Riding the Third Rails

Posted on 07/07/2021 at 10:00am

Riding the Third Rails

Law out of balance is no law at all.  This is most apparent with streaming compensation to musicians and vocalists, the people who make the records.  Everyone is getting rich except them, and there’s a good reason for that phenomenon: The contractual royalty system is designed that way.  It doesn’t matter if the result was intentional, the effects are so profound.

Rather than fixing the vast number of licenses, the better solution is to bring balance to the law.  Leverage the existing international CMOs like SoundExchange and PPL to collect a new remuneration payment from streaming platforms. CMOs already have existing payment relationships with featured and nonfeatured performers.  The new payment is fair because it recognizes the uncompensated benefits these performers confer on streaming platforms through their labor.  And it appears to be the only way to break free from the clutches of the “market centric” or “big pool” contractual royalty systems that the parties will resist changing.

Thanks to the support of the AFM and FIM, the World Intellectual Property Organization commissioned a policy study on this subject for consideration by WIPO’s Standing Committee on Copyright and Related Rights that I co-authored with the noted economist, Professor Claudio Feijoo.  (The study is available here.)  WIPO has never before commissioned a study on the economic effects of streaming on performers, and I think we should all be appreciative of WIPO’S response.

After reviewing the status quo and a number of possible solutions we determined that the best solution is what we call “streaming remuneration”.

It is up to the Member States of WIPO to consider this call for balance and fairness.  I am hopeful.  It is in the interest of the Member States to protect their local cultures and performers from the homogenized dominance of Spotify and Apple Music.  It is in the interest of the platforms to get ahead of the scathing criticism of their economics as we saw both at Parliamentary inquiries in the UK and with the recent letter to the UK Prime Minister from the Rolling Stones and others quoting our WIPO study and calling for government action on streaming royalties.  It is, of course, also in the interest of the record companies to find ways to counterbalance the harmful effects of the “market centric” model on the performers on whom they depend.

Like a subway that runs only on third rails, streaming remuneration accomplishes many of these goals.  Streaming remuneration is an additive payment solely for performers.  Like other CMO payments, it is outside of record royalties for featured artists or session payments for nonfeatured performers.  It does not expand the compulsory licenses.  It may not be offset against or reduce contractual payments from streaming platforms to record companies.

 

By Chris Castle[1]

[1] Chris Castle is a music lawyer in Austin, Texas.  He writes the MusicTechPolicy.com and MusicTech.Solutions blogs and may be reached at christiancastle.com and @musictechpolicy.

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