For artists relying on the twin revenue streams of live performances and music royalties, the pandemic left a material dent in income. Touring profits were depleted, and while digital music saw a boom, artists weren’t able to fully fall back on streaming royalty payments just yet. With slim pay-outs per play from service providers, many artists were effectively stung twice, creating an income vacuum that left them short of the valuable resources required to fund new projects.
As we continue to delve into this period of affordable music streaming for the masses, where subscriptions have become more of a utility than a luxury, it stands to reason that the decision process behind music creation becomes more diffuse, more in the hands of both the artist and their fans. On the surface the mechanics of music royalties are simple: consumption drives payment. But some industry players have gained a bad rap for their lack of transparency.
This has ruffled the feathers of many world-known artists. Talking Heads lead singer David Byrne has openly described what he calls the “music industry’s black box” where “major labels assigned the income they got from streaming services on a seemingly arbitrary basis”, with little inclination to disclose their own cut.
Of course, the big three Sony, Warner and Universal, and producers and record labels across the board, have a positive history of experienced artist management. However, this level of input, time and expertise does rightfully come at a cost, which usually manifests itself as a greater stake in an artist’s musical catalogue.
Music creators should be able to have the option to retain greater control of their work’s IP ownership and royalties, enabling them to make their own strategic decisions. Streaming is now the largest single component of recorded music revenues – of the 62 per cent it brought in in 2020, roughly 30 per cent is often taken by the provider. When it comes to distributing the final 70 per cent slice, it’s important artists have a say in choosing a management model that’s right for them. A more democratic and transparent funding model could help to find a better balance for the music industry in its entirety.
Rebalancing the status quo puts the power back in the hands of the creators, and in turn fans themselves, allowing them to negotiate more predictable income flows. Through a rights exchange like this, established music creators take back control. It allows them the opportunity to sell a proportion of the rights to their work, generating upfront debt-free cash to sustain their musical output.
This liquidity can then be backed by fans; with these investment opportunities offering an extremely low barrier to entry, it can engage aficionados across the spectrum. From an artist’s loyal student following to high net worth individuals, everyone can take on the role of tastemakers allocating their capital in support of their favourite established artist.
A more balanced approach to rights control and royalty negotiations is a no brainer from the artist’s perspective. While investors and fans gain the opportunity to generate stable income and sustainable capital growth investing in the royalties of established catalogues, they also help to unlock artist’s financial liquidity. It cuts both ways, and for the industry in all ways.
Our listening habits have changed, and so should those changes be mirrored in music creators’ earnings.
This will create a more fluid and creative market that puts artists back on the front foot, building the next generation of music and enabling investors.