Royalties
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Downtown Music Holdings has acquired Curve Royalty Systems, a company that specializes in royalty processing for digital income, it was announced Thursday (Jan. 5). Curve will now be a part of Downtown Music, a division that focuses on servicing the professional music industry.
In recent years, Downtown has pivoted away from its previous role as a traditional publisher and rights holder by selling off its 145,000-song catalog and putting its efforts into building a service-focused music company to tap into the growing cohort of DIY artists and professionals. The company has quickly amassed a suite of service tools via acquisitions including Curve, FUGA, CD Baby, Soundrop, AdRev and more. Downtown is also an active investor in companies like Beatbread and Vampr.
Though Downtown is integrating Curve into its suite of offerings for distribution and monetization, the royalty processing firm — which can distill multiple royalty statements into one cohesive report — will continue to serve its existing client base of over 1,000 labels and publishers worldwide. This includes Warp Records, Ingrooves, Mad Decent, MRC, Royalty Solutions Corp, Domino Recording Company, Hospital Records/Songs in the Key of Knife, Cal Financial and Alta Financial. Since its inception in January 2019 by co-founders Tom Allen, Richard Leach and Ray Bush, the company says it has processed nearly $4 billion in revenue.
Downtown Music president Pieter van Rijn said of the deal, “In Downtown Music, we’ve combined innovative technology and industry-leading services to create an offering that empowers music businesses and their creators. Curve perfectly complements our mission to be the leading music industry platform and their past work speaks to their high standards and pioneering technology.”
Downtown CEO Andrew Bergman added, “For some time, we have been admirers of the technology and service quality that Tom and Richard have been building at Curve. As we got to know them and their team, it became ever more obvious that their dedication and forward-thinking vision were a great fit for Downtown. Accuracy, precision, timeliness, and innovation in royalty services are core to Downtown’s mission of supporting creators and the businesses that serve them. Welcoming the Curve team to Downtown is another important step in furtherance of our mission.”
A prominent ’90s hip-hop duo is suing Universal Music Group for withholding royalties tied to what they’re alleging is a “sweetheart” deal the label reached with Spotify in the late 2000s.
Filed Wednesday (Jan. 4) in U.S. district court in New York by attorneys representing Andres Titus (Dres) and William McLean (Mista Lawnge), members of the hip-hop duo Black Sheep, the lawsuit claims UMG owes its artists approximately $750 million in royalties deriving from the company’s stock in Spotify. Under a licensing deal they claim UMG and the streaming giant reached in 2008, the label agreed to receive lower royalty payments in exchange for equity in the then-nascent streaming company. But Titus and McLean say the label breached their contract with Black Sheep and other artists by withholding what they argue is the artists’ rightful 50% share of UMG’s now-lucrative Spotify stock — and otherwise failing to compensate them for the lower royalty payments they received as a result of the alleged deal.
“Rather than distribute to artists their 50% of Spotify stock or pay artists their true and accurate royalty payments, for years Universal shortchanged artists and deprived Plaintiffs and Class Members of the full royalty payments they were owed under Universal’s contract,” the complaint reads. Titus and McLean further claim that Universal deliberately omitted from royalty statements both the company’s ownership of Spotify stock and the lower streaming royalty payments that resulted from its alleged deal with the streaming service.
“Over time, the value of the Spotify stock that Universal improperly withheld from artists has ballooned to hundreds of millions of dollars,” the complaint continues. “These and the other wrongful conduct detailed herein resulted in the Company’s breaching its contracts with artists, violating the covenant of good faith and fair dealing that is implicit in those contracts, and unjust enrichment at the expense of its artists.”
In a statement sent to Billboard, a UMG spokesperson denied Titus and McLean’s claims: “Universal Music Group’s innovative leadership has led to the renewed growth of the music ecosystem to the benefit of recording artists, songwriters and creators around the world. UMG has a well-established track record of fighting for artist compensation and the claim that it would take equity at the expense of artist compensation is patently false and absurd. Given that this is pending litigation, we cannot comment on all aspects of the complaint.”
According to the lawsuit, Titus and McLean signed a record contract with Polygram in July 1990 (later amended and revised in July 1991) as Black Sheep — the duo best known for the hit rap single “The Choice Is Yours (Revisited)” from their RIAA Gold-selling 1991 album A Wolf in Sheep’s Clothing. Black Sheep’s record contract was then assumed by UMG after the company merged with Polygram in 1998.
UMG acquired just over 5% of Spotify shares “in or around the summer of 2008” in a licensing agreement in exchange for lower royalty payments, the complaint adds, citing a 2018 Music Business Worldwide report. It claims that Universal acquired additional Spotify shares through its 2011 purchase of EMI, which had acquired shares in the streaming company around the same time, the suit alleges. It then cites UMG’s own prospectus, released in September 2021, revealing that the label held roughly 6.49 million, or roughly 3.35%, of Spotify shares as of June 30, 2021, valued at 1.475 billion euros ($1.79 billion).
It’s worth noting that UMG’s stake in Spotify has become significantly less lucrative since June 30, 2021, however. As of Wednesday’s closing price, UMG’s stake in Spotify is now worth just $560 million — the result of Spotify shares falling 70.5% over the past 18 months. Notably, Spotify isn’t the only streaming service UMG has equity in; according to the same prospectus, it also owns 0.73% of Tencent Music Entertainment shares, a stake that’s currently worth $112.5 million.
Included as an exhibit in the complaint is Black Sheep’s amended July 1991 contract with Polygram, which states that royalties paid to Titus and McLean “‘shall be a sum equal to fifty percent (50%) of [Universal’s] net receipts with respect to’ the ‘exploitation’ for any ‘use or exploitation’ of ‘Master Recordings’ created by Plaintiffs.” The plaintiffs claim they and other UMG artists are thereby entitled to 50% of the labels’ Spotify stock but that UMG has failed to pay it. This demand stems from a couple of broad assumptions: that all artists in the class signed similar contracts and that they were similarly not compensated with a portion of UMG’s stock holdings in Spotify.
The plaintiffs are asking for compensatory damages, punitive damages and an injunction “or other appropriate equitable relief” requiring UMG “to refrain from engaging in deceptive practices” as outlined in the lawsuit.
UMG isn’t alone among the major labels in acquiring Spotify stock — both Sony and Warner Music, as well as indie Merlin, also have or had stakes in the company. In May 2018, Sony sold half of its 5.707% stake in Spotify for an estimated $761 million, while that same month Merlin announced it sold its entire stake for an unknown amount and had shared the proceeds with its members. Warner followed suit in August 2018 when it sold its entire 2% stake in the streamer for $504 million, with the company announcing that around $126 million of the proceeds would be paid out to the company’s artists.
UMG has yet to sell any of its stock in the streaming giant.
-Additional reporting by Glenn Peoples
You can read the full lawsuit below.
Exactly one decade ago, on Dec. 21, 2012, Psy‘s “Gangnam Style” made history as the first music video to reach 1 billion YouTube views. As a result, YouTube’s Billion Views Club was born. A way to celebrate official videos that have achieved peak virality, the club is now home to over 300 music videos, including many of the most iconic hits from the past 10 years — from Adele‘s “Hello” to Luis Fonsi‘s “Despacito” feat. Daddy Yankee.
But how much do artists get paid for crossing the billion-view threshold for a music video on YouTube? The royalties are dependent on a few factors. Label affiliation, location and type of view affect these rates significantly. For example, artists signed to major labels — which represent the vast majority of members of the Billion Views Club — earn higher rates on the platform than those who are unsigned or affiliated with an indie label.
But location is possibly the biggest determining factor of all: in the U.S., rates are generally higher than in other countries. So while an official YouTube music video for a major-label artist could generate a blended average of $0.0038 per stream in the U.S., globally — which is how YouTube counts its views — Billboard estimates that rate at $0.0026 per stream. YouTube Premium video streams (views from customers who subscribe to YouTube’s ad-free video-watching tier) are also higher than plays from users on the ad-supported tier, both in the U.S. and globally.
Consequently, for major-label artists, 1 billion video streams on an official music video would generate about $2.6 million globally. That’s, of course, before the label takes their cut of royalties, which varies widely based on each artist’s individual deal, and before the artist takes into account what, if anything, they owe to their featured artists or producers on the track.
For non-official videos that use music — like a user-generated video of someone’s visit to the zoo, set to a song by a major-label artist — that global blended stream estimate would drop down to $0.0021, given lower payouts on UGC videos and the over-indexing of UGC viewership vs. that of official videos. So for a major-label song on YouTube that generates 1 billion views across all videos that use it, the label and artist would generate closer to $2.1 million.
Of the more than 300 music videos on YouTube to hit 1 billion views, the fastest to reach the benchmark is “Hello” by Adele, which took just 88 days from release to amass such a viewership. Next is a tie between “Shape of You” by Ed Sheeran and “Despacito,” both of which took 97 days. The third and fourth places on the list are also both held by Spanish-language songs, with “Mi Gente” by J Balvin and Willy William earning the title in 103 days and “Échame La Culpa” by Luis Fonsi and Demi Lovato taking 111 days.
Additional Reporting by Ed Christman.
Preview
Songwriters have something to celebrate this holiday season. Though it seemed rulings on royalty rates for the period of 2018-2022 (Phonorecords III) and 2023-2027 (Phonorecords IV) would not receive final judgement by the Copyright Royalty Board in time for Christmas, there is finally clarity about at least one type of royalty. The board on Friday (Dec. 16) accepted a proposed settlement to hike the royalty rate for U.S. mechanicals for physical products (like vinyl records, CDs, cassettes), permanent downloads, ringtones and music bundles.
Taking effect on Jan. 1, 2023, as part of Phonorecords IV, songwriters will earn 12 cents per track or 2.31 cents per minute of playing time or fraction thereof, whichever amount is larger for physical products and permanent downloads. This will also include inflation-based adjustments for subsequent years of the rate period, a major change for composers who have historically been locked into stagnant penny rates for sales, despite the increasing cost of living. Ringtones will remain at the same rate as they were previously, and the money earned for each element of a music bundle will be decided according to the rates for that element.
The new ruling today approves what is known as “Settlement 2,” which was formed by the National Music Publishers’ Association (NMPA), Nashville Songwriters Association International (NSAI), as well as the major music companies: Universal Music Group, Sony Music Entertainment and Warner Music Group earlier this year.
As the name of the settlement implies, there was one that preceded it. In 2021, the same parties proposed “Settlement 1” which would have upheld the long-standing 9.1 cent penny rate for physical goods and permanent downloads. That proposed settlement was sent to the Copyright Royalty Board judges for approval last year, but it triggered backlash among some in the independent writer community.
The 9.1 cent rate has been in effect since 2006 and has not risen with inflation. George Johnson, an independent songwriter who often pushes back against settlements at the Copyright Royalty Board in favor of higher rates, and other interested parties objected to continuing this 9.1 cent rate for another five year period. They also noted other issues with Settlement 1, like the lack of adjustments for inflation, and questioned a memorandum of understanding (MOU) between the major labels and the NMPA, which could have provided waivers on late fees the U.S. Copyright law allows when payment deadlines are missed.
In response to concerns, The CRB judges concluded the proposed settlement did not provide a reasonable basis for setting statutory rates and terms as stated in proposed settlement 1.
For many years, the CRB rate proceedings have primarily focused on achieving fair compensation for streaming rates. In 2021, audio digital services paid out about $1.3 billion to publishers and songwriters, according to data from the Mechanical Licensing Collective.
While sales formats comprise roughly 15% of the recorded music market, the NMPA estimates those formats produce just 5% of U.S. publishing royalties. If streaming continues to grow at its current pace, some say that within three years these sales formats that are covered by the subpart B configurations might only account for 1% of publishing royalties.
The NMPA has also pointed out in the past that rate litigation is expensive — often in the tens of millions of dollars — as a reason why they have focused on fighting for high streaming rates rather than what formats are covered by subpart B, noting that the cost of litigation could end up equaling or outweighing whatever additional money a higher subpart B hike could achieve.
In Friday’s ruling, however, the court notes that the royalties generated by vinyl, CDs, downloads and other formats covered in subpart B “should not be treated as de minimis, or as a ‘throw away’ negotiating chip to encourage better terms for streaming configurations.” They also noted the improvements to Settlement 2 as “distinguishable” from the first proposed settlement.
The event marks the biggest rate increase for songwriters for physical goods and permanent downloads in almost two decades.
Now, just one final step remains: the register of copyrights has to check and make sure this is compliant with the copyright statute, and if approved — which is typical — this will go into effect at the top of the year. However, participating parties also have 30 days to file an appeal to the CRB’s determination.
While the downfall of FTX and the Crypto Winter that saw NFT sales drop 90% dominated Web3 headlines this year, for many creators there was a bigger issue at play. Their royalties have been under attack, undermining a central promise of Web3 as a sustainable model for musicians.
Creator royalties on NFTs ensure that artists get paid a cut of revenue every time their work is sold on a secondary market. As the music NFT market has matured since multi-million dollar sales attracted widespread attention, these royalties have been a central part of the Web3 proposition — presenting musicians with a possible alternative to the major label system and allowing them to generate meaningful revenue over the long term. Only now, that promise is being pulled from under them as several new NFT platforms effectively or explicitly cut out creator royalties — even though it was a core part of the Web3 promise when they originally listed their NFTs for sale — in an aggressive bid for market share.
Even OpenSea, the largest NFT marketplace, briefly considered changing its policy before a deafening backlash from artists forced the company to double down on its commitment to royalties. OpenSea also introduced an “enforcement tool” allowing artists to blacklist rival marketplaces that don’t honor creator royalties. It’s a small win for creators although some have called it a “bandaid” as many growing platforms including Blur, Magic Eden, LooksRare and Sudoswap still do not enforce royalties by default. In some cases it’s a hardline policy, in others the royalty is “optional” allowing traders to opt out of paying the artist when they sell an NFT. Most traders opt out, making the effective royalty rate close to zero.
Creator royalties are the beating heart of Web3 and the primary reason why artists flocked to NFTs in the first place. “Coming from the music world, the promise of being able to earn royalties in perpetuity without the interference of middlemen, was something I could only dream about,” says Illa Da Producer, a 12-time platinum-certified music producer credited on Eminem’s “Killshot” and community lead at Yuga Labs, the company behind Bored Ape Yacht Club. The artist can choose their own royalty rate — typically 2.5% to 10% — and they are lucrative, earning more than $1 billion for creators on OpenSea in 2022 alone.
But there’s a problem. These royalties are not coded directly into the NFTs themselves. They were introduced by marketplaces like OpenSea, originally to attract artists to the space, which means they can be removed just as quickly.
None of this was an issue during the bull-run where cartoon animal JPEGs sold for over a million dollars a piece. Collectors were flush with crypto, happy to pay the artist royalty whenever they made a winning trade. But now the bubble has popped. The price of Ethereum has dropped by 75% and NFT volume is down 90% from the highs in January. NFT platforms are left fighting for market share in a shrinking economy and traders are trying to save as much money as possible.
In a desperate bid to attract users, rival marketplaces like X2Y2 effectively cut out creator royalties by making them “optional” — traders can choose not to pay the artist royalty when they sell their NFTs, therefore pocketing more money from each sale. Other platforms including Blur, LooksRare, Sudoswap and Magic Eden followed a similarly aggressive policy.
Creators were blunt in their criticism. “In many ways, it amounts to theft by the marketplace,” says Jeff Nicholas — founder of WRVPSound, a collection of 9,999 AI music NFTs and the biggest Web3 music project ever by volume at 6,115 ETH (~$7.15 million at current prices) traded, “If a project sets royalties in their terms of service and those royalties are not enforced.”
Nevertheless, it worked. Traders abandoned OpenSea in droves. The platform’s market share dropped from 80% earlier in the year down to 45% in November according to crypto research company Messari. As a result, OpenSea claims that more than $1 million of creator royalties was effectively bypassed in the first week of November alone. At risk of losing even more market share, OpenSea was forced to act quickly, launching a tool that allows artists to blacklist those rival marketplaces.
But there’s a catch. The tool only works for new NFTs. It would not work for the thousands of existing NFTs and projects. The future of royalties on these collections — including the Bored Ape Yacht Club, Doodles and Azuki, was left wide open. In a blog post, OpenSea put all options on the table, including the potential of optional royalties.
The backlash from artists was fierce. “The message to trading platforms like OpenSea is this,” says Gino the Ghost — a Grammy winning producer and founder of Web3 music project Blocktones — “You either stand firm to support the ethos of of Web3 as the creative revolution or you lose the trust and business of the very creatives that make you successful in the first place.”
Many artists spoke out about their fear of losing their livelihood if OpenSea followed through. “I am a transgender teen that escaped an abusive household through the power of NFTs,” wrote Fewocious — a 19 year old digital artist who’s built a massive following in Web3 — in a statement on Twitter. “And there are probably so many more artists, many of whom may not be as fortunate as me, who live off their artist royalties … Please reconsider removing royalties.”
Fewocious’ statement quickly spread across social media, garnering retweets from Snoop Dogg (“Power to tha artists”) and prompting further discussion from industry execs like Lady Gaga’s former manager Troy Carter, “Fucking over creators is very Web2.”
Founders in the space also warned that it would threaten the future of NFT companies, given that many projects rely on royalties to fund their business operations. “None of the top NFT projects you see would be where they are without them,” says Betty — founder of Deadfellaz, an NFT project that partnered with Steve Aoki in October for a Halloween merch drop and has generated more than $37 million in total volume since launching in 2021. “It’s why most of us flocked to this industry and it’s what platforms like Opensea were built on.”
After engaging with the community in several heated public debates, OpenSea clarified its position and promised to enforce creator royalties on all existing collections going forward. Speaking to Billboard, OpenSea admits they could have communicated better during this time. “We own that,” says Shiva Rajaraman, vp of product. However, he affirms that OpenSea has always stood behind artists and, while all options were discussed internally, OpenSea never truly wanted to cut out creators. “Honestly, the idea of just getting rid of creator fees made no sense.” Instead, OpenSea wants to put the power in the hands of creators, he explains. “We should respect, as platforms, that choice that is made [by creators], rather than make that variable.”
Meanwhile, the new on-chain enforcement tool — which Rajaraman describes as a “healthy tension against other marketplaces” — is beginning to work. At least one rival marketplace X2Y2 has backed down and conceded that it will also enforce royalties on all existing collections. OpenSea has since handed over ownership and control of the tool to a collective of several NFT platforms so that the community can be more involved in how it develops.
Artists have mostly responded positively. “This is actually a really good start to enforcing royalties,” says Nicholas. And it’s proof that artists can still make themselves heard, force change and define their terms in the nascent Web3 space. However, he also admits that this solution might just be a “bandaid.” Despite the progress made by artists in the last month, the final decision still appears to be in the hands of the marketplaces.
Some creators are therefore fighting for a complete change to the system. “[We need] a creator focussed and led solution,” says Deadfellaz’s Betty. “We’ve needed to come together for a long time … and work on solutions outside of centralized marketplaces.”
In the meantime, artists and OpenSea do agree that creator royalties should be enshrined as a social and cultural rule, even if they are not always honored by some marketplaces. “If we don’t,” says Nicholas. “Web3 runs the risk of going the same way every other technical innovation has over the last 20-plus years and squeezing the artists and creators yet again.”
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
If the 2010s were the decade that established streaming as the de facto way that most people enjoy music, the 2020s will be the decade the platforms’ royalty rates took a leap forward.
For much of streaming services’ existence, the industry has tried to gently balance the need to foster growth with the need to generate something close to subsistence-level income for creators and rights holders. If rights holders squeeze too tight, they could strangle the life out of the companies they depend on to carry them in a post-CD, post-download world. Too loose a grasp on streaming platforms would mean the spoils of technological disruption would remain with tech companies.
The process requires patience. With social media apps, licensing deals start small, with lump-sum payments rather than percent-of-revenue royalties while the fledgling platform builds a sustainable business model. Because licensing deals are renewed every three years, rights owners endure long waits to secure better terms that will result in more royalties. It will take a few cycles for a platform to generate meaningful royalty income for its label partners.
This year, there were numerous developments that point to better royalty rates in 2023 and beyond. They have different degrees of certainty, however. Higher subscription prices are sure to move the needle and result in higher payouts to artists and labels. Whether artists and labels will finally get paid for terrestrial radio play in 2023 is less certain, although the mood in Washington D.C. seems favorable. And with the authors of Chokepoint Capitalism, Cory Doctorow and Rebecca Giblin, currently making the media rounds, and the Federal Trade Commission cracking down on companies that take advantage of gig workers, the plight of creators in today’s digital economy is getting mainstream attention (my colleague Rob Levine brought attention to tech companies’ value destruction in his book, Free Ride, a decade ago).
Congressional Bill to Get Artists & Labels Paid for Radio Airplay Clears Critical House Vote
12/09/2022
Music subscription price increases
Artists have wanted a raise from streaming services for years. Part of the problem is how royalties are calculated — a pool of money is split according to the number of times the tracks were played. That puts album-oriented artists at a mathematical disadvantage to mainstream artists in popular genres like pop and hip-hop. Another common complaint is that streaming services have barely raised their subscription prices for more than a decade. With prices flat, the best way to improve streaming royalties is to attract more subscribers. Keeping subscription fees relatively affordable, especially when Netflix and other video streaming services routinely hiked their prices, ensured customer acquisition would continue. Affordable family plans, which cover up to six people for 50% more than an individual plan, helped attract customers and reduced churn — but didn’t help artist payouts. Finally, this year Amazon, Deezer, YouTube Premium (which includes YouTube Music) and Apple Music announced broad price increases to individual and family plans. Spotify has hinted it will follow with price hikes of its own in 2023. The financial impact could be massive: A modest increase of $1 per month for individual plans and $2 per month for family plans in mature markets — less in developing markets with lower prices — would easily generate many hundreds of millions of incremental subscription royalties, which totaled $12.3 billion in 2021, according to the IFPI.
A TikTok subscription service
TikTok doesn’t pay much in royalties, but it plays an outsized role in cultural trends — the app has over 1 billion active users and is especially popular with Gen Z consumers. That has changed the balance of power in music streaming. “The major streaming platforms are reacting to culture now rather than driving it,” Tatiana Cirisano, music industry analyst and consultant for MIDiA Research, recently told Billboard. In that light, news that TikTok is working to expand its Resso subscription service (it’s available only in Indonesia, Brazil and India) is a big deal. Currently, TikTok creates impressions and demand for music that has downstream effects on other platforms — see a TikTok video, listen to the entire track at Spotify, YouTube Music or Apple Music. But if TikTok owned both the short-form video platform and the subscription platform, it could better convert that initial interest into downstream listening while eroding the influence of the Spotifys and Apple Musics of the world. More importantly, a TikTok subscription service would help change TikTok’s status as a royalty underperformer.
Subscription streaming rates
Publishers and songwriters will get a slight raise in subscription streaming royalty rates over the next five years due to a settlement reached in August by the National Music Publishers’ Association, the Nashville Songwriters Association International and the Digital Media Association. The headline royalty rate will go from 15.1% of revenue in 2023 to 15.35% in 2027. That’s not a huge gain, but it’s an improvement. The settlement could help in other ways, too. Streaming services were able to get favorable terms for bundles and free trials that allow them to get more subscribers into the ecosystem. That would help songwriters and publishers by increasing the number of subscribers — the major driver in streaming royalty growth — as they enjoy modest annual increases in royalty rates.
Inflation adjustments to noninteractive streaming rates
Each year, the rate paid by noninteractive streaming platforms in the U.S. is adjusted to account for inflation over the previous year. In 2023, artists and labels will get a raise due to inflation rates that reached a 40-year high in 2022. (The rates increased 7.1% for subscription plays and 9.1% for ad-supported plays.) In years past, noninteractive streaming services such as Pandora were a more significant part of artists’ and labels’ incomes. That gave extra weight to the decisions of the Copyright Royalty Board and changes in the per-play streaming rates. Now, on-demand services like Spotify and YouTube dominate the streaming landscape and noninteractive webcasting has diminished in value and relevance. Still, Pandora’s ad-supported listening hours fell only 5% year over year in the third quarter of 2022 — to 2.75 billion — and it paid out $921 million in royalties in the first nine months of the year. Above all, a raise is a raise.
Terrestrial radio royalties
Legislation that would pay artists and labels for airplay on U.S. terrestrial radio was passed by the House Judiciary Committee on Wednesday (Dec. 7). With only a month left in the current Congress, Rep. Jim Jordan, ranking member of the House Judiciary Committee, said he’s confident the bill could make it through the next Congress (that could be 2023 or 2024). While this isn’t the first legislation to address the lack of a performance right, the AMFA arrives at a time when lawmakers — in D.C. and elsewhere — have taken an interest in creators’ ability to make a living in the streaming age. Outgoing House Judiciary Committee chair Jerry Nadler has shown concern about a “race to the bottom” in streaming royalties, for example, and U.K. lawmakers examined the equitableness of streaming royalties paid to artists in that market. Passage of an AMFA-like law, or a settlement with radio broadcasters, would be a huge coup for artists and labels who get only promotion from radio airplay while radio stations are obligated to pay songwriters and publishers. In fact, U.S. radio royalties would be two — not one — new stacks of money. That’s because the lack of a performance right for broadcast radio in the U.S. means European countries withhold royalty payments from American artists for performances on their soil, SoundExchange CEO Michael Huppe explained in a recent Billboard op-ed.
The American Music Fairness Act (AMFA), which would require AM/FM stations to pay performance royalties to music creators and copyright holders for radio airplay in the U.S., just cleared a key hurdle in Congress — though the bill is unlikely to pass before the new session of Congress convenes in January.
In a mark-up session on Wednesday (Dec. 7), the House Judiciary Committee (which deals with copyright matters) voted to advance the bill, clearing its way for a full vote on the House floor. To become law, the bill would need to be approved by the full House of Representatives as well as the Senate and then signed into law by President Biden. However, the proposed legislation is unlikely to pass in the current session of Congress, which is drawing to a close at the end of the month, unless it’s tacked onto a must-pass bill during the lame duck period.
In an opening statement prior to the vote, Judiciary Committee ranking member Jim Jordan (R-Ohio) noted that bipartisan negotiations over the AMFA in recent months “stalled and never reached a resolution,” though he expressed confidence the bill could make it through the next Congress.
“While today’s debate is an important start in this conversation, if the American music Fairness Act has not become law this Congress, negotiations must resume next year,” Jordan said. “We believe there’s a deal to be struck here that is fair to all sides most importantly, fair to taxpayers and consumers.”
The AMFA is just the latest attempt by members of Congress to compel radio stations to pay performance royalties, which is a common practice in other countries but has not historically been required in the U.S. In Nov. 2019, Sen. Marsha Blackburn (R-TN) and Rep. Jerrold Nadler (D-NY) introduced a similar bill, the Ask Musicians for Music Act, which would have allowed artists and copyright owners to negotiate performance royalty rates with radio stations in exchange for permission to play their music. That piece of legislation followed a previous bill, the Fair Play Fair Pay Act — also introduced by Blackburn and Nadler — that set out to achieve the same goal.
The AMFA was introduced in the House by Reps. Ted Deutch (D-FL) and Darrell Issa (R-CA) in June 2021, with the legislation announced during a press conference attended by singers Dionne Warwick and Sam Moore and Dropkick Murphys singer/bassist Ken Casey. A companion bill was introduced in the Senate by Sens. Alex Padilla (D-CA) and Marsha Blackburn (R-TN) this past September.
Unlike satellite/online radio and streaming services, AM/FM stations pay only songwriter royalties on the music they broadcast. To rectify that, the AMFA legislation would establish fair market value for radio performance royalties in the same way it has been for those other platforms.
The bill was a response to the Local Radio Freedom Act, a non-binding resolution introduced in May 2021 by Rep. Steve Womack (R-AR) and Rep. Kathy Castor (D-FL) that opposes the imposition of a performance royalty, which proponents argue would be financially devastating for broadcasters. A companion resolution was introduced in the Senate by Martin Heinrich (D-NM) and John Barrasso (R-WY). Both resolutions are backed by the National Association of Broadcasters (NAB), which has long been opposed to enforcing a performance royalty payout on terrestrial radio.
In a statement on Wednesday’s vote, Recording Academy CEO Harvey Mason jr. called it “an important step,” adding, “I am grateful to Chairman Nadler, Rep. Issa, and members of the committee for supporting the music community’s right to fair pay. It is vital to the health of our industry that creators are compensated for the use of their intellectual property on terrestrial radio, and the Recording Academy will continue to advocate for AMFA until this bill is signed into law.”
The Recording Academy is a key supporter of the AMFA along with organizations including the AFL-CIO, the American Association of Independent Music (A2IM), the American Federation of Musicians, the Recording Industry Association of America (RIAA), SAG-AFTRA, SoundExchange and the musicFIRST Coalition. Over the past several weeks, more than 100 artists including Warwick, Common, Harry Belafonte, Jack White, Becky G, Cyndi Lauper and Gloria Estefan have signed their names to a letter urging lawmakers to support the bill.
“To be clear, this fight is far from over,” said musicFIRST chairman and former Democratic congressman Joe Crowley in a statement. “We still have further to go before this important bill can be passed into law and improve the lives of artists across this country, and we know that Big Radio corporations will continue to oppose us every step of the way.”
In his own statement celebrating Wednesday’s vote, SoundExchange president and CEO Michael Huppe called on the full House to pass the bill. “Tens of thousands of music creators – our family, friends, and neighbors – are counting on Congress to do the right thing and help them get paid for their work. We cannot let them down,” he said.
On the other side of the issue, NAB CEO and president Curtis LeGeyt thanked the committee members who voted against advancing the AMFA, along with members of Congress who have supported the Local Radio Freedom Act resolution that stands in opposition to the bill.
“These lawmakers understand that AMFA will harm local broadcasters and audiences around the country, undermine our ability to serve their communities and ultimately fail artists by leading to less music airplay,” said LeGeyt. “Broadcasters urge the recording industry to join us in serious discussions instead of using the few legislative days left in the calendar to pursue divisive legislation that faces broad congressional opposition.”
In a year historically high inflation has wreaked havoc on the costs of both touring and producing music, musicians and record labels received a bit of reprieve — thanks to high inflation.
The Copyright Royalty Board, which sets royalty rates for some streams in the United States, announced on Dec. 2 that per-stream rates for noninteractive webcasters’ streams will take a big jump in 2023: commercial webcasters will pay 0.3 cents per stream for subscription performances, up 7.1% from 0.28 cents in 2022, and 0.24 cents per stream for ad-supported performances, up 9.1% from 0.22 cents. Non-commercial webcasters’ per-stream royalty rate for 2023 is 0.24 cents for all digital audio transmissions in excess of 159,140 aggregate tuning hours in a month on a channel or station.
The CRB’s calculated the adjustment by multiplying the base rate by the percentage change in the CPI-U published by the Bureau of Labor Statistics before Dec. 1, 2022 (298.012), and the CPI-U for Nov. 2020 (260.229). In 2015, the CRB decided to add an annual cost-of-living adjustment to royalty rates paid for plays of programmed streams for 2016 to 2020. The rates for the current period, 2021 2025, are also adjusted annually. Previously, the CRB established a slate of increasing rates for a five-year period and did not revisit the rates annually.
Artists are ensured to feel the bump in royalty rates because webcasting royalties are paid by streaming services to SoundExchange, which distributes payments directly to performing artists from noninteractive webcasters such as Pandora. In contrast, on-demand services cannot operate under a statutory license and must secure licensing agreements from record labels. So, royalties from on-demand services such as as Spotify and Apple Music are paid directly to labels, which in turn pay artists according to the terms of the recording contract (or don’t pay artists if expenses have not been recouped).
A raise from noninteractive webcasters affects only a minority of an artist’s digital revenues, however. SoundExchange distributions – which also include royalties for performances by satellite radio and cable broadcasters — in the first half of 2022 declined 4.5% year over year to $464.9 million, according to the RIAA. That was about 7.2% of total streaming royalties, down from 34.4% in 2016. Today, most streaming royalties come from paid subscription services, which accounted for $4.5 billion of revenue in the first half of the year and are growing at nearly at double-digit rate.
Still, noninteractive streaming royalties have risen considerably over the years thanks to the cost-of-living adjustments. In 2016, a webcaster such as Pandora paid out 0.22 cents per stream for subscription plays and 0.17 cents for ad-supported plays. Low inflation meant the rates increased only once over the next five years. A new slate of rates for 2021 to 2025 brought the rates to 0.24 cents for subscription plays and 0.21 cents for ad-supported plays in 2021. The cost-of-living adjustments for 2022 took the rates to 0.28 cents and 0.22, respectively.
In the latest example of a stellar synch bringing in a surprise windfall, The Cramps‘ 1981 psychobilly classic “Goo Goo Muck” has become a breakout hit over the past couple of weeks.
Since Netflix’s new Addams Family spinoff Wednesday debuted on Nov. 23, including the series’ titular heroine performing dance sequence set to “Goo Goo Muck”, the track has taken off on streaming services.
In the week following the show’s release, from Nov. 25 to Dec. 1, The Cramps’ “Goo Goo Muck” was streamed on-demand over 2 million times in the U.S. — a more than 8,650% increase from the average 47 weeks before this year. That adds up to $11,089.85 in a single week for the Capitol Records master recording and $2,492.33 in publishing, according to Billboard estimates.
Those numbers dwarf the rest of the song’s 2022 activity — until the Wednesday dance sequence came out, “Goo Goo Muck” this year had generated a total of $130.21 per week for the master and $32.28 for the publisher. Thanks to the Wednesday synch, The Cramps’ “Goo Goo Muck” earned in total almost 78% more money in a single week than it had for the entire year.
“It’s a really amazing, fun little bonanza,” Jim Shaw, a member of the late country legend Buck Owens‘ Buckaroos, who happens to own the publishing, told Billboard last week.
Early streaming activity suggests “Goo Goo Muck,” a cover of a 1962 single by Ronnie Cook and the Gaylads, could potentially follow Kate Bush‘s renaissance when her minor 1985 hit “Running Up That Hill” landed in Stranger Things and turned into a smash. “Goo Goo Muck” had 2,500 daily on-demand streams as of Nov. 22; by Dec. 1, the track jumped to more than 209,000 daily streams, according to Luminate.
The streaming boost for “Goo Goo Muck” is a bonus on top of the upfront synch fee — the amount of which is unknown — that would have been paid on both the master recording and the publishing for the song.
Capitol reps did not respond to an interview request, but Shaw, who runs the Buck Owens Foundation, said he scored the publishing rights after the original publisher, Dave Bell, felt guilty about owing his friend Shaw “a couple thousand dollars” and offered the song instead. (Bell, who died in 2013, owned a recording studio, label and publishing company in his hometown of Bakersfield, Calif., and put out Cook’s original version of “Goo Goo Muck.”)
“It hasn’t really done much until recently,” Shaw says. “That’s what every songwriter, and publisher, hopes will happen. Anything they put on YouTube, they hope something goes viral.” If “Goo Goo Muck” goes full Kate Bush? “Well,” Shaw says. “[It] wouldn’t break my heart.”
A federal judge says he won’t undo his ruling that Slacker owes nearly $10 million in unpaid music royalties to SoundExchange, seemingly unmoved by the streamer’s warning that the ruling will have a “devastating” impact on the company’s finances.
SoundExchange claims Slacker’s parent LiveOne has failed to pay royalties for years, and last month won a ruling requiring the streamer to hand over $9,765,396. Slacker said last month that the huge judgment could trigger financial ruin for the company – a warning SoundExchange urged the court to disregard.
In a decision issued Wednesday, Judge André Birotte Jr. did exactly that. He ruled that the seven-figure judgment was simply the result of an agreement that Slacker itself had signed – and noted that the streamer was not actually legally disputing the terms of that deal.
“Defendants cannot argue that the judgment is a result of ‘excusable neglect’ or that it is ‘without fault,’ when the judgment was entered pursuant to stipulation that defendants negotiated for and assented to,” Judge Birotte wrote. “Because Defendants signed the stipulation, and in fact do not dispute the amount of money Plaintiff is entitled to, the court finds the judgment is fair, adequate, and reasonable.”
SoundExchange, which collects performance royalties for sound recording copyrights, sued LiveOne in June, claiming the company had stopped paying artists and labels way back in 2017. And it claimed that a subsequent audit revealed it had been underpaying for years before that.
Court records show the two sides entered into the repayment plan in 2020, which gave Slacker two years to pay off its debts. But in the June lawsuit, SoundExchange claimed that Slacker had quickly failed to live up to the terms of the agreement.
“By refusing to pay royalties for the use of protected sound recordings, Slacker and LiveOne have directly harmed creators over the years,” SoundExchange president and CEO Michael Huppe said at the time. “Today, SoundExchange is taking a stand through necessary legal action to protect the value of music and ensure creators are compensated fairly for their work.”
Just a few months into the litigation, SoundExchange played an unusual legal trump card. On Oct. 12, the group invoked a so-called consent judgment, which had been inked and pre-signed by execs at Slacker back in 2020 as part of the repayment plan. Under the terms of that earlier deal, if Slacker ever defaulted again, its executives agreed that a judge should enter a so-called judgment against the company for the full sum owed.
On Oct. 13, Judge Birotte did so, ordering the Slacker to pay $9,765,396, which covered both unpaid royalties and late fees. He also permanently barred the company from using the so-called statutory license, an important federal provision that makes copyright licenses for recorded music automatically available to internet radio companies like Slacker and Pandora at a fixed price.
A week later, Slacker asked the judge to overturn his own ruling, saying it had been procedurally improper. To support the request, Slacker warned the judge had quickly caused other creditors to call in other debts owed, threatening “economic damage” to the company that would be “unsustainable.”
“Plaintiff’s surreptitious request for entry of judgment has triggered LiveOne’s default on two substantial senior secured notes which are secured by all of LiveOne’s and their subsidiaries assets,” the streamer wrote.
SoundExchange urged the judge to deny the request, saying it had spent years “indulging” the company’s “many excuses for non-payment,” and that it had simply become time for the streamer to be legally forced to pay up: “Five years is long enough.”
In Wednesday’s decision, Judge Birotte sided with SoundExchange, ruling there was no legal wiggle room for Slacker to challenge an agreement signed by its own executives. The judge said that unless there is proof of “fraud or misconduct” – and there is none – there was no reason to undo the ruling. And he was unmoved by the company’s warnings of economic ruin.
“Defendants argue that the ‘repercussions will be devastating to LiveOne, its employees, and to its creditors,” the judge wrote. Defendants, however, have failed to explain what balance is actually due, whether defendants’ creditors have elected to require immediate payment, or how the repercussions will actually impact its business or livelihood.”
A representative for Slacker parent LiveOne did not immediately return a request for comment on the decision.
Read the entire decision here: