Who Owns Music?
A couple of days ago, IFPI released their 2016 Global Music Report, a report that breaks down the music consumption trends around the world in the past year. What was significant about 2015 was that, for the first time ever, digital consumption beat out physical sales, making up 45% of global music revenues. This was unsurprising as digital sales have been part of an upward trend for several years now. Another, unanticipated discovery however, was that 2015 was the first year in over a decade in which global music revenue as a whole increased rather than declined. While global music industry revenue has increased, IFPI made sure to point out that although “Music is being consumed at record levels across the world…consumption is not returning a fair remuneration to artists and producers…This is a result of a market distortion known as the ‘value gap.’” This is not new information. Every day there is a new article about an artist withdrawing their music from specific services (such as Kanye West limiting the streaming of his album, The Life of Pablo, to Tidal only), or claiming that they have not been paid the royalties they are owed (such as Lady Gaga’s claim that she has made no money from Spotify). There are many causes for this value gap, one of the main ones being the major issues surrounding music ownership.
Structure of Music Ownership
Music ownership is one of the concealed aspects of the music industry. Most people would assume that it is a straightforward system in which royalties are split among songwriters, performers, and record labels. The reality is that it is MUCH more complicated. For the most part, music is split into compositions and sound recordings. Compositions include the intangible pieces of a song including lyrics, notes, structure, instrumentation, and melody. A sound recording is a recording of a composition. In order for an artist to make a sound recording, they have to obtain the copyright license from the owner of the composition. This means that any song is essentially two pieces of intellectual property, each with its own set of copyright laws. To use any given song, a digital streaming service/radio station/TV show/etc. has to obtain several different licenses ranging from a mechanical license allowing one to reproduce a composition, to a public performance license allowing the song to be publicly performed, to a synchronization license allowing a piece of music to be attached to a moving picture, on and on.
Do you now understand how music ownership is structured? Neither does anyone else, which is exactly the problem. There is no standard system that gives music buyers an easy list of who should get paid for what. It is simple enough for them to pay the record label, but where does the royalty distribution go from there? As Glen Sears states, “When an artist’s song is played, it can be exceptionally difficult to know who needs to get paid. Or how much they are owed. Or where the money is.” Big companies get the royalties, and ultimately do not know who it belongs to. As long as they get paid, they do not really care about who gets screwed. With the expansion of digital music, a new system needs to be created that allows for everyone involved, from the labels, artists, producers, musicians, publishers, performance rights organizations, songwriters, composers, lyricists, administrators, etc. to be paid what they are owed. Although the music industry is evolving, the music ownership system has not, hurting many of those involved.
Thankfully, people are really starting to acknowledge that this is a major problem, and are searching for solutions. For example, Berklee College of Music released a 29-page report last year that delved into the problems with the music industry and gave suggestions into some potential new technologies that if embraced, could benefit the system. One of these technologies is The Blockchain, a data system that is connected to Bitcoin and acts as a public record for transactions. For those that have not heard of it, Bitcoin is a digital payment system that is essentially decentralized virtual currency. This company’s goal is that in the future, all monetary transactions will occur with this type of cryptocurrency, a more secure system that allows for transparency thanks to its archived data. For this to work, music would be uploaded in a whole new format, requiring labels to include all of the ownership information. Edith Suarez further explains this stating:
“Music is placed in the decentralized server, then each song is embedded with a piece of code, meaning that in time, anyone who downloads a track with a cryptocurrency, a payment is automatically sent to anyone involved, be it the writer, the producer, the singer, as well as many others.”
To have a simple, specific place where all of the metadata is stored, a place where listeners can directly pay for their music and musicians can directly receive it, would eliminate a plethora of problems the current system has now.
The Blockchain is one of many potentially great solutions to the ownership metadata problem. However, there are obvious obstacles, otherwise it would be the main system in use already. One problem is that it requires a full systematic shift. People are reluctant to change and switching to a completely different system of currency and organization is not ideal to most people. An even bigger issue would be the fact that someone is going to have to insert years and years’ worth of back catalogues. Most likely, it would be record labels that would have to do this, and as they stand the most to lose from a system like this, it is quite unlikely. Still, everyone agrees that changes need to be made. It will be interesting to see what viable solutions come from the discontent surrounding digital music royalties.