By: Tony Vineberg

Tony Vineberg — Fri, 06 Nov 2015 11:02:13 +0000

Dear Communia,

I’m a pro musician for over 30 years. I have played with many Grammy, Latin Grammy, Emmy and Billboard artists, at major festivals and venues in Europe, Latin America and the U.S.
During the last 3 years ,while preparing to enter professional pop and r & b songwriting, and becoming somewhat familiar with the music licensing construct, it became clear that despite the many contacts I have with top producers, arrangers and players, there is almost no revenue to music creators. I am hoping for the real actions to be taken by the U.S. Congress to reform copyright law for music creators , as their work is the quintessential driving force of the industry and the other parts involving licensing cannot function without the songs.

Chairman Goodlatte and Ranking Member Conyers issued the following statement on the upcoming copyright review listening tour:
“America’s copyright industries – movies, television programming, music, books, video games and computer software – and technology sector are vitally important to our national economy. The House Judiciary Committee’s copyright review is focused on determining whether our copyright laws are still working in the digital age to reward creativity and innovation in order to ensure these crucial industries can thrive.
“In the coming weeks the House Judiciary Committee will conduct several roundtable discussions to hear directly from the creators and innovators about the challenges they face in their creative field and what changes are needed to ensure U.S. copyright law keeps pace with technological advances.”

In the music industry, Royalty and Rate court, arbitrators, and the like, have not only failed small actors miserably for well over half a century by condoning and perpetuating a revolving door of exploration, grievous from the onset, and catastrophic in recent years to creators, but by allowing the existing non-free market, entitlement system of large, anti-competitive players and suppression of small actors, opportunity for far greater economic growth than what oligopoly could provide has been wasted, vast potential through abundant technology is inaccessible to the many independent actors within creative communities across the nation, and instead has simply amounted to an all-you-can-eat free buffet with creators footing the bill; economically benefiting only a handful of corporations which have nowhere near the capability of creating jobs that the widespread independents would have under non-oppressive conditions.

A nation’s culture treasures are among its greatest forms of advertisements. How do you estimate the worth of the Pyramids in Egypt or Stonehenge? Are they valued at the pile of rocks they’re made up of? Even to non-visitors they have profound effect on promoting the countries which produced them. And when we want to understand an account culture for which there is no exosomatic record of events, we study the art. The art tells the story of the people and the times they were in. We understand art in a context of formal and social and historical setting because music creators and artists don’t come out of a vacuum. They would not have come into being in the way they did without the scenes they came from. Every region, every city that came to be famous had a scene, not just a few musicians, but a primordial soup of artists, from those at the very top and those aspiring to that level, competing, exchanging ideas, learning from each other.

Work song, spirituals, Mississippi, Texas, New Orleans, Kansas City, territory bands, honkey tonk, Appalacians, Bluegrass, the railroad , race records, Louisiana, cajun, chitlin , polkas, powwows, klezmer, big band, dance music, bebop, Chicago, Memphis, Detroit, independent labels, Sun, Chess, Stax, Motown, New York, L.A., Nashville, Miami, Atlanta, Seattle, the Northeast, the South, West coast; each one a branch on the tree of American music. Jazz, R & B and Western Swing influencing music of Latin America and the West Indies. Big bands inspired Europeans over radio in world wars .They listened and understood what America represented and represents: Independent thought. Diversity. Cooperation. Progressiveness. Democratic values. Music is the international ambassador, which greets every person where he lives, where he works, in his heart , in his memory, marking the events of his life. European music creators later started and are top creators and performers of many electronic music styles. And many of the top songwriter-producers in pop and r & b styles today are from European, and it came from the U.S.. No country in the 20th Century, and the early part of this one, has been more of a messenger of musical creativity, provider of musical memories connected to the spectrum of our experiences than America. How many countries would like to claim America’s musical accomplishments? All would, and just as the pyramids or great artistic achievements of nations, it’s part of what makes those cultures and countries revered.

Core
Overall, the pay earned by music creators is by the licensing of their work, work-for-hire representing a supplement. There are about 66 different types of licenses for situations where music is used. Due to early industry challenges in the U.S., of collecting revenue through licenses, and potential threat of collective influence and exertion by individual creators, on the industry and public, the U.S. government allowed large, categorically anti-competitive performing rights organizations, ASCAP and BMI, to operate as artist-revenue collection intermediaries, as well as large and overbearing major record labels to function in a non- “free market” style. U.S. government mandated, -and still does – percentages to the various parties within each particular use of licensed music, and places uncommon limits on creators’ ability to control their rights under these licenses. In fact, songwriters are still not even allowed to organize as a union in the U.S.

The significance of each of the roughly 66 music licenses has changed over time, in terms of revenue yield, and continues to do so. However, U.S. government’s pre-determined, fixed-percentage scheme is not capable of tracking up-to-date value of actors within licenses. Some licenses being less significant now than before, some being far more significant, make this pre-constructed scheme increasingly harsh for creators whose revenues are displaced to new-key licenses, but without an accompanying legal provision for creators to negotiate percentages and terms within them. Lack of transparency in the long-empowered anti-competitive construct has manifested in major label manipulation, leveraging, payola, and ongoing nefarious dealings.

Rate and royalty court have been the fall-back setting for deeper disputes between parties for many decades. But, at every turn, large corporate actors have had the obvious advantage of size, influence, U.S. government favour and its legal precedent. The outcomes produced through lengthy process have also come at a high legal cost to small actors, and for creators have provided little more than extremely minor improvement through bizarre calculation of quintessential work to the industry. More revealing of the problematic nature of the licensing construct is the now-key music use via newer technology, which is not accounted for by old pre-conditioned licences, and non-comparable technological applications. By applying contorted foreign schemes to these technologies within the licensing construct, we’ve sentenced creators to endure unsustainable hardship, with major record labels , and their parent companies, streaming companies and their investors benefitting by their executive making large salaries, while the private major record labels release, – and reveal through leaks, – questionable revenue, – losses or gains – depending where you look; effectively at the cost of total decimation of the professional creators’ revenue. So, what U.S. government had substituted for some individual creator-cooperation long ago has since been an assured and all-encompassing, anti-trust formation; an endless open season for oligopolistic non-creative entities to cannibalize the revenue of the most-vital, yet made-vulnerable creator, small actor, and culturally-defining industry. But first, to point out some of the licensing-revenue reversals and grievous inequities for music creators, we look to music use in restaurants, bars, dance clubs, large-audience performances, and streaming, and to follow a timeline for each.

Restaurants and Bars
For many decades, music use in restaurants and bars very often meant live performance. In the U.S., in the 1920s, commercial radio broadcasting began and soon found use in businesses, joined there later by recorded music. By the 1980s, live music’s great popularity in these businesses had succumbed to the combined use of replacement forms: satellite, downloading/file sharing and streaming technologies. These technologies having gained true prominence over live music in these commercial uses, but creators are excluded from the revenue from these technologies, a justification that radio revenue for creators would “make up for it” ; again highlighting the counter-productivity and futility in attempting to arrive at fair market value for creators’ work in an ever-evolving industry, constrained, which condones advantage to large entities in an exceptional, early 20th Century anti-competitive construct, with no “free market” in operation in the licensing parts of the industry. But, clearly, without the creators’ songs there would be no music broadcasted, downloaded/file shared or streamed music in bars or restaurants.

Large Audience Performances
When a performer – long exploited by major record label approaches -overcomes odds and achieves great success, live performances will represent approximately 80% of their revenue. Currently, the biggest single source of revenue in the industry is from the star-performer, large-audience shows and tours. Star performers can earn in excess of $400,000 US, and their accompanying singers and musicians, often times not even playing instruments but merely holding and acting out the performance with a musical instrument – $120,000 US, or more, may be paid per performance. But for the many songs used during the performances, which are at the heart of the passion and interest, which send literally billions of fans rallying celebrity, and driving massive ticket sales worldwide, the many individuals responsible for the creation of the many songs divide up a measly, non-negotiable 3% of the total paid to all of the “performers”. Clearly, without these songs, there would be no large-audience music performances. It should be noted that the very same song can produce a hit for more than one star performer, but without a hit song, a performer cannot be a star. At the core, creative works are what drive the industry. And the pre-determined 3% for quintessential work within a top revenue-generating license, non-negotiable by creator, is an obscenity; a perpetuated mockery of the prime individuals.

Streaming
Around 2000, iTunes’ mp3 music sales and Napster’s and Limewire’s unlicensed, peer-to-peer audio file-sharing began, and ran concurrent for a short while until the latter were forced to shut down. iTunes remained. A few years after, Youtube, an ad-revenue-based, audio-video file-sharing service emerged and started gaining a customer base worldwide. This was a licensed “freemium-model” for consumers, imitating unlicensed services from just a few years earlier. A few years later, ad-revenue-based streaming services including Pandora, Spotify, and IheartRadio came onto the scene, offering free-tier service to customers. Membership to these services exploded in number, in just a few years , but almost all migrating to the free-tier platform. As there were no file-sharing or streaming technology in those early industry days, and therefore no pre-existing license for it within the licensing construct, what had been allowed here is a percentage-scheme from terrestrial radio, a roughly 1.75% of revenue going to music creators, with almost all of the revenue from creator-content going to the major record labels and streaming facilitators, in transparent and non-transparent ways.

“Spotify and Pandora have made it impossible for songwriters to earn a living: three months streaming on Pandora, 4,175,149 plays=$114.11. “ Bette Midler on Twitter April 4, 2015

A Pandora spokesperson said in response to this story: “But we must clarify an important fact: Pandora paid more than $6,400 for those 4+ million plays, based on our 2014 rates which are published publicly. In terms of compensation to the creative community Pandora remains by far the highest paying form of radio. Pandora pays songwriters a greater percentage of revenue than terrestrial radio. And Pandora paid 48% of our revenue in performance royalties to rights-holders in 2013 – more than $300 million – while terrestrial radio was required to pay nothing.” Billboard April 6, 2015.

“Pandora paid her slightly more than $114 for more than four million song spins over a three month period. That would mean for each digital radio airplay she earned a rather microscopic micropayment of .00002733076 cents per track.” Billboard April 6 , 2015

Impossible reasoning through and through: Terrestrial radio had always encouraged the sale of music. Newer technologies: Spotify, Pandora, streaming and Youtube – now replace music sales. A cultural mindset grew toward expectation of having the work of others for free. Rights holders are major label record companies who have, through leveraged positions to obtain rights from actors who have little option in an industry where competition by independent record labels is suppressed are stifled. A sloped floor scheme is used by Pandora whereby smaller artists and labels feed the payout to major labels, from which a minuscule amount is passed on to creators.

“Spotify pays out about 70% of its revenue–at a rate of 0.7 cents a spin–to major labels and publishers, who then pass along a small fraction (of $0.0011) to ( their signed) artists and songwriters(, and $0.007 to those unsigned). These arrangements offer labels another way to leverage their artists to make money from digital streaming: arbitrage. The formula for how much Pandora, YouTube and Spotify pay the labels isn’t related to the formula that the labels use to pay the artists whose songs are played. The latter is determined by a combination of individual contracts and a structure so byzantine that it goes by a moniker only a secretive hedge fund quant could love: the “black box.””Forbes.com, April 15, 2015

So, is it reasonable and just practise to allow creators’ works be sold, in a “compulsory” manner, against the creator’s will, for a pittance, given away for free to a global market well-conditioned to this expectation, while non-creative entities: intermediaries, facilitators and others collect almost all of whatever revenue there is from works them don’t own? If the creators’ songs are worth 2% or 3% of revenue from large-audience tours, streaming, satellite, and file-sharing, then without the songs, the revenue through these ought to be 97% or 98% of what they are with the songs. But Without songs there is no large-audience music tours, music streaming or music satellite,.

Major-label arbitrage, Big-tech smoke and mirrors, and suppression:

Major labels, Goldman Sachs, are the investors in streaming companies and are paid directly by them. Spotify alone has borrowed nearly a billion Dollars since its inception less than decade ago, has given away the music for free, and shown company losses nearing a billion Dollars, and recently had Wall street investment bank Goldman Sachs step in with a roughly $400 million Dollar loan. Suddenly, Spotify has publicized in major news sources that their company worth is estimated at $8 billion Dollars, and are considering taking the company public.

Still now, panel discussions or meetings with U.S. Congressional members or Caucuses have proven highly slanted, consisting of PROs, streaming and broadcast representatives, representatives of “public interest” groups’ which have later been revealed to be nothing more than disingenuous firms backed by Google or other tech.

“More interestingly, the contract details how Sony Music uses a Most Favored Nation clause to keep its yearly advances from falling behind those of other music labels, how Spotify can keep up to 15 percent of revenues “off the top” from ad sales made by third parties, and the complex formula that determines how much labels get paid per stream.”
Leaked memo by Sony Music Group Publishing CEO Marty Bandier seemingly expressing concern over abhorrent songwriters inequity: “This is a totally unacceptable situation and one that cannot be allowed to continue.”

But no initiative is undertaken by Sony, Universal, or Warner Music to share a fair portion of the revenue with creators who creative the work which they derive their revenue from. In fact, quite the opposite: songwriters with their hands tied behind their backs by government have had to fight these massive labels tooth and nail. Major labels have made every effort to keep the money in their pocket and give as little as possible toward creators’ share. Public apathy and increasing trend of U.S. Congressional members’ campaigns funded by big business, big tech and big investment banks, have essentially done nothing to stop the major labels.

Rich Bengloff, head of independent label group A2IM, listed dirty tricks currently being employed by Universal Music Group in “3 Easy Steps”:

(1) “Universal Music makes the per-stream rate as low as they possibly can so they have to give the artist very little money.”

(2) “Then, on top of that, they have something called a ‘listener hour guarantee,’ which they know is going to up their compensation by about 40% — since it’s per listener hour, not per track, the artist gets screwed because it’s not attributable to a track, so the artist doesn’t get a royalty. That’s not fair, that’s not the way we do business.”

(3) “The third thing they do is get a minimum annual guarantee or an advance if they know the service isn’t going to reach that level of business and be able to recoup — it’s what’s called [digital] breakage and they also don’t share that with the artists.” Digital Music News, June 18, 2014

For many decades, performers, in order to record an album professionally, and advance their careers, sought a “recording contract” from a major label, generally consisting of a loan between $250,000 and $400,000, to cover necessary rental costs of professional recording studios affiliated with major labels. And by these recording contracts, the major labels would keep the vast majority of revenue derived from the album’s sale, typically about 94% – and still do-, so that even if the performer’s album sold millions of copies, the performer would often be unable to recover from the larger debt he’d incurred. Promotion costs were added in to artist debt. Very many artists, despite having generated large profits for their labels, reside near the poverty line, while, major labels essentially applied expenses from the made-destitute artist’s project as a tax write-offs against major labels’ huge gains from a fewer number of artists who’d miraculously managed to overcome. Much has changed since then, and most of those costs and necessities have either been greatly reduced or eliminated entirely.

April 14, 2015 ABC News: Universal Music agrees to pay up to $11.5 Million to settle contention lawsuit alleging it had cheated recording artists by improperly classifying digital downloads as “sales”, justifying packaging and other deductions. A very minor concession, indeed.

April 24, 2015 Billboard Magazine: Universal Music Group announces dismantling of distribution company, executive shuffles.

In the last few decades, breakthroughs have come in recording technology which have given rise to independent, affordable, computer-based recording studios. The technology has provided affordable, computer-based recording studios which formed direct competition to the old, high-cost recording facilities. Performers, songwriters, producers , arrangers, singers, musicians, engineers and others can now interact musically, and in other ways, between cities, regionally, globally, via the internet, and present their music to the world themselves. Today, apart from a few-high cost recording facilities which are needed for certain applications, the vast majority of old recording facilities have vanished because of their inability to compete in a market with affordable computer-based recording studios. Acknowledgement of these advancement is also evidenced by major record labels more recent expectation of song or album productions to come to them on a “silver platter”, in releasable quality, and so are far, far less extended in artist recording costs than they had been in the past. In our golden age of accessible and affordable technology, artists can develop their careers, recording single tracks or entire albums, independently. And artists seeking major label contracts are expected to bring self-built fan bases , which they often do successfully through promotion and advertising on social media and website, the latter more so than a major label can, due to the major label’s potential to over-saturate by virtue of the large stable of artists it represents. Major label, in signing an artist, would merely carry on the social-network promotional work done by the artist, him or herself. So major-label artist and repertoire development, A & R, plays a far less of a role in signed artists than in the past. Artists can now distribute their work independently, or without major labels, and effectively. PROs who have historically declared their value to songwriters claiming that without PROS any wishing to license music would need to go door to door around the country and world to obtain permission. Can anyone actually be expected to believe this to be true in 2015 where computers calculate countless transactions through e-commerce on a daily basis?

Smaller record labels, with rosters of independent artist, although representing 28.4% of the total marketshare, continue to be prevented from growing and competing by a disastrously-slanted playing field by the 3 major record labels.

April 29, 2015 Digital Music News: “Apple will charge you 30% more if you subscribe to TIDAL on iOS”.
In 1997, U.S. Government made certain that Microsoft knew that if Apple Corporation failed, Microsoft would be held accountable to violation of anti-trust and anti-compete laws. And government was prepared to exercise that judgement.Government, by feeble management, has let the music industry be manipulated by massive entities who engage in cutthroat strategies to prevent competition.

Fortune Magazine : “Is the music industry better or worse than it was 50 years ago?”
Quincy Jones: “Honey, we have no music industry. There’s 90% piracy everywhere in the world. They take everything. At the recent South by Southwest [an annual music festival in Austin], they had over 1,900 musicians, but fans didn’t know where to go. You can’t get an album out because nobody buys an album anymore.”

FORTUNE: “What about some of the newer, online distribution models. Doesn’t that give artists more ways to get music to fans?”
QUINCY JONES: “That doesn’t mean anything. They sell 4.5 million albums and they think it’s a hit record. It’s a joke. We used to do that [sell 4.5 million records] every weekend in the 80s. Today, you don’t get paid.”

The governance of the music industry, without a free marketplace, will slash and burn of the ecosystem of musical art, and its prospects for future creation. A free market, with reasonable and fair guide lines, would correct problems of inequity which were largely the result of government construct long ago, and government is needed to get us out of this situation. A free market, with today’s advancements in technological capabilities accessible to independent creators and artists, streamers or other facilitators would adjust the commission for dispensing content. At present, these facilitators are exploiting outdated laws at it does not reflect anything close to true market value of the work which drives the industry.

Compulsory licenses; disallowance of songwriters to organize as a union, permitted anti-trust entities , non-negotiable revenue percentages to creators – We need FREE MARKET solutions in the licensing areas of the music industry, as exists in other industries. The problems which exist in music licensing were addressed, and largely remedied by the U.S. Sherman Act of 1890. The music industry has been excluded, made exempt, and is many, many years behind other industries. It is is too far gone to shirk and assign responsibility to the U.S. Supreme Court. Congress must act now. The industry is close to mass extinction. Top creators who’ve had the greatest achievements, in terms of the acceptance of their work, have gotten a pittance while non-creative facilitators have used government schemes to taking it all, and scheming through lack of transparency. This is about being paid what a fair market tells you your work is worth. While more creators are needed than ever before to create content, more and more creators have fallen away. 80% of pro songwriters are no longer working full time. Aspiring creators are changing interest to other sectors within the industry or leave it entirely. Very few people are interested in music written by semi -pros or “weekend warriors. It won’t drive star performers’ ticket sales and live shows or careers.

Who would be motivated to write songs after having written a #1, which we might estimate had generated $10 to $20 million, and where the creators responsible received a few thousand dollars? It is not the call by proxied- PRO representation of “feeding our families”. Slaves fed their families. Was slavery alright? If music licensing isn’t sufficiently redone there can be no industry.
http://www.tennessean.com/story/money/industries/music/2015/09/22/all-bass-writer-decries-streaming-revenue/72570464/

Excerpts and recommended links relating to correcting creator inequity

“The first listen to all tracks is always free of charge. The second listen, and any listen thereafter, is paid for in one of the following ways, with the listener choosing to:
Rent the track for one play for 10 cents, much like putting a dime in a jukebox.
Buy the track for $1, which then makes it possible to both download it, as well as stream it forever at no additional cost.
Stream the entire service’s catalog for a subscription fee, but at a much higher price point than Big Music — potentially $40–60 a month. Remember, the goal is to ensure the artists and labels get adequately paid. The $10 per-month charged by Apple Music and Spotify will never, ever lead to meaningful compensation for musicians.”
Anil Prasad https://medium.com/@Innerviews/a-fair-music-streaming-model-is-possible-453d4a9b34c2

“ Rip it up and start again” CEO Berlin-Based BMG, Hartwig Masuch
http://www.musicbusinessworldwide.com/how-to-revolutionise-the-music-business-rip-it-up-and-start-again/

My Recommendations
No license issuing less than 39% of revenue to creator/s. Free music must be at the expense of streaming or downloading company, never at creators’ expense unless he/she deems it, and not by large entity-leveraging. Transparency in all licensing. Small-actor transgressions treated on a case-by-case-basis.

Remove ineffective scheme were revenue to creator or performer from one license makes up for another. Equalize percentage split between songwriters and performers in large-audience concert performances/tours, restaurants and bars, radio- terrestrial and satellite, streaming, file-sharing/downloading, and other licenses must be standard. Any changes in percentage split may be negotiated by transparent and fair practice.

Creation of a publicly-available comprehensive database to house all relevant, music ownership copyright information.

Absolute transparency within all dealings and licenses, collection, and payment made by labels, collectives, publishers, streamers and any licensing party.

Partial withdrawal and capacity for music creators to negotiate or stipulate, with capacity to revise, revenue percentages to creators within licenses. Any misconduct should be dealt with in a case by case manner.

Government stewarding the industry toward the free market.

Allowance of Songwriters to organize as a union.

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By: Creative Commons Summit: Next Steps in Copyright Reform » infojustice

By: Tony Vineberg