CMU Insights Seminar: Digital Dollars & Song RoyaltiesDIGITAL LICENSING: SONG RIGHTS Once the labels...

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CMUINSIGHTS

DIGITAL DOLLARS & SONG ROYALTIES


THE DIGITALMARKET


THE SHIFT TO STREAMS

STREAMS(subscription & ad-funded)

CD DOWNLOAD(a la carte)

This shift from CD to download to stream is still ongoing…


THE SHIFT TO STREAMS: RECORD INDUSTRY REVENUES

This shift from CD to download to stream is still ongoing…

•2018 IFPI FIGURES

PHYSICAL DIGITAL

STREAMCD

3.6%vinyl

21.4%CD

12%download

47%streaming

14%broadcast& public

peformance

2%sync



STREAMS(subscription & ad-funded)

CD DOWNLOAD(a la carte)



£§ The streaming boom has

resulted in the record industry going back into growth following fifteen years of steep decline.

§ Premium streaming is behind most of the growth.

§ This boom means streaming income is increasingly important to songwriters and publishers as well.


THE GLOBAL STREAMING SERVICES


THE KEY REGIONAL STREAMING SERVICES


DISSECTING THE DIGITAL DOLLAR

The way the streaming services are licensed and digital royalties calculated each month is complex.

For five years now Music Managers Forum UK and CMU Insights have been helping artists, songwriters and their managers navigate and understand the streaming business through a series of Dissecting The Digital Dollar reports and guides.


DIGITALLICENSING


DIGITAL LICENSING

The streaming services are obviously streaming recordings of songs – so they are exploiting both recording rights and song rights.

Copyright law generally doesn’t specifically define a ‘stream’ – but it has been decided that a stream exploits both ‘mechanical rights’ and ‘performing rights’ at the same time.


DIGITAL LICENSING

With physical product, the label would acquire a licence covering all rights in all the songs featured on each record – usually relying on a collecting society or compulsory licence.

In digital, it has generally been agreed that it is the digital platform’s responsibility to license all song rights – labels do not get involved.


DIGITAL LICENSING: RECORDING RIGHTS

This means streaming services need to do two sets of deals – recording deals and song deals.

On the recordings side these deals are done by record labels and music distributors.

Once each deal is done, the label or distributor will upload their recordings to the service.


THE MAJORS + THEIR DISTRIBUTORS

LABEL

DIGITAL DEALS: RECORDING RIGHTS

ARTIST

STREAMING SERVICE

ARTISTS VIADISTRIBUTORS

INDIES VIA MERLIN

LABEL

INDIES VIADISTRIBUTORS

LABEL


DIGITAL LICENSING: SONG RIGHTS

Once the labels and distributors start uploading their recordings, the digital service is nowalso streaming a lot of songs.

The digital service actually doesn’t know which specific songs it is streaming let alone who owns those songs in each country – so ideally it needs to license ALL songs to ensure it is covered.



The easiest way for this to be achieved would be if the songs industry offered the digital services a blanket licence via each country’s collecting society – as it does with radio etc.

Each society would then license both its own members’ repertoire and the repertoire of all the other societies it has reciprocal deals with,but only in its home country. .



1. In some countries there are separate societies for mechanical and performing rights.

2. In some countries there is no conventionalsociety administrating mechanical rights.

3. The big publishers decided they wanted to license Anglo-American repertoire through direct deals.

However there are issues with this approach:



4. Unlike most traditional licensees many digital services aspire to be global operations.

5. Services want to do as few deals as possible,territory by territory licensing is unattractive.

6. European societies came under pressure from regulators to offer multi-territory licences.




7. There are inefficiencies with allowing other societies to administer your rights.

8. Processing streaming income is complex and not all societies are necessarily up to the job.

9. Artists and writers are demanding faster payments and more transparency.




As a result, there is now a mixed approach…

• Some direct licensing by publishers.

• Some multi-territory licensing by societies.

• Some reciprocal licensing by societies.

• Sometimes MR and PR licensed separately.

• Some societies collaborate via copyright hubs.



But the service still needs to cover all songs,so must complete a licensing jigsaw.

LOCALCMO

PUBLISHER

PUBLISHER

PUBLISHER

PUBL

ISH

ER

CMO

CMO

CMO

CMO

HUB


PRO

DIGITAL DEALS: SONG RIGHTS

SONGWRITER

PRO PRO PRO PRO PRO

STREAMING SERVICE


PUBLISHERPUBLISHER

STREAMING SERVICE


SONGWRITER

PUBLISHER PUBLISHER PUBLISHERPUBLISHER


PUBLISHER PUBLISHER

STREAMING SERVICE


SONGWRITER

PUBLISHER PUBLISHER PUBLISHER PUBLISHER

POLARIS ICE


STREAMING SERVICE

COMPLICATIONS: SEPARATE SOCIETIES IN ONE TERRITORY

SONGWRITER

Though those separate CMOs may collaborate

PUBLISHER

And then you have the problem that is the USA

PUBLISHER

?

Separate CMOs for performing and mechanicals

PUBLISHER


STREAMING SERVICE

COMPLICATIONS: SEPARATE SOCIETIES IN ONE TERRITORY

SONGWRITER

Though those separate CMOs may collaborate

PUBLISHER

The MMA should havesolved the issues in the US

PUBLISHER

Separate CMOs for performing and mechanicals

PUBLISHER


STREAMING SERVICE

COMPLICATIONS: DIRECT DEALS

SONGWRITER

Publisher provides mechanical rights

for the songs in its Anglo-American catalogue- with co-writes only its % of the copyright

CMOs provide accompanying performing rights

via the reciprocal agreementsof the publisher’s partner CMO

Publisher forms JV with a CMO – called a SPV

Publisher negotiates deal – subject to approval of partner CMOs


STREAMING SERVICE

LICENSING PUBLISHING RIGHTS TO DIGITAL

SONGWRITER

LOTS OF CMO DEALS

THE CMO HUBS

ALL THE OTHER CMOs

PERFORMING RIGHTS MECHANICAL RIGHTS

PUBLISHER

SOME DIRECT DEALS

CMOs


THE DIGITALDEALS


LABEL / MUSIC PUBLISHER / CMO

RevenueShare

Advance ???

Equity ???

Fees ???Minima

Guarantee

THE DEAL


LABEL: revenue share of 50-60%

THE DEAL

§ Most important components of deal: Revenue Share + Minima

§ Every deal is different, and these rates usually secret.

§ Although, generally…

PUBLISHER/CMO: revenue share of 10-15%

§ Currently ‘revenue share based on service-wide consumption share’.


HOW ROYALTIES ARE DISTRIBUTED EACH MONTH

TOTAL REVENUE

20% OF TOTAL CONSUMPTION

20% OF TOTAL REVENUE

PAYMENT

If a label’s catalogue accounted for 20% of total consumption, 20% of revenue is allocated to that catalogue.

That money is then split with the label,according to its revenue share agreement with the service.


PROCESSINGTHE MONEY


PROCESSING THE MONEY

§ Remember: the streaming services do not know what songs are being streamed or who owns those songs.

§ When they upload new content, the record companies only provide meta-data for the recording – ie the ISRC.

§ They may now provide some songwriter information,but no ISWC or ownership split information.

§ There is no global publicly accessible industry-widedatabase matching ISRCs to ISWCs.


HOW STREAMING ROYALTIES ARE PROCESSED

CONTENT ROYALTIES DATA ROYALTIESINVOICE

RECORD LABEL/DISTRIBUTOR

STREAMING SERVICE

ARTIST

PUBLISHER/CMO

RECORDING RIGHTS PUBLISHING RIGHTS


MATCHING WORKS

THE RECORDING

THE SONG


MATCHING WORKS

ISRC

ISWC


PROCESSING THE MONEY

§ Many publishers and societies outsource this work to…

§ So, as a rights owner you have to decide…

ANOTHERSOCIETY

A COPYRIGHTHUB

A SPECIALISTCOMPANY

WHO DOESTHE DEAL?

WHO CONTROLSTHE DATA?

WHO PROCESSESTHE ROYALTIES?


INTRODUCING THEROYALTY CHAINS


ROYALTY CHAINS

§ Once deals are done money is paid each month by the streaming services to all of its licensors.

§ That money will pass along a ‘royalty chain’ from the streaming services to the songwriter.

§ Because of the mixed approach to licensing, different income will pass down different royalty chains.

§ Depends on service, country and repertoire, and mechanical rights v performing rights.


SOCIETY DEAL ROYALTY CHAINS



PUBLISHER DEAL ROYALTY CHAINS



EXTRA LINKS IN THE CHAIN



MULTIPLE CHAINS FOR SINGLE STREAMS

MR

PR (P)

PR (W)



WHAT IS HAPPENING AT THE FIRST LINK IN THE CHAIN?

MR

PR (P)

PR (W)



MAPPING THE ROYALTY CHAINS

§ The flow of digital income on the song side is complex.

§ Songwriters are often in the dark about what royaltychains are being employed for their income.

§ Their income might actually flow down multiple chains,even for a single stream from a single service.

§ Inefficiencies can lead to delayed, reduced or lost income.

§ Songwriters and their teams need to understand what chains are being employed and check money is flowing.


DIGITAL DOLLARDEBATES


THE DIGITAL PIE DEBATE

*Artist and writer share dependent on label and publisher deals

RECORDING DSPSONG

LABEL ARTIST

PUBLISHER SONGWRITER

Are these splits fair? If not, how do you go about changing them?


PERFORMING/MECHNICALS SPLIT

PERFORMING RIGHTS MECHANICAL RIGHTS UK

FI/NO/SE

DN

Particularly important for Anglo-American repertoire.

But often affects payment terms in other countries too.


SHOULD WE SHIFT TO A USER-CENTRIC DISTRIBUTION APPROACH?

CC’s SUBSCRIPTION MONEY

20% OF CC’s CONSUMPTION

20% OF TOTAL OF CC’s SUBSCRIPTION MONEY

PAYMENT

This time the money is split and allocated based onthe consumption of each individual subscriber.

The revenue share agreement is then applied to allocationsfrom each individual user’s subscription money.


THE END

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CMU Insights Seminar: Digital Dollars & Song RoyaltiesDIGITAL LICENSING: SONG RIGHTS Once the labels...

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