Independent Labels, Fan Funding and Music Piracy News, June 22, 2014

Independent Labels, Fan Funding and Music Piracy News, June 22, 2014

Indie labels and artists quarreled over YouTube’s new subscription video service. Also, The Guardian explored whether or not fan funding will really play a part in the transformation of the new music industry. And the Recording Industry Association of America (RIAA) said it has now reported 50 million pirated music links to Google.

 

On Stage

 

What Will the New YouTube Really Mean for Indie Artists?

 

YouTube announced it would start blocking videos from artists on independent labels that had not signed the new terms of service agreement it has laid out to prepare for a new streaming service launching later this year. This caused major waves with indie artists. Billboard grabbed a sample contract being offered up by Billboard and laid out what this shift will mean for musicians and labels. Even though the contract analyzed by Billboard was an early version of the document, artists and labels that have seen the updated version confirmed royalty rates laid out are the same as those in the newest document.

 

YouTube will allegedly be offering artists royalty rates lower than services like Spotify and Rdio. YouTube will pay either a percentage of revenue or a minimum per subscriber to its service, whichever amount is highest. According to the contract, its premium service rate for audio-only music equals payments of 65.5% of the service’s revenue. Of this amount, 55 percent will go to labels and ten percent will go to publishers and performance rights organizations (PRO)s. And for music videos, the rate equals 55% of revenue – 45 percent to labels and ten percent to publishers.

 

YouTube is also offering another revenue stream by charging $5.50 per subscriber per month to labels and between 50 and 80 cents per subscriber monthly to music publishers.

 

YouTube’s payment percentages are lower than the 70 percent of revenue artists, labels and publishers make through the premium Spotify or Rdio services.

 

However, indie labels are not particularly unhappy about YouTube’s royalty rates. They are unhappy about what Billboard refers to the company’s “take-it-or-leave-it approach”: If a major label or music publisher agrees to rates lower than the rates presented in the contract, Google can also reduce indie labels’ royalty rate without their permission.

 

This means majors can set up a three-part payment plan that includes a non-recoupable advance or a minimum per-streaming rate that eliminates the percentage rate. Indies cannot negotiate their own third prong, so they will get hit with a reduced payment.

 

However, an unnamed source from Google said this “most-favored-nation” clause is typical with music services. It helps make sure that major and indie labels get the same deal when new partners join on with a service. And insiders also claim that this clause does not affect indies more than it affects anyone else.

 

In terms of how this clause could affect musicians, if YouTube were to launch a promotion for the service or “bundle” it with another player – i.e., a mobile company that had a different agreement with labels – the bundle would equalize rates by going with the lower ones vs. the higher ones.

 

However, another service provider executive noted that Google is actually providing a contract similar to the one iTunes and Amazon has: “When iTunes introduced its matching-cloud service, the labels were not given any choices. They were told ‘this is the service, you will be in it and here is what we will pay … There wasn’t any outcry from indies then. Google sees itself on the same level as iTunes and acts accordingly.”

 

Independent labels also complain that YouTube’s premium service is too focused on the company’s ad-supported version. YouTube currently only pays artists for music videos that have ads connected to them. If a song or music video has all the rights owners in place, but no advertising inventory to match up an ad with a play, the play is not monetized. In order to stay competitive with Spotify and Rdio, YouTube would need to bring the ad-supported version of its service up to speed with the payments for all music streamed in its competitors’ ad-supported services.

 

An indie label executive clarified, “… they are saying they may monetize our music, but there is no guarantee that they will … We know that in the other interactive services every piece of our content will be monetized. But YouTube is moving the goalposts on us, and may only monetize 90% of our content. If you already have lower rates and then [they] may not monetize all our content that further reduces the revenue bucket.”

 

A YouTube source countered that argument by explaining that if every video had ads supporting it, users would get frustrated and play videos less. YouTube is trying to keep its users engaged and increase advertising revenue across the board by having some videos with commercials and others without: “In the long run, this will bring more revenue and be a good experience for everyone involved, the artist, [rights owners], viewer and the advertiser … Now that we are adding the premium component, we have also improved payment terms from what they were initially for some of the music categories in the ad-supported component.”

 

Indie labels are still worried about other subscription services calling foul due to all the free plays on YouTube’s streaming service. And they also say that the fact YouTube started out not providing indie labels with a minimum guarantee means the company is not really investing in the growing streaming market. However some insiders said YouTube did amend the contract to include a minimum guarantee after indies asked for it.

 

How Fan Funding is Affecting the Music Industry

 

Many artists and executives have credited crowdfunding with having the potential to fix an ailing music business. But The Guardian laid out why this type of fan-driven revenue stream may not be as perfect as it seems.

 

The 1994 Aphex Twin album Caustic Window hit YouTube on June 16. The album originally had only five test pressings, but when one appeared on Discogs, a crowdfunding campaign begun to get the album in digital format. It raised $67,424, and every fan who contributed $16 ended up getting a digital copy of it. This incident provides an example of what fans can accomplish through social networking platforms and activities.

 

Also this week, Rik Mayall’s World Cup theme song “Noble England” was pushed into the Top 10 through a fan funding campaign, and the Foo Fighters agreed to play Richmond, VA for the first time in 16 years after fans pre-sold tickets through a crowdfunding campaign to show them there was high demand. And in early 2013, Neil Young raised the third-highest amount ever on Kickstarter when he announced his high-fidelity music player Pono. Other artists have been jumping on the crowdfunding bandwagon and have seen success and returns.

 

One of the managers of the Foo Fighters ticket campaign said, “We’ve sold [tickets] for a concert that doesn’t exist yet … Nothing like this has ever been done before.” Songkick’s Detour program has, however, been engaging in similar practices, taking “pledges” from fans who campaign for bands to play gigs in their town. Superchunk, Televsion, Braid and others have been lured to underserved cities via Detour campaigns.

 

However, will crowdfunding be sustainable as the digital marketplace evolves? And is it really going to take out the middlemen that are currently limiting revenue and other components of the music industry? The Guardian suggested fans are simply creating new middlemen: Crowdfunding services that are skimming percentages off successfully funded projects. However, something fan funding services are doing is making previously inaccessible artists accessible, making each fan feel individually valued.

 

Still, said The Guardian, Kickstarter and other services are not yet causing a real “revolution,” because “the crowd tends to know what it wants.” A campaign to bring a huge band to a small town is impressive, but crowdfunding projects work best when fans are “preaching to the choir” and leveraging fanatics’ fandom. When a project is smaller and less obviously “worthy,” crowdfunding gets challenging.

 

At its worst, fan funding might make being a musician less “professional” and decrease music’s perceived worth by fans. Also, even though crowdfunding has brought some great returns for artists, it is still rooted in the “free-market” mentality of technology. It creates an “elitist” environment where only a handful of people get access to the product being created. And this might eventually affect the quality of art that reaches everyone’s ears.

 

The RIAA Reporting 50 Million Pirated Links to Google

 

The RIAA reported its 50 millionth music copyright infringing link to Google last week, reported TorrentFreak. The 25millionth came less than a year ago, showing that piracy is still thriving. And even though Google has a removal policy that results in fast takedowns, links still often reappear almost instantly. Similarly, even though viable legal music services abound throughout the world, record labels are still seeing a lot of pirated music.

 

Takedown notices have become a way for the RIAA and other music industry groups to address copyright infringements, with most going directly to Google.

 

The latest stats revealed that the 50 million links reported were attached to 14,907 different DMCA takedown notices. A majority of the requests (approximately two million) were for URLs attached to filestube.com, which has since changed its domain name. MP3 download sites psamba.com, downloads.nl, mp3skull.com and beemp3.com have between 1.3 and 1.6 million infringing links apiece.

 

Even though Google’s speed at removing pirated links has improved over the years, the RIAA has still been dissatisfied with the process. Its major issue is that a handful of non-U.S. sites ignore takedown notices or put the links back up immediately under new URLs.

 

RIAA CEO Cary Sherman stated, “All those links to infringing music files that were automatically repopulated by each pirate site after today’s takedown will be re-indexed and appear in search results tomorrow … Every day we have to send new notices to take down the very same links to illegal content we took down the day before. It’s like ‘Groundhog Day’ for takedowns.”

 

The RIAA and other copyright holders do not have many choices about how to deal with “rogue” sites. Still, the RIAA feels Google and other search engines could be more stringent about preventing access to the sites through their services.

 

The RIAA suggested search engines cut a deal with copyright holders to ensure pirated files stay offline via improved filters. The organization would also like Google to remove its takedown limits, push pirate sites down in search results, better advertise legal sites and services, remove pirate terms from the “Autocomplete” system and totally eliminate all repeat offenders from Google’s search index.

 

Google has repeatedly claimed it is already doing enough to prevent piracy. Senior Copyright Policy Counsel Katherine Oyama said previously that copyright holders need to support Google’s efforts by implementing better SEO techniques and improving the legal options available to consumers: “The best way to battle piracy is with better, more convenient, legitimate alternatives to piracy, as services ranging from Netflix to Spotify to iTunes have demonstrated. The right combination of price, convenience, and inventory will do far more to reduce piracy than enforcement can.”