Our next Music Biz 101 & More radio show this Wednesday night will feature former Atlantic Records recording artist Ryan Star, who is now a tech-entrepreneur. He’s created a music app called Stationhead. Look it up. Then tune in and hear us live at 8pm.
In the meantime, listen our on-demand podcasts HERE – and we’re always open to answer your tweets, so ask away. Oh, here’s something:
The smart looking fella with the glasses is Stephen Dallas, the holder of a VP title at Warner/Chappell Music (VP of Digital Legal Affairs and Business Development). He starred on last week’s Music Biz 101 & More radio show.
Also in the pic are student co-host Stephanie Grimes (to the right of Little Stevie Dallas; meaning his right – she’s on our left but don’t be so self-centered) and Ashley Weltner, in the foreground. She’s the radio show’s engineer and producer. Philp and Doc Marcone are also in the pic, but they aren’t important.
Your Professor David Kirk Philp
Spotify did something wrong when it built itself. It didn’t license all of the songs it was supposed to license that are on its service. This is potentially millions of songs that, on the publishing end, have been streamed on the service for years. The company never licensed the songs because, most likely, they didn’t know they were supposed to do this back in its early days. (Remember – Spotify is really a tech company; it’s not a music company.)
The problems are complicated, even moreso now. Spotify is a private company, owned by founder Daniel Eck and scores of other investors, both institutional (companies) and individual (people like you and me, but really rich and connected in the investment world). The company wants to go public, meaning it wants to be listed on the NASDAQ or New York Stock Exchange. It would sell shares to all of us as a means of raising money so that he can keep growing. To keep the company valuable in the eyes of potential investors, it has settled a lawsuit brought on by many publishers and songwriters who claimed their songs weren’t licensed properly. These people wanted to get paid.
The problem here is that the settlement was for just $43 million. The lawyers got over $14 million of this (more than 30%!). That means the songwriters and publisher beneficiaries were due $28.7 million. In THIS ARTICLE, you can see how the money breaks down. It ain’t that much.
“If as few as one-quarter of those songs, 7.5 million, were unlicensed then, taking the $28.7 million left in the Settlement Fund after attorneys’ fees are paid and dividing that number by 7.5 million songs, the result is a settlement payment of $3.82 per infringed song. As the Court is well aware, Spotify faces potential liability of up to $150,000 per infringed composition for willful infringement and $30,000 for nonwillful infringement, plus attorneys’ fees and costs. While a discount of some amount is to be reasonably expected as part of a compromise settlement, the discount potentially afforded Spotify in this case is a 98.7% discount for nonwillful infringement and a discount for willful infringement so close to 100% as to give Spotify a practical free pass on willful infringement.”
Did you read all of that? The songwriters and publishers are getting cents on the dollar, which is ironic since a stream on Spotify is worth only a percentage of a cent. Because the payout is so low, the songwriters and publishers, including Tom Petty, Tom Morello, Rivers Cuomo, and others, don’t want this settlement. More lawsuits are being filed. In the ridiculous category, Spotify is stating that it, in fact, doesn’t really need to pay a mechanical royalty (the royalty paid to publishers per stream). What makes this ridiculous is that Spotify has paid mechanical royalties for years PLUS it has been involved in talks with the Copyright Royalty Board, a federal governmental body which sets statutory mechanical rates. In the past, the company has never brought up that it shouldn’t pay the type of mechanical royalties it had paid and negotiated to pay to publishers.
Here’s another complication: The major labels own some of the top publishers that are complaining about the settlement. The major labels are also equity owners of Spotify. When it goes public, the labels will reap a large profit.
But if this settlement is blocked and a new lawsuit comes into play, Spotify could be on the hook for hundreds of millions of dollars, or more. Would you invest in a company that might go broke because of a lawsuit? No. You’d put your money in Apple or a mutual fund instead. So the investor pool could shrink, demand for the shares could go down, and the share price wouldn’t reach the level Spotify would expect. That means less money for them and less for the labels. So if the labels, or their parent companies, own the publishers, would they be more inclined to support a new lawsuit or hold back in order to cash in on the public offering?
Where is this going to go? If you read the initial article above, it closes with this paragraph. The last line is the most important one.
“If Spotify continues to argue that it has no obligation to license mechanical royalties, the National Music Publishers Association (NMPA) may intervene, says president and chief executive David Israelite, ‘I’ll be shocked if they try to raise that argument again,’ Israelite says, ‘because they’ll be at war with the industry.'”
War is the last thing anyone wants, especially when streaming has become the #1 format in the world. Ultimately, this is all about money, fairness, and money. Don’t expect a quick solution. Watch this space.
What Happens When Your Entire Band Is Arrested?
Click and read this fairly short article about the Polish band Decapitated. On September 9th, the four members of the band were arrested “on suspicion of kidnapping a woman after their August 31 concert in Spokane.” The band had just performed a show in Santa Ana, California at the time of the arrest.
So, now what happens? The band has a lawyer who has publicly stated that the band is innocent of all charges. But there are music business-related things to think about.
First, the band members are Polish citizens. We can assume that they are here on some type of work visa that comes with an expiration date. Worst case scenario for the band is they get deported and can’t qualify for a future visa to enter the United States. Barring that, there are other worries.
1. Each day the band is incarcerated is a day they aren’t out on the road, playing to current and potential fans.
2. Each show that gets cancelled means less revenue for the band, for the promoter, for the agent, for the merch person, and for the manager. Promoters and agents don’t forget. That means…
3. Cancelled shows and lost revenue will make it harder for the band to promoters and agents on board for future shows, which makes it harder to come back and tour in the United States profitably.
Moral of the story? Make good choices. If you’re managing a band, be aware of what your band does after a show. Think worst case scenario. It just may happen someday. Let the band know they should be very, very careful.
Now go ahead and click and read the story.
Your Knowledge Presented By:
The book is out! Did you buy it?!?
Don’t be afraid to flaunt your purchase! Order & memorize this masterpiece HERE. Why, young Lea Bourinaris scrapped a few pesos together and bought her copy. Be like her.
Make your best choice today!
Click and either read or listen to this report from NPR. It’s an interesting look into how a famous anthem has lost a portion (so far) of its copyright protection through the courts. How did it start? A documentary filmmaker wanted to make a film about the song, but couldn’t get permission from the copyright holders. He sued.
What would have happened if he made the movie without permission? Ahh, you’ll have to read or listen to find out.
What is Kobalt? You may know the name but be unsure of its place in the music industry ecosystem. Let’s just say it’s very important. Listen to Melissa speak and let your brain indulge in massive intelligence.
Our 2017 radio show schedule looks like this:
– September 20 – Ryan Star – Stationhead (the app)
– September 27 – Erin Jacobsen – The Music Business Lawyer
– Rocktober 4 – Ben Weinman – Dillinger Escape Plan/Kimbra’s Manager
– November 1 – Terry Currier – Music Millennium (Oregon music retailer)
Mark those dates on your calendar; 8 PM on Wednesdays. What do you want to know? Who do you want to hear from? Let us know! The best part? It’s FREE music biz talk.
For full details about the Music & Entertainment Industries Program, including courses, the minor, and our MBA, click HERE.
For full details about the WPU Pop Music Studies Program, including courses and audition requirements, click HERE.
Professor David Philp is Assistant Professor Music & Entertainment Industries and Popular Music Studies at William Paterson University. He is the co-host of the only FREE advice college radio-based music & entertainment industry talk show in America, Music Biz 101 & More, which airs live most Wednesday nights and is available as a podcast HERE every night (days too). Your favorite professor is also co-author (with Dr. Steve Marcone) of Managing Your Band – 6th Edition. Reach him at PhilpD@wpunj.edu or find him on LinkedIn HERE.