Who wins the streaming game?

By Monyca Motta

The music industry is constantly changing, shaken by the roller coaster of music distribution and models of consumption. From oral transmission to the appearance of handwritten and then printed music sheets, all the way to the invention of the phonograph and its spinning cylinders to digital format (on a path that skipped LPs, cassette tapes and CDs), music has always been a trailblazer. The scenario we see today, however, is dominated by streaming platforms.

How are composers and musicians coping with such fast change? How to balance art with business, especially in the independent market? Make no mistake: this is a fierce dispute; they who conquer knowledge - a vital tool - over it, wins.

First of all, the artist needs to understand that their copyright is born with their music. It must be protected and claimed at each use. Understanding how the many available players operate may make this journey easier.

They are “intellectual works protected, creations of the spirit, expressed by any means, or fixed by any tangible or intangible support, already known or still to be established in the future,” says Article 7 of Law 9,610 / 98 or Copyright Law (LDA). Copyright is born with the creation itself, not with its registration or fixation. However, this right must be acknowledged and protected in order to generate results.

In the case of music, it is born with the composition, which could be the combination of the melody and the lyrics, or even just the melody. It multiplies itself with the recordings. Once the music is created, it must be spread.

This basic right over the creation belongs to the author. It is a fundamental, constitutional right, and it overrides anything derived from it. Only the author can determine whether and how their work should be used, and only they can decide whether to associate it with other players in the market or not. These include music publishers and author societies, which have different, yet often complementary roles.

Music publishers represent composers and negotiate their creations with record labels. They receive the so-called reproduction (speech) rights and also act in order to guarantee the synchronization rights (those paid for the inclusion of musical compositions in videos, movies, soap operas, etc).

The authors societies, in Brazil, are private associations with the purpose of defending their affiliates and ensuring that they get paid for the public performance of their musical compositions and also their recordings. These societies got together and created the Central Collection and Distribution Office (ECAD).

The recording of the work can be done by the composer themselves or by other artists. This allows the creation of new rights - also known as authorial rights: phonographic producer, performer, performing musicians. They are all protected in exactly the same way as copyright, under article 89 of the LDA.

With the coming of digital and new formats of distribution, however, the game changed. Companies outside the music business (“outsiders”), such as Apple (with iPods and iTunes), have become protagonists. Then, a few years ago, it was time for the streaming platforms.

In this new world, major labels put their catalogs straight on the platforms. Digital aggregators or distributors were created in order to assist independent artists. They provide the necessary structure in order to receive and to distribute this digital content.

With streaming, nothing is sold directly: the customer has access to an extensive catalog of songs, and the artist, publisher and / or record company knows (or may know, as the transparency of this information is a moot question) how often each specific song was heard.

But in this model, where is the money? Who pays for it? Who charges? Who wins?

Check who are the mains stars when it comes to copyright in the music industry

Music performer The artist who records the piece. They receive the rights similar to those of the author, as well as the phonographic producer and the musicians who took part in the recordings

Music publisher They register compositions and represent composers. They receive reproduction rights and assure the synchronization rights (when the song is used in videos, movies, soap operas and more)

Distributors Companies which provide the structure needed to receive and distribute independent artists digital content throughout the platforms

Association of Authors It assures that those who are filliated to it receive copyrights when compositions and recordings are layed publicly

Songwriter They who write lyrics and/or melodies

Record companies It manufactures, distributes and promotes the records made by artists/interpreters. There are two categories of record companies: major and independent ones. They receive reproduction and synchronization rights (when it comes to phonograms)

Streaming platforms They offer catalogs with thousands of options. They payback record companies/distributors/editors according to the quantity of plays the track or artist gets. In Brazil, they also pay ECAD for public execution of tracks

Learn how the copyright revenue is shared when it comes to the reproduction of songs.

41,7%: Interpreter/Main Artist 41,7%: Phonographic producer 16,6%: Backup musicians

Info: abramus.org.br

This is the next big thing. Although copyright law has provided its protection on “creations of the spirit, expressed by any means, or fixed by any tangible or intangible support, already known or still to be established in the future,” the reality is that, at least for the moment, neither the law nor the market is prepared to deal with this new business model.

Singer-songwriter Marisa Monte described it very accurately in an interview for Folha de S.Paulo in August 2019. At first, internet access caused a widespread hysteria. Only then people tried to work out what to do with the copyright of the material made available. Many tech giants grew in such void.

In the same interview, Marisa Monte also acknowledges that the problem is old, despite the technology: in the era of physical media one could never be sure that the numbers provided by publishers and record companies were actually true.

Digital platforms earn their revenue from subscriptions and advertising. They created formulas in order to identify and to reward the music content based on the number of subscribers, play count comparisons, and other factors. But the beneficiary was still to be determined.

There was a conflict because it was initially understood that obtaining authorization and making payments to record labels and publishers in order to distribute this content should suffice. For the independent artists, part of this path is taken through the aggregators. The artists delegate the task of receiving the earnings for the tracks that are uploaded to these platforms and then pass them on.

But in Brazil, ECAD found legal ways of proving that the rights for public execution were also pertinent in this market. Therefore, it began to collect these sums, which the associations passed on to their members.

So why is it still difficult for independent artists to understand and to get paid for the use of their digital work and tracks? Because those who are not tied to a record label or a major publisher (or another emerging niche entity) have many difficulties identifying and charging their content, especially when it comes to copyright.

There was a market void when digital platforms started to operate. Many started functioning based on large deals with the largest players, those who own most of the music catalogs. This was done through large pre-licenses and substantial payment advances. The big publishers and record labels provided this legal assurances so that they could operate in each individual country. First, they made earnings for identifying and licensing the content they represent. And the independent artists only had their turn when the aggregators came into existence. That’s when they began to receive for their tracks and then for the musical compositions.

The first distribution of public performance rights for digital services was made by ECAD and copyright associations in 2016. UBC announced that a total of R$ 2.38 million would be paid to 116,000 copyright holders. In 2017, ECAD signed an agreement with YouTube; In 2018, the US Copyrights Board determined a 40% increase in the amount that should be paid for copyright on streaming platforms. In 2019, Facebook and Instagram started paying artists for the songs used on their platforms. As usual, it all starts with the major labels / publishers and only then it reaches the independent market.

According to the IFPI’s annual report, the global music market grew by 9.7% in 2018. Streaming experienced a growth of 34% and accounted for 47% of total music revenues. In Brazil, the streaming market grew by 15%.

There is still a long way to go in the digital music market when it comes to business transparency and, above all, even chances for major players and the independent market. The lesson learnt is: the game changes, the rules change, some players fall along the way, while others stand up and move on. In this market, you must have knowledge, strategy and keep the eyes on the prize. 24/7.