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THERE’S NOTHING BETTER THAN A PAY DAY. With a multitude of income-generating avenues available for musicians on the Internet, there is no shortage of ways to make money online. How much you can make, however, is a different story. This month’s Legal Pad looks into online streaming, the dollars and cents behind the services, and how these services may affect you – the performer – in years to come.
While there is money to be made, don’t bank on online services alone to make a living. In recent months, there have been various stories of artists making as little as 0.001 cents per play. Hypebot recently featured an article by singer/songwriter David Lowery declaring that he’d been paid only $16.89 for over 1 million plays on Pandora. Enough to buy a few pairs of strings, but not exactly the payday you might imagine for the size of the audience reached. Lowery details his frustration with the process:
“Soon you will be hearing from Pandora how they need Congress to change the way royalties are calculated so that they can pay much much less to songwriters and performers. For you civilians, webcasting rates are “compulsory” rates. They are set by the government (crazy, right?). Further since they are compulsory royalties, artists cannot “opt out” of a service like Pandora even if they think Pandora doesn’t pay them enough. The majority of songwriters have their rates set by the government, too, in the form of the ASCAP and BMI rate courts – a single judge gets to decide the fate of songwriters (technically, not a “compulsory,” but may as well be). This is already a government-mandated subsidy from songwriters and artists to Silicon Valley. Pandora wants to make it even worse.”
It has been reported, however, that Pandora pays more to labels per stream, with labels receiving approximately 12 cents per 100 streams (Lowery’s cut comes after the label’s take and is watered down from splits with multiple songwriters/performers). Keep in mind that these rates are not set in stone. Every five years, the royalty fees paid to artists and record labels are set by three judges serving on the Copyright Royalty Board, an arm of the Library of Congress. The CRB follows guidelines in various copyright laws passed as new radio and online formats developed in prior years, and it has become stricter as a result of aggressive music industry lobbying (i.e. the efforts by Pandora to lower its rates).
STANDARD ROYALTY RATES FOR STREAMING SERVICES
It’s not all bad news and many sites pay more than Pandora, depending on their model. New sites are launched daily that provide streaming or download capabilities. Several models exist: fee based, ad supported, and user-generated are three of the more popular models. Here are a few of the more popular sites and some of the fee structures they maintain:
CHANGES IN THE INDUSTRY
There may be more changes on the horizon for streaming services. It has been reported that tech/music giant Apple has opened discussions with record labels and industry leaders about obtaining rights to launch a music streaming service. Based upon their other forays into the music industry (monetizing digital downloads with iTunes), it is not difficult to see this as a game-changer. That said, there has been some push back from labels because Apple is offering a significantly smaller amount of money per stream. Their proposed rate has been reported at 6 cents per 100 streams (HALF of that paid by Pandora). Apple wants to make their new service, predictably called iRadio, bundled with iMatch, which allows iTunes users to make their music available on all iOS devices.
On a (somewhat) positive note, services that provide no royalties or payments of any kind to artists are beginning to feel the heat. Last year, Grooveshark was sued by all four major record labels for failing to pay royalties. Grooveshark, which relies on its 35 million-plus members to upload their music libraries to the streaming service, is somewhat protected under the Digital Millennium Copyright Act (which may avoid penalties if it removes infringing content within a specified timeline after notice). However, Grooveshark is not an innocent party in this practice. During the course of the lawsuit, emails showed that the company’s employees led an effort to post more than 113,000 pirated songs. Another email reportedly from Grooveshark’s chairman Sina Simantob says: “The only thing that I want to add is this: we are achieving all this growth without paying a dime to any of the labels.” That about says it all. The Grooveshark suit, which is anticipated to settle, is still being actively litigated.
Adam Barnosky is a Boston-based attorney and writer. For music industry news, entertainment law updates, or to suggest an upcoming Legal Pad topic, find him on Twitter @adambarnosky.
Disclaimer: The information contained in this column is general legal information only. Consult your attorney for all specific considerations.