for their repertoire and once they had arrived at some sort of agreement with the record companies , then they came to the music publisher and songwriter side and said , ‘ Well , there ’ s really nothing left over so you ’ re just going to have to be satisfied with the crumbs that are left on the table .’ So , from a timing perspective , there was definitely some disadvantage to the process and I think that we ’ ve been afflicted by that reality ever since .”
On SOCAN ’ s side , Brown seems to be on the same page as Rioux , noting she doesn ’ t feel there is a justifiable reason for the large gap between the publisher / songwriters ’ share and labels ’. “ Again , there isn ’ t much transparency on it . We do know that the labels do have a large percentage and that ’ s been one of the big arguments that a lot of the big publishers have been making , especially in the U . S ., about the discrepancy between the recording and the value of their recording and the value of the work and that they should be more on par ,” Brown says . “ I think it may just be historical or may just be the fact that , again , the labels are negotiating directly and they ’ ve got the recordings and then publishers and the creators were under a different process of going and having very open tariff hearings so both sides see all the data and can exchange the information and we ’ re getting the rates that are published by the copyright board .”
Speaking for the labels , Music Canada Executive VP Amy Terrill responds that “ I think it really does come down to the level of investment . At the same time , we don ’ t try to get in public arguments with the publishers . It ’ s not healthy for the industry . We believe that we need to work together to grow the pie for everybody .”
Growing the pie for everybody is admirable , but let ’ s remain focused on who is getting what slice of the current pie . Artists ,
you may have heard , are not happy with the size of their slice . Spotify especially , being the largest on-demand service , has received a hailstorm of criticism by the likes of Thom Yorke and Taylor Swift for what they feel are meager royalties for artists that devalue their music . But is that fair ?
Like we mentioned , an artist ’ s share of streaming royalties is determined by their record contract , not by the streaming service . As well , while Spotify took in US $ 2.2 billion in revenue last year , it still lost US $ 193 million . It actually increased its year-overyear losses by 6.7 per cent . The comparable financials for Apple Music and Google Play Music are not available but it ’ s unlikely they ’ re turning a profit for their parent companies . How is it possible to earn $ 2.2 billion and lose $ 193 million ? Because Spotify has astronomical operating costs , the largest of which are its payments to music rights holders . As well , Spotify isn ’ t a philanthropic organization ; it ’ s a corporation . It ’ s unrealistic to expect it to pay more than it needs to simply because it “ values ” music . It ’ ll pay what the tariffs and negotiated contracts dictate and nothing more . ( Another side note , Spotify is currently renegotiating its long-term distribution agreements with all three major labels .)
“ We haven ’ t done an analysis the way SNEP has , but the IFPI is a pretty good source for some of this information ,” says Terrill at Music Canada . The IFPI also commissioned an internal report breaking down on-demand streaming revenue and gave Music Canada permission to share that information with Canadian Musician . The Europe-based IFPI ’ s report , Terrill says , looked at what portion of a € 9.99 monthly subscription fee for an on-demand service goes where . They found that publishers / songwriters get € 0.98 of the € 9.99 , the artist gets € 1.35 , and the labels get € 3.14 , with the remaining € 4.52 going to the service and taxes . Keep in mind part of the IFPI ’ s job is to advocate for music labels .
“ So on the surface of that , it does look like labels get a lot more in terms of the revenue share , but then if you break down the costs and apply the typical costs for a label for the marketing and promotion and the recording , artist advance , sales and distribution , etc ., what the label would retain as net income is 53 cents . So that breaks down
LAWYER & AUTHOR PAUL SANDERSON
to about five per cent of what the consumer has paid in a monthly streaming subscription . Five per cent is what the label is able to retain ,” says Terrill . “ So it is just recognition of the amount of investment they ’ re putting in and I think that is the difference .”
That labels should receive the largest share of the payouts because they invest the most in music is a fair argument , but artists still need to make a living . The labels ’ majority share of payouts includes the royalties they pay on to their artists and the value of those royalties is determined by the artists ’ record contracts .
What those record contracts look like with regards to streaming royalties has become a bone of contention between artists and the labels . What ’ s interesting is that in record contracts , streaming royalties are not separated from physical and digital download sales even though nothing is being “ sold ,” per se . This is important because the label / artist split of revenue from “ sales ” versus “ licensing ” is often very different . It is all dependent on negotiations , of course , but the typical major label record contract dictates that the split of licensing revenue is 50 / 50 between the artist and label while the split of sales revenue is weighted heavily in favour of the label .
Indie labels often , though not exclusively , negotiate what are called “ net receipts deals ” with their artists , which typically means there is a 50 / 50 split of all revenue , sales included . Major labels , on the other hand , negotiate based on PPD ( purchased price to dealer ), which is the wholesale unit pricing of a recorded work used to negotiate royalties and necessitates the separation of licensing and sales .
Safwan Javed has been privy to many record contracts as an entertainment lawyer for Taylor Klein Oballa LLP , and as a songwriter and drummer for Wide Mouth
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