Part I provides an overview of the basic rules and business practices that apply to the record and music publishing business, In addition, it reveals how new technologies, despite these recently developed rules and business practices, have made downloading, streaming and webcasting possible.

Chapter 1. Music Law and Business Primer

The Copyright Office issued a report titled Copyright and the Music Marketplace, a Report of the Register of Copyrights in February 2015

From the Executive Summary:

“The Copyright Office believes that the time is ripe to question the existing paradigm for the licensing of musical works and sound recordings and consider meaningful change. There is a widespread perception that our licensing system is broken. Songwriters and recording artists are concerned that they cannot make a living under the existing structure, which raises serious and systemic concerns for the future. Music publishers and performance rights organizations are frustrated that so much of their licensing activity is subject to government control, so they are constrained in the marketplace. Record labels and digital services complain that the licensing process is burdensome and inefficient, making it difficult to innovate.”  In the report the Copyright Office offers a series of  recommendations for change including:

             Extend the public performance right in sound recordings to terrestrial radio

broadcasts.

             Fully federalize pre‐1972 sound recordings.

             Adopt a uniform market‐based rate setting standard for all government rates.

             Reform Consent decrees under which ASCAP and BMI are governed

             Migrate all rate setting to the Copyright Royalty Board (“CRB”).

             Streamline interim rate setting and require immediate payment of royalties.

             Permit opt‐out from PROs for interactive streaming.

             Allow bundled licensing of mechanical and performance rights.

             Permit collective licensing of mechanical rights but with an opt‐out right for

interactive streaming and download uses.

             Consider permitting SoundExchange to process record producer payments.

Record producers

             Allow SoundExchange to terminate noncompliant licensees

 

Chapters 4-6

The below graphs are not fully legible in the hard copy version of the 4th edition. They appear on pages 97, 106, and 116 respectively.

moneyflow.streams (1)

 

moneyflow.sales

 

moneyflow.radio

 

Chapter 5: Interactive Streaming

TIDAL

In January 2015, Jay Z purchased TIDAL and its Scandinavian parent company, Aspiro, for 56 million dollars. TIDAL had been an interactive music service offering a high fidelity audio experience. Jay Z continued to provide high fidelity content for $19.99 per month, but he added a standard quality interactive streaming service for $9.99.

At a NYC press conference in March 2015, Jay Z announced it had partnered with 15 other artists. They are his wife, Beyoncé, and Rihanna, Kanye West, Nicki Minaj, Daft Punk, Jack White, Madonna, Arcade Fire, Alicia Keys, Usher, Chris Martin, Calvin Harris, deadmau5, Jason Aldean, J. Cole, and Lil Wayne. Each has an equity interest in the company reported to be 3%. An important selling point for Jay Z’s version of TIDAL is that it offers exclusive video and music content by these celebrity artists.

Following the press conference, TIDAL received criticism from indie artists as well as the press. The main complaint was that Jay-Z described TIDAL as “for the artist,” “super-transparent,” and that “everyone is some kind of owner in it in some kind of way.” Yet the only artists with an equity interest are Jay Z the 15 celebrity artist partners.

Here is an example of the criticism from Ari Herstand writing for Digital Music News on March 31:

If they want to be so transparent, come out proudly and say “each first tier artist gets 3% of the company.”  Don’t have an anonymous source reveal it to Billboard.  If you want to be so transparent, on launch day proudly exclaim that every artist will be paid the same rate per stream.  Or maybe they won’t be.  Jay Z has already revealed that the “first tier artists” (the select 16, including Jay Z) are going to own the highest stake and the 2nd tier artists will own a bit less.  How far down will he go. Will independent artists get some equity?  Probably not, that seems impossible. Where is he going to draw the line?

So Spotify gave equity to major labels in order to license their catalog. Jay Z gave equity to superstar artists in order to obtain exclusives. And who knows what he offered to the major labels in order to obtain the rights to license their catalogs on          Tidal.

If you want to be so transparent, be transparent!

Another criticism was that Tidal did not announce any initiatives that would assist indie artists such as fan analytics, a way for artists to connect with their fans, or share full album artwork, photos, bios, tour dates, merchandise offerings and crowd-funding campaign links, services that would make TIDAL “for the artist.”

Prior to Jay Z’s purchase, the service had 500,000 subscribers.   TIDAL claimed to get 100,000 new subscribers following the March conference. In April 2015, Jay Z announced on Twitter that TIDAL had 770,000 subscribers. Although TIDAL was in the top 20 applications downloaded on Apple’s App Store following the press conference, TIDAL is no longer in the top 700 applications downloaded.

TIDAL claims to pay 62.5% of its subscriber fees to labels who represent artists and 12.5% to music publishers who represent songwriters. This compares to Spotify’s claim that it pays out 70% to copyright owners. TIDAL continues to advertise and release exclusive content.

 

APPLE MUSIC

Apple launched iTunes in 2001. iTunes was always and continues to be a download service, not a streaming service. But in August 2014, Apple acquired Beats, a company created by hip hop producer Dr. Dre and record company executive and producer Jimmy Iovine, including the audio headset operation (Beats by Dr. Dre) and an interactive music streaming service (Beats Music) for $3 billion.  Dre and Iovine launched the headset company in 2006 and the music service in January 2014.  By December 2014 they had 303,000 subscribers, but many of those were for the free trial.

In June 2015, Apple launched Apple Music which incorporated Beats Music, but also created Beats 1, a radio streaming service with DJ’s.

The reason for the move was most commonly believed to be that download sales decreased for the first time in 2013, but revenues from streaming services have been increasing. This is Apple’s attempt to enter the streaming service game and compete with Spotify, which has increased its paying subscribers from 6 million in March 2013 to 10 million in May 2014.

Unlike Spotify, Apple Music has no free tier, although the first three months are free.  Initially, Apple Music planned to not pay artists or labels royalties during the 3-month free trial period.  In response to this news, Taylor Swift wrote an open letter to Apple threatening to pull all of her music from the new service if they did not pay royalties during the free trial. Following that threat, Apple CEO Tim Cook announced that Apple changed course and would indeed pay royalties during the free trial.

Apple tried to differentiate itself from the other streaming services by adding “Beats 1,” a continuous live radio service curated by celebrity DJ’s Zane Lowe, Ebro Darden, and Julie Adenuga. Apple Music also has a feature that creates playlists tailored to fans’ music preferences. Along with these features, Apple has created a social media space for users to follow their favorite artists.

Experts have pointed to an advantage that Apple Music has over its many competitors: Apple has over 800 million credit cards on file. On the other hand, Wall Street Journal writer Joanna Stern wrote:

There’s nothing remarkable new or different about [Apple Music]. In some respects, it isn’t as good as them…It is so jam packed with features, it lacks polish and simplicity.

In addition, critics have complained that the new service contains many technical glitches and some have complained of losing previously purchased music.