This Week In Royalties: Spotify Buys Mediachain, Record Collections for PRS, and More

Apr 28, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

UK Collection Society PRS for Music Posts Record 2016 Revenues (Billboard)
Benom’s Take:  If you’ve been following these weekly updates from RoyaltyExchange, you will see a common theme: various royalty collection societies and industry organizations around the world are reporting record royalty revenue growth. In weeks past, we’ve discussed this positive growth data from the likes of ASCAP, GEMA, RIAA, MiDIA, SoundExchange and SOCAN. The data doesn’t lie--the music industry is coming out of its digital transition slump and the new streaming economy is here to stay (at least for the foreseeable future). The latest royalty report from the UK further solidifies this data and should build the confidence of creators, copyright owners and investors alike that we are truly in the midst of the industry’s “turnaround.” 

Spotify Acquires Blockchain Firm Mediachain (Music Business Worldwide)
Benom’s Take: More big news on the Spotify front this week: the company acquired blockchain technology firm, Mediachain. The acquisition comes on the heels of Spotify’s licensing deal with Universal (though Spotify is still locked in tense negotiations with Sony and Warner), Spotify’s artist Content Management System “Spotify for Artists”, as well as the recent acquisition of British audio detection tech company, Sonalytic. This blockchain acquisition means that Spotify will now possess an even more robust, transparent and efficient data management system to accurately pay royalties and provide further transparency for artists and rights owners.

For more information on blockchain technology, please see this week’s RoyaltyExchange article here

These recent developments are certainly strengthening and solidifying Spotify’s case (and attractiveness) to investors for an eventual IPO, as well as building confidence within the music industry about the platform’s overall viability. If Spotify can maintain this kind of momentum, it will be very difficult for competitors like Apple and Pandora to keep up. I believe that with this kind of momentum (as long as all the company financials hold up) that within 10 years time, Spotify could be the catalyst to create an entirely new generation of “middle class artists”--independent artists earning $50,000 to $100,000/year. That’s at least the general feeling and outlook amongst my industry colleagues. All in all, very positive news for the Spotify narrative that’s always in motion.

U.S. House Passes “Register of Copyrights Selection and Accountability Act” (MusicRow)
Benom’s Take: This is excellent news for the U.S. Copyright reform movement. We previously discussed this exact issue in the March 24th edition of “This Week In Royalties.” The House voted this week to adopt new rules in selecting the U.S. Register of Copyrights (the head of the U.S. Copyright Office), which include making the Register of Copyrights a presidential appointment, confirmed by the Senate with a 10-year term limit. This bill removes the Register of Copyrights appointment from the Librarian of Congress and will now move on to the Senate for a vote.

I’m very encouraged by this development and agree with the National Music Publisher’s Association President and CEO, David Israelite, when he said “...it elevates the position [of Register of Copyrights] to where it always should have been--amongst the ranks of the top officials within the [President’s] administration.” Indeed, it is encouraging progress, but this particular issue is really only one piece of the puzzle to bring complete reform to our archaic U.S. Copyright system.

SoundExchange CEO Points to SiriusXM’s Growth for Royalty Rate Increase Optimism (Billboard)
Benom’s Take:  As we’ve discussed before in our weekly updates, some royalty rates are regulated by the government. This regulation primarily occurs through the Copyright Royalty Board (CRB) judges for everything from musical compositions to cable television rebroadcasts. The royalty rates generated by sound recording performances on (non-interactive) satellite and internet radio are included within the CRB’s scope of duties. These royalties are paid to SoundExchange and right now the CRB is holding hearings to set new royalty rates for SiriusXM’s service for 2018 - 2022.

SiriusXM’s subscriber growth is encouraging because it means there is hard data to support an increase in their royalty payments to SoundExchange. As of now, SiriusXM pays 11% of monthly gross revenue and SoundExchange is requesting an increase to 23%. The CRB has a track record of making decisions that make both parties “just a little bit unhappy." However, with the subscriber growth at SiriusXM, the CRB will likely increase the rate from 11%, but 23% is probably a stretch. The hearings are supposed to conclude by May 18 and my guess is that we may see a rate increase move up to approximately 14% - 15% of SiriusXM’s gross revenues. Once again, this could be more positive royalty growth news for the industry at-large.