Swedish musicians threatening to sue their labels over Spotify distribution

Monday, October 28, 2013 - 11:55am

It might seem ironic that Swedish musicians are unhappy with their participation in Swedish-born Spotify. But it makes sense that if any national group of artists would take action related to Spotify payouts, it would be in Sweden, where streaming music has become rampantly popular. Spotify reportedly accounts for 70 percent of Swedish music sales, with 10 percent of the population subscribing to the paid service.

The musician argument is less with Spotify than with labels, and how Spotify revenue is shared with artists by those labels. When Spotify income is treated like album-sale income (physical or download), artists share the money according to a royalty split, typically 10 percent. Licensing revenue, by contrast, is often set as a 50/50 split in artist contracts, and the Swedish complaints assert that Spotify distribution of music tracks should be a licensing scenario. The musicians union involved in this controversy is threatening action to remove artist repertoire from Spotify.

This Swedish page can be translated for quotes by the union head. The Guardian has an English write-up here

Tunecore has paid musicians $330M in royalties

Thursday, October 17, 2013 - 12:40pm

Tunecore, one of several intermediaries that provide a gateway to digital distribution for independent musicians, announced on its blog that 330-million dollars has been paid out to musician clients during the company’s seven-year history.

Tunecore represents an interesting and significant service category in digital music. Its rise, along with that of CD Baby and others, emblemizes the replacement of old-world career agencies with technology platforms, just as digital listening has displaced analog music products. Tunecore and its ilk are distributors to retail outlets, but also have replaced A&R departments and artist managers to some extent. 

Tunecore’s essential business is putting recorded music into streaming music services like Spotify and Rhapsody, and download stores like iTunes and Amazon. Its clients are indie artists who own their own labels and fully control their recorded masters. The core values are distribution and bookkeeping. For relatively low fees, aggregators like Tunecore and CD Baby place music in large portfolios of commercial outlets, track streaming and purchasing, issue earning statements, and write royalty checks.

This middleman service is alluring to musicians seeking exposure and a toehold in the music business. However, for many who reside down the long tail of available music, those low fees are never recouped in fractional payouts from streaming and downloading. From that sad outcome stems much of the controversy surrounding the economics of streaming music services and the fairness of artist royalties.

Operating profit might be elusive for music services like Spotify which pay royalties, and for indie musicians who receive royalties. Intermediaries like Tunecore (which is privately owned and venture-funded) sit in a sweet spot between the two, passing content in one direction, funneling money in the other direction, and collecting a fee. It’s a valuable service. But some musicians wonder: Wasn’t the Internet supposed to eliminate intermediaries?

As rumored, Rhapsody downsizes, Irwin out as president

Tuesday, September 17, 2013 - 12:00pm

Last week when word hit that pioneering music service Rhapsody might shake up its leadership, RAIN editor Brad Hill asked (here): "Can a subscription-only service provide compelling value against free-listening platforms? For that matter, can any streaming-music business hold its own against content costs?"

The official word came yesterday (and was covered right away by The Verge's Greg Sandoval) that Rhapsody will "rebalance and restructure U.S. operations," has laid off 15% of its staff (30 workers), and will replace top managers like president Jon Irwin (who'll move into an advisory role) and CFO Adi Dehejia. Rhapsody's new "executive operating committee" will be made up of executives Brian Ringer (CTO), Paul Springer (SVP/Americas), Thorsten Schliesche (SVP/Europe), and new CFO Ethan Rudin.

The company also announced investment firm Columbus Nova has taken some ownership of the company. Columbus Nova, by the way, owns Harmonix, which owns the Rock Band videogame franchise. Rhapsody says it will "add resources to enable the company to accelerate its efforts in Europe and emerging markets."

Sandoval puts Rhapsody's fortunes in the larger context of the tough go online music services have had.

"In the post-Napster era, we've yet to see a single digital music distributor generate lasting or significant profits," he wrote. "More recently, Spotify's losses have grown. Grooveshark has cut the size of its workforce. Rdio has struggled to keep pace with Spotify in terms of building an audience. In this environment, Rdio and others are trying to stay competitive. Operators of these sites say the obstacles are significant, as consumers remain reluctant to pay for songs and the cost of licensing music is still too high" -- the two very points Hill made last week in RAIN.

Read Rhapsody's official announcement here. Read Sandoval in The Verge here.

Pandora to issue more stock, warns it can't sustain its rapid growth

Tuesday, September 17, 2013 - 12:00pm

Leading webcaster (and public company) Pandora plans to sell 10 million more shares of stock as a "follow on" offering, to raise $279 million for "general corporate purposes." The company's biggest investor shareholder, Crosslink Capital, also plans to sell 4 million shares it holds.

And though it says it has nothing in the works, Pandora may use some of the money it raises "for potential acquisitions of businesses, products or technologies."

Within its announcement of the proposed offering, Pandora warned it doesn't "expect to be able to sustain (the) rapid growth in both listener hours and advertising revenue" it has enjoyed in the last few years -- meaning it expects to continue to lose money in the near future. The company continues to battle sound recording and composition copyright owners over royalties (by far its largest expenses, consuming more than half the company's revenue), and faces perhaps its biggest competitive test yet with tomorrow's launch of Apple's iTunes Radio

Read more on this in The Wall Street Journal here, Tom Taylor Now here, and from Pandora here. and founder unveils new service to handle online music licensing

Friday, September 13, 2013 - 11:55am

Entrepreneur Jeff Yasuda -- of and "people-powered" online radio Fuzz fame -- has launched a new company with the aim of taking "all the complication out of music licensing" for webcasters, online retailers, and more. (we last reported on Yasuda's Feed Media, parent to and, here) will handle the regulatory and payment issues for entrepreneurs and site owners looking to license music online, such as Internet radio.

TechCrunch writes that for a monthly fee, will "add the service’s stations to their site or app. They can also build stations from their own personal collections. And offers an analytics dashboard and A/B testing so publishers can quantify that the music is improving engagement and see how their visitors are engaging with the music."

Yasuda told TechCrunch early testing reveals sites that use music from the service got a 20%-400% bump in average time-on-site, and some e-commerce sites saw sales increase as much as 20%.

Read more in TechCrunch here.

Radio and label groups react to Clear Channel licensing pact with Warner

Friday, September 13, 2013 - 11:55am

Yesterday the nation's largest radio broadcaster announced a deal with one of the big-three label groups to pay for the on-air use of sound recordings (see our coverage here). The Clear Channel/Warner Music Group agreement isn't the first, but it's the largest so far, and the first involving a major label group.

Performers and copyright owners have long fought for compensation for the use of their work by broadcast radio. On the other hand, it's pretty clear that the biggest obstacle to the growth of Internet radio has been this very compensation, which online and satellite operators do pay. So, one interpretation of the deal is that it's a start towards bringing this situation into equilibrium.

When Clear Channel Media Holdings CEO Bob Pittman began making these deals with independent labels and label groups like Big Machine, some observers felt it was actually simply a ploy to turn down the heat from Congress, as more and more lawmakers clamored to make on-air performance rights a law. But with a royalty pact with as significant a player as Warner, some feel perhaps Pittman is indeed fully committing to a digital future for radio. Pittman himself said this deal (and the previous indie deals) are about building a successful digital broadcast business -- which isn't possible under the current royalty structure.

The actual terms of the WMG agreement aren't public. Thirty Tigers' David Macias writes he's heard press rumors of 1% of advertising revenue for on-air plays, 3% for digital plays. Billboard sources say the earlier indie deals were for 1% of terrestrial/2% of digital -- terms all three majors, including WMG, turned down (Economist David Touve has some "back of the napkin" calculations of "the value of a radio performance" based on these numbers here). The Wall Street Journal Corporate Intelligence blog says whatever the percentages, "Clear Channel will pay Warner Music close to $50 million over the next three years... including a portion of that upfront."

Entercom, a broadcast competitor to Clear Channel, has made on-air/online royalty deals with independents as well. Entercom President and CEO David Field applauded Pittman's agreement as "smart, bold and visionary," calling it "another important step forward in establishing a new business model that aligns the interests of artists, labels, consumers and broadcast radio." [Programming note: David Field will keynote Tuesday's RAIN Summit Orlando, more here]

The RIAA, which represents major and some indie labels, seems more skeptical. "It’s important to understand that there is no substitute for actual legislation establishing a legal performance right," spokesman Jonathan Lamy said.

Another music industry lobby, MusicFirst Coalition, called on Clear Channel to break with the National Association of Broadcasters and its opposition to a federal law estabishing a broadcast right for sound recordings. "Unfortunately, Clear Channel and (the NAB) have been the principal roadblocks to ending the loophole that allows AM/FM broadcast radio alone to take music without paying artists or labels," said executive director Ted Kalo.

David Macias, co-founder of indie label Thirty Tigers, wrote in an op-ed in Hypebot that he's worried deals like yesterday's may simply make it even harder for independent artists and labels to get on the air. He worries over "a future where the exposure via public airwaves and public bandwidth for music will be in large part governed by the financial relationships between media companies and larger content providers. This will have a chilling effect on the independent music community from a business standpoint and will increase the likelihood that most of the music that you will hear on the public’s airwaves will be music that a corporation feels can be commoditized."

Like the RIAA and MusicFirst, he feels a "compulsory license" -- where broadcasters could license any music simply by paying an industry-wide mandated rate -- is a better solution. He also brings up the fact that "direct deals" like this circumvent the legal requirement that copyright owners split royalties with performers 50/50.

"Hey artists. So when those payments for non-interactive radio streaming start going to your label through negotiated deals that you’re not a party to because you don’t own your master, rather than going through Sound Exchange, what percentage of those payments do you think you’re going to get? You should call your label now and ask," Macias wrote.

We're looking forward to analyzing this deal further, when/if its terms leak...

Read more in Billboard here, Touve's Rockonomic here, Corporate Intelligence here, and Hypebot here.

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