Streaming Music: a Sour Note?

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Leading music industry lawyers examined why all-time-high music consumption produces windfalls for only a few mega-artists—and what can be done to change this phenomenon—during the Third Annual Entertainment Law Symposium at Fordham Law School on Feb. 23.

Americans streamed 431 billion songs in 2016, according to industry tracker Nielsen, but the artists responsible for the songs make, on average, a fraction of a cent per play on platforms such as Spotify, Pandora, Tidal, and Apple Music. That model might work for an artist like Canadian rapper Drake, who had 5 billion plays across all platforms in 2016, but it isn’t sustainable for most professional musicians, said participants of the symposium hosted by the Fordham Media and Entertainment Law Society.

Symposium keynote speaker Horacio Gutierrez, general counsel and vice president and corporate affairs at Spotify, called for the music industry as a whole to address publishing issues to ensure artists receive fair payouts across streaming platforms. The current “arcane system” with “very high transaction costs at every step of the chain” means artists who should benefit the most actually benefit the least, he noted.

“It’s very easy for people to point at the end of the chain, at streaming companies, and say you’re the reason why an artist got one cent, when you really have to look at the whole chain,” said Gutierrez, who joined Spotify 10 months ago from tech giant Microsoft.

In its decade-long existence, Spotify has prided itself on presenting a legal alternative to online piracy, Gutierrez said, while providing consumers a “freemium” experience that allows them a choice between a free listening experience with ads or a premium paid experience with no ads.

Spotify pays around 10 percent of its income to songwriters and publishers—a figure that is more than double that of similar streaming platforms such as Pandora and Sirius—while also offering data insights about an artist’s popularity in certain cities or demographics.

“The insights we have could revolutionize the way managers, artists, and labels look at promotion and marketing of their services,” Gutierrez told moderator Derek C. Dessler, a Fordham Law adjunct professor with more than two decades of entertainment and media law experience.

As streaming music achieved market ubiquity, record sales tanked. U.S. record sales generate around $4-5 billion today, as opposed to a record $13 billion in 1999. Licensing of performances on radio, television, the Internet, and live concerts only somewhat compensates for the record-sales loss.

Yet, the amount of money Spotify and others make, while paying a small portion of its income to artists, remains a sore spot for many in the industry, agreed participants in the opening panel, titled “Music Publishing: The Changing Landscape and New Sources of Income for Songwriters.”

“It boggles my mind, for companies whose only product is music, that the progenitors of that music are getting 4 percent of the money being generated,” said entertainment lawyer Bob Donnelly, who has represented artists, managers, record companies, music publishers, and more during his four-decade career in the music industry.

Songwriters received around nine cents for every physical CD sold in the days before Apple’s iTunes model made singles the featured product. Today it takes 150 streams to equal one track sold and 1,500 streams to replace the lost sale of a record, noted Keith Hauprich, deputy general counsel for BMG Rights Management.

“There’s more volume and more consumption than ever, but the price point is so low, it’s almost silly,” Hauprich said. “So streaming is everywhere, but we’re not getting barrels of money through the door just yet.”

Fordham Law Professor Olivier Sylvain moderated the day’s second panel, “Keeping Up With the FTC: Social Media Influencers and Developing Ad Laws.”

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