The digital age has created previously unimagined opportunities for musicians, and changed music creation, distribution and discovery forever. But alongside those changes, the livelihoods of creators has been threatened. Now is the time to recapture the value that music creates, argues Sound Royalties Alex Heiche, and he sees signs that it's starting to happen.
Guest post by Alex Heiche, the CEO and founder of Sound Royalties
It is time for music to take back control from technology.
Over the past several decades, new mechanisms have drastically improved listening quality, ease and accessibility for music fans. However, these advances have simultaneously and paradoxically hurt the livelihoods of those creative artists behind the very songs we love so much.
From direct piracy on Napster to most streaming services now paying a fraction of what FM radio or physical sales paid, technology has delivered a critical blow to the income of the creators of music. But the tides are beginning to turn, starting with Spotify.
The Tides Are Turning
Over the weekend, hip hop icon Jay Z pulled all of his 12 albums from Spotify and most of his music from Apple Music – the latest in a what seems to be a growing trend among many top artists.
You could say it began when Taylor Swift removed her catalog from Spotify in 2014. Slowly, more artists began to follow. Last year, Spotify didn’t have Beyoncé’s new album, and you couldn’t find any music from Jason Aldean or even The Beatles.
Then recently, the industry’s three major labels – Universal Music Group, Sony Music, and Warner Music Group, which together represent about 75 percent of global music recordings, made a power play demonstrating that they represent the interest of the overall music community in a streaming world.
Each label individually allowed their long-term license deals with Spotify to expire. This has left Spotify on month-to-month licenses until longer-term deals can be renegotiated.
The Power Has Finally Shifted
Finally, enough music is on the bargaining table and the balance of power has shifted in favor of the music community, which is firmly re-positioned back in the driver’s seat.
That became clear Wednesday when Spotify weakened its position on selective “windowing,” (allowing additional music on streaming’s paid services that is not on the free version) in order to re-secure a long-term deal with Universal Music Group. While this practice is something Spotify has adamantly opposed in the past, additional reports indicate that the company is considering similar deals with the other labels that would allow windowing of blockbuster album releases to their premium paid window in exchange for lower royalty rates.
Logic dictates that Spotify’s in-progress and long-awaited IPO attempt will be contingent upon showing a path to profitability and long-term stability. In addition to Universal, deals with the other labels toward selective windowing to drive down the revenue Spotify shares with the labels, from 56 percent to around 51 or 52 percent, will help that profitability. But for stability, the company will still need to re-sign long-term license deals with each of three major labels.
To grant Spotify what is needed, the labels have reportedly given the company several “suggestions.”
The first suggestion is allowing blockbuster album releases to be selectively windowed between the freemium and the paid tier only.
The second involves marketing guarantees that Spotify will promote blockbuster album releases. This is equivalent to providing top-shelf or end-cap positioning in the grocery store.
A final suggestion is that if the revenue share percentage is lowered, Spotify should guarantee an increase in paid subscribers to help make up for that lost revenue. If it doesn’t hit those growth targets, then the expectation can be that the reduction will be paused or reversed.
As the consumption of music shifts into digital formats, it is important that the deals which are negotiated finally bring back the opportunity for the music community to provide a livelihood for themselves and their families.
Creating music is an art, but it is also a trade that many choose to pursue as their lifelong careers. The creators to the soundtrack of our lives generate tracks that move us, motivate us, comfort us, and so much more. Something as simple as the format on which we enjoy their creations should not affect whether they get paid a viable income versus the allowance of a teenager.
Recently, The Financial Times reported that Spotify and the major labels “licensing talks have picked up considerably” and that “deals could be inked within weeks.” That proved true for Universal, but remains to be seen for the other two major labels. Thankfully, this news comes at a time when the music community can clearly negotiate from a position of greater strength over the tech companies.
Technology can be great, but in the music industry, it is also nothing more than a delivery mechanism. It should never dictate the human spirit or control creativity– which are the heart and soul of music.
Alex Heiche is the CEO and founder of Sound Royalties, a company working to transform the entire way that music professionals fund their creativity.