Fighting for their Rights: Recording Artists and the Battle over Royalties

-- By BradleyMullins - 17 Nov 2009

Much of the discussion surrounding the effects of zero-cost distribution of music has focused on the “music industry” – with particular emphasis placed on declining revenues of record labels. Less attention has been paid to how free access to music will affect artists themselves. Perhaps one reason for this is that artists themselves have been unable to reach a consensus opinion as these inevitable changes in the distribution of music. This dissonance amongst various artists was thrown in into the spotlight due to a recent spat between two British artists, Joss Stone and Lily Allen. Allen received major media attention after blogging her view that illegal filesharing was a disaster for the development of new artists. Stone responded by claiming singers such as herself do not need income derived from record sales, as people will come to a concert to see artists like Stone perform “real music,” and these performances from the only income necessary for an artist – “enough to make music, eat and go on tour.” Neither is completely correct -- all artists can likely thrive in a world of free distribution.

Unreliability of Album Sales

It is difficult claim that record sales are a particularly beneficial source of income to most recording artists. First, the sharp decline in actual record sales has been well-documented. Between 2007 and 2008, physical album sales fell by 60 million, and increased digital sales accounted for only 22 million of this loss. Second, recording labels share very little revenue derived from album sales with the artists themselves. For an artist that receives a 12% royalty, a typical digital sale will result in a payment of only twelve cents. These royalty rates for digital sales are especially alarming, as they often include deductions for packaging and distribution costs. As these costs are effectively zero for digital sales, there is little justification for providing such low royalty rates to artists. Third, many artists never actually recoup royalties from album sales because they are so in debt to their record labels. As albums become less reliable a source of income, it is important for artists to focus on other means of deriving income from their music.

Alternative Income Streams for Artists

There are numerous alternative means for artists to derive income from their music. Perhaps the most obvious is touring. A major artist can expect to take home 50-60% of gross revenue from a concert, much more than he or she can expect from the sale of an album. And contrary to Stone’s argument, such touring revenue is not limited to certain categories of artists. Stone implies that artists known solely for “their track, their personality and their celebrity” must rely on album sales, but the fact that Britney Spears’ most recent tour grossed $24 million in its first three weeks indicates otherwise. The touring success of Spears, an artist infamous for her lip-syncing, demonstrates that, while many consumers are only willing to pay to see a talented live performer in concert, others are clearly happy to pay to catch of glimpse of the “celebrity” that Stone derides.

When it comes to touring (and related sources of income, such as merchandising, endorsement deals, songwriting, etc.), free distribution of music has the potential to actually increase an artist’s income. An essential aspect of convincing people to buy a ticket to a show is making those people familiar with an artist’s music. Promoting the sharing of music amongst friends, or even amongst strangers with similar musical tastes, has the potential of exposing an artist to a much wider population than is possible with restricted distribution. The repeated listenings made possible by transmission of an actual copy of a song rather than just a one-time broadcast may make consumers more likely to develop the familiarity necessary to attend a concert. Additionally, if consumers no longer have to devote resources to the purchase of albums, they may be more likely to spend money to attend a concert.

Artists Development Without Record Labels

One of Allen’s primary concerns is that, without income derived from album sales, record labels will be unable devote resources to the development of new artists. Yet the story of Allen’s own success runs counter to her argument – her initial popularity was due in large part to her posting of demos on her MySpace account. In addition, new business models are continually providing opportunities for new artists to develop without resorting to the support of record labels, as represented by a new venture called Polyphonic. Polyphonic treats new artists like a start-up company, providing an initial investment in return for a share of profits. Unlike a record deal, however, artists maintain control over their careers, recording their own music and handling decisions about publicity and touring. Perhaps more remarkably, Polyphonic artists retain ownership of their copyrights and master recordings. Contrary to Allen’s argument, as the fixed costs of music creation decline and new potential investors emerge, it may actually become easier for new artists to emerge.

Letting the Artist Decide

The recent actions of one artist demonstrate the potential benefits of accepting a world of free music distribution. Just last week, Solange Knowles, sister of Beyonce, released a cover of a song originally performed by the Dirty Projectors, a Brooklyn-based indie band. Her record label quickly removed the song from websites, but Knowles was resistant. Rebelliously, she took to her Twitter account to advise anyone who had downloaded the song to “send away!”. She seems to have realized what Allen has not – by sharing the song, people were spreading familiarity with both Knowles and the Dirty Projectors. And maybe because of that increased familiarity, one or two people will be attending a Dirty Projectors concert in Williamsburg later this week – providing income that would not have existed without free distribution.

For a Taste of the Music:

Lily Allen, Smile

Joss Stone, Son of a Preacher Man

Solange Knowles, Stillness is the Move