Archive for the ‘streaming’ Category

With Grammys Near, Will Prince’s Music Make a Big Return?

February 7, 2017

Ben Sisario NY Times.com 2/6/17

At the Grammy Awards next month, the biggest question for fans may be whether Adele or Beyoncé takes home the prize for album of the year. For the music industry at large, however, perhaps an even bigger question is whether the show will finally usher Prince fully into the streaming age.
The Grammys ceremony, on Feb. 12, is the focus of a major marketing campaign set up by the music companies that have rights to release Prince’s songs, and by the streaming services that have been hungry to carry the music but were blocked from doing so by Prince himself before he died last year at 57. (Currently, Prince’s albums are only available on Tidal.)
If all goes according to plan, Prince’s music will be made available on virtually all streaming services around the time of the Grammys, where an all-star musical tribute to Prince is expected to be one of the show’s splashiest moments.
To promote the music’s availability online, Spotify is expected to run a number of promotional spots, including, perhaps, a television ad during the broadcast and a series of online teasers to begin as early as next week, according to several people with direct knowledge of the plans who were not authorized to speak about them. Spotify declined to comment.
But when it comes to managing Prince’s music, nothing is easy.
Despite the eagerness of the music industry to promote Prince’s music online, many issues with the estate remain unresolved. As a result, the plan to offer Prince’s music around the Grammys, first reported by Bloomberg News, remains uncertain and could still fall part, these people said.
“The drivers of what will happen with Prince will be the estate,” said L. Londell McMillan, a lawyer who represented Prince and is one of two experts advising the estate’s administrators on entertainment deals. “When you are looking to release product, you’re looking for the right moments. The Grammys may represent a moment in time, but it’s not certain that that’s going to be the case.”
Here is a look at some of the complications about the estate and the legacy of Prince’s music.
A Complex Estate
Since Prince died without a will, a Minnesota court is overseeing the estate, whose value has been estimated at up to $300 million. Major tasks still need to be completed, like valuing assets and confirming heirs, although the judge overseeing the case has indicated that the heirs will likely include Prince’s sister, Tyka Nelson, along with five half-siblings.
Those presumptive heirs have split into two camps over the management of the estate. One group, including Ms. Nelson and Omarr Baker, one of Prince’s half-brothers, have nominated Van Jones, the CNN commentator, to be a “co-personal representative,” a role similar to an executor. The other four favor Mr. McMillan.
In a nod to the feuding and finger-pointing of the proceedings, the judge, Kevin Eide, ruled last week that he would not appoint anyone to the role unless all heirs agreed and questions of conflicts of interest are sorted out. The estate’s next step, expected next week, will replacing one bank with another as administrator, a move that will bring in yet another round of lawyers and other overseers.
Music executives who have dealt with the estate say that these issues have not interfered with deal-making, but they raise questions about how the estate will be managed in the future and who will benefit from its business.
A Tangle of Rights
Prince maintained close control of his music rights, and wielded them to an extent few other musicians can. For instance, he used his ownership of music publishing rights — the copyrights for songwriting — to block his music from appearing on YouTube, Spotify and other streaming outlets.
But that control led to problems after his death. Prince withdrew his membership from Ascap, the organization that manages performing rights, and it was not until the very end of 2016 that his estate signed a new deal with Global Music Rights, a boutique competitor to Ascap. Performing rights are essential to having music played on the radio or streamed online.
Randy Grimmett, a Global Music Rights executive, said that before he died, Prince had been considering managing his performing rights himself, a burden that few musicians could manage. “He would have been the first — and only — major artist that I know of to have taken that on,” Mr. Grimmett said.
In November, the Universal Music Publishing Group announced that it had made a deal with the Prince estate to act as administrator for the publishing catalog, and signaled that it was ready to release his music widely. But as with most deals, it still needs approval from the estate.
A Vault of Recordings
The estate still has one more major musical asset to offer: the recordings Prince released after leaving Warner Bros. in the mid-1990s, as well as his storied vault.
That trove of unreleased recordings, including hundreds or even thousands of songs, was stored in two actual vaults at his Paisley Park complex outside Minneapolis, and has been the subject of fan fascination for years. The estate has shopped this material to the major record labels, but no deal has been struck yet; executives briefed on those talks have noted the difficulty setting a value for such a range of material, and Warner Bros. still has rights to a large part of it.
Some unheard recordings, however, are set to come out soon. After putting one long-bootlegged track, “Moonbeam Levels,” on a hits compilation last year, Warner Bros. is set to release a new version of Prince’s biggest album, “Purple Rain,” this spring, with a full disc of unreleased material.
A Lawsuit With Jay Z
When it comes to Prince and streaming, the estate faces a question in court: whether or not Tidal, Jay Z’s streaming service, has exclusive streaming rights.
Tidal and Roc Nation, Jay Z’s management company, have argued in court that Prince granted Tidal rights to his catalog. But the estate disputes that point, and in November sued Roc Nation for copyright infringement, saying that Jay Z’s companies have produced no evidence of a deal.
The suit has become a tantalizing sideshow; one document filed in court shows a lengthy marketing presentation for Roc Nation apparently intended to woo Prince. But so far it does not seem to have slowed down deal activity.
What Would Prince Have Done?
Even if the estate is able to get Prince’s music available on all streaming services, is that what Prince would have wanted? He was well known for policing his catalog carefully, pulling it down from services he found unappealing. “Spotify wasn’t paying, so you gotta shut it down,” he told Ebony in 2015.
But associates who worked with him say that Prince’s true intentions could be hard to divine. After writing the word “slave” on his cheek in protest of his Warner Bros. contract in the 1990s, he returned to the label in 2014 to make a deal that was highly favorable to him.
A high-ranking entertainment executive who worked closely with Prince said that after pulling his catalog down from streaming services in 2015, Prince continued to discuss with them the possibility of returning it. He was in those talks until the end of his life, said this executive, who spoke anonymously to avoid revealing details about working with Prince.
Alan Leeds, Prince’s tour manager in the 1980s and later the president of Prince’s label, Paisley Park Records, said that Prince’s attitudes toward technology in particular could be unpredictable but were focused on protecting his interests.
“Prince’s wishes were subject to change,” Mr. Leeds said. “His attitude toward technology was that when it served him he embraced it, and when it didn’t he turned his nose up. It varied day to day, depending on his mood.”

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How Streaming Is Changing Music (Again)

December 15, 2016

by Michael Luca and Craig McFadden hbr.org 12/12/16

Beyoncé made history with her album Lemonade, which was streamed a record 115 million times in its first week. Just one week later, Drake broke that record when his album Views was streamed 245 million times. The age of streaming music has arrived in full force, displacing both physical sales (e.g., CDs) and downloaded songs (e.g., iTunes). As streaming has taken hold, U.S. album sales, both physical and digital, have plummeted from a peak of 785 million in 2000 to just 241 million in 2015. The change comes from people switching from purchasing full albums, either online or offline, to listening to individual songs through a streaming platform such as Spotify, Tidal, or Pandora (where one of us works, full disclosure).

This shift has the potential to reshape both the music people listen to and the music that artists create. For example, will the concept of albums survive in the age of streaming, or will artists simply release their best singles? (History buffs will note that the concept of recorded albums is itself relatively new.)

As music fans, we wanted to get a sense of the evolving music landscape. Looking at the academic research on the topic and our own data set of 2,400 top-selling albums from 1992 to 2015, two patterns about music quality emerged.

The “Long Tail” Is Easier to Find and Cheaper to Make

Digitization has brought new strategic challenges, and falling revenue, to the industry. Yet it has also brought new opportunities to a wider variety of artists. By reducing search costs, the digitization of music makes it easier to discover new artists and albums.

Despite early concerns that falling revenue (and online piracy) would reduce the availability of music, research by economists Luis Aguiar and Joel Waldfogel shows that the number of music products created between 2000 and 2008 tripled. Skeptics may worry that quantity is coming at the expense of quality. Music quality is, of course, in the eye of the beholder, and some people surely think that music has been on the decline since the death of Tchaikovsky. Focusing on the narrower context of recorded popular music albums from 1960 to 2007, Waldfogel created metrics aimed at capturing the quality of music, such as whether an album ended up on critics’ lists of all-time best albums and the extent to which an album continues to be listened to in future years. (These metrics capture things such as critical acclaim and staying power in the eyes of listeners, focusing on how new and older music compare.) The data suggests that the quality of music has actually improved in the digital age. It is easier to find and less costly to release new music, leading to unpredictable successes from artists who might not have been discovered or produced an album in an earlier era.

While music is still an industry associated with superstars, a greater variety of artists are producing best-sellers over time. Looking at the data, the sales going to the top 100 albums has dropped by about 20% over the past 20 years — nontrivial gains for other artists.

With subscription pricing and the ability to easily skip among artists (as opposed to per-album or per-song charges, which were the norm), streaming pushes users to listen to explore new artists. This has the potential to reduce the concentration of the very top artists and albums, while also helping music lovers find what economists refer to as the “long tail” of the industry. In other words, it’s easier than ever before to find an artist like Julia Nunes, a ukulele player doing cover songs of pop bands who was first discovered through YouTube.

Average Album Length Has Changed Over Time

The quantity and quality of music are not the only things that are changing. In 1992 cassette tapes were the predominant form of consumption in the U.S. and albums averaged about 12.5 tracks. The rise of compact discs brought about better functionality to skip around to different tracks and to know what song you were listening to. (Hidden tracks also suddenly became not so hidden.) As compact discs became the norm, the number of songs per album increased, averaging 15.8 at its peak in 2003.

Around this time, online music started becoming popular and album length began to fall — today it’s about 14.17 tracks. It has been holding steady for about five years but may still be in flux, as artists are figuring out how to adjust to the streaming age.

While many factors affect album length, this raises the potential of adjusting creative content in response to new modes of distribution. When albums are less popular relative to, say, song downloads, albums might become shorter. “Filler” tracks, less popular songs that are not released as singles, serve a diminished purpose. For example, all 12 tracks on Lemonade debuted on the Billboard Hot 100.

What’s Next?

For the industry, these changes raise strategic questions, not only about contracts and pricing but also about which types of artists will thrive and what content artists should be producing. Artists like Drake and Beyoncé show that the concept of an album is still relevant, in part because of innovations such as the visual album. Beck’s 2013 book of sheet music, Song Reader, was innovative in a different way, leading fans to post their own versions of the album online. For example, there are now dozens of versions of the song “Old Shanghai” on YouTube, on instruments ranging from a toy piano to a ukulele.

The Chainsmokers show an alternative path to the album. First known for their 2014 hit “#Selfie,” the band has foregone full-length albums and instead released 10 separate singles and official remixes, which have sold 2.6 million downloads and been streamed over 600 million times on Spotify alone.

For artists, it is a time of reflection and increased strategic options. And for music lovers, it is time to sit back and listen.

Amazon and Pandora to Gauge Music’s Value in the Internet Age

September 12, 2016

By BEN SISARIO NYTimes.com 9/11/16

How much are people willing to spend for streaming music?

For years, thanks to rigid pricing structures at streaming services, the answer has been stuck at $10 a month or nothing. But that model may soon be challenged by two giants of online media: Amazon and Pandora Media.

Both companies are set to introduce new versions of their streaming services in coming weeks, charging as little as $5 a month, according to multiple people with direct knowledge of the plans who spoke on the condition of anonymity because the process was ongoing. The plans will put pressure on incumbent players like Spotify and Apple Music and offer the music industry a major test regarding the value of streaming music — including the crucial question of whether discounts will be enough to entice people to pay anything when virtually every song is also available free.

The pricing model of $10 a month, the standard rate charged by most on-demand streaming services, has been compared to the 99 cents that Apple charged for song downloads when it opened the iTunes music store in 2003 — a simple and comprehensible amount that established in consumers’ minds the value of music in the internet age.

But many in the business have argued that $10 a month is too high for casual listeners. At $120 a year, it costs more than most people have historically paid for music. According to MusicWatch, a market research firm, the average music customer in the United States will pay about $67 this year on recorded music, up from $55 last year but down from $80 in 1999, around the peak of the CD market.

“Even with the presence of free, you can still get tens of millions to pay for streaming services — and possibly much more — in the event that you get the price much lower,” said David Pakman, a venture capitalist and former digital music executive who has long argued that lower prices would lead to greater sales over all.

The streaming market is divided between internet radio services like Pandora, which offer songs tailored to listeners’ tastes but do not let them choose exactly what songs to hear, and so-called on-demand services, like Spotify and Apple Music, which let users pick specific songs and create playlists.

Pandora is expected to make the first move by unveiling, perhaps as early as this week, an expanded version of its $5 subscription platform. That service, which is currently limited to removing ads on its internet radio streams, will soon begin offering customers new features like the ability to skip more unwanted songs and store several hours’ worth of playlists online, according to three people with direct knowledge of the company’s plans.
By Christmas, according to these people, Pandora wants to introduce a fully developed competitor to Spotify and Apple Music, with a catalog of tens of millions of songs that a listener can gain access to on demand. That version is expected to cost $10 a month, in line with the current market.

Amazon’s ambitions may pose more of a challenge to the existing services. The company already offers a limited catalog of on-demand music to members of its Prime program, which costs $99 a year for free shipping, streaming movies and other perks. But in coming weeks, Amazon is also expected to introduce a music service with a full catalog, charging $10 a month or about half that amount for customers who use the Echo, Amazon’s voice-activated speaker system, according to several people who have been briefed on the plans.

For both companies, the new streaming offerings represent variations on the existing models, with a mix of new features that are intended to entice casual listeners into paying a minimal fee without eroding the ranks of customers who are willing to pay more.

Amazon and Pandora have spent months negotiating new licensing terms with record companies and music publishers to allow their new streaming offerings, and they are close to completing those deals, according to the people briefed on the plans. Representatives of both companies declined to comment.

To some degree, these deals reflect a new willingness among the major record companies to experiment with pricing and shore up a wide field of competitors. Just last year, when Apple was negotiating with record labels over Apple Music, its streaming service, the company wanted to charge customers $8 a month. But the labels balked and held out for $10, giving Apple no price advantage over competitors like Spotify, Rhapsody and Deezer.

That episode, technology executives say, was a window into a little-understood reality of the streaming business: that prices are indirectly enforced through the licensing contracts that services sign with record companies.
Yet while the headline prices have been stuck at $10 a month, analysts and music executives say that a range of discounts and promotions has made it difficult to gauge what customers are really willing to pay. Most offer family plans, student discounts and introductory trials.

Other services have also made brief and inconclusive attempts to offer online music at lower prices. Last year Rdio, a struggling streaming outlet, introduced a $4 subscription plan that let users listen to 25 songs of their choosing each month. But by the end of the year the company had gone bankrupt, and its assets were acquired by Pandora.

Another service, Cür Media, announced its intentions this year to introduce limited streaming plans for as little as $2 a month. But by the summer, it appeared that the company had been unable to raise the $15 million that it said it needed for expenses like licensing deals with record companies. Last month, in filings with the Securities and Exchange Commission, Cür Media reported that it had laid off all of its employees, and that its chairman and chief executive had resigned. Attempts in recent days to reach any representatives of the company were unsuccessful.

Major corporate players like Amazon and Pandora do not face such basic questions of financial viability. But there are still doubts about whether lower price points will make any difference to consumers. YouTube makes virtually any song available free, and, much to the chagrin of the record companies, it is widely considered the most popular online source for music around the world. Spotify, in addition to its $10 premium service, also has a free version supported by advertising.

Russ Crupnick, the managing partner of MusicWatch, the market research company, said his research showed that subscribers to premium services like Spotify were pleased with the product and willing to pay. Furthermore, such customers were also likely to pay for other media subscriptions, like to Netflix, Showtime and so on.

But for less engaged consumers, he said, particularly those who are satisfied with radio or free streaming on YouTube, it may take much more to get them to buy a subscription.

“I don’t know that you get the casual listener to automatically be a superfan just by lowering the price,” Mr. Crupnick said.

Epic Records Whips Up Hit Album Out of Thin Air (and Online Streams)

August 9, 2016

By JOE COSCARELLIAUG. NYTimes.com 8/08/16

You technically can’t buy the digital compilation album from Epic Records featuring hits by French Montana and DJ Khaled that has been a steady presence on the Billboard chart this summer. In fact, the album has sold a total of zero copies since its quiet release seven weeks ago.

Yet thanks to an updated formula for determining positions on the Billboard 200 that accounts for online activity, as well as some savvy opportunism from the label, the album, “Epic AF,” has become a disruptive presence on the charts, landing in the Top 10 four times by exploiting — or mastering — the new system.

It works like this: Since late 2014, Billboard has counted 1,500 streams or 10 paid downloads of a song as the equivalent of one album sold. But if a hit single comes from an album that is unreleased, the millions of plays it tallies on services like Spotify, Tidal and Apple Music go nowhere.

Epic has collected its album-less artists’ most popular summer songs across streaming services — “Lockjaw” by French Montana and Kodak Black, “Don’t Mind” by Kent Jones, “Pick Up the Phone” by Travis Scott and Young Thug — into one digital playlist, giving it a hip title and some generic cover art. In 2016, that’s enough to call it an album.

Now, when Billboard counts the weekly plays for “Don’t Mind,” which has 139 million Spotify streams to date, they are attached to the album, catapulting the digital compilation over traditional albums from artists on competing major labels. Chart position equals bragging rights — and its own form of marketing via brand visibility.

Dave Bakula, a senior analyst for Nielsen Music, which supplies the data Billboard uses for its charts, said that some could see the tactic as “trying to manipulate the charts.” But “if they’re living within the rules, good for them in being creative and having enough of a stable of big-name artists and big songs,” he said.

“It feels a little bit like a ‘Now’ record for streaming services,” he added, referring to the “Now That’s What I Call Music!” CDs, which peaked in the early 2000s.

Billboard declined to comment on Epic’s methods. But this week, the chart company opted to change its rules slightly so that paid downloads of singles included on this album do not count toward its chart position but streaming numbers do.

Still, the system is flexible.

The album which has added tracks since its initial release, includes current hits from DJ Khaled (“For Free,” “I Got the Keys”). Before the release of DJ Khaled’s own album “Major Key” on July 29, the streams for those songs were going toward the compilation album. This week, however, they were counted toward “Major Key,” which hit No. 1. (As a result of losing those streams and all song sales, the compilation album dropped to No. 32 from No. 5, having accomplished its goal as a placeholder hit.)

“It did what it was supposed to do,” said Celine Joshua, a senior vice president for commerce at Epic and its parent company, Sony Music Entertainment, who oversaw the project.

“It was born out of a need and a problem,” she said. “I was thinking about our hot roster and the cycles of which content was coming out when, albums that were around the corner and how young fans on these platforms are behaving — consuming in the playlist manner.”

For hip-hop and R&B especially, streaming has become the dominant mode of consumption. Streaming activity nearly doubled in 2015 as traditional sales and digital downloads fell; this year, on-demand audio streams are up another 97 percent. As a result, the online discovery of new artists increasingly comes from streaming playlists like Spotify’s influential Rap Caviar, with its more than four million subscribers.

“Why don’t we design a product that behaves the way our consumers do?” Ms. Joshua said she had asked, bringing the idea to Epic’s chief executive, L. A. Reid, who gave the green light and helped to pick the track list. (The associated costs — “none,” Ms. Joshua said — helped the process along.)

Buoyed by the label’s biggest names, including Future and Puff Daddy, the album also features lesser-known artists, like Lotto Savage and Rory Fresco, who the label hopes will take off with young fans.

The album title, which includes a popular online abbreviation for a vulgar phrase, was designed to speak to millennials as well, Ms. Joshua said.

Assuming Billboard does not further adjust its rules to block digital-only label compilations, imitators can be expected. Already, within Sony Music, more versions are planned, including another from Epic featuring more pop-leaning acts, and a potential follow-up from sister label RCA.

“Streaming,” Ms. Joshua said, “is the now and the future.”

Music sales growing at fastest rate since 1998

April 13, 2016
   Robert Cookson FT.com 4/12/16

Record companies have reported their fastest revenue growth in nearly two decades, as the rise of subscription streaming services such as Spotify and Apple Music offset declines in CD and download sales.

Total industry revenues grew 3.2 per cent to $15bn in 2015, according to the International Federation of the Phonographic Industry, an organisation that represents recording companies. This is the highest rate of sales growth in the sector since 1998.

Frances Moore, IFPI chief executive, said: “After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music: measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time.”

British singers Adele and Ed Sheeran were the top selling recording artists of the year, followed by Taylor Swift, Justin Bieber and One Direction.

However, Ms Moore argued that the industry’s revenues should be much higher, claiming that certain streaming services such as Google’s YouTube were paying too little to record labels for the use of their songs.

Overall, recording companies’ streaming revenues increased by 45 per cent to $2.9bn last year, IFPI reported. Of that total, $2bn came from about 68m people who pay for subscription streaming services such as Spotify and Apple Music.

By contrast, only $634m was from YouTube and other “user upload” streaming services in 2015, even though these services streamed songs to almost 1bn listeners, IFPI noted.

“We’re operating in a market that’s skewed,” Ms Moore said.

IFPI argues that YouTube has been able to avoid paying a “fair” rate to copyright holders by taking advantage of legislation that protects internet hosting companies from being liable for copyright infringement by their users. This has allowed users to upload unlicensed content on YouTube — and left it to the recording companies to request its removal. IFPI is now lobbying European and US regulators to amend the legislation.

Chart: Recorded music industry sales

YouTube, however, says it has paid out more than $3bn to the music industry to date and points out that it provides a tool, called Content ID, that gives record labels strong control over their copyrights. It makes the bulk of its revenues from advertising but recently launched a subscription offering.

While music streaming was surging, revenues from physical formats continued to decline in 2015 — albeit at about half the rate of decline in the previous two years. Sales from physical recordings, mainly CDs, were worth $5.9bn, a drop of 4.5 per cent.

These sales were boosted, in part, by the success of Adele’s latest album, which was withheld from streaming services, as well as a rebound in Japan, the world’s second biggest music market, where CDs are still the main medium for music consumption.

Revenues from performance rights — the use of recorded music by broadcasters and public venues — increased 4.4 per cent to $2.1bn.

However, download revenues fell 10.5 per cent to $3bn — a bigger decline than in 2014.

Will Page, director of economics at Spotify, said the growth of the Swedish streaming service alone more than offset the global decline in downloads in 2015, “which makes this streaming-based recovery feel increasingly sustainable”.

In Shift to Streaming, Music Business Has Lost Billions

March 25, 2016

By BEN SISARIO and KARL RUSSELL NYTimes.com 3/24/16

There is plenty of good news in the music industry’s latest sales report released this week. Streaming is up. Vinyl has continued its unlikely renaissance. And did we mention that streaming is up?

But a closer look shows that the big sales numbers that have sustained the recorded music business for years are way down, and it is hard to see how they could ever return to where they were even a decade ago.

Revenue from music sales in the United States has hovered around $7 billion since 2010, according to the Recording Industry Association of America. For 2015, the number was $7.02 billion, up slightly less than 1 percent from 2014.

Within that steady total, however, have been drastic shifts in listener behavior. CDs and downloads have been gradually abandoned as streaming has become the platform of choice.

The result is that the music industry finds itself fighting over pennies while waving goodbye to dollars. For instance, the growing but still specialized market for vinyl records is generating more revenue than the music on YouTube, one of the biggest destinations on the Internet, but that’s because YouTube pays royalties in the tiniest fractions of cents.

Streaming — whether through paid subscriptions to Spotify or Rhapsody; Internet radio from Pandora; or even videos on YouTube — now makes up 34.3 percent of sales, edging out digital downloads as the industry’s biggest source of revenue. In 2015, the year that Apple Music arrived and Tidal was reintroduced by Jay Z, paid subscription services generated $1.2 billion in sales in the United States. After adding in free streaming platforms and Internet radio, the total for streaming is $2.4 billion.
Photo
Beyoncé with Jay Z, second from right, who announced his plans for the Tidal streaming music service in March 2015 in Manhattan. Credit Sam Hodgson for The New York Times

Getting people to subscribe en masse to streaming services has been a priority for record labels and the streaming companies alike, who have often claimed that by building robust subscriber ranks, they would eventually return the industry to its former glory.

But so far streaming has not saved the music business, and deep worries persist about the model. Many artists are suspicious of the deals that their record companies have cut with technology companies, and they want to know how much money is trickling down to them. In a rough analysis of the recording industry association’s numbers, Billboard magazine estimated that the average amount of money generated each time a song is streamed fell last year by about 24 percent, to 0.506 cent. (The fine print: That number, a retail sales figure, covers so-called on-demand streams, excluding Internet radio.)

What gets lost in the battles over fractions of pennies, however, is just how much money has vanished from the music business as consumers have abandoned its most profitable product: the CD.

In 2006 — years after Napster, and well into the iTunes era — record labels still reaped $9.4 billion from CD sales in the United States, more than the total sales revenue of the business today. Last year, CD sales stood at just $1.5 billion, a drop of 84 percent in a decade. And downloads, also once viewed as the industry’s savior, have now been falling for three consecutive years with no sign of recovery.

In a note accompanying the recording industry’s report, Cary Sherman, the group’s chief executive, criticized sites like YouTube — characterized in the report as “on-demand ad-supported” — for what he described as paltry payouts compared to their enormous popularity online. Last year, YouTube and sites like it generated $385 million in royalties. In comparison, vinyl records — a niche if there ever was one — brought in $416 million.

“Reforms are necessary to level the playing field and ensure that the entire music community derives the full and fair value of our work,” Mr. Sherman wrote. (In response, Google, which owns YouTube, objected to its comparison alongside audio-only platforms, referring to it as “apples to oranges.”)

It may be possible for the music industry to wring more money out of YouTube. But it seems doubtful that it will ever earn back what it has lost from the CD.

Will Streaming Music Kill Songwriting?

February 9, 2016

John Seabrooke NewYorker.com 2/08/16
For many songwriters, the wake-up call comes when they have their first streaming hit. For Michelle Lewis, an indie-rock singer-songwriter who now writes primarily for other artists, it was the song “Wings,” which she co-wrote for the British girl group Little Mix. Lewis and her writing partner, Kay Hanley, the former lead singer of the band Letters to Cleo, had been busy working on a Disney show (children’s TV relies heavily on alt-rock music), and at first she didn’t realize how popular the song had become.

“We were emerging from this bubble,” she told me, “and I realized, ‘I have this hit. This is going to be good! Nearly three million streams on Spotify!’ And then my check came, and it was for seventeen dollars and seventy-two cents. That’s when I was, like, ‘What the fuck?’ So I called Kay.”

“And I said, ‘What the fuck?’ ” Hanley recalled.

“And then we started reading and talking to our friends and fellow-songwriters,” Lewis said. Eventually, they found their way to Dina LaPolt, a music lawyer in Los Angeles, who specializes in copyright and songwriter issues.

Lewis: “And Dina said to us, ‘Where the fuck have you bitches been?’ ”

Hanley: “She literally said that.”

LaPolt told them that unless streaming rates were changed and the music-licensing system were overhauled for the digital age, the profession of songwriting was on its way to extinction. And they were on their own, she added, because, while everyone loves a songwriter, members of the profession have no actual bargaining power, whether via a union or another powerful institution, and so, when the money in the industry dries up, they’re in serious trouble.

“Our jaws were on the floor at the end of talking to her,” Lewis said. “And then it was, like, ‘We have to tell our friends.’ ”

If streaming is the future of music, songwriters may soon be back to where they started. Stephen Foster, America’s first professional songwriter, was also the first to die broke. His songs, which include “Oh! Susanna,” “Camptown Races,” “Old Folks at Home” (a.k.a. “Swanee River”), “My Old Kentucky Home,” and “Jeanie With the Light Brown Hair,” made lots of money for other people—music publishers, music-sheet sellers, minstrel-show promoters, concert-hall owners, and star performers. But not very much of that money reached the chronically impecunious Foster, who died, in 1864, in New York City, at the age of thirty-seven, with three pennies in his pocket, some Civil War scrip, and a scrap of paper on which the songwriter had written “Dear friends and gentle hearts.” His best-known melody, “Beautiful Dreamer,” came out only after his death.

Over the next century and a half, American songwriters’ prospects improved dramatically, largely thanks to the Copyright Act of 1909 and subsequent government intervention. Under the regime that emerged in the first half of the twentieth century, composers own the “publishing” rights to their songs—the copyright on the song’s words and melody, as they exist on paper. Most songwriters assign part of these rights to a music publisher in exchange for an advance and for marketing services. If the music publisher succeeds in getting a song recorded, the songwriter then grants the backers of the recording—a record label, generally—what’s known as a “mechanical license.” (The word “mechanical” derives from the days when player-piano rolls were the primary commodity of the nascent record business.) With each copy of the record sold, the owners of the master recording, as the audio copyright is known, pay a mechanical royalty to the owners of the song’s publishing rights. Today, that royalty rate works out to about nine cents per copy.

Songwriters also earn performance royalties when a record is played in a large commercial venue, such as a restaurant or a theater. With the spread of broadcast radio, in the nineteen-twenties and thirties, performance royalties became a significant part of a songwriter’s potential income. Generally, when a song plays on the radio, the station pays the publishing-rights holders a fixed rate that represents a percentage of the station’s advertising revenues. The owners of master recordings, on the other hand, don’t make anything from radio play, nor do the performers. The reasoning behind this bizarre arrangement, which apart from the U.S. exists only in Iran, North Korea, and China, is that the promotional value of radio play is recompense enough; the labels and performers can make up the difference with record and ticket sales.

In 1941 the Justice Department issued what’s known as the Consent Decree, which allowed performing-rights organizations (P.R.O.s, or collecting societies) to process the licensing fees for large numbers of songwriters, collectively, for obvious reasons of efficiency. In return for an exemption from what would normally be treated as an antitrust issue—private owners banding together to set prices—the music publishers agreed to let a federal court set the royalty rates, if the parties disagree on them. The Consent Decree also mandated compulsory licensing, requiring songwriters to make their entire catalogues available to whomever pays the licensing fee. Accordingly, songwriting is now the most heavily regulated of the creative arts. Seventy per cent of a songwriter’s income comes from rates set by the government, rather than by the songwriters and publishers, on the free market.

Regulation helped to insure that songwriters avoided Stephen Foster’s fate and were paid fairly for their work. Today, the system supports perhaps a million American songwriters. (The estimate is based on the memberships of the two largest collecting societies, ASCAP and B.M.I., and a guess about the much smaller SESAC, which doesn’t publish its numbers.) It offers a decent living for many in the trade, and the prospect of extraordinary wealth for a few. Indeed, the amount of money that a hit song can earn for its composers is staggering. Court papers in a recent infringement dispute involving Pharrell Williams, Robin Thicke, and the estate of Marvin Gaye have revealed that the song “Blurred Lines” earned almost seventeen million dollars in under two years, mainly from radio play, with Thicke and Williams each getting more than five million dollars. And a long-running suit launched by the family of Randy California, the former front man of the band Spirit, whose 1968 song “Taurus” is alleged to sound a lot like “Stairway to Heaven,” calculated that the Led Zeppelin song, which was released in 1971, had earned half a billion dollars by 2008. Since copyrights last for up to seventy years, depending on when the song was released, the rights to a couple of hit songs can support an entire family for several generations.

The remarkable worldwide popularity of American music is often ascribed, rightly, to the talent and diversity of the country’s artists and musicians. But it also happened because of a system that inspired and allowed songwriters to devote themselves full time to their craft. (Of the top ten most-downloaded songs in the U.S. in 2015, according to Nielsen, only one, Fetty Wap’s “Trap Queen,” was written solely by the artist.) The system not only rewarded proven talents; it also let promising novices secure advances against future earnings, affording them the time to learn their craft gradually, until they too had a hit and could begin nurturing the next generation of talent.

But as the music business began to be slowly and agonizingly stretched across the rack of the digital age, the songwriter’s comfortable spot amid music’s royalty flow started slipping away. The steep decline in album sales—the result of a shift from brick-and-mortar distribution to digital retail, and now to streaming—has dealt a blow to songwriters’ mechanical-royalty income. (In the album era, even a throwaway track on a best-selling LP earned as much for a songwriter as the hits that made people purchase the album in the first place.) And, as Lewis’s experience demonstrates, the performance-royalty rates that songwriters command from streaming services such as Pandora, Spotify, YouTube, Amazon Prime, and Apple Music are in most cases far lower than the ones they get for terrestrial-radio plays—the entire royalty payout, remember. Typically, under terms that the record labels worked out with the streaming services (and somehow persuaded the federal rate courts to sign off on), when a song is streamed, sixty per cent of the income goes to the owners of the sound recording, thirty per cent goes to the service itself, and ten per cent goes to songwriters and publishers. When a song is streamed on an Internet radio site—Pandora is by far the largest—the holders of publishing copyrights receive a thousandth of a cent per stream.

Why are streams worth so much less than radio spins? The standard reason given is because a stream is generally a one-to-one transaction, whereas a spin goes out to thousands or even millions of people at a time. But if millions of people hear your song on YouTube, and you still haven’t received a check, you begin to sense that something is amiss. Also, why is the value of the publishing copyright worth so much less, relative to the sound-recording copyright, in the streaming world? There appears to have been a digital land grab by the record labels, who own most of the master recordings for the U.S. catalogue. Having lost out, historically, on income derived from performance royalties and sound recording for terrestrial radio, they were careful, in the digital era, to guarantee themselves income, and in some cases equity interest, from streaming.

Kara DioGuardi, a longtime songwriter known for her turn as a judge on “American Idol,” told me recently, “I’ll be at a party and I’ll hear a friend’s song, and then I’ll realize it’s being streamed. And I’ll think, ‘Wow, that sucks,’ because I know the songwriters aren’t getting paid what they deserve.” For songwriters, there are both big, sweeping rationales and smaller, more nuanced reasons to hate streaming services. Perhaps the greatest outrage, apart from the primal sense that the services are picking their pockets, is directed at the corporations benefitting most from streaming music—Google, Amazon, Apple. These companies, which are among the wealthiest on earth, use music to draw traffic to their sites and keep people within their ecosystems, but for them, the business end of music is hardly more than a rounding error. In 2015, for example, the global music-copyright industry brought in twenty-five billion dollars, barely more than a tenth of Apple’s revenues for the year. What makes the situation positively Kafkaesque is that under the terms of the Consent Decree, which was created in part to prevent songwriters from monopolizing the market, composers are now often compelled to license their songs to these monopolistic behemoths at absurdly low rates.

As for the more nuanced reasons, some streams are worse than others. Spotify’s free, ad-supported platform has been the source of much complaint, as has YouTube’s. Spotify’s total revenues from its ad-supported tier in the first half of 2015 were a paltry hundred and sixty-two million dollars, sixty million less than the revenues from the sales of vinyl albums and EPs over the same period. Revenues from the company’s paid tier are usually marginally better than from its ad-supported one, but it’s still having issues with publishing royalties there. It appears that while the company was assiduous about getting the licenses for the audio-recording copyrights from the labels, it was less thorough about obtaining all of the necessary mechanical-publishing licenses, partly because the metadata needed to identify the rights holders is missing from many song files. Spotify is holding about seventeen million dollars in royalties in a segregated account until these copyright holders can be identified (publishers say that the number should be closer to twenty-five million), and is in the process of building a database that will make it easier to identify them.

In late 2015, David Lowery, the frontman of Cracker and Camper van Beethoven, and a persistent industry gadfly, filed a class-action lawsuit against Spotify, charging the company with willfully infringing the mechanical rights to a number of his songs, and those of others, and seeking up to a hundred and fifty million dollars in damages. According to TechDirt’s breakdown of the suit, Lowery is arguing that Spotify is failing to obtain the necessary mechanical licenses for many of the compositions in its database, including some of his; the case may hinge, among other issues, on whether the company properly complied with technical requirements for situations in which it didn’t know who the copyright holders were. (A second lawsuit was filed by the singer-songwriter Melissa Ferrick in early January.)

Certainly the missing names did not slow co-founder Daniel Ek’s quest to license all the world’s music. However, it’s not entirely clear whether Spotify even needs a mechanical license to stream music. A stream isn’t a copy in the same way that a download is—in many ways, it is more like a performance. The Copyright Act of 1976 is too dated to provide much useful statutory guidance.

Amid all of the anger and uncertainty, last year LaPolt, the copyright lawyer, brought together Lewis, Hanley, and some hundred other songwriters, and inspired them to found an education and advocacy organization, Songwriters of North America (SONA), that seeks major reforms in the song-licensing system, to better suit the digital era. There are already a few legislative initiatives under way, nationally—among them the Songwriter Equity Act, a bill first introduced by Doug Collins, a Republican from Georgia, and Hakeem Jeffries, a Democrat from New York, and then in the Senate by, among others, Orrin Hatch, who is himself a prolific songwriter. (Copyright issues make for strange political bedfellows.) It would amend two sections of the Copyright Act of 1976, to raise the rate songwriters get from streaming services. Another effort, the Fair Pay, Fair Play Act—which would require terrestrial-radio companies to begin paying royalties to audio-recording-rights holders, as well as to songwriters, alongside some reforms to the digital-music industry—was introduced in the House of Representatives in 2015.

In LaPolt’s view, the best hope for real change is a major revision of the Copyright Act of 1976. Bob Goodlatte, a Republican congressman from Virginia and a techie, has made copyright reform a signature issue of his tenure as chairman, for the past two years, of the House Judiciary Committee, holding twenty subcommittee hearings on the issue, and inviting a number of songwriters, including Rosanne Cash and Sheryl Crow, to appear. LaPolt thinks it is unlikely that Goodlatte would leave the chairmanship (in 2017) without at least trying to effect significant reform.

Songwriters have never really had to organize before, but they’re learning, Lewis said. “It’s because we’ve been doing fine. As long as the checks showed up it was, like, ‘This has nothing to do with me.’ But about two years ago people started saying, ‘Hey, who moved our cheese?’ ” Even now, she added, some writers are loath to complain, because “the psychology is, ‘I can’t believe they’re paying me to do this at all, and I’d better not rock the boat or they’ll find out about my scam!’ ”

Savan Kotecha, whose “Love Me Like You Do,” was recently nominated for a Grammy, told me that songwriters are increasingly aware of the stakes. “It affects how you plan for the future and whether you invest in new talent, because in the streaming world you won’t necessarily see any return on your investment. For now, terrestrial radio is holding out. But radio could go away, because everyone has phones. And once streaming gets into cars in a big way, it’s over.”

Indeed, music listeners continue to embrace streaming. On-demand streaming-service usage rose ninety-three per cent in 2015, with three hundred and seventeen billion songs streamed, in all. Adding YouTube and other unpaid services pushes the total into the trillions. Meanwhile, album sales, the longtime mainstay of the business, continued their decline, in spite of the record-breaking success of Adele’s “25”, which accounted for three per cent of the entire U.S. album market in 2015, according to Billboard. For a songwriter, taking a stand against streaming can seem like taking a stand against your own future.

Performers are facing many of the same challenges, but they, at least, have the option of going on tour. Without royalties, songwriters will have only dear friends and gentle hearts to support them. That didn’t work out so well for Stephen Foster.

Smaller music companies find it hard in face of offerings from big technology groups

December 4, 2015

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Robert Cookson, FT.com 12/13/15

Smaller music companies find it hard in face of offerings from big technology groups

Singers such as Rihanna have embraced streaming services
For record labels, music streaming is big business. They earned $2.2bn from services such as Spotify, Deezer and Pandora last year — a figure that has quintupled in five years. It is also a golden age for music lovers, as listening to songs has never been easier.
But for the streaming services themselves, survival is a struggle. None of the most popular services has ever turned a profit and some people doubt any of them ever will.
Last month, Rdio, a US-based streaming start-up launched in 2010 by Skype founders Niklas Zennström and Janus Friis, filed for bankruptcy — owing its creditors more than $210m. Pandora, a larger rival, plans to buy some of Rdio’s assets for $75m.
A month earlier, French streaming service Deezer aborted an attempt to raise €300m in an initial public offering after investors baulked at its touted €1bn valuation.
The future appears bleak for companies whose sole business is music streaming. An increasing number of investors and people in the record industry expect that digital music distribution will be dominated by a few large, cash-rich technology groups — in particular, Apple, Google and Amazon.
“When you have the likes of Apple fighting against you, it becomes very difficult to survive,” says Mark Tluszcz, chief executive of Mangrove, the venture capital firm and one of the original investors in Rdio. It sold its shares several years ago after concluding that no matter how many subscribers the streaming service managed to attract, it would never be able to turn a profit.
“As a streaming platform, your relative value is nil, because you don’t own the content,” he says. “This is not a good business to be in.”
The fundamental challenge for streaming services is that they are largely at the mercy of music copyright holders — including Sony Music Entertainment, Vivendi’s Universal Music Group, and Warner Music Group. These three record companies alone control about three-quarters of the $15bn-a-year global recorded music market.

To stand a chance of attracting a large number of subscribers, a streaming service must offer a broad catalogue of songs from all three major record companies. That means that streaming services essentially have no choice but to agree the licensing terms demanded by the majors, no matter how onerous.
Even Spotify, the market leader in streaming, is heavily lossmaking. The company has more than 20m subscribers, who pay about $10 a month for on-demand access to a catalogue of more than 30m songs. It also offers a free version of the service, which gives users less control over what songs they hear and includes advertising.
Under the terms of Spotify’s licensing contracts, it must pay out 70 per cent of its revenues in the form of royalties to record labels and music publishers. As a result, while the company’s revenues surged last year to almost €1.1bn, it incurred an operating loss of €165m.
Spotify can absorb its losses for the time being. The company raised more than $500m this year in a funding round that valued the Swedish company at $8.5bn.
But venture capital has all but dried up for smaller streaming companies, and many are disappearing. The number of licensed digital music companies has declined by about 100 in the last three years to about 400, according to IFPI, a record industry body.

Anthony Bay, chief executive of Rdio, whose operating expenses were more than double its monthly revenues of $1.6m, says that “it’s incredibly difficult for an independent company to be successful in streaming, when no one in streaming is profitable”.
Making matters harder for independent operators is that they have to compete against technology groups that subsidise their streaming operations to achieve wider commercial goals. Apple, whose annual revenues exceed $230bn, has long used music as a loss-leader to help it sell devices such as the iPhone, first with the iTunes download store and now with streaming service Apple Music.
“Apple doesn’t care if the margins suck,” says Mr Bay.
Google, Amazon and a number of telecoms companies are also using music streaming to lure internet users into their spheres of influence — and are happy to pay record companies handsomely for the privilege. In the short term, this is boosting revenues for the record industry.
But Mr Bay warns the lack of profits in streaming bodes ill for the sector in the long term.

“There are no healthy industries on this planet where the distribution channels don’t make money,” he says.
Others are also concerned about the way that digital music distribution is evolving.
Lohan Presencer, chief executive of Ministry of Sound, an independent record label, says that “it’s very dangerous relying on companies whose primary business is not music to subsidise the music industry”.
One day, he forecasts, these companies will lose interest in music and they will seek to drive down prices.
Mark Mulligan, analyst at Midia Research, adds that if the record industry is to maximise its revenues from streaming in the future, the market “needs innovation from smaller players”. Allowing the technology groups to dominate, he warns, “locks the digital music market into a very narrow trajectory”.

Spotify Isn’t Killing Record Sales

October 29, 2015

But it isn’t saving them either.

Gillian B. White theAtlantic.com 10/2715

Technology, as anyone with a phone or computer can attest, has made it easier than ever for artists to get their music to their audience. But it’s also created some huge dilemmas when it comes to how talent and their record labels get paid. What’s the net effect?

A new paper from the National Bureau of Economic Research takes a look at the streaming services, sales, and unpaid downloads in order to figure out whether, all told, these services are helping or hurting the music industry.

These streaming services—Spotify, Apple Music, Tidal, and Pandora—represent a compromise of sorts between the music industry and those providing music via the Internet. Instead of buying an entire song or album, users can just pay a flat rate, queuing up the songs that they want to hear whenever they want. Or users can pay nothing, but must endure interruptions from advertisers. Either way, the services cut down on piracy and provide both websites and record labels with some cash. That makes them a better option for the record industry than having music pirated, in which case they would make nothing, but a worse option compared to buying tracks outright. (The royalties per stream are significantly less than what pure sales bring in.) Overall, the Recording Industry Association of America reports that revenue from streaming services grew to nearly $2 billion in 2014 from about $0.5 billion in 2010.

To find out how streaming platforms impact record-industry revenue, researchers took a look at Spotify, a streaming service which started in 2006 but enjoyed substantial growth after 2011, once it became available in America. The service has more than 75 million users, and around one-quarter of them shell out $10 a month for premium access (which cuts out commercials and allows users to play songs offline). The other 75 percent generate revenue for the company through ad exposure. The company then pays artists, record labels, producers, and others a cut for allowing their music to be included in their offerings.

Luis Aguiar and Joel Waldfogel, the authors of the NBER study, find that, at least in the case of Spotify, streaming brings virtually no financial gain to the industry, but it also prevents losses. When looking the top songs each week and calculating how much rights holders were paid, researchers find that streaming usage increases music-industry revenue thanks to the ability to convert those who were either downloading illegally or not listening to tracks at all. But those gains are pretty much offset by streaming’s displacement of permanent track purchases or downloads.

But that doesn’t mean that this is the end of the story. While streaming has grown in popularity, the business model still struggles to attract paying customers. Tidal, the streaming service started by Jay Z and a gaggle of other celebs, has only recently broken the 1 million subscriber mark. Apple Music has managed 6.5 million paid subscribers, though it remains to be seen if those numbers will hold once people realize that their free trials have automatically converted. The ongoing challenge of getting people to actually pay for music on the Internet means that to make money, platforms must generate adequate ad revenue, and then also be able to pay out enough to attract top artists. The latter issue is one that received lots of attention when America’s favorite red-lipped songstress, Taylor Swift, scolded Apple for plans to withhold royalties during the three-month free trial of its new streaming music platform, writing, “Three months is a long time to go unpaid, and it is unfair to ask anyone to work for nothing. I say this with love, reverence, and admiration for everything else Apple has done. I hope that soon I can join them in the progression towards a streaming model that seems fair to those who create this music.”

Swift got her way, but that doesn’t mean that music sales will ever be as simple, or as lucrative, as they used to be.