OPINION:
Members of Congress are being pressured by lobbyists, songwriters and music-publishing executives to pass legislation artificially forcing copyright royalty rate increases on music. While this issue may seem esoteric to much of the public, the outcome of this battle could have significant impact on music consumers.
The legislation, known as the Songwriters Equity Act, would once again twist the contrived formulas used to calculate royalties for composers. The writers of this legislation seek to ensure their government-set rates will rise regardless of the state of the economy, market demands or consumer spending. Unfortunately, if passed, this bill would only leave music lovers without their favorite streaming platforms and composers with no streaming royalties at all.
The centerpiece for the industry’s campaign is its appeal to “fairness.” It argues that “fair pay” to songwriters can only be fixed if the industry is given more power to extract higher royalties through the government. The industry often cites artists as being paid only $90 for 1 million plays of streaming music. So it seems fair to ask what precisely is the use of this anecdotal evidence intended to produce? Would a 1,000 percent increase in the current rate be deemed satisfactory? Would $900 for a million plays be enough?
The reality is that streaming music companies are already paying hundreds of millions of dollars in royalty payments every year — some more than 70 percent of their total revenue. How much more should they or any streaming company pay? Would 85 percent of all revenue seem “fair”? How does this allow a robust and legal streaming music industry with many innovative startups to continue to exist? The short answer is that it doesn’t.
No business could sustain such an overwhelming cost structure, and none will. Despite having more than 10 million paying subscribers, Spotify has yet to turn a profit. Pandora has more than 70 million subscribers but they, too, have yet to turn a profit. The only logical result of the higher rates sought by the publishing industry would be the death of streaming music platforms.
Billions of dollars are being collected in songwriter royalties for streamed music, TV, music, movies and broadcast radio play. Despite that fact, the big music-publishing corporations and their national association continue to claim that the cause of inequitable payments to songwriters is because not enough money is given to them. However, the sad but true problem for songwriters and composers is that they are last in line to be paid. Several other entities have their hand in the till that are happy to collect money and hold it in escrow and yet still manage to be paid long before finally disbursing a percentage to the writer. For example, in 2012, Broadcast Music Inc., the second-largest performance rights organization, took in $944 million in royalty payments, but only distributed $814 million to copyright holders, keeping $130 million for itself. Regardless of the platform on which songs are played, it is a well-documented fact that royalties paid by licensees are severely whittled down before the remainder, a small fraction of the original amount, finally trickles back to actual writer of a song.
If “fairness” for songwriters is the standard by which this issue should be judged, there are plenty of places that demand priority before attempting to squeeze more out of licensees already struggling to survive. Does it really take $130 million a year to collect and process payments to artists? Are publishing corporations really entitled to 50 percent of a songwriter’s royalties? Where are the calls for “fair pay” directed at all the many and varied interests taking a cut of songwriters’ profits?
The fact is, reforming how the music industry operates would afford artists more compensation, but it would also undermine the total domination that corporate interests such as big music publishers and performance rights organizations exert over artists. Artists might see a marginal increase in revenues under the Songwriters Equity Act, but not nearly as much as the big corporations secretly pulling the strings. More importantly, it would allow these corporations to keep completely intact the current exploitive system that enables them to keep a heavy hand in songwriters’ bank accounts.
The bottom line is that despite all of the songwriter-centric rhetoric and the use of individual songwriters as the face of the industry campaign, this isn’t about them. The lobbying campaign is designed to give a pittance of benefit to composers, while feeding the corporations that voraciously profit from artists’ work, even if it means killing off the burgeoning new streaming industry and leaving music consumers singing the blues.
Daniel Horowitz is an independent consultant who has served as a staffer in the U.S. House and Senate and as a presidential appointee at the U.S. Small Business Administration.
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