Glass Jukebox - Trends of fairness and transparency and the Finnish music industries
On 12 September, the European Parliament adopted the new Copyright Directive. It specifies, among other things, stricter filtering of copyrighted material by the sites that host media uploaded by users. A few days earlier, Finnish singer-songwriter Lauri Tähkä had spoken out in favour of the Directive [interview by the Finnish Broadcasting Company YLE, in Finnish], expressing his horror at the low level of royalties paid by YouTube. Artists, managers and record labels alike have been complaining for some years about the ‘value gap’: that YouTube, the most popular music service in Finland and globally, does not have to pay market-level copyright compensation, since by current legislation it is defined as an ‘inactive mediator’ of music content uploaded by its users.
Received with conflicting emotions, the Directive epitomises the controversies in the new music industries. On the one hand, new digital distributors – streaming services – allow access to an unlimited amount of music by popular and unknown artists alike. But on the other hand, they are often seen as exploitative by the ‘traditional’ industry parties such as artists and record labels (nowadays also often involved in publishing, booking and other sectors).
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The shift to streaming has stirred a lot of debate in all corners of the world, Finland not excepted. Before Tähkä’s critique of YouTube, there had been tough negotiations – even outright disputes – between YouTube and the local composers’ copyright society, Teosto. In the midst of renewing their contract last November, YouTube even blocked access to Teosto-copyrighted videos momentarily, in an echo of the dispute between YouTube and the German copyright society GEMA before they reached an agreement in November 2016.
Before the emergence of the online video monopoly of Alphabet/Google, a local version of the controversy was played out in Finland with Spotify – an on-demand streaming service that just celebrated its 10th anniversary. Singer-songwriter Anssi Kela publicly lamented the reimbursements paid by Spotify (see also the article in FMQ 1/2014) – although in a much more discreet manner than his UK colleague, Thom Yorke. In the Facebook discussion group ‘Kuka Mitä Häh?’, launched by the Finnish Broadcasting Company Yle in 2011, a motley crowd of concerned music professionals such as artists, journalists and representatives of music companies and record labels together with semi-professionals and fans joined the debate on the digitalisation of music. This debate has provided an excellent overview of the differing viewpoints on the shift to streaming and thus serves as a useful primary source for my doctoral study on the digitalisation of the Finnish music industry.
Very few things have become clear in these conversations, which are often heated, polarised and ripe with a typical vernacular language. However, I have been able to spot a certain tendency over time in the discussions, as smaller actors and larger industry bodies have generally taken opposite sides, for example as regards the licensing contracts with streaming services. The opaque agreements signed with the streaming services by major music companies on the one hand and by copyright agencies on the other have left the small actors in the industry feeling disadvantaged.
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In the column of this magazine last March, Jari Muikku presented the results of the research done by his team on Spotify’s revenue model. The data they had obtained from a one-month period in Finland – unique in having been acquired from the streaming market leader – showed that the current ‘pro rata’ model of distributing revenues benefited the most popular artists as compared with the user-centric model. In the latter, the sum paid by the subscriber is directly distributed according to stream volumes of the songs they have listened to. While the user might be unaware of it, in the current model their subscription fees are pooled and revenues are distributed according to the overall volume of streams during the month.
Previous studies in Denmark and Norway based on data acquired from WiMP (now TIDAL) suggest that the remarkable difference in using the user-centric model instead of the ‘pro rata’ model is in how much greater local artists’ income would be with the former – something that the Finnish study did not explore. On basis of leaked contracts, it also seems that revenues are not distributed strictly according to the ‘pro rata’ model either, as major companies have been able to secure various minimum guarantees such as per-stream rates.
In any case, Muikku suggests that making the revenue distribution fairer and more transparent (in terms of the user-centric model) might induce more users to subscribe to the service. Indeed, fairness and transparency have been the catchwords in discussions in the music industry for several years now.
The Open Music Initiative, managed by Berklee College of Music in Boston since 2016, is an international project aiming to advance both of these. The initiative is advocating blockchain, a relatively recently developed technology whose best-known application is probably Bitcoin. Blockchain affords a way to record transactions automatically in a decentralised database. It can be viewed but not unilaterally edited. The technology would, for example, allow rightholders such as record labels, performers and authors to monitor where their works have been licensed, how many times they have been streamed/performed and how much they have been reimbursed.
The Finnish Composers’ Copyright Society Teosto is one of the participants in the initiative and has piloted a blockchain solution for a better sharing of information between copyright management organisations regarding live performances. However, some of the blockchain implementations developed might bypass many of the core sectors of the copyright managing organisations – as well as other music industry intermediaries, such as publishers and record labels. These would make it possible for creators and performers to directly license their works via the blockchain platforms.
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Nevertheless, the core of recording industries in terms of revenue has not changed: it is still based on exploiting copyrights, despite the fact that streaming services embody new digital interfaces for consumption, now more connected to playlists, algorithmic recommendations and individual tracks. And in this light, the shift in the recent history of the digitalising music industries has not been that fundamental after all, as we can conclude now that the streaming environment has somewhat stabilised during the recent years. Of course, there is and has been some exceptions to this rule.
Time will tell for example in the case of YouTube whether the EU or rightholders – most of whom disagree with YouTube’s compensation policy – will succeed in bringing YouTube to heel through copyright legislation, or whether it withdraw from music completely, as some commentators have feared. The tide has turned in favour of Spotify in the eyes of the industry – though many artists still do not agree – since YouTube is now vilified as the epitome of unfair exploitation. However, the industry does need both – the latter essentially to get the attention of the masses. YouTube could even be used for cultural promotion, since it is such an easy platform on which to share any music and live videos.
My research indicates that power is tied to copyrights in the recording industries (apart from the major services YouTube, Spotify and Apple). Owners of larger and more popular catalogues of rights are able to exercise more power and to make more profitable wholesale deals, like acquiring equity in services. In Finland, the ‘Big Three’ – Sony, Universal and Warner – already control a whopping 90% of the market. Furthermore, in the streaming economy the master recording is valued more than the work. According to a survey on music consumption conducted by the Finnish record producers’ association IFPI and Teosto in 2017, the most important factor by far for listeners in choosing music is a ‘good song’. Compensating composers, lyricists and arrangers better would thus be the logical next step for a fairer music industry.
In conclusion, my research suggests that the dominant players in the sector are able to skew the streaming environment to their benefit. Nevertheless, after the initial hard shift, making music and recordings is becoming more and more popular even at the grassroots level.
The author is completing his doctorate on the digital democratisation of the Finnish music industry at the Faculty of Communication Studies of the University of Tampere.