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 decline 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

Bradley, a few thoughts on your paper. Let me start by saying that I'm entirely sympathetic to your argument, but I think there are few weak spots here which could be bolstered a bit.

First, when you say, "It is difficult claim that record sales are a particularly beneficial source of income to most recording artists" you are putting the cart before the horse in a big way. There's a circularity in saying that artists can thrive in a free distribution world because they aren't making money from recordings, when they aren't making money from recordings because of free distribution. All you've done is shown that the old business models aren't working, but you haven't taken the reader any farther in showing that the new model of free distribution will. I happen to agree with your implicit contention that it will, but pointing to the failure of one system isn't a substitute for demonstrating the efficacy of another.

Second, and this is perhaps more literary, I think you're leaning a bit too heavily on Allen/Swift/Knowles in the essay. It's useful as a framing device, but you're making some very serious arguments here that affect an awful lot of people, and of course what really matters, an awful lot of money. Who really cares what Taylor swift has to say about business models? You face too the problem that none of these "artists" are actually in control of the distribution of their own music. They really have no more to say about the choices musical artists face than I do--- that is to say, not a lot.

Third, the section about Knowles is a bit problematic. The future of free distribution of content isn't in the "rebellion" of a pop star typing away on her Twitter. The song was still taken down. Obviously the subtext of this is that the record company can't do anything anyway--- the flow of information can't be stopped--- but I think you've framed this in an ineffective way. You call this section "Letting the Artist Decide", but really Knowles did anything but. Her record company tried to make a choice, but the realities of digital distribution did it for them.

I think you have a lot here, but there are some gaps that make it hard for even your sympathizers to get on board. -- DanaDelger - 18 Nov 2009

Bradley, I also have a few thoughts. First, I think that when advocating for other models than the traditional artist/label model you may want to spend some space, if you can spare it, discussing the current model in more depth. You do spend some time on this in the Unreliability of Album Sales section, but I think it would be useful to discuss why artists are willing to give up control over so much of their careers and music in order to sign the record contract. In my view these reasons include the cash up front advance, access to a influential marketing vehicle, and perhaps even some cognitive dissonance ("even though most albums don't sell well, mine surely will"). There may also be a cultural aspect to it -- many of the music artists I know see a record deal as "making it." I think addressing some of these points would make your discussion of why Polyphonic and other models are attractive to artists more complete and convincing.

Second, I think the debt comment in the same section might be a bit misleading. Yes, some artists take out loans against future sales from their record label, but my understanding is that it is rare. As I understand the standard contracts I have seen the advance and expenses (dinner will be provided while you record Mr. Elvis) can only be regained by the record label through the application of royalties, and thus are not debt the same way law school loans are debt: if the album doesn't sell well the artist keeps the advance and the record label loses the advance and expenses.

-- JustinColannino - 20 Nov 2009