Royalties – Auxiliary Memory

By James Wallace Harris, Tuesday, February 10, 2015

Since a generation of young people had no ethical qualms over stealing music, asking if artists are paid too little under the new streaming model might be a moot point. We live in a society where we want everything free or very cheap, but we’ll also pay $7 for a cup a coffee, or $200 to see a Broadway roadshow. For many people, music is a peak experience, more important than coffee or plays, often providing the emotional soundtrack to their memories. Shouldn’t we worry that people who create the songs we love get paid properly?

What we’re seeing here in America is a economic paradigm shift that’s effecting all aspects of society. The middle class is being deflated while its wealth is being shifted to the ultra rich. More and more people work for minimum wage. Even once well-to-do professions are under attack. And people who were once rich rock stars are now making far less. The super-stars are always well-rewarded, but making it big isn’t as easy as it used to be. Streaming music is great for tens of thousands of would-be stars to get a start, but it’s now much harder to make a living from even a moderately successful album. The middle-class artist is disappearing too.

So, I’m asking, are you fine with that or not? I love Spotify, but it bothers me that artists who once made much more money from the CD sales model are now making much less renting their music. Listening to music over the internet is far more convenient than playing CDs or LPs. Having access to nearly all music with the tap of a few keys is fantastic. Paying $10 a month is an incredible bargain. And knowing it’s legal is righteous. But, is it fair compensation for the artists?

PBS News Hour has been running a series on this issue. Their coverage is probably all you need, but this discussion is all over the web, especially since Taylor Swift pulled her catalog from Spotify. Here are some recent articles:

In the age of streaming music, just how much is a listen worth? – PBS Newshour
Can the music industry survive the steaming revolution? – PBS Newshour
How music on demand is killing the album – PBS Newshour
How an underestimated song became a streaming summer hit – PBS Newshour
If you care about music, should you ditch Spotify? – The New Yorker
Spotify Royalties Appear To Be Awfully High Despite What Thom Yorke Says – Forbes
New Spotify report debunks “per stream” payments for artists – ars technica
Spotify To Taylor Swift: Would You Rather Have $6 Million or Zilch? – Business Insider

If you read enough of these articles you’ll realize this is a vastly complicated issue. Part of the problem is most of the streaming royalties goes to the record companies, and song writers, singers, and musicians get the tail end of the payment stream. But that was also true back in the LP/CD days. How the record companies divvies up its money with its artists is between those parties, but as fans we pay for the music, and set a standard. At least streaming is a major step up from stealing. Personally, I’d like to see more profits go to the artists themselves, and I’d like to see royalties paid to musicians. I think it stinks that all classic songs I love, the musicians were only paid a one-time fee.

The solution I would suggest is streaming services should charge a subscription fee for their service only, and then we pay 1 cent per stream to be divvied up by the record company, composer, singers and musicians. So Spotify might charge $2.99 a month for me to use their service, and that would go to them. And I would be billed 1 cent per stream, so my monthly bill would vary. If I listened to no music that month, it would be $2.99. If I listened to a 1,000 streams, it would be $12.99. Most people pay $9.99 now, so that would be equal to 700 streams. That’s about 25 streams a day, or about 1.5-2.0 hours of music a day. Which is probably more than what most people listen to. If you want constant background music you should use radio or Pandora type services.

Such a payment system would also allow me to subscribe to more than one music service, because they do offer different content and different features.

CD and digital song purchase sales are down. At one cent a stream, it would take 129 listens by a fan to equal the purchase of a song. I think this is a decent equivalent. But if you watch the PBS Newshour shows you’ll see how artists lament the passing of albums. Fans really prefer hits. Spotify could encourage albums listens by charging 5 cents to stream an entire album.

Streams should not count unless we listen to more than sixty seconds of a song. Any song we give the hook in less than a minute should be considered a free trial.

If artists wanted to sooth listeners who hate the thought of constantly renting, they could let streaming services count the plays and after 129 mark the song as owned, and free from then on out. This would also encourage subscribers to stick with the service.

I bought thousands of albums in the last fifty years, and many of them were duds. I’d only listen to them once or twice. Most often I’d buy an album and listen to one or two songs many times. Album sales were not always fair to listeners, even though artists made the most money from them. The streaming model of pay per play is actually more fair to listeners and artists. It’s fair to artists because they’re paid each time a fan plays a song. It was always depressing to spend $15 for an album that turned out to be a turkey.

I hear the complaints by my favorite songwriters that Spotify cheats them. I feel bad. But I also think one cent a stream is a fair price. It’s more than what they get now, and if their songs are actually popular, they’d earn about the same, or even more in the long run over CD or digital sales. Songs that people really love will get played 129 times, and if an album has enough good songs, it will eventually earn about the same amount of money.

I’ve bought many albums by Bob Dylan three times, first as LP, then CD, then as SACD. I still play his songs so much, I’m sure at one cent a play, I will eventually pay more than what I did buying those albums three times.

JWH

On August 16, 2008, the Washington Post ran the news story, “Giant of Internet Radio Nears Its ‘Last Stand’,” referring to Pandora.com. Pandora is a standout Internet site that allows users to create custom Internet radio stations based on their favorite songs and artists. It’s a unique way to discover undiscovered music showcasing technology that gets about a million daily listeners. The Post quotes Pandora’s founder Tim Westergren, “We’re approaching a pull-the-plug kind of decision. This is like a last stand for webcasting.”

The problem is one of paying royalties. Right now there are a number of technologies that broadcast music: traditional radio, satellite radio, cable TV radio and Internet radio. Oddly, they each pay different rates to play music, and it looks like the music industry wants Internet radio to pay the most. If this happens many sites will shut down. Pandora has yet to make money but anticipated to go into the black in 2009 if the rates were not increased.

There are many articles about the death knell of Internet radio showing up now, with the implication that if the rates these sites have to pay goes up they will close their doors. I think other things might happen. Why give up on a new business model so quickly? Pandora is actually a superior way to listen to random music – it’s superior because it’s less random but still random.

There are two way to listen to music. You think of a song you want to hear and you play it, or you turn on a broadcasting system to play music for you. The first method usually involves owning the song, but subscription music is a variation of that. The second method, random listening, involves finding a source that’s close to your musical mood. In the old days, a city might have a dozen radio stations and you picked one to play, or if you were in your car, you programmed your five radio buttons and jumped between them. Satellite music offers more variety by giving you more stations to choose from. Internet radio ups the variety factor further.

Pandora let’s you pick a seed song and then Pandora plays songs their Music Genome Project software thinks will match your taste. You can click thumbs up or thumbs down on their picks to help the software zero in on what you like. It works exceedingly well, but it’s still random music, or broadcast music.

Now I want musicians and music producers to get all the money they can, but I don’t want them to unfairly charge one random music technology more than another, and that appears to be a key issue with Pandora and other Internet radio sites. Another random site I like is Playa Cofi Jukebox, which allows you to seed your mood by picking a year and it broadcasts random songs that came out in that year. That’s another triumph of technology in my book. I want these sites to succeed.

Pandora is thinking of ways to improve its ad revenue and that’s good, but I think they should think of other ways to generate revenue. I pay for cable TV and a DVR so I see less television ads. I would be willing to pay a fee to Pandora to not hear ads. They should run ads, but allow users who want to pay not to listen to them. Another possibility is to merge with a subscription service like Rhapsody or Napster and be an extra selling point for those companies. Rhapsody has random radio stations for when I don’t want to pick my songs, but it would be even better if they had the Music Genome Project technology.

I have come to see great value in random music because of shuffle play of my MP3s. I can even add Music Genome Project like tech to my own MP3 library with MusicIP software. But Pandora beats my collection of 17,081 songs by light years. And I can play it on my iPod touch. I really do not want to see Pandora and other Internet radio stations go out of business.

Another option, rather than increasing royalty rates, could require Pandora to provide links to songs that take users to sites selling the song. Sites that would also provide a commission to Pandora. Pandora could offer a variety of online music stores and users could check box their favorite when they register. Increased sales should offer better revenue than broadcast royalties.

Don’t get me wrong. I’m not wanting free music. I believe free is bad. I want the music industry to make their money and I want Pandora to make money and I’m willing to either listen to ads or pay a subscription to get what I want. It will be a shame if the industry that collects royalties forces these new sources of random music out of business. I don’t listen to traditional radio anymore. I’m not interested in satellite radio. I have cable TV radio but I don’t use it. I’m an Internet person. Why should random music businesses pay more per song for customers like me than the other businesses pay for their customers?

Jim

If you read the Slashdot thread listed below one reader posts the suggestion that Internet radio should just stop using songs that require royalties. That’s an interesting idea, but I think ultimately it’s a bad idea. Free is not good. If this idea succeeded it would kill off a whole industry and destroy legions of jobs. If the writer’s purpose is to promote new artists and bands, it would be better to use Pandora and help these new musicians gain an economic footing, rather than turn the music industry into all amateurs. The Music Genome Project would work just as well with unknown artists.

The real virtue of Pandora is when it plays a song for you that you’ve never heard but you love it so much that you buy it.

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