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Beggars reviewing 50/50 streaming split with artists

By | Published on Tuesday 8 April 2014

Beggars Group

In a lively debate about the ever-evolving streaming music sector, and the royalties artists earn from it, Beggars Group digital chief Simon Wheeler confirmed at the latest MusicTank event last night that the independent music firm was now reviewing the cut of streaming income it passes on to its artists.

What cut of digital monies labels pay out to artists has, of course, been a topic of much debate in the last decade, as record industry revenues have shifted from physical to digital. It’s a particularly contentious debate for artists whose record contracts pre-date the digital era, and therefore make no mention of download or streaming revenue.

Record contracts have always allowed for different royalty cuts to be paid to artists based on revenue stream, with the artist’s cut of record sales income usually less than when recordings generate revenue in other ways. But how are downloads and streams to be classified? As much previously reported, the former question has gone legal many times over in the US.

Meanwhile, after Thom Yorke and Nigel Godrich kickstarted a debate about the size of royalties artists are receiving from Spotify et al last year – the implication being the streaming start-ups simply aren’t paying enough – others in the artist community, and most notably Billy Bragg, who led last night’s Music Tank proceedings, have argued that the real issue isn’t what royalties the streaming services are paying to the labels, but how much of that money the record companies are passing on to artists.

Bragg argues that, with the costs and risks associated with digital content much less than when pressing and distributing physical product, labels should be paying a higher cut of that income to the artist. And for Bragg something more like a 50/50 spilt of this income between label and artist (rather than the much more modest record sale royalty, which will often be around 15%) seems fairer.

But most labels, to date, have been paying a much lower artist royalty on digital income, certainly for downloads, and often for streams too, sometimes opting for the same revenue cut as with physical record sales. Though when it comes to streams the Beggars Group stood out as a record company which opted for the 50/50 split, something confirmed by Wheeler at a previous Music Tank event on the streaming market.

But last night the Beggars man confirmed that that policy was now up for review. “As I said at that MusicTank event two years ago” he told his audience, “as a company we felt that as the streaming music market first emerged it was appropriate to share this new income stream with our artists on a 50/50 basis. But we were always clear that if and when streaming became a significant part of our overall business, that was something we would have to review”.

And, it seems, Beggars has reached that point already. Wheeler confirmed that for the Beggars Group the streaming revenue stream has rocketed in the last year, and especially the last six months, so that it now accounts for 40% of the company’s overall global digital income. And while physical and download sales both remain strong in the short term, streaming revenue is starting to replace the more traditional income streams. And a 50/50 split just isn’t viable as streaming becomes a core revenue stream for the label, Wheeler confirmed.

“The costs of running the company need to be covered by sales income, and the streaming revenue stream now needs to bear its share of those costs. So we will be reviewing our policy on what split of streaming income we pass onto the artist. That rate, once decided, will likely be applied to all existing contracts, and all new contracts moving forward. I can’t say what rate we will decide on, though we will seek the best possible rate for artists that also enables us to provide the kind of global resources our artists require”.

For those in the artist community pushing for a 50/50 royalty split on streaming, and who have possibly used Beggars’ previous policy on the matter as something for other labels to aim for, the news is possibly of blow, even though it’s not especially surprising.

Last night’s MusicTank debate also threw the spotlight on the often hidden costs associated with digital content, which while perhaps not as high as pressing, storing and distributing CDs, are still significant, not least the investment needed to develop technology that can cope with and process the mountain of data generated by digital services, some of which is relevant to royalty payments, and some of which is needed for marketing and campaign evaluation.

Despite all this, there was a generally optimistic mood on the panel last night – the music industry was facing big challenges in adjusting to a consumption-based future, but these were challenges that artists, labels and digital service providers could rise to. And though the debate was technically initiated by Thom Yorke’s Spotify-bashing of last year, the DSPs were generally portrayed as good partners for artists and rights owners. With perhaps one exception – any DSP bashing last night was reserved for YouTube.

The Google-owned platform is an important partner for the music industry everyone agreed, but the music community’s relationship with the content giant – skewed by the firm’s opt-out rather than opt-in approach to dealing with rights owners – needs to change.

There has been a real swing against YouTube in the music community in the last year, with growing resentment over the particularly low royalties the platform pays out, and the limited control it offers artists and rights owners over their content. There’s also a growing fear that the market-leading content service will prevent other more industry-friendly platforms from ever going into profit.

But, said Wheeler, YouTube has big ambitions to move into the audio streaming space, and the industry needs to now use the shortlived power that ambition gives artists, labels and publishers to restructure their working relationship with the Google company.