Royalty Agreements Holding Up Necessary Change In The Music Industry

from the need-a-clean-break dept

Eliot Van Buskirk over at Wired’s Listening Post has an interesting article about the latest music royalty battle: focused on royalties for songwriters and music publishers. He likens it to the TV writer’s strike issue, and sides with the songwriters, noting that the recording industry needs to encourage songwriters to write good songs, and stiffing them won’t help. However, I disagree that the best way to do this is to agree to what the songwriters are asking for — which is a larger defined cut of any use of their songs. Just as the TV writers are wrong in pushing for an extra cut of internet revenue, the same is true in this situation. Yes, in both cases, it’s totally understandable and reasonable to feel sympathy for the writers — who are often squeezed out of money and treated unfairly by the big entertainment companies. I’m not denying that at all. However, it’s the very structure of this compensation that’s going to cause more harm than good in the long term. It will limit the options for the entertainment companies, and allow others, not tied to those legacy agreements, to run rings around them. It provides a crutch for the songwriters, allowing them to lean on that, rather than embrace important new business models. These types of agreements will only slow down the adoption of new models and will only make it less likely that people can earn a living from writing either TV shows or music.

Why? Well, with regards to music, the trend is clear that the music world itself is increasingly moving towards free music. That’s just basic economics at work. Yet, by tacking on a defined royalty on each download or streamed song, it makes it much harder for anyone tied into that royalty system to actually embrace the opportunities that free music provides. And if you recognize that those opportunities are likely to be even larger than the existing market, then by agreeing to these royalty payments, the songwriters are actually limiting their own market potential. In the end, all it does is artificially inflate prices, leaving more efficient and innovative solutions to route around the existing songwriters, rather than rewarding them. Just like everyone else, songwriters will need to learn to change the way they’re compensated. Trying to inflate the old, obsolete system won’t help things. It will only make it that much more difficult for the entire industry to change.

One other aside on all of this. In the comments, more than a few times, we’ve had discussions where people have suggested that the models we’ve discussed wouldn’t work for songwriters, specifically, claiming that the old system is fine, but any new system would never work — ignoring the many ways it could work (using a straightforward pay-for-hire setup, for example). However, it’s interesting to see that relying on the supposedly “successful” old model is starting to come under stress from everyone else in the industry. It highlights, once again, that when we talk about these models, it’s silly to compare the “old way” and any “new way.” It’s more important to recognize that the old way just isn’t sustainable. You need to compare the new models to what the old models are trending towards.

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Comments on “Royalty Agreements Holding Up Necessary Change In The Music Industry”

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Mike (profile) says:

Re: Re:

Ummm, their desire to actually make money? Live in the real world sometime. Yeah, your theory is all nice and good, but it doesn’t work in all places.

Hmm. And, yet, nearly every other industry works on that model and does fine. While you’re suggesting they need to tie themselves to an old model and help it die by limiting the ability for companies in that space to adapt to necessary new business models.

You think it’s better for them to go down with the ship, where there will be absolutely no money to be made, or to embrace new models that will allow for bigger markets, and the ability to make more money? That doesn’t make any sense to me.

SmellyG says:

Re: Re:

How much do writers get per song sold? Anyone? Considering its pretty low for Artists who write their own songs, isn’t that going to be less if you have to split it between the Performing artist and the writer?

They might get more if they are contracted to write a song. But i have no idea what writing a song is worth.

The writers will have to write good songs, because no person is going to hire a person with a bad song writing record.

This could work very much like Design Consultancies. Much work by Design Consultancies are done on a Pay-for-Hire basis. The consultancy designs the product to the clients needs, the consultancy gets paid (by what im not sure), and the product gets sold.
I can see it working the same way for writers. You could have Song Consultants!

matt says:

Re: Re:

the reality of “Getting paid for work you do” as opposed to “Continually over the life of the work in addition to what you’ve done” is a bit of reality of whats going on. This is why people burn out of businesses like sales, cause people are too lazy to be successful in some instances.

Remember, people don’t just get royalties, if they did would be fine. But combine patents, copyrights, and royalties and now you see why people like Metallica push so hard…make one good album and you get a welfare check for life.

SHel says:

Re: Re: Metallica getting welfare for life?

Bad metaphor. Welfare is not earned. It is an entitlement. Metallica- or anybody for that matter- has a hit. It endures. People play the songs for years. If Disney can control rights for their products (which like Pinocchio were adaptations of others’ works) for 75 years, where is your outrage? If Disney or Metallica want to give away their work, I have no complaint. But why should any one be forced to relinquish the fruits of their labor?

Scott says:

Re: Re: Re: Metallica getting welfare for life?

One consequence of one proposed alternative model – work/pay for hire – does indeed force the creator to relinquish the fruits of their creation (see, for example, what happened with Marv Wolfman and Marvel Comics over the creation of the character of Blade, which has earned a lot of people other than Mr. Wolfman a lot of money.) Certainly an arguement can be made that Marvel’s risk in investing in the character deserves rewarding, but should it mean the creator’s limit to future rewards is zero?

Mike (profile) says:

Re: Re:

Whats “good” for the industry might not be good for parts of that industry, like writers. Of course, we can just accept the next Britney or the next reality show that doesn’t require writers, but hey, thats progress, right?

Indeed. It is true that what’s good for the industry may not be good for parts of that industry, but that’s a misleading statement in some way. I mean, the automobile industry wasn’t good for buggy whip makers… but if they had adjusted and realized they could use their talents to be a part of a much bigger industry, they could have done much better.

Same thing here. If songwriters recognized where the industry trends were going, and how to embrace that, they too could be part of a much bigger market opportunity.

We’ve yet to see a world where that hasn’t happened — where the new models didn’t open up more opportunity. Yet, somehow, folks tied to the old industry seem to think that “this time” it will be different.

I’m reminded of Paul Romer’s comments on the subject:

“Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material (see Natural Resources).

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding. Possibilities do not add up. They multiply.”

Thom says:


I have no problems with writers going away. I like reality shows – at least the highly edited but unscripted ones. Too many writers, like too many artists in all areas, highly overvalue themselves, their works, and their contributions to society. The Arts are not the lofty things that all the artists claim them to be and, in fact, they are few of those things and no more valuable than the useful but non-artistic creations and contributions of the rest of society.

Tatheg (profile) says:

Re: shoo

The problem here is that one of the reasons for the strike is to get the studios to pay the writers for the “reality” shows union scale. As for over-valued artists, Do you mean that someone that puts 100 hours into a painting and over $200 dollars of materials should get paid less than $2000 dollars? ($18 per hour plus expenses) Or do you mean that a musician that practices 1000s of hours for no pay should get what minimum wage? I suppose you think that the middle managment at Fox news is contributing greatly to society and they deserve $100,000 per year ….

Killer_Tofu (profile) says:


Hey coward, you might want to try adding some substance to your argument. Notice the article, how Mike gives details.

Well, your argument of “you are wrong” tends to pale in comparison to that.

We usually all laugh at you, whether you realize it or not, because just saying “Mike you are wrong” doesn’t make you right at all. Give some detailed examples if you would like to help create a constructive argument.

Constructive arguments where you offer back up to your theories are often best, for it gets the most people thinking. And it also actually stands of a chance of swaying people who are either undecided, or believe differently, to come over to your camp. But just saying “you are wrong” stands a 0% chance of that happening.

Anonymous Coward says:

Re: Re AC to Killer_Tofu

And Mike’s articles usually include links to his other blogs (because we all know that it they are blog not articles) which is basically like I am right because I am right look at what else I have written that proves I am right. Also, Mike is wrong, because his arguments are flawed and his research is poor. There is usually no reliable sources minus a seldom link to And in response to your final “paragraph,” no one that reads this blog is undecided and why should I have to offer up suggestions when Mike is only offering poor excuses for business models. I mean I know he has a doctorate in Music Business and everything (yeah right), but seriously, his ideas are socialist and are an entitled brat.

Mike (profile) says:

Re: Re: Re AC to Killer_Tofu

And Mike’s articles usually include links to his other blogs (because we all know that it they are blog not articles) which is basically like I am right because I am right look at what else I have written that proves I am right.

When I link back to older blog posts, it’s because I know they’re not going anywhere. But each of those blog posts links to information elsewhere. I like how you brush it off as just being from a “blog” but those links include peer reviewed research from some of the top economists in the world, including at least two nobel prize winners.

why should I have to offer up suggestions when Mike is only offering poor excuses for business models.

Because I have pointed out over and over again why that business model works, both from a macro standpoint, using economic research and from a micro standpoint, showing example after example after example of where these business models actually work. So if you want to disagree with that, it helps to actually provide some sort of evidence rather than “you’re wrong.”

his ideas are socialist and are an entitled brat.

Can you explain how letting the free market set the price is considered socialist? That argument always confuses me. It would seem to me that the position you’re supporting (i.e., gov’t granted monopolies) seems a lot more socialist than the one I’m supporting (let the market decide).

Matty T says:

Copyright is valid, distribution system is lame

As a writer, bands approach me for lyrics. If I write a bad song, and it doesn’t get big, it makes no sense for them to purchase it from me. It puts all the risk on my consumer, and makes dealing with me a high risk (and therefore expensive business) Royalties allow me to get paid biased on a free market determination of my products value (as a part of the band’s final song production) where the audience determines it’s value.

Otherwise, I have to lower my already minuscule price in order to offset the risk… Meaning I bag more groceries and write fewer songs.

I usually get paid when a band I wrote a song for signs a deal, then I get a cut. That cut is after the band pays it’s own production cost. A $1 million dollar deal with the record industry usually means you pay a good $300K in production, more in equipment investment, 20% or so to a manager and then split say, 200K between the creative contributors in the band in proportion to contribution, atleast 4 guys + writers and roadies) so a “big” deal doesn’t net the artist JACK!

You never see royalties because the label recoups them for advertising costs. I don’t need to retain rights for royalties. I need to retain my rights so I can give the time to sell their product (to which I am a contributor) and therefore determine a value for my effort. So that when they sign they don’t take my song and leave me at the checkout counter.

The system is corrupt, but saying because you are ABLE doesn’t mean it’s RIGHT. Most of you are linux supporters, and your programs are distributed UNDER LICENSE. When you find someone who abuses that license, you use the EFF to seek justice. Thousands of you and one infringer, versus single artist and thousands of infringers.

SomeGuy says:

Re: Copyright is valid, distribution system is lam

It’s possible, though, that a different business model could work out, though. Like pulling from the office-space world (you’re hired by a band for a certain rate to write them songs; if you write bad songs, you’re fired; you develop a reputation and can demand more or less compensation based on how well you’ve done in the past), or maybe from the contracting perspective (one or more bands contract you to write one or more songs for a given price; you develop a reputation and can demand more or less per song based on how well you’ve done in the past).

The advantages to this, I think, are two-fold: (1) it no longer ties itself to distribution of the music, which we’re seeing is problematic in the digital age, and (2) good song writers will be better compensated that poor song writers, by virtue of building a reputation and being in more or less demand respectively.

chris (profile) says:

Re: Copyright is valid, distribution system is lam

Most of you are linux supporters, and your programs are distributed UNDER LICENSE. When you find someone who abuses that license, you use the EFF to seek justice. Thousands of you and one infringer, versus single artist and thousands of infringers.

i guess you don’t understand the GPL.

GPL code is available Free (as in freedom) to do what you want with it as long as you give any modifications that you make back to the community. it means that if you use GPL code to make something, most of the time the resulting product will have to be GPL too. other open source licenses (like the mozilla license or the various BSD licenses) don’t require you to give your changes back.

you can minimize your proprietary products’ exposure to GPL violation by minimizing the use of GPL code in your proprietary products. in other words: if you don’t want to make GPL software, don’t base it on GPL products.

taking something from the community, improving it incrementally, and not giving those improvements back is taking advantage of the community. you are withholding your derived benefit from the community.

making an incremental improvement to something for the community is not making an original work.

when you write a song, it’s supposed to be an original work. if it’s not original, and you get found out, you are in the same boat as those that don’t give their changes back to the community in accordance with the GPL: in both instances the infringer gets slapped with a lawsuit.

open source organizations (the mozilla foundation, the FSF, etc.) back open source projects with legal and financial help. the orgs help the projects because the projects help the orgs and the community itself. they protect the community by weeding out those who take from the community without giving back.

community works like GPL projects are made by the community, made for the community, and protected by the community. if you would like your work to enjoy the same community support, give it to the community. if you don’t share with the community, the community isn’t going to share with you.

if people take your music and pass it off as your their own, you are free to take those people in to court and would be justified in doing so. hopefully you have some sort of organization behind you, otherwise you are not likely to see any justice.

if you are trying to say that supporting file sharing and supporting the GPL makes you hypocritical, then you don’t understand the GPL.

Anonymous Coward says:

Re: Re: Copyright is valid, distribution system is


You are only under the obligation to release your modification when you distributed your software to the world. You are not under any obligation to distribute it to the members of the community.

Also, GPL software are not necessarily produced pro bono or produced by a community.

Woody (profile) says:

Re: Copyright is valid, distribution system is lam

I do not buy the argument. As a contract software writer, I write code to which the purchaser has agreed to a monetary value. At the end of the day the “real value” of the program can only be determined by it’s usage. But that time is long past the contract negotiation. I worked with the purchaser of the code, determined what it is they think they wanted, provided an estimate, agreed to a project price and wrote the software. I even provide some editing post delivery as part of the deal to handle issues not realized during the initial writing. (You may alter the original lyrics in places the band thinks could be improved.)

If the program turns out really well (popular), I get shorted. If at the end of the day it does not really help the purchaser, he gets shorted. If he gets shorted, then my reputation suffers and my ability to get the next contract or negotiate a good price drops. If I write an effective program, my reputation (resume) increases in value and my next job gets better pay and so forth.

Any writing can be done this way. You put a price up front for the time and effort you put into writing the song. If it takes 8 hours to write the song and you charge $200/hr, you get $1600 and the band assumes the risk beyond that. Considering that the scarcity of music is nil and the ability to copy digital content in infinite (effective $0 cost), the band makes their money touring (that is real work). They quit touring they quit making money.

Like the rest of the world, you work you get paid, you sit and you do not get paid. Fairly simple equation.

An alternative analogy is that your song is an investment (a stock maybe). You set a price, they pay it, you write the song and depending on how well the wrting is and how well they perform it, the audience my like it and show up to concerts (ticket sales, return on investment) or not like it and stay home. It’s no different than a stock. Once a company sells stock, they no longer (directly) benefit from the rise in price, only the investor does. But if the stock rises in value the company gets a good reputation and the price of their next stock offering increases. Eg, they get more money for the next set of shares released.

Now granted with so many people clinging on to the old model, it will be hard to get the paradigm shifted. But as someone who has had to spedn a time hustling contracts and working out deals all in order to buy groceries, I do not buy your argument, nor do I feel any sympathy.

mike allen says:

Re: Copyright is valid, distribution system is lam

There used to be a time when artists NEVER wrote their own songs, Then came a small band from Liverpool called the Beatles and every band started writing their own songs “Tin Pan Ally” as the publishing houses were called disapeared. We still have writers they adapted, maybe mikes “new Model” is not the right one but what is clear is you wont know till you try it and more importantly a new model is desperately needed throughout the industry.

Debunked says:

Classic Misdirectional Argument Technique

Mike quote:
“Yes, in both cases, it’s totally understandable and reasonable to feel sympathy for the writers — who are often squeezed out of money and treated unfairly by the big entertainment companies.”

Notice Mike misdirects attention to the big entertainment companies here and smoothly targets them as unfair.

Quote from David M. Israelite, President & CEO, National Music Publishers’ Association who is actually at the negotiations:
“The National Music Publishers’ Association (NMPA) will be representing the interests of songwriters and music publishers and will be fighting vigorously to protect those interests to ensure that musical compositions are compensated fairly.

On the other side of this fight stands the Recording Industry Association of America (RIAA) and the Digital Music Association (DiMA). Both the RIAA and DiMA have proposed significant reductions in mechanical royalty rates that would be disastrous for songwriters and music publishers.”

Of the 3 groups at the table, Mike’s past positions have been at times favoring (but not completely) congruent with the Digital Music Association (DIMA) type arguments. A clue is the “digital” in the title. Mike- please note that I am only setting up a fair “Would you side more with the webcasters or the RIAA question?” I think it is fairly safe to guess which way you would lean. Also note that in this article after the classic misdirection quoted above Mike stakes out a clear position against the Music Publishers/songwriters. Notice that DIMA is on the same side of the table as the RIAA beating down the songwriters on the other side of the table as represented by the NMPA (National Music Publishers Association).

Mike quote from another article:
“After all, webcasting helps promote music — so why would the RIAA (and its SoundExchange spinoff) want to set rates so high that it would kill off this promotional channel?”

Keeping in mind that the RIAA and the techies in the DiMA are on the same side of the table, here is one more quote.

Quote from David M. Israelite, President & CEO, National Music Publishers’ Association:
“The RIAA actually proposed that songwriters and music publishers should get the equivalent of .58% of revenue. This isn’t a typo – less than 1%. And DiMA is taking the shocking and offensive position that songwriters’ and music publishers’ mechanical rights should be zero, because DiMA does not believe we have any such rights!”

Teef says:

From an actual songwriter ...

Songwriting is all I do. No day job, no school, just writing songs. I wake up, I get clean, I eat and then I get to work. Some songs almost feel like they write themselves. Some are like pulling teeth. But, they require real work and a passion to do that work. And this work is done 9 – 12 hours a day. Every day.

One must be talented to do this work. It’s not something you can go to school to learn. You are born with it or you’re not. It’s just that simple. Couple that with all the years of sacrifice we put into our craft to actually turn our natural talents into a honed skill, and you have something that should be compensated for. And our compensation should be handsome.

Without us, there literally would be no music. Of course there are artist who can write for themselves. But most cannot. As a matter of fact, a lot of artists who you think are writing their own material, aren’t. They have ghost writers. And those ghost writers are paid well because they are giving up the rights to their compositions. If I’m going to be paid a one time fee for my work, it’s going to have to be in the six figures per song. Which, if one thinks about it, isn’t a lot. Some writers only have one or two good songs in them. So, if a songwriter gets one hit and that brings he or she $100,000, but that person has been writing for 10 years and never has another hit, that writer has really only made around $10,000 a year. Less after taxes.

Contrast that with the artist that records that song who will continue to make money from it through touring and what not. Why would I except some measly one time fee, while the person who didn’t write it continues to make money as long as they are able to perform it? In other words, the artist makes a living, but the writers starves. I don’t think so.

Writing songs isn’t writing code or assembling a car. I’m not trying to down anyones job or abilities. But, if one goes to school, make decent grades, and is a reasonable hard working person, he or she can get a job and make a nice living. And, can expect to do better as that person gets older and more experienced. As long as one is healthy, the average person can work well into their old age.

Songwriting is the exact opposite. Some of the best songwriters I’ve ever known can’t get arrested let alone a hit record. These are men and women you may never hear of because they don’t “know” the right people. So, if you are lucky enough to get your song(s) covered by a chart topping artist, you have a huge problem; time. As you get older, styles change, and your songs begin to loose their appeal. Your still good, but you begin to sound “dated.” A prolific songwriter can expect a span of 10 years in the “game.” Maybe less.

Songwriters step out on a wing and a prayer. We take a huge chance with our lives while everyone else takes the “safe route.” No health insurance, no 401k matching funds, no severance pay or unemployment “net” should things not work out. That’s why we get royalties. That’s our retirement plan. So, to all those saying we should get a one time payment for our work, I say to you; quit your job and leave your security blanket behind. Step out on faith and struggle for a few years for no other reason than believing in your talent. No school, no day job, no back up plan. Do that for 5 years. Be a real artist for 5 years. Then, come back and we’ll have this conversation.

See, this is what’s wrong with the music biz. Too many people who, are not artist and don’t understand or respect the art of making music run the industry. Just a thought.

Twinrova says:

Personal reply

Woody wrote: “If I write an effective program, my reputation (resume) increases in value and my next job gets better pay and so forth. Any writing can be done this way.”

I usually try my best to refrain from targeting specific poster’s comments, but this one rubbed me the wrong way and I had to reply.

The business model of “increased reputation” is flawed. In fact, if the business keeps this model, it’s failed to doom in the long term, just where the industry is today.

The business model doesn’t take into account “the next business” who can deliver the exact same “product” but at a cheaper rate. Cheaper. As in lower cost.

The “consumer” will always try to save money. This is not disputable. As the “reputation” grows, consumer base declines. As an ex-software writer, I know this too well, a lesson learned from experience.

Now, this business model is based on market value and not reputation. It was a forced model because in order to stay in the market, the offerings had to stay with what others could do, but less.

The “reputation” comes in at a higher rate of being hired, thus, more customers. This forces the “little guys” out of the picture. With more customers (at market value rate) comes the higher profits.

I’m not from the entertainment industry, so I can’t really speak on what’s really going on, but as an outsider to it all, I question the tactics used by those in unions/guilds.

Striking does nothing but ensures that the future hurts the consumer, not the writers. These writers also tend to forget they’re also consumers. If royalties are paid out for digital internet distribution, then these costs have to be made up and this usually comes in the form of higher prices to the consumer.

Anyone remember the NFL strike a few years ago? Same thing. Players felt cheated, owners felt pay was on par, and consumers were screwed with no product. Once the strike was over, players got more, owners scrambled to make up losses, and ticket/merchandise prices soared.

Unfortunately, there is no simple solution that suits everyone, but I definitely know that “free” isn’t one of them, even if economics drives products to this point because nothing is ever free.

And as a consumer, the last damn thing I want is more advertising to get that “free” product because often times, the ad intrusion isn’t worth the price in terms of enjoyment.

Good luck to those in the entertainment industry. You’re going to need it.

Killer_Tofu (profile) says:

Re that one AC

You said
“which is basically like I am right because I am right look at what else I have written that proves I am right.”

Well, there are a couple things wrong with this.
One, again it is the “i am right you are wrong” style argument. Without anecdotal cases to back up your claim, you have no claim.

Secondly, when you use the handle Anonymous Coward, or simply don’t type in a handle (since it is a default), it is REALLY hard to know which posts were yours previously throughout all of the posts that people don’t type in a name for.
So saying to “look at what else I have written” also doesn’t mean squat.

Debunked says:

More Tax Information

Teef quote:
“So, if a songwriter gets one hit and that brings he or she $100,000, but that person has been writing for 10 years and never has another hit, that writer has really only made around $10,000 a year. Less after taxes.”

To further illustrate the above “less after taxes” using the same scenario as sketched. Songwriter income is very uneven. Here is a simple chart:

ordinary 10k job minus 1000 fed/state taxes (conservatively overstated)= 9000 yearly times 10 years= $90,000 after tax income

songwriter 100k good year minus 20k fed/state taxes (conservatively understated)= $80,000 after tax income for the same period

Ken says:

writer's strike/agreement

Doesn’t it seem rational that the ‘players’ in the industry could begin an offsite coalition to study all the possible pathways the internet can take us, and work out agreement scenarios to fit each player’s needs? Or is it really that everyone is just trying to do an end run around each group, and there is no hope that anything rational even has a chance?
Greed sucks the lifeblood out of all of us.


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