Back

Fair Trade Music: Letting the Light Shine In

Tuesday, October 22, 2013
ShareThis

In November of 2012, Songwriters Association of Canada President and Music Creator's North America Co-Chair, Eddie Schwartz made an online presentation viewed during the "Evolution and Equilibrium: Copyright this Century" conference in Wellington, New Zealand. Eddie's presentation was on the Fair Trade Music initiative which has been adopted by over 25,000 music creators in Europe, Africa, Latin and South America, and Canada and the US.

Two other contributors to the conference, Professors Glynn Lunney, Tulane University Law School, and Doctor Rebecca Giblin, Monash University Faculty of Law, responded with concerns regarding Fair Trade Music in separate papers. The following is Eddie’s response, which includes excerpts from both Professor Lunney and Dr. Gliblin’s papers, and gives a good overview of the Fair Trade Music initiative.  

Once Professor’s Lunney and Gliblin’s full papers are published, we hope to provide a link to them.

Fair Trade Music: Letting the Light Shine In

By Eddie Schwartz

I submit the below in order to clarify and enlarge upon some of the points I made during my online presentation of November 17th, 2012. Many thanks to Professors Frankel and Gervais for allowing me the opportunity to do so.

My talk was about a proposed Fair Trade Music (FTM) regime conceived as a broad initiative that would address the major areas of economic activity that affect music creator incomes, both at the “wholesale” and “retail” level. Not only would this include more recent methods of delivering music to consumers such as streaming services and digital stores – Apple’s iTunes being the most widely known example of the latter, but various intermediaries through which creator incomes flow, such as collective management organizations, music publishers and record labels. All could be evaluated and certified by a FTM certification body that included music creators, and would be based on supportable criteria of fair compensation and transparency.

Applied to a digital music streaming service (for example Spotify or Pandora), Fair Trade Music certification would result in a FTM seal or stamp of approval displayed on the certified services, web sites, apps and advertisements. This of course mirrors FTM’s agricultural counterpart for coffee and many other products. This seal would inform consumers and creators alike that that particular service fairly and transparently compensated songwriters (and artists) when their music is streamed.

While music “file sharing” technologies that do not offer music creators any compensation for use of their works would obviously be excluded from FTM certification, many “authorized” music services might also fail to be certified, for reasons that will be discussed shortly. In any case, file sharing would not be the primary focus of a FTM regime as Professor Lunney suggests in his chapter “Copyright on the Internet: Consumer Copying and Collectives”. That said, nothing I propose would bar authorized file sharing services that chose to compensate music creators in a fair and transparent way from receiving FTM certification.(1)

Professor Lunney writes, “Just as there is no law that requires consumers to purchase fair trade coffee, so too there should be no law that requires consumers to pay more for copyright works.”

I agree. This is why Fair Trade Music would neither entail nor require any such law. A FTM regime would be voluntary; it would call for nothing more of consumers than other fair trade systems do. The choice to “go fair” would be left entirely to each consumer. In Professor Lunney’s own words, “[a] consumer may choose to pay the higher price for fair trade coffee because she derives satisfaction from making the “right” choice (the “warm glow” effect).”

Substitute the word “music” for “coffee” in Professor Lunney’s sentence, and he has described a basic tenet that the FTM proposal shares with its agricultural forbearer. Research undertaken in Canada convincingly demonstrates that the vast majority of consumers of music support creators being fairly compensated when their work is used.1 The FTM proposal would establish a means for consumers to realize this preference.

Professor Lunney also questions the validity of applying the fair trade model to music because a FTM regime would “redistribute from the relatively less well-off, music consumers, to the relatively better off, copyright owners.” Such a sweeping and all- encompassing statement regarding the economic status of all farmers, all consumers and all copyright owners seems difficult to support. There are of course some “copyright owners” who are “better off” than many “music consumers”.

Dr Dre, Professor Lunney’s example, is certainly one of those remarkably successful individuals. In one way or another however, many of us have transferred some of our likely more modest wealth to the likes of say Tiger Woods, Steven Spielberg, Larry Page or Bill Gates over the years through various means, both direct and indirect. Is Professor Lunney suggesting that only those who achieve success through the creation of popular music be subjected to economic repression? Or would he subject all who have achieved commercial success, from sports to software and everywhere in between to the same treatment?

Given that we live in societies where, in most cases, those who achieve great commercial success receive substantial financial gain, I respectfully suggest that if an individual consumer wishes of her own free will to “redistribute” a relatively very small portion of her wealth to those whose music she enjoys, we allow her to do so.

Then of course there are the other 99% or more of music creators who are at best no better off than their fellow citizens, and who struggle to survive in an exploitive and often dysfunctional economic ecosystem called the music business, where even the most successful careers often span a few short years. Substantial “commercial” success these days often results in virtually no financial gain for “successful” music creators, while CEOs, investors, shareholders and others often do handsomely from exploiting their works.

Contrary to the assertions of Professor Giblin in her paper, Spotify is an excellent example of the problem, rather than the solution. As a creator of works that are streamed on a regular basis on Spotify, I have first-hand experience of this. I regularly speak to many colleague creators and also have their experience to draw on. For example, a recent publishing statement I have access to details earnings from Spotify. Since the writer of the song in question is the sole writer, the arithmetic is very straightforward. As the reader will see, the statement of royalties received from Spotify is illuminating.

This report shows that a particular song was streamed 162,525 times on Spotify. Total royalties reported for those streams are US$11.46.

Since this songwriter receives 50% of those royalties (as does the publisher, a common arrangement), those 162,525 streams represent US$5.73 to the songwriter, or $00.000035 per stream. (For many songs, 2 or 3 songwriters might further divide this amount)

To extrapolate, one million streams would pay the songwriter US$35.00. One hundred million streams would pay US$3,500. One billion streams would pay US$35,000.

To put that into perspective, for a songwriter to earn what many would consider a modest middle class living of US$35,000 over a 10 year time span, that particular songwriter’s work (assuming he or she is the only author) would need to be streamed roughly 10 billion times. Numbers are sometimes hard to contextualize. This might help. 10 billion streams means that every human being on Earth would need to stream that one song 1 and 1/2 times. The reader should keep in mind that this would have to be the case for every other songwriter who hopes for a modest annual income as well. This bears repeating. It means that every songwriter in the world who wishes to make a modest middle class income would need to have at least one song downloaded by more than every human being on the planet (including the billions who have no Internet access) every year.

How does this compare to the analog world? At the height of the music industry little more than a decade ago, sales of 500,000 records were considered a relatively rare achievement and celebrated by the issuing of a “Gold” record. The much rarer achievement of 1 million (not billion) sales was awarded with a disc of “Platinum”. A platinum record in those heady days would generate approximately $40,000 for the songwriter(s). To achieve comparable compensation in the digital realm, the work in question would need to be more than 1,000 times more successful than what was considered rare success in the past. And again that level would have to be achieved every single year in order to generate a sustainable revenue stream.

Professor Giblin in her chapter references Spotify’s growth as hope for music creators’ future. As the above demonstrates however, growth never before seen by any human endeavor, with the possible exception of some envisioned in science fiction, will be required for Spotify and/or like services to attain sustainable revenue flows where music creators are concerned at current per stream levels of remuneration.(2)

As things stand, songwriters’ income streams from streaming are hundreds of times less than in the previous, analog world, and frankly, quite simply untenable. Even if, as some claim, streaming services double, triple or indeed multiply by ten the amounts paid to songwriters, based on current formulas or “splits”, the future is not viable. This is not because no one is making money, however. It is because the financial flows circumvent creators. Hence, the FTM proposal.

I would be remiss if I did not acknowledge that Professor Giblin does make some excellent points.

She writes:
“In reality however these payments are doing little to directly benefit artists, as the bulk of the money goes to labels. This fact is at the root of many criticisms of the service, which was partly sold to major record labels as a price of securing the rights to their content.”

This problem is compounded by a lack of transparency in terms of royalty advances, and ownership stakes as Professor Giblin rightly points out, that benefit major labels (and due to large advances, multinational music publishers as well in some cases) for licensing the use of their respective catalogues of rights in masters (sound recordings). Moneys received through these means are rarely reported to, or shared with, those who actually make the music.

And that is precisely why a Fair Trade Music system would be so helpful.

The strength of FTM is that both the retailers and streaming services (iTunes, Pandora, Spotify, etc.) and the record labels and other intermediaries themselves “would be held up to the light”. If a service does pay a reasonable percentage of revenue to creators, and is certified by FTM, but the amounts that actually flow back to creators are unduly reduced or go missing entirely, then a FTM system would reveal where the chain is broken, and where certification should be withheld.

FTM will gain momentum not just because of positive consumer attitudes towards music creators (as confirmed by the Canadian survey(3)) but also because it offers intermediary companies and organizations a competitive advantage for those that comply with FTM criteria. We see this happening already in the case of Kobalt, now one of the world’s largest independent music publishers. In recent weeks, the likes of Paul McCartney, David Grohl, Lady Antebellum, the Lumineers among many others have moved rights to their music to Kobalt largely because Kobalt has publicly and aggressively committed to transparency in its business dealings and administration.

Music creators support and encourage new ways for people to enjoy our music (including services such as Spotify and Pandora). Tens of millions of people around the world are enjoying music every minute of every day. CEOs, investors and shareholders extract hundreds of millions of dollars from these businesses, and Internet service providers, telecommunication companies, and global conglomerates facilitate access to the world’s repertoire of music and receive immense financial gains for doing so. Contrast this with the impossible financial scenario music creators now face. The urgent need for a Fair Trade Music system is, I suggest, crystal clear.

Consumers and music creators need to be informed as to who pays and plays fair in the new and rapidly changing music landscape, and who does not. This is the only way that they can decide whom to do business with, and whom they may wish to avoid. Fair Trade Music will thus empower both creators and consumers with the knowledge they need to make informed decisions.

(1) Details of a licensing system that might allow such certification are available at http://www.songwriters.ca/proposalsummary.aspx
(2) Note also, that rather than contemplating increases in those rates, services such as Pandora are currently in court fighting to reduce them.
(3) S.A.C. Monetizing Music File Sharing: A New B2B Model, available at http://www.songwriters.ca/sacsurvey2011.aspx