ is being resisted because it is ‘rooted in the historical evolution of terms that sought to define black music’ and has ‘developed into a generalisation of black people in many sectors of the music industry, including employees and music by black artists’. Ultimately, its abandonment might result in structural as well as semantic change. The hope is that its departure will bring an end to the ghettoization of black employees and artists. The move is not universally welcomed, however. There are black music bosses who argue that this ‘we are all the same attitude’ will not work in a society in which some are more equal than others. They fear that the removal of barriers will result in white executives taking charge of black repertoire because they feel they know ‘better than anyone else’.

There is a manoeuvre that has received less attention but which could result in unquestioned good. One of the ways that racism has been ingrained in the music industries is through black artists receiving exploitative contractual terms. As such, it is not surprising that artists such as Kelis and Erykah Badu have retweeted a statement by the American professor, Josh Kun: ‘If the music industry wants to support black lives, labels and platforms can start with amending contracts, distributing royalties, diversifying boardrooms, and retroactively paying back all the black artists, and their families, they have built their empires on’. This has already had some effect. On Tuesday 9 June, BMG’s CEO Hartwig Masuch declared that    

Mindful of the music industry’s record of shameful treatment of black artists, we have begun a review of all historic record contracts. While BMG only began operations in 2008, we have acquired many older catalogues. If there are any inequities or anomalies, we will create a plan to address them. Within 30 days.

It is not only statues that are falling.

 

Measuring the Measuring

In late 2017, UK Music published their latest Measuring Music report. UK Music is a lobbying group for the ‘collective interests of the recorded, published and live arms of the British music industry’. Measuring Music is one of their campaigning documents and it therefore contains headline-grabbing statistics. One of the most eye-catching is that live music is worth £1bn to the UK economy, while recorded music is only worth £640m.

            This phenomenon has been reported in turn by media institutions, such as the BBC and the Financial Times, and by industry players, such the Music Publishers Association, Ticketing Business News and Billboard. It is also noted in the recent UK Live Music Census.

            What these news reports miss out, however, is that that the live music statistics and recorded music statistics are not directly comparable. UK Music admit as much in their separate ‘methodology’ document, albeit only in terms of their calculation of the Gross Value Added (GVA) Contribution, the figures that illustrate the contribution of each music industry sector to the British economy. UK Music state that GVA ‘is most simply understood as the value of sales minus the cost of bought in goods and services used up in the production process’, but also admit that calculating GVA is not straightforward at all. As a result, ‘This means that it is likely that the ratio of GVA to Gross Output that we apply may vary between the different elements of the core music industry. It is bespoke to the core as a whole, not to the component parts of the core’.

            GVA is nevertheless only one of the factors that help to make any direct comparisons between live and recorded music questionable. In fact, the figures are more profoundly skewed by other elements of the methodology, notably decisions about what makes up the ‘core music industry’ and what makes up the ‘wider music industry’; about what to include within each sector of the music industries; and about what to exclude from these sectors. Recorded music suffers in comparison to live music in each of these methodological respects.

            ‘Core music industry’ occupations are counted towards the trade figures; ‘wider music industry’ occupations are not. The core includes live industry revenue from ‘ticketing agents’ and ‘concert venues and arenas’, but it does not include recording industry income from ‘music retail (shops)’, ‘music retail (digital)’ or ‘other music-based digital services for consumers’.

            This discrepancy becomes more apparent when we look at what is included within the ‘recorded music’ sector and what is included within ‘live music’. Recorded music is restricted to the wholesale income of sales of physical formats and downloads, as well as the money that record companies make from streaming (of both the ad-supported and subscription varieties). It does not include the money that the retailers and streaming companies make from selling these goods. The Live music figures, meanwhile, include ‘Total ticket sales for all kinds of live music events’. In contrast to recorded music, they feature the share of income that goes to the retailers of the tickets: ticketing Agents are included. This makes a significant difference. If the retail income from recorded music were included, its totals would rise by at least 30% in the case of the streaming and downloading trade and by around 40% in respect of physical sales. Conversely, ticket agents earn about 10% of the income from ticket sales. On top of this, the live music figures include ‘food and beverage sales’, ‘merchandise’ and ‘venue parking’, as well as ‘camping fees’ for music festivals. It could be argued that recorded music generates similar ‘ancillary’ income (record shops generate merchandise sales and many also now sell food and drink), but these are not included in the figures. The list of trades included under live music is also more expansive. The figures incorporate music festival organisers, music promoters, music agents and production services. Recorded music does include ‘design and production of physical product and packaging’ alongside those employed by record labels themselves. Nevertheless, it does not include the money generated by ‘music producers, recording studios and staff’. These could be considered intimately connected to recorded music, but they are given a separate section within the Measuring Music report.

            There is a more significant omission, however. The live and recorded music figures are concentrated upon those who make a living because of the work of musicians and composers: the record companies, manufacturers, ticket agents and venue workers. The income of the musicians and singers is not included under the headings of recording or live. The policy, instead, is to subtract artist income from these totals and to place it in the combined field of ‘musicians, composers, songwriters & lyricists’. This makes a difference in three respects. In the first instance, it enables the Measuring Music report to argue that artists are the biggest income generators of all. Their total GVA contribution is calculated at £2b. This is double the live income figure and more than three times the amount calculated for recorded music. Secondly, because the figures for composers and performers are combined, we do not get a picture of how much money they are each deriving from recording and how much from live music. This is significant, as we need these figures to get a more accurate picture of the money that is being generated in these two fields. A third factor results from the fact that Measuring Music does not drill down into its figures. We do not get to see how much record companies are earning from recorded music in comparison to recording artists and composers, and nor can we assess the distribution of income in the live music field.

What can be assumed, however, is that the majority of income reported under ‘recorded music’ will result in related income for musicians and composers. They will receive royalties from each sale, download, stream, radio play, public performance or licensing deal. Moreover, while there are variations in the amounts that artists will receive, these are within parameters: approximately 15%-20% of the income from sales and streams will go the recording artists, 8.5% will go the songwriters and their publishers; performing rights relating to the sound recording will be divided 50/50 between record company and musicians, while songwriters will receive at least 50% of the performing rights income for the composition.

            In contrast, there are several income streams reported under ‘live music’ that will not result in corresponding income for performers or composers. In the majority of cases this will include the sales of food and beverages at gigs, the parking income and camping fees, and also the money that venues charge to put on events. Other income figures for live music can be widely variable, including the shares that artists receive from ticket sales and the money that they make from merchandise. The general tendency, however, is that the gap between the rich and poor is wider in live music than it is in recorded music. Live music income is oriented towards star performers and heritage acts, as well as to artists who perform cover versions of these performers songs. Performers down the lower end of the scale may earn nothing from live music or even operate at a loss. Recorded music, in contrast, has a more equal basis. The stars here obviously do make more money than the obscurities, but they do so from generating multiple sales and streams, rather than by charging higher prices than their competitors or by demanding higher fees.

            In one respect UK Music’s decision to separate the income of composers and performers into a category of its own is justified. Although these artists have different income streams for their recorded and live work, the profits and losses in these areas are intertwined. The report depicts a sequential process whereby it is songwriting that enables the creation of successful records, and successful records that prompt successes within live performance. This sequence moves in various directions when it comes to revenue, however. Live performance drives the sale and usage of recordings, and recordings drive the sales of tickets for gigs. Beyond this, as Measuring Music argues, the most successful artists are not just selling their music; they are selling themselves ‘as a brand, reputation or image’.

            At the same time, the categorisations employed by UK Music are of tactical use. As stated above, Measuring Music is a campaigning report. It seeks to gain the government’s support for the UK music industry as a whole. In doing so, it has a dual task. One objective is to point out the value of music. Therefore, the report documents the vast amounts of money that are being accumulated and the large numbers of people who are being employed. At the same time, the report calls for aid. It wants the government to intervene so that yet more money can be made and so that jobs in each sector can be secured.

            UK Music is a coalition between record labels, publishers, artists, managers, songwriters, collection societies and the live music industry. It aims to promote a unified front. It does not want to identify injustices amongst these industry sectors. Therefore, despite the widespread criticism of streaming royalty rates for musicians and songwriters, this report will not show you whether record companies and publishers are profiting at their artists’ expense. Similarly, while prices for tickets have risen sharply in recent years, Measuring Music provides no clues as to whether the live music industry could be more altruistic towards smaller venues or to nascent performers.

Instead, it locates responsibility for low rates of pay outside of the core music industry. As with virtually all industry documents from last year, its main beef is with the ‘value gap’: if there is unfairness in music it is due to YouTube and Facebook and their pesky ‘safe harbours’. Michael Dugher, the CEO of UK Music, stresses that ‘these platforms offer little adequate reward to the investors and creators of the “content”. As a result, their safe harbours must be removed.

The report also suggests that the closure of this value gap within the recording industry will help all parts of the music economy. In doing so, it absolves the live music sector from any responsibility for the distribution of its riches. Dugher notes:

Live music did have another great year as millions of people poured into festivals, stadiums and venues to see and hear their favourite acts. And live music is a fantastic driver for growth. But future talent will never get the chance to shine if we continue to see cuts in music in schools and closures in venues where artists need to learn their craft in the first place. To reach the big stage you need to have a hit record and you need to be able to pay the bills. That means that those who create music and invest in it must be properly rewarded. That’s why we must urgently address the ‘value gap’, particularly on the new and exciting platforms that many people now use to listen to music.

This would appear to indicate that, despite the headline figures about live music’s dominance, when it comes to artists’ recompense it is recorded music that is primary.

The Single Goodbye

Ten years ago, when I was working on my PhD, I would regularly bump into Travis Elborough in the British Library. Little did I realise that we were exploring similar themes. I was writing my thesis about vinyl, which in adapted form became my book. Travis was also investigating recording formats. He believed that iTunes was destroying the album as a source of income and a ‘thing’. The fruits of his labour became The Long-Player Goodbye, which was published by Scepter in 2008.

            His predictions have not necessarily come true. 159m albums were sold in 2005. This figure was for physical formats only, as the download album was not yet generating any income. The British Phonographic Industry (BPI) published the sales figures for 2015 yesterday. They claim that there were 122m album sales last year. While this represents only three-quarters of the sales of a decade ago, it is probably more than anyone expected. Travis, for example, had suggested that the album appeared to be ‘severely imperilled’. But rather than being at risk, the album has revived. The sales figures for 2015 were up 3.7% on the previous year.

            Or at least that is how the record industry has chosen to present things. When we look more closely at the figures we find that genuine ‘albums’ - a collection of songs that a user purchases or consumes as a combined body of work - are not doing so well. CD sales are surprisingly resilient, but they are definitely not increasing: at 55.8m they were down 3.9% on the previous year. Digital albums are faring worse. Standing at 25.7m, they were down 13.5%. Back in 2008, Travis had glimpsed stirrings of a vinyl renaissance, describing it as a ‘peculiar rearguard action’ in the face of the defeat of the album. It is now more than that. In their report on the 2015 sales figures, the BPI note that vinyl was facing ‘near extinction’ in 2007, but its ‘fairy tale revival’ has seen sales reach a 21-year high. 2.1m units were sold last year, an increase of 66% on 2014. This does, however, still represent less than 2% of music consumption in the UK. In total, these formats accumulated 81.5m sales. This was five million fewer than the previous year, and just over half the albums figure for 2007.

            How, then, has the BPI reached its total of 122m album sales? First, they have quantified all individually downloaded tracks as ‘album equivalent sales’. Each download is only allowed to represent a tenth of a purchase, however, in deference the average number of tracks an album. In addition, each individual stream is counted as an album sale. These are divided by a thousand, in accordance with a ‘standard music industry metric’: ‘100 streams = one track sale and 10 track sales = one album’. Using these calculations, individual downloads were equivalent to the sale of 13.3m albums in 2015. Although this was down 14.7% on the previous year, any shortfall was more than made up by the popularity of streams. These were equivalent to the sale of 26.8m albums, a huge 81.7% increase on 2014.

            These mathematical shenanigans are not to everyone’s taste. Tim Ingham, founder of Music Business Worldwide, has described them as ‘self-evident madness’. I don’t think that Travis would approve of them either, albeit that they do provide evidence that some of his hunches were right. These ‘equivalents’ have helped to crack open ‘any notion of the album as linear, unalterable whole’.

            The larger question, however, is why should the record industry want to present every use of music as an album sale. Economics surely come into it. These figures help to downplay the popularity of streaming. This is useful in a climate when the low royalty income from streams is widely criticised. There were 26.8bn individual audio streams in the UK last year, as opposed to 81.5m physical and digital album sales, and yet despite this vast traffic streams are only generating around a third as much money (£251m as opposed to £687m, according to the BPI’s figures, which due to the low income from ad-supported services only feature the income from streaming subscriptions). The division by 1,000 makes this income appear just, as streams represent a third of physical and digital album sales when employing the ‘equivalent’ calculation. However, the BPI’s streaming figures are not only divided by a thousand, they are also halved. They fail to include the 26.9bn streams of music that took place through video sites. This includes YouTube, the most popular provider of music in the UK.

            If these figures tone down the popularity streaming, they also boost the importance of physical formats. When the equivalents are in place, the CD emerges as the leading product. In addition, vinyl’s percentage increases enable this format to be widely praised. It remains important for the record companies to promote these products, as this is where their main profits lie. The companies may well be deriving more income from streaming services than their artists do, but those royalties are dwarfed by the money they rake in with the sale of vinyl and CDs. Tim Ingham has calculated that Adele’s 25 would need to have been streamed 16.4 billion times to equal the $115bn it has thus far generated via physical formats and download sales.

In some cases, however, it costs the industry money to describe products as albums rather than as singles. Simon Fuller’s company 19 Recordings has taken their parent label Sony Music Entertainment to court, alleging a number of contractual misdemeanours. Among them is the fact that Sony regard individually downloaded tracks as singles, whereas 19 Recordings believes they should be classified as ‘segments’ of albums. These definitions have financial consequences, derived from the days when all records were physical, as the plaintiff’s case makes clear:

Because of the high costs of promoting the ‘single’ to radio as well as the relatively high costs of manufacturing, and distributing and marketing it to the ‘brick and mortar’ retail stores that then existed in comparison to those comparable costs expended on an Album, virtually all record labels historically paid lower royalty rates to artists on this less profitable ‘singles’ product. In contrast, the Album, with its relatively small incremental additional costs to manufacture and distribute, but with its 3 to 4-fold higher selling price, permitted labels to achieve a substantially higher profit margin in comparison to the ‘single’, and thus the labels were able to pay a significantly higher royalty rate on albums, including escalations in that rate based on sales success since those profit margins only increased as sales volume went up.

Sony has paid 19 Entertainment a royalty rate for singles that is 25%-35% lower than their album rate. The album rate has the further advantage that, if worldwide sales of 1m are achieved, the royalty increases.

Fuller’s company is furious at the treatment they have received in the download world. First, Sony Entertainment has allowed iTunes to ‘disaggregate’ albums without 19 Recordings’ permission, thus making all tracks available individually. Second, Sony have claimed that these individual tracks should be paid at the reduced ‘records other than album’ rate. Third, Sony are not allowing the sales of these individual tracks to count towards ‘the equivalent of the sale of one Album ... for purposes of calculating sales escalations on that Album’. Consequently, 19 Recordings believe they are being cheated in respect of some ‘albums’ whose disaggregated tracks total the equivalent of 1m sales. There is much in 19 Recordings’ argument. In the online world the costs of manufacture and distribution cannot be used to justify a lower royalty rate for singles. Moreover, the fact that trade bodies are keen to report all online activity as ‘segments’ of albums should surely help 19 Recordings cause.

Given these royalty implications, there must be reasons beyond the financial why record industry personnel remain so devoted to albums. One explanation, perhaps, is that they are not so different to Travis Elborough: they admire the beauty of the LP. This is not as fanciful as it may it first appear. The industry’s major awards, whether these are Grammys, Brit Awards or Mercury Prizes are for albums, and these are (supposedly) based on artistic merit, rather than upon sales. The artists that the industry admires most are those who consistently make important albums. It has commonly accorded greater merit to rock than to pop. Simon Cowell, from this perspective, is not an industry mastermind; he instead suffers from the industry’s snobbery – his artists are consistently frozen out from the most important industry awards.

Of course, these values are as financial as they are artistic. One of the reasons why the record industry praises rock artists over pop artists, and album sales over single sales, is because it is here that longevity lies. And with longevity lies profit. Development costs are paid off and break-even points are achieved. Nevertheless, it is not only consumers who value ‘product’ for its aesthetic worth. Industry personnel work best when they are promoting music they admire. They can also appreciate the beauty of the product itself: industry figures are capable of being spellbound by the look and feel of LPs. Tony Wadsworth, who retired as chairman of the BPI last year, left his post to help set up a vinyl-only branch of the record shop Sister Ray.

There is one further reason for the industry love of albums that mixes the financial with the emotional: patriotism. In 2015, seven of the 10 best selling albums artists were from Britain. In 2014, all 10 were British, the first time this had happened. The situation is different for streaming. The ten most popular streamed tracks in 2015 came from a variety of sources, with only a third of the artists hailing from the UK. This is reflective of a longer historical pattern. For the past ten years the best selling album in Britain has been by an artist from the UK, but the singles charts have been more international. The trade figures issued by BPI downplay the importance of singles by only reporting album sales and album equivalent sales. The triumph of international artists in the singles charts has been decimated, and it has been reduced by a thousand when it comes to streams. Meanwhile, the triumph of British artists in respect of conventional album sales is left to stand as it is. Overall, by kissing the single goodbye and recalibrating streams and individual downloads as albums, these trade figures promote the locals and give a lower profile to the foreigners. The British Phonographic Industry is putting British music first. 

Assets and Equity

Assets. They have long complicated music industry economics. Record companies have argued that they deserve to own the majority of sound recording copyrights because a minority of artists succeed. They need to keep the copyrights of the 10% of artists who recoup their advances in order to pay off the losses of the 90% who are in debt. While the losses from ‘unsuccessful’ artists are detailed in record company balance sheets, the value of their copyright catalogues does not appear there. Nevertheless, as the Music Managers’ Forum has argued, ‘the copyright catalogues of the record companies are their most valuable asset’. Traditionally, the biggest deals that have been made in the business have arisen when these catalogues have been sold on to other companies. These transactions have happened when the major companies have merged with one another and when larger companies have bought up indie labels. Derek Green, head of China Records, made the economics of the indie sector clear:

Well, the only reason we do it is because on our balance sheets we have the value of our masters and the value of our contracts marked as zero. Therefore technically every year our accountants tell us we’re bankrupt. But what we really know and believe is that the majors will pay millions to buy us.

The crucial factor about these takeovers is that the money went to the owners of the record companies that were being sold. Unless artists happened to have equity in the company, they would gain little, nothing or perhaps even lose out from the sale. There are many stories of artists who found themselves marginalised when transferred to a new corporation.

            The sale of one record company to another did at least have a degree of honesty and transparency about it. The owner of the record company that was being sold would be profiting from an institution that he or she had overseen. The assets up for sale were the recordings that they had invested in, even if some of those recordings had been fully subsidised by artists who had recouped.

Streaming provides continuities and discrepancies with this model. We still have the situation whereby companies are making little profit – even Spotify is running at a loss. The low sums of money being generated by these companies is presenting a problem for record labels, whose income from streaming is, in the first instance, based on a share of advertising and subscription revenues. The record companies’ songs might be being streamed billions of times, but this doesn’t mean that advertisers are willing to invest in these new advertising platforms or that consumers are willing to upgrade to subscription services. Last year in the UK there were 14.8 billion individual audio streams and 14.3 billion video streams. Despite this vast traffic, the money generated by subscription services only constituted 12.4% of the total income for recorded music, while the money from ad-supported services - although it was the avenue for the vast majority of those 29 billion streams - only constituted 3.5% of the same market. In total, the income from streaming contributed £115m to the UK’s recording ‘sales’ last year. Vinyl albums and CDs, meanwhile, contributed £320m. Record companies are nevertheless continuing to have faith in streaming services. If the income generated by these services hasn’t managed to offset the decline in physical and download sales, streaming is having the effect of converting ‘pirate’ users of musical content into legal consumers.

What is more significant for our immediate purposes is that record companies have found diverse ways to generate income from streams. Their share of advertising and subscription revenue is backed up by minimum guarantees. Each record company who enters into a licensing agreement with a streaming company will be guaranteed a minimum sum each time one of their tracks is played. In addition, some record companies receive a guaranteed sum for each subscriber who signs up to the streaming company. These minimums only come into force if the revenue target is not reached. In the instances where this income did come into play last year, it will have been reported as part of the total streaming income of £115m.

There are, however, areas of streaming income that are not reported on the record industry’s balance sheets. Most importantly, record companies demand equity in streaming companies as part of their licensing agreements. Here, as the MMF have identified, there is an echo of the ‘bankrupt’ nature of indie record companies. Just as those old indie companies were aware that their impoverished balance sheets disguised the fact they could be worth millions if sold on to larger record companies, today’s record labels are aware that, when it comes to streaming, the ‘single biggest revenue generator may be the sale of the streaming business, either to an existing major tech or media firm or through flotation on a stock exchange’. What is more, the record labels might even ‘agree to less favourable terms on revenue share and minimum guarantees, where income is shared with the artists, in return for a better deal on equity’.  And who will get the money from the sale of the sale of the streaming companies? The MMF have reported that:

The assumption is that many labels will keep these profits in their entirety, citing clauses in artist contracts that say the record company is only obliged to pay royalties to artists on income directly and identifiably attributable to a specific recording.

Here there is a difference to earlier practice. The record companies will be profiting from the sale of companies that they haven’t even had a hand in creating. The labels might argue that they have provided the essential content that has transformed streaming companies into valuable commodities, but that content is sound recordings, which have been created and in some cases paid for by recording artists. The record companies will not even be selling this content on to the new purchaser of the streaming company: the purchasing corporation will still have to licence the recordings. No wonder then that it is artists, rather than record companies, who are raising questions about the land of streams. 

I’ve Been Making Available All My Life

In recent blog entries I have been taking a look at the recording and publishing industries, as well as at mechanical and performing rights. Mechanical rights, which are also known as reproduction rights, incorporate the right to copy a work and the right to issue copies of a work to the public. Performing rights encompass the right to perform to work in public and the right to communicate the work to the public, which includes broadcasting.

In ‘Adding Up the Publishing and Recording Industries 2014’ I stressed the monetary importance of performing right for both songwriters and recording artists. Under PRS for Music rules, songwriters are automatically entitled to 50% of income whenever their song is licensed for performance, whether this be in a live setting or via a broadcast. Similarly, under the ‘equitable remuneration’ rules operated by PPL, recording artists are entitled to 50% of income whenever their recordings are played in public premises or are broadcast on radio or TV. In both cases these royalties are safeguarded: they cannot be recouped from advances.

In ‘Broadcast Y’Self Fitter’ I stressed the difference between classifying digital income as a performance or a mechanical right. If it is regarded as the former, being considered more akin to broadcasting, then artists as well as songwriters can be entitled to as much as 50% of the royalties. If it is regarded as the latter, being instead associated with physical recordings, the recording artist’s royalty rate can drop to something like 15%.

            I’m not alone in having this interest. Since uploading my last blog entry, the Music Managers Forum has published Dissecting the Digital Dollar: How Streaming Services are Licensed and the Challenges Artists Now Face. It is an important document, providing a detailed and lucid account of copyright and royalties in the digital age. It also provides further detail for the case that I have been making.

            One of the best ways to highlight injustices and inconsistencies in respect of royalties is to compare the activities of the collection societies, publishers and record labels. Publishers’ collection societies view the broadcasting of songs as involving both a mechanical and a performance right. In Britain, both the Performing Right Society (PRS) and the Mechanical-Copyright Protection Society (MCPS) have collected income for radio broadcasts. The performing and mechanical rights are present for online licensing as well, whether this is for online radio, downloads or streams. Consequently, the umbrella society, PRS for Music, operates joint licences to capture both of these forms of copyright.

There are differences in the way that income is divided, however. Perhaps understandably, as the format has an affinity with the sales of records in record shops, downloads are regarded as being more mechanical: 75% of royalties collected under the relevant joint licensing scheme go to MCPS and 25% to PRS. Online radio witnesses the reverse: 75% of income goes to PRS and 25% to MCPS. Again, this is understandable, as radio leans more towards the communication right that is enshrined in PRS activity, than it does towards the right to copy, which is patrolled by MCPS. Streaming sits in between: here the money from joint licensing is divided 50/50 between MCPS and PRS. These splits have implications for songwriters. They might receive similar overall shares in each area: for example, both the mechanical and performance income could be divided 75/25 between artists and publishers. As stated above, however, it is only the performance income that is safeguarded against advances: 50% goes directly to the songwriter and cannot be recouped.

If the recording world were to have parity with music publishing, streaming would be regarded as having an equal split between mechanical and performing rights. It would then follow that record companies would collect the 50% of the streaming royalty that relates to the mechanical right themselves. From this income, they would pay their recording artists a similar royalty to their income for physical sales: this would result in a new recording artist receiving an approximate 15% share. The recording artist should do better when it comes to the performing right. 50% of streaming income would be collected by the relevant performing right society, which in the UK is Phonographic Performance Ltd (PPL). This income would itself then be split 50/50, with half going to the record company and half to the recording artist.

But this doesn’t happen. Record companies collect the whole of the streaming income. According to PPL’s own literature, the labels regard both downloading and streaming as involving the mechanical right only. Their 2011 Annual Report states:

PPL’s online revenues remain limited as the majority of online sound recording licensing is carried out directly by rights owners. This reflects the prevailing view of record companies that downloading and on-demand streaming is analogous to the distribution of sound recordings, a traditional record company function.

Running somewhat counter to this argument, the record companies’ also claim that recording artists are not entitled to ‘equitable remuneration’ when it comes to downloading and streaming because this is an area in which performing rights operate differently.

            Here they refer to the ‘making available’ right, which was formulated during World Intellectual Property Organisation treaties of 1996 and enshrined in EU law in 2001. Dissecting the Digital Dollar outlines the origins of this right:

the communication control, where defined in copyright law, traditionally related to conventional broadcasting which, while easily extended to webcasting, might not apply to other kinds of digital transmission. To ensure digital communication of this kind would still be restricted by copyright, and perhaps to distinguish it from the existing controls that covered broadcasting, some rights owners lobbied to have a separate control added to copyright law called ‘making available’.

The activity controlled by this law is ‘electronic transmission in such a way that members of the public may access the recording from a place and at a time individually chosen by them’. As such, it clearly encompasses downloading, but does not encompass online radio (as a result online income in this area is collected by PPL). The record companies believe that the ‘making available’ right encompasses streaming as well. However, as the MMF report states, ‘not all artists agree’ with this point of view. As illustrated by the way that the publishing sector deals with streaming income, this activity can be regarded as akin to both broadcasting and to record sales.

            Why does any of this matter? ‘Making available’ is the only area of sound recording performance rights that is exempt from ‘equitable remuneration’. Consequently, artists are not guaranteed 50% of this income. Instead, it can be collected by record companies directly and some artists will therefore be on a standard royalty rate as low as 15%. What is more, any royalties collected can be recouped from advances.

            Dissecting the Digital Dollar includes a survey conducted with artist managers. Their responses to two questions are particularly telling. 78% of respondents believed that equitable remuneration should exist for all digital services, including both downloads and streams. However, when asked if they know how collection societies proportion streaming income according to the mechanical right and the performing right, only 3% replied in the affirmative.  

R4949 Starr

I’ve had a couple books on the go recently and they’ve both had something to say about the status and economic worth of vinyl records. First, there’s The History of Live Music in Britain, Volume 1: 1950-1967, a brilliant collaborative venture between Simon Frith, Matt Brennan, Martin Cloonan and Emma Webster. The book seeks to redress the balance of most accounts of the music industry, which, as the authors rightly point out, ‘over-privilege the recording sector at the expense of the sector in which most musicians in all genres have been located historically: the live arena’.

In the period that this first volume covers even the most well known musicians made more money from touring than they did from recording. The authors quote Gordon Thompson, who states that in the mid-1960s ‘recording contracts provided so little money that a band such as Herman’s Hermits needed to tour because most of their income came from live performance’.

            As so often, what was true of Herman’s Hermits was also true of the Beatles. The second book I’ve been reading is another opening volume: Mark Lewisohn’s Tune In, the first part of his trilogy of books covering the Beatles’ history. The book is unusually forthcoming about recording contracts. It reveals just how little the Beatles stood to earn from their record sales. Lewisohn writes:

the everyday business of management was the stage. No ‘pop stars’ could live off broadcasting fees and only the very biggest of chart stars could live off record royalties, so miniscule were the percentages. No one even tried. The sole object of making records was to attract a bigger profile and so earn higher fees from concert and ballroom shows – and, if the artists were lucky to be chosen, to appear in summer seasons in seaside resorts.

The Beatles’ initial contract with EMI gave them a royalty rate of one penny for each single sold (taking into account both sides of the record). This was payable on only 85% of sales (the other 15% was kept by the record company in lieu of ‘records returned and/or damaged in transit and/or used for demonstration of advertising purposes’). Albums were calculated proportionally, ‘usually as six or seven singles’. The royalty rate was halved for sales outside Britain. Lewisohn does the maths:

In the Beatles’ case, this penny they’d get on 85 per cent of sales would have to be divided five ways: 15 per cent to Brian [Epstein, for his manager’s commission], the rest split between John, Paul, George and Pete [Best]. If they sold a thousand records, they’d get fifteen bob each, and if they ever managed such a famous, gilded, pinnacle-of-career accomplishment as a million-seller, they’d each get £750. If this happened in America – which was, quite obviously, ludicrously unlikely – it would be £375.

He also has the figures for their first EMI royalty statement, which rewarded the band for the sale of 36,868 copies of ‘Love Me Do’. The total received was £130 11s 6d, out of which the Beatles took just £27 15s each. Lennon and McCartney earned more from their songwriting royalties for the single than they did from their record contract. According to Lewisohn, the ‘mechanicals’ for this volume of sales would bring in £325. After Epstein’s 20% commission on this income, this would give the composers £130 each. However, this songwriting income paled in comparison to the money the band was earning from live performance. At the time of ‘Love Me Do’ the Beatles were commanding £50 for each concert appearance.

            And yet it was not live performance that the band venerated, it was records. Here’s Ringo, recalling the experience of seeing ‘Love Me Do’ pressed up as a 45:

[It was] The most momentous moment – that we had a record out, that we had a bit of plastic with us on it. Just the idea of being on a bit of plastic was really incredible after all those years of playing. My God, a record that you hadn’t made in some booth somewhere . . . you don’t believe how great that was.

Ringo, lest we forget, would earn less from recordings than the other Beatles. He wrote the fewest songs. He’s not alone, though, in lauding the moment of seeing yourself on record for the first time. Here’s Keith Richards, talking about the Rolling Stones and their contemporaries:

In a way, in those days, being able to get into the studio and get an acetate back sort or legitimized you. ‘You’re now a commissioned officer’ instead of being one of the ranks.

If only someone would ask him, I’m sure Peter Noone has a similar quote up his sleeve.

            Reading these books made me think about my own work. In Vinyl I argue that one of the distinguishing features of the analogue disc – from the 1880s to the present day – is that it is very difficult to manufacture copies within your own home. This is a format for professionals. As Keith Richards says, it legitimizes you, and it does so in a way that live performance can never do.

            Thus far Ringo and Richards back up my claims. I have paused for thought, however. In the fourth chapter of Vinyl I write about the desire of musicians to escape the commodification process, focusing in particular on the the negative comments rock musicians have made regarding the transformation of their art into serially produced consumer goods. However, it is clear that most musicians (myself included) loved the experience of being pressed into a record for the first time. Consequently, I would now temper my analysis in two ways. Firstly, mass manufacture is not always spurned. There are many artists (and consumers) who place their faith in the most multiplied of products. Jimi Hendrix was amongst them (at least when it came to guitars). According to Charles Shaar Murray:

he seldom bothered with special left-hand models, both because right-handed guitars were more plentiful and easier to obtain, and because – with a touchingly American faith in mass-production – he believed that they were likely to be manufactured to a higher standard.

This depiction of the performer as consumer leads me to the second aspect that I would now change. In the chapter I make a crude distinction between artists and audiences. In doing so, I draw upon the work of Jon Stratton, but I now realise he may have led me up the wrong path. Stratton’s argument is that, in creating a vinyl record

The music is not only commodified; in the process it is also distanced, alienated, from the artist, and becomes an object which is understood to exist in its own right. It moves from the private domain of the artist to the public domain of the market place. Reciprocally, the artist experiences a distancing from his or her music as it becomes product, and is experienced as existing in a different social context. The record company, like a book publisher, acts as a gate-keeper shifting the experienced position of the music from the artist’s individual identification with his/her music to the experiencing of the music as a commodity in the market place.

He suggests that, as this happens, the artists aren’t only distanced from their music; they are distanced from the fans. The musicians stand at one end of a process, their audience is at the other. In between is the apparatus of recordings, gatekeepers and mediation.

He’s clearly right that the music becomes a product and that it exists in a different context. He’s wrong about other things, though. By entering the market place, the music isn’t distanced from the artists: they are consumers too. In fact, one of the reasons why artists are excited about seeing their work on record is because it enters shops in which they have browsed their whole lives. This isn’t alienation; this is coming home.

            What’s interesting to note, though, is that artists’ excitement about the commodity form always seems to come in relation to their first record releases. In the Beatles’ case they each knew by heart the R4949 catalogue number of ‘Love Me Do’. It had become etched into their memories as they had gazed at the record label for so long. And yet, once they had a few releases under their belts, the band members struggled to remember in which order those records were issued or which songs each album contained. Maybe the point at which pop stars become alienated is not when their music is turned into product, but when they stop hanging out in the market.

Cover Me Badd

There is a new trend within academic writing about copyright: people are talking to music makers. I have previously discussed the work of Justin Morey and Phillip McIntyre, who have interviewed sampling artists to gauge their feelings about sample clearance and songwriting splits. Amanda Sewell echoes their work in her investigations into hip-hop sampling. Talking to the artists, she has found a range of approaches to increased licensing fees. In contrast to scholars who moan about a decline in hip-hop’s quality as sampling laws have tightened, she believes that ‘artists have responded to various challenges’. They have found affordances within copyright laws to create new strains of the music.

            In addition to this research, there is the work of John Street and Tom Phillips, who set out to discover ‘What Do Musicians Talk About When They Talk About Copyright?’ What they found was that few of their interviewed musicians had ‘any very detailed knowledge of copyright’. At the same time, these musicians were not opposed to copyright per se.

            In fact, there was an occasion when they wanted copyright law to offer greater constraints than it actually contains. This was in relation to cover versions. One of the musicians - who is a signed artist - described her band’s attitude when covering a song by a well-known US act. She believed that her cover was done for ‘aesthetic’ rather than commercial reasons and that it was therefore acceptable to the US group. Her band also sought permission from the other act to release their cover version. In return, the artist expected that any act considering covering one of her songs would seek her agreement first. She states, ‘If approval hadn’t been given I would be really, really mad about it to be honest’. So much so that she would ‘hit the roof’.

            She might have to do some roof hitting. Copyright law has safeguarded the right to do cover versions. In this respect, the law differentiates songwriting from other artistic practices: the music composer has less control over the future uses of their work. Prince has remarked on the oddity of this, stating: ‘There’s no other artform where you can do that. You can't go and do your own version of Harry Potter. Do you want to hear somebody else sing “Kiss”?’

In Britain, the only constraint on recorded cover versions is the First Licence Refusal (FLR). Songwriters can specify who they first want to record a specific song, but once that version has been released that song is free game. This notion was first enshrined in the 1911 Copyright Act. Clause 19(2) states that ‘It shall not be deemed to be an infringement of copyright in any musical work for any person to make … records … if such person proves that such contrivances have previously been made by, or with the consent or acquiescence of, the owner of the copyright in the work’, i.e. if a recording of a song had already been made available, then other performers were permitted to record their own version of the song. The Act also outlined how songwriters would be rewarded for the cover versions of their work: they would receive a royalty of 5% of the retail price of each record sold. According to Terri Anderson:

The reason why this Act … embodied a Statutory Licence (a compulsory licence after the first recording of any copyright music) was that the British Government shared the US Government’s fear that the then all-powerful music publishers would want to strangle the infant record industry at birth, and the best way to do this would have been to deprive it of any worthwhile copyright music to record.

Accordingly, the US Copyright of 1909 had also safeguarded cover versions. Clause 1(e)a states:

That whenever the owner of a musical copyright has used or permitted or knowingly acquiesced in the use of the copyrighted work upon the arts of instruments serving to reproduce mechanically the musical work, any other person may make similar use of the copyrighted work upon the payment to the copyright proprietor of a royalty of two cents on each such part manufactured.

Marybeth Peters has suggested that, rather than acting to restrain the publishing industry, Congress was instead ‘concerned that the right to make mechanical reproductions of musical works might become a monopoly controlled by a single [record] company’. Consequently, the Act made the recorded repertoire of songs available to all record companies.

            In the US the royalty rate remained at 2 cents per record until the Copyright Act of 1976, and even then it was only raised to 2.75 cents. This Act also introduced conditions for artists who wanted to make cover versions, including the notion that ‘the arrangement shall not change the basic melody or fundamental character of the work’. The administration of this licensing scheme has remained in the hands of the US government. Licensees are expected to apply to the Copyright Office for permission to record their cover versions. That said, according to Donald S. Passman, ‘the compulsory license is almost never used’. It is too burdensome, and so publishers offer direct licences instead.

            The UK has moved in a different direction. Here, the compulsory licence was retained in the 1956 Copyright Act, which raised the rate to 6¼% of the retail price of each record sold. By the time of the 1988 Copyright, Designs and Patents Act, however, the compulsory licence had been removed. Rather than being enshrined in copyright law it was instead perpetuated in the Membership Agreement of the ‘mechanical’ collection society, MCPS. In contrast to the US Copyright Act, the MCPS sets no specific guidelines regarding the nature of cover versions. In the UK, as long as a prior version exists, and the new work is not derogatory, artists are free to make any arrangement in any way they wish.

            If this causes the musician quoted by Street and Phillips to bang her head, she should brace herself, as the rules surrounding cover versions are only growing looser. For many years MCPS included an FLR box on their songwriting registration forms. Songwriters would have to tick this box if they wanted a specific artist to make the first recording of their work. MCPS found that this process held up the licensing process and have consequently devised a new system. Songwriters now have to inform them of an infringing cover version after they have discovered that one is due to be released. Only then will MCPS block the offending article.

            The compulsory licence is the reason why cover versions can rain down on us. Everyone has a cover version that they object to (Prince might not want to hear Tom Jones’s ‘Kiss’; I don’t want to hear Travis doing ‘Baby One More Time’), but it’s a small price to pay for musical freedom of speech.