Facinating article in Real Life Magazine
For the past few years, music lawyer and publisher Henderson Cole has been thinking about this central idea: What if the U.S. had a federal, taxpayer-funded, government-run music streaming service? The proposal, published in 2019 by the Penny Fractions newsletter, is outlined here. It is built around five core points: anyone in the U.S. could host their music on the library; songwriters and artists could upload their work directly (current corporate streaming services require distributors); the library would be paid for by a tax on the wealthiest Americans; the library would serve as an archive for long-term preservation of music files; the library would create a new royalty system with which to pay artists, separate and more collectively lucrative than the currently archaic and dysfunctional royalty system.
The basic premise of the American Music Library suggests that streaming could be less destructive to society if it were funded and organized differently — that perhaps the problem with streaming isn’t streaming per se, but the predatory industry norms that surround it. What if we severed the concept of streaming from its current economic models, and created something with public resources that belonged to and served the public? Something more in line with the functions of public libraries, which today remain hubs for free access to information, community space, educational programs and more, driven by values like privacy and preservation.
The American Music Library would have no playlists, recommendations or algorithmic discovery functions — it would just be a repository for music from around the world. As Cole writes, this would not only eliminate the biases that define the streaming environment today (where playlist curators are gatekeepers, and payola is rampant) but also reduce the overhead costs required to get the service established. In a sense, it’s like a rethinking of federal arts funding for music.
Currently, mainstream streaming models use a pro-rata payment system, where artists are paid proportionately depending on how their streaming numbers compare to the entire pool. Cole’s proposal calls for the creation of a new royalty system that would pay artists on a per-stream basis. The idea of per-stream payments is aligned with calls from many artists and organizations for streaming services to adopt user-centric payment: If someone pays $10 per month to stream Galaxie 500 all month, then Galaxie 500 should get that $10. The proposal also includes a built-in maximum wage of sorts: a cap on the amount that individual artists can make, ensuring that the government isn’t just funneling all of the allocated funds to already rich pop stars. This cap makes sense given the failures of the celebrities-take-all scarcity model. As Cole writes, “The effect of this policy is that more of the value of streaming royalties will be distributed to the lower and middle class musicians, who could badly use the payout to continue their careers.”
Read the full article at
Source: https://reallifemag.com/socialized-streaming/
This is Henderson Cole’s Original Piece
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The American Music Library
https://docs.google.com/document/d/14Wu_2B8fOZAPSpRpiNujrURd94plCzGXVFKLQb8vHeU/edit
This idea is still in its early stages and is open to changes. Thanks for reading. Send any questions, concerns, or ideas to HColeLaw@gmail.
The Streaming Economy Needs A Fix
Music streaming has become the single foundational pillar of the music business, with streams now accounting for more than half of all music industry record sale revenue (75%+ in 2019). Unfortunately, that cornerstone isn’t sturdy enough to hold up the industry for much longer. The major streaming services lose millions of dollars each year, and artists and songwriters are not making enough money from their miniscule streaming royalties, which have cannibalized other physical and digital album sales. Artists are forced to tour until breakdown because it is their only stable source of income, and songwriters are quitting in droves because royalties are unbearably low. This has only accelerated during COVID. This problem is having a wide ranging effect across the entire music industry, damaging groups as diverse as artist managers, lawyers, producers, booking agents, and venues, who all depend on artist revenues to support their work.
Music streaming is currently dominated by corporate titans. Spotify, Apple, Amazon and Google are sparring for control of the market. However, within the technology of music streaming there is the potential for something much better than corporations angling and underpaying creators. Through music streaming, everyone can have access to nearly every song ever created, free to listen whenever they want. We should take steps to make this potential a reality, while also remedying streaming’s royalty problems to strengthen this important industry.
The American Music Library
My proposed solution is The American Music Library (AML). The AML is a government-run music streaming service that every American can access for free (similar to the US public library system). This streaming service will not have algorithms or service generated playlists, but instead be a repository for all music from all over the world. The artists and songwriters would be paid fairly when people stream their work, and no labels, publishers or other industry figures would be able to wield power over the service, or prevent anyone from hosting their music there.
Not that hard to imagine right? Isn’t that just Spotify’s free tier? Well, not all music is available on Spotify, it pays artists an insufficient royalty, and it is almost entirely controlled by mysterious algorithms and major labels. You could say pretty much the same things about Spotify’s competitors as well. Artists and songwriters are not pleased with streaming as it stands.
The US government could manage a streaming system much better and more efficiently than these corporations because the government has important advantages that would allow it to break free of the standard structure of music streaming. Here are some rules the government could mandate along with the creation of the service that would make it substantially more beneficial for artists and songwriters.
- No one may prevent any Artist or Songwriter from hosting their music on the American Music Library. This will allow all music to appear on the service, unhampered by contract disputes, restrictive labels, or exclusivity agreements.
- Songwriters and Artists can upload their work directly to the American Music Library without the use of distributors. Removing the need for distributors will make the system accessible for everyone, and will reduce costs, therefore increasing payouts.
- The American Music Library will be tax funded. A tax funded system allows the music library to not have to compete with other streaming services for subscriber dollars. There could be additional ads if necessary like public radio or donor drives like PBS, but the service will not have to worry about subscriber numbers dipping and the entire system collapsing. The library will therefore be securely funded and long lasting.
- The Government Will Preserve The Music For Future Generations. The government service could store and secure the music for all time, so that songs are not lost forever when the only copies are deleted or destroyed by private companies, as has happened countless times in the history of the music industry including a fire at Universal that destroyed thousands of original masters which can never be replaced.
- The US Music Library will pay a royalty completely separate and unique from the current royalty system to Artists and Songwriters. This is the single most exciting benefit of a government controlled system. Creating a new royalty just for the music library has many advantages laid out below.
Advantages of Creating A New Royalty
Currently, every music streaming service is required to play by the existing rules of our endlessly complicated royalty system, only to have any royalties that do end up being distributed get gobbled up by record labels and publishers. However, the government has an advantage over these corporate streaming services, because as the creator of the entire copyright system, it can create completely new royalties and determine which sort of streams qualify for each. For instance, FM radio pays royalties to the songwriter but not the performing artist, XM radio has to pay both, while neither pay the same royalties as Pandora. We can debate whether those rules are logical, but there is no debate that the government decides these things.
I propose that instead of playing within the current system, The American Music Library create and pay a completely separate and distinct royalty than other streaming services. This “stipend royalty” could be paid directly to artists and songwriters. “A study released by Citigroup showed that in 2017, only approximately 12% of the music industry’s revenue went to artists” (Liz Pelly). This new structure would offer the government a quick and easy way to get the financial aid to the artists and songwriters that need it most.
The 3 major advantages of such a plan are outlined below.
1) Increased Songwriter Pay
There are primarily 2 groups that need to be paid for the use of the music in the American Music Library or any streaming service: Songwriters and performers aka “Artists”. Songwriters are the ones that write the music, and Artists are the ones you hear on the recording. Sometimes they are the same people, but often it’s a slightly different group on each track. For instance, for a cover song the original songwriter is paid, but so is the new artist who performed the track.
In the presently existing streaming royalty system, songwriters are simply not paid enough to survive. Currently, songwriters make about 20% of what Artists make from each stream, and this is after the Music Modernization Act created some payment improvements for songwriters.
By avoiding the traditional royalty system, The American Music Library’s new stipend royalty could pay Songwriters and Artists much more evenly, perhaps even equally. Songwriters badly need the increased pay, and they are the creative force behind the music, so it is very important that any plan to improve streaming include their benefits as a priority.
2) Royalties Can Go Directly To Artists and Songwriters
The American Music Library could mandate that all (or most) of Artist royalties be delivered directly to Artists via SoundExchange and all (or most) Songwriter royalties be delivered directly to Songwriters via PROs (ASCAP, BMI, etc). This will greatly increase Artist and Songwriter payouts because labels and publishers will be unable to deduct their shares or apply these revenue balances to recording debts or recoupable costs.
In the current system, it is common for Artists to see virtually zero royalties from streaming, because labels are entitled to nearly all of them under their contracts. By creating a new royalty system based on a direct artist stipend, The American Music Library could avoid these pitfalls, and at least make sure that a significant portion of the royalties reach the Artists and Songwriters.
3) Reduction of Music Industry Inequality
Currently, the vast majority of streaming royalties go to a few artists at the top. The American Music Library could use any number of systems to even out their inequality. One smart way to do so, that would also increase the royalty per stream, would be to have a maximum monthly royalty/stipend for any Artist or Songwriter.
The Music Library could make a rule that after let’s just say $100,000 (or about 10 million plays at AML’s increased royalty rate) in a month, the maximum stipend has been reached, and additional royalties will not start accumulating until next month. The same could be done with Songwriters. For instance, if there was a limit of $100,000 for Artists and a $75,000 limit for Songwriters, a performer that writes their own songs could collect a maximum of $175,000 per month (definitely still a huge check for someone on any rung of the music biz). The extra money that would have otherwise been headed to this top 1% artist or songwriter, can instead be used to raise the royalty rate for everyone.
The effect of this policy is that more of the value of streaming royalties will be distributed to the lower and middle class musicians, who could badly use the payout to continue their careers. This will reduce the inequality among musicians because it will allow smaller artists and songwriters to make a more substantial check every month, and it does so only at the slight expense of the most successful artists and songwriters. These top entertainers will still be receiving a large royalty stipend payment each month, and because of their popularity, they will have many other opportunities for sales, endorsements, and other more traditional music industry revenue streams that smaller artists do not.
4) Higher Pay Per Stream
With the benefits of the monthly stipend cap, government funding, and the ability to establish a completely new royalty rate for this “Music Library Stipend”, the Music Library will be able to offer a much higher royalty than any streaming service currently existing.
I would offer an estimate that The American Music Library would be able to offer somewhere in the neighborhood of $0.01 per Artist master stream (an amount that Artist organizations have recently been calling for) and $0.0075 per Songwriter composition stream. This doesn’t sound like a ton, but it is about double the highest rates from streaming services for the Artist royalty, and even more than double for the Songwriter royalty. For an artist who writes their own songs, 100,000 plays on this service would net $1750 per month ($1000 to the band and $750 to the songwriter) as opposed to about $500 under current royalty rates! For thousands of artists and songwriters, this stipend royalty could become a career sustaining revenue stream.
This stipend royalty is especially helpful for both artists and songwriters because record labels and music publishers won’t be able to take a huge percentage of these earnings or claim them to pay off release costs. Therefore, this royalty stipend would be a dependable source of revenue for all Artists and Songwriters even if they had signed a bad contract in the past.
It’s also important to remember that the American Music Library would be existing alongside the current music infrastructure, so all those additional money-making opportunities for Artists and Songwriters will still be out there as they are now: album sales, licensing, live performances, merchandise, and streaming royalties from other services.
Is This Possible?
Yes, the government has the authority to create a program like the American Music Library, and it has the resources to do so. The US government controls the entire copyright system and therefore the music royalty system. Every performing rights society and collection agency operates with government approval and sanction and the government can completely bypass these collection agencies or create something completely new if it pleases. The US Library system already has music collections in many libraries, some even have MP3 collections for download, and this wouldn’t be much different. It would really just come down to our lawmakers having the desire and foresight to create such a system and invest in it’s success.
How Will We Pay For This?
The creation and promotion of a new streaming service and the payment of increased royalties to Artists and Songwriters would be an extremely expensive proposition for all but the largest private companies, however for the US government it would be a relatively small expense.
Spotify’s operating costs are somewhere around 5 billion dollars per year, or less than one-third of how much the US government gives to fossil fuel manufactures each year in stipends, a tiny expense in the scheme of the massive US government. And those Spotify costs include expensive operating costs for their algorithmic and service generated playlisting divisions which will not exist within the American Music Library. Even if it was an unexpectedly large cost of 10 billion a year because the service was so popular, that would effectively be a 10 billion-dollar stimulus paid out to artists and songwriters, which would stimulate the economy and protect an industry (entertainment) that is one of the United States’ leading exports. All of which could be paid for with a minor tax on the wealthiest Americans.
There are many different tax options to generate this revenue, but personally, I prefer an escalating wealth tax that starts at about 10 million in net worth, but even something far less intense would be adequate. Vox’s Wealth Tax Tool estimates that even just a tax of 0.5% on wealth over $20 million would generate more than 10 times what the service would require. This Library Tax could fund the American Music Library and also supply more funding for the US public library system for books, which also could use an increase in funding to upgrade into the internet age.
The point is that cost is not a barrier to the creation of a service like the American Music Library, especially considering the return on investment and job creation due to the stimulation of the entertainment sector of the US economy.
Disadvantages
There are some potential disadvantages of this system over privately owned streaming services. Because it will be a government controlled entity, free speech rules will apply, which means that any music that isn’t considered “obscene” must be allowed on the platform.
Similar to public spaces and other government entities, there will be no bans for abusers or nazis. However, having art created by questionable people on the service is a small cost to pay for such a huge advancement of the public good, and it is far preferable to the government censoring which music can appear on the service.
Without algorithms or service controlled playlists, the government will also not have to worry about accidentally directing listeners toward offensive artists. The choice will be completely that of the listener. This tax funded music catalogue will be a way that taxpayers can directly affect where their money goes. Every listen will be a few pennies toward an artist they enjoy.
What About Spotify and Apple and Amazon?
They’ll be fine. Spotify and other streaming services can try to coexist alongside the American Music Library. They will be able to offer curation and playlists that the government service won’t be able to offer, and if some of those businesses end up closing, that is just economic efficiency. The current streaming services are losing money even before the creation of the American Music Library. It is also important to mention that the creation of this service will create thousands of government jobs with pensions, far more secure jobs than at any of these corporations. Overall its a net benefit all the way around.–
This idea is still in its early stages and is open to changes. Thanks for reading. Send any questions, concerns, or ideas to HColeLaw@gmail.
Henderson Cole
