Spotify, WMG, Deezer execs on artist-centric payments, streaming fraud and ‘the new free goods’

Executives from Spotify, Deezer, Warner Music Group and more share some candid comments on artist centritc royalties, streaming fraud and more on a recent panel.

by CHRIS CASTLE from Music Tech Policy

Our friend Helienne Lindvall, President of the European Composers and Songwriters Alliance, spoke at on a panel at the ESNS Festival in the Netherlands recently.  The topic was “Moneymon:  The Streaming Economy Evolution” and Helienne’s fellow panelists included Sophian Fanen of Les Jours, Milena Taieb, Spotify’s head of music for Benelux & France, Niels Walboomers, President of Records & Music Publishing, Warner Music Group Benelux, and Nigel Harding, VP Artist Relations for Deezer.

Among other topics, the panel discussed Spotify’s “Track Monetization Eligibility” policy that you’ve probably heard so much about.  That’s the one I call Spotify’s “free goods” policy to repurpose a term that actually means something to musicians and especially songwriters.  This free goods policy is part of Spotify’s approach to streaming fraud.

Unfortunately there is no recording of the panel, which is a shame.  The panelists discussed important issues so we asked Helienne her impressions of the conversation.

I understand the panel discussed the “artist centric” concept for streaming royalties?  How did that go? 

Firstly, I had to question how it could be claimed to be artist centric if no artists had been consulted. I think we all can all agree that the way streaming royalties are distributed needs improvement. Hence why we launched the #FixStreaming campaign in the UK, which resulted in working groups being set up by the Intellectual Property Office to “fix streaming”, and it’s why we worked closely with MEP Ibán García del Blanco and his team to help deliver his report on “Cultural diversity and the conditions for authors in the European streaming market”, which was adopted by the EU Parliament a couple of weeks ago. Both initiatives were initiated by music creators, so it’s puzzling to me that no music creator organisations were consulted – or even contacted – before implementing these so-called “artist centric” payment models. 

Some of the changes are clearly both needed and make sense, such as differentiating between functional audio and music, and differentiating between “lean-in” and “lean-back” listening, with the latter being more akin to communication to the public – both of which are more forcefully tackled by Deezer’s new payment model than Spotify’s. 

You know one of my concerns about streaming royalties is the lack of a contractual basis for many of these “policies”.  Artist (and songwriter) consent is the centerpiece of the “ethical pool” model that is predicated on artists opting in to the model.  Consent is what makes the ethical pool ethical.  Did you get any clarity on how these platforms intend to obtain artist consent?

Spotify’s Milena Taieb said they deal with the right holders – and the rights holders of the masters are the labels. Warner’s Niels Walboomers said that the label represents the artists, which led me to ask: did their artists sign contracts that agreed for their royalties to be rerouted to a more successful artist if they didn’t reach a certain level of success? I said that if they tried implementing these models on songwriters’ royalty distribution they would come up against serious push-back due to the agreements CMOs have with their writers, as well as the fact that CMOs have songwriters sitting on their Boards. 

Nigel Harding said that Deezer’s new payment model only applies to those who have signed up, but as long as we have a pro rata system, any change will surely affect everyone, signed up or not.

On Spotify’s Track Monetization Eligibility policy, to my knowledge that absent outright fraud, there is no contractual basis for refusing to pay for streams (unlike free goods which is contract based).  Did you get any clarity on what the legal basis is for this “policy”? 

Deezer said that they’re replacing functional audio such as white noise and rain with their own versions of it, which will not get any royalties at all. This is welcome. Spotify is trying to tackle the problem by differentiating payments according to length. However, if someone puts the self-explanatory “Loopable White Noise For Babies” on a loop it will still drain the royalty pool for music. 

Is it just me, or is it the case that the platforms approach to streaming fraud is always after the track is in their offerings?  The alternative would be to avoid the negligence and limit which tracks can be uploaded to the platform.  Any discussion of the timing issue?  Do you have thoughts on this distinction? 

Not at this particular panel, but I participated in a panel called Tackling Fake Streams: Industry Responses to Streaming Fraud, hosted by the Dutch independent label association STOMP, which featured distributors Downtown and Zebralution. It’s estimated that almost 10% of streams are fraudulent. We have the Swedish example of criminal gangs laundering money via “fake” streams, and cases such as the Bad Dog fraud, highlighted in the New York Times. A former Spotify employee in the audience appeared to think the onus lies with the distributors. I suggested a more rigorous identification procedures of uploaders, and the distributors said they’ve formed a working group where they can share information on bad actors, in order to prevent them simply jumping from one distributor to another. An important first step, I think. 

It seems like there’s some pretty severe discrimination in the free goods approach that would potentially be rough on the prepared piano people for example, like Cowell, Cage, Villa-Lobos, I could go on.  In fact, the stream limitation flies in the face of genres such as instrumental jazz and classical which have always had deletion protection at distributors.  Who made them A&R?

Lucian Grainge called those having an issue with his royalty distribution model “merchants of garbage” (great band name, by the way), and a couple of my fellow panelists said the threshold would get rid of “the garbage”. I find using that term about music quite offensive. Also, haven’t we been told for a decade that one of the great things with streaming is that it got rid of the gatekeepers? What happened to that “long tail” that was going to make it a more level playing field? I especially find the minimum threshold of having to have 500 unique listeners every month problematic. This favours those who have the marketing powers to continuously get featured on editorial playlists with unengaged lean-back listeners over those who have a smaller but highly engaged fan following. 500 unique listeners every month may not sound like a lot but try to get 500 people showing up at your gigs, and you’ll realise it is. 

Did they really say storing millions of tracks was bad for the environment?  That seems extraordinarily unaware given the insane amount of electricity that streaming burns up every second, not to mention data centers that support the entire Internet.

Yes, that was one of the justifications used. Another one was that having so many tracks on the platform made it harder to find what you’re looking for. 

Do you think that creators are willing to sit down to discuss these issues directly as opposed to waiting until the pitchforks come out?  Wouldn’t that be the better approach?

I kept pushing this point throughout the conversation. Both Deezer and Spotify said that these changes could be tweaked after they see how they work. We are here and we’re ready to sit down with them at any time to help make streaming truly artist-centric. Harding said Deezer would be keen to take us up on our offer, so watch this space. 

It’s worth noting, however, that Spotify is the biggest legal audio streaming service in Europe and the US. In Scandinavia Spotify is the only game in town for musicians, representing around 95% of the market, so it would be important to have the same openness to discussion from them.