How the internet changed music & the future of royalty payments

Insights

Author: Stephen Duval

Posted: 29.01.20

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It has been more than sixty years since the first annual Grammy Awards. Amongst the award winners that night were Ella Fitzgerald, Perry Como and Henry Mancini.

Much has changed in the decades since, with completely new genres and artists emerging to redefine our experience of sound right up to the present day.

The very foundations of the industry have evolved, a change driven in recent years by the new technologies that have revolutionized the entire music business. The emergence of the open internet blindsided the traditional gatekeepers of the industry: record labels, entertainment retailers, radio stations and managers, unlocking access for consumer and producers alike in the process.

For the first time, any aspiring musician with a computer could connect and contribute. This explosion of the internet facilitated the simplicity of downloading music straight to your computer, and the wider arrival of streaming.

Streaming is altering the world around us. It has changed the way we listen to music, the way we consume television shows, and now it is even starting to impact upon the way we watch sport.

Record companies will usually treat downloads as ‘new media/technology’, which means they can reduce the royalty from 70% to 50%. This means that rather than paying artists a 10% royalty on recording sales, they can pay them a 5% or 8% rate when their song is downloaded from the internet.

In spite of this, the manner in which people making music are paid has not evolved over the past fifty years. The systems for managing payment information are out of date and payments are often delayed. Very few organisations have implemented royalty payment processes that put artists first, and that needs to change.

Broadly speaking, recipients have no control over the method or currency of payments, and cross-border royalty payments are particularly expensive. The frequency of payments is unreliable, and many royalties fail to reach the recipient at all. None of this is fostering and encouraging creativity, or putting the power back in the hands of the artists.

The principal problem the music industry faces right now in an internet-driven world is metadata. In the music world, metadata generally refers to the song credits you see on services like Spotify or Apple Music, but it also includes all the underlying information tied to a released song or album, including titles, songwriter and producer names, the publisher, the record label and more. In order for all of the right people to be identified and paid when you play a song, all of that information needs to be synchronized across all manner of industry databases.

As it stands, this is not happening. If the systems can catch up and be fully implemented to fix this issue, there is nothing stopping a songwriter from eclipsing the royalty payments of all artists before them.

Then the challenge will not be the payment systems in the music industry, but the challenge of writing another great song.

Tags: Music, Royalties, Streaming

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