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Tyson Whiting

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“If you want to use music, you’ve got to pay for it”

Music's crisis, and how to fix it

Jeff Price slaps his hands on his desk. As he details the flaws he's found in the music industry since the early 2000s, his words fly out faster and faster until he has to stop to breathe in the middle of a sentence.

"Music is important," says Price, the former owner of the indie record label Spin. "Music has inherent value. And if you want to use music, you've got to fucking pay for it."

In 2005, Price co-founded a company called Tunecore. At a time when the only other option for digital sales was the iTunes Store, Tunecore allowed musicians to upload their music to sell on the internet. Artists, Price believed, no longer had to get locked into contracts with labels, ones where they signed away their copyright. Price realized the internet had the potential to change the music industry's whole business model.

"I think what happens in the next three years will really decide the future of the industry"

"I launched Tunecore because I thought artists were being screwed, and you know what? I was right," he says.

Tunecore became part of the revolution that overthrew the old system of music and helped introduce a new digital Wild West. It was radically successful in helping artists get their music online.

Now Price is trying to do the same thing for streaming. In 2013, after being ousted from Tunecore, Price founded Audiam, a service that attempts to help artists get paid for digital streams.

Price is a controversial figure in the music industry. He yells and rants, even on the phone with me. He isn't right about everything, but he's right about this: the music industry has a problem with ownership and pricing transparency, and nobody who could do anything seems to care about fixing it.

The crisis in music

Money in music comes from payment. Most people, however, don't pay for music anymore. From 2012 to 2013, purchasing physical music such as CDs and records dropped 13 percent, according to the Pew Research Center. Digital music purchases dropped 6.3 percent. That year was the third in a decade and a half in which physical music sales dropped more than 5 percent. For everyone who makes their livelihood from music, those numbers are terrifying. But they're especially concerning to artists.

Artists don't feel like they're getting their fair shake, as songwriter Aloe Blacc told me in December. Labels, who represent performers and their copyrights, feel like they are being squeezed out of the picture and losing money rapidly. Publishers, who handle the songwriters and their copyrights, are worried that copyright is going to change so drastically that their future may be in jeopardy.

Almost everyone in music thinks they aren't paid what they're worth. Some have numbers to prove it. In November, Blacc wrote in Wired that Avicii’s "Wake Me Up!," which Blacc co-wrote and sings, was "the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US." And yet, he wrote, "that yielded only $12,359 in Pandora domestic royalties."

The numbers are much, much fuzzier than they appear, however. One of the big problems music is facing is that everyone is dissatisfied with the amount of money they are making, but they have very little data to prove their point accurately. There's no concrete data that shows it's exponentially harder for an artist to make money streaming than it was to make money from selling digital or hard-copy albums.

There are a few things everyone in the industry wants. Everyone wants listeners to be able to access, listen to, and enjoy music. Everyone wants, or at least says they want, creators to be paid for creating that music. But pretty much everything else is open for debate.

"This is really a crucial time," Charles Caldas, the founder of the digital rights agency the Merlin Network, told me. "I think what happens in the next three years will really decide the future of the industry."

There are three main components of the industry — infrastructure, transparency, and technology — that together could hold the key to fixing this whole mess and creating a world in which art can flourish, both creatively and financially.

The internet transformed how we listen to — and pay for — music

The music industry used to function like a record store. The store had a single entrance, and when you walked through it, the first thing you'd see was a display of Top 40 albums — the Celine Dions and Norah Joneses and Madonnas of the world. Everyone had to walk past the stuff at the front to get to their niche area, be it rock 'n' roll, hip-hop, or metal.

Then the internet happened.

In 2003, iTunes blew a new door into the wall of the record store, creating another way for consumers to find music. As the internet grew and Napster solidified its popularity, more and more doors were blown into the walls of the record store. Everyone could find any album they wanted at any time and didn't even have to walk past the Top 40 to get there. They didn't have to walk at all.

"There used to just be a handful of ways to get into the marketplace," Casey Rae, a vice president at the Future of Music Coalition, told me. "Now there are infinite ways. The earlier system still had a lot of disadvantages, like limited shelf space and fewer chances for the non-mainstream artists to get heard."

Now, instead of an organized record store, music exists everywhere, which makes it that much harder to keep track of. Instead of knowing exactly how many records were made, packaged, and sold, music changes hands far quicker than money ever could. It can be under a pay lock in one moment and free online in another. The internet made music more accessible than ever, but it also made it much harder to trace. The malleability of music makes it a more creative field than ever before, but it also makes it one in which no one really knows who made, owns, or should get paid for anything.

"We have a totally new model," Charles Caldas told me. "There's a shift going on from ownership to consumption and access. It's fundamentally changing the way people pay for music."

Indeed, the idea of owning music is outdated. In terms of revenue alone, from 2013 to 2014 the sales of digital music fell almost as much as sales of physical CDs did. The only two sectors of the industry that saw growth in the last year were streaming and vinyl, which is a collectors' hobby.

music streaming vs sales

Artists are being forced to adapt in response to this shift. Some artists, especially younger ones, don't mind this new, post-ownership system. Nicole Miglis, the lead singer of the electro-pop band Hundred Waters, wants to be paid for her work. But she has accepted that people accessing her music on a streaming platform or downloading it illegally is how the system works now — for better or for worse.

"I fully support free music," she said. "I think it's called stealing now, but I think that's going to change in the future."

Singer-songwriter Joni Fatora told me she considered printing some CDs of her first EP but realized that no one buys CDs anymore. "Instead, I'm going to do a smaller run of vinyl," she told me. "I think people see it more as a piece of art when it's on vinyl, and I think my listeners would really want and appreciate that." Fatora released her album on SoundCloud, and is hopeful it'll get plays there.

Recording artist Niia told me she thinks "the expectation that albums should be free is fine, because that's the standard, and right now I just need the exposure."

These are young artists. For them, acquiring a fan base is their first step to having loyalists who will purchase their albums and pay to see them at shows in the future.

Their understanding of how music is priced is that it should function on a kind of sliding scale. Right now, they cannot expect everyone to pay full price for their work. Just like young artists handed out cassette tapes during the rise of hip-hop in the Bronx, they are handing out their work to potential fans.

"I fully support free music. I think it's called stealing now, but that's going to change in the future."

But artists who have been working for years and have established fan bases and credibility within the industry already don't see free music as a right. They see it as their own lost revenue.

"It's my opinion that music should not be free," Taylor Swift wrote in an op-ed for the Wall Street Journal last year. "My prediction is that individual artists and their labels will someday decide what an album's price point is. I hope they don't underestimate themselves or undervalue their art."

Melvin Gibbs, a famous bassist who has appeared on more than 200 albums, expresses a similar view.

"The major problem for me as a creator," Gibbs told me, "is that we aren’t getting fairly compensated. We’re being asked to invest in a whole new business model without getting any reward for it."

The big debate over money led Taylor Swift to withdraw all of her music from Spotify in December. Streaming is making artists money, but it's not enough to sustain an artist on its own — they must sign advertising deals, tour extensively, or bring in some other supplemental income to make that work. For a pop star, those things are part of the job, but for a smaller artist they can be exhausting. Only a major overhaul to the way royalties are paid out and the structures behind that process could make streaming as profitable as possible for artists.

The problem with copyright

The problem is that music royalties are based on licensing — who owns what parts of the song at what percentage, and who gets paid for what — and the current system for copyrighting music is incredibly and unnecessarily convoluted. Here's how it works right now: every song has two copyrights, a mechanical copyright for the music and lyrics and one for the actual recorded performance of the song. Every type of platform pays a flat fee for the mechanical license, but the performance licenses vary.

None of these laws were passed even semi-recently. The idea for the mechanical copyright, in fact, stems from mechanical pianos, which were heavily used in the early 20th century.

"I think everybody should be doing a lot and probably a lot more to reassess the shape of how monetization happens, to find a way that people can be, if not happy, at least in a place where they can continue to create and produce music," Caldas told me.

Every stakeholder wants the laws around copyright to change so that they receive a bigger chunk of the pie in the end. The argument right now centers on the Fair Play Fair Pay Act, a bill before Congress that's attempting to change the way artists are paid for radio plays.

Currently a compulsory license is in place for radio and non-interactive streaming services where users cannot pick the next song, like Pandora. The compulsory license is enforced by the United States Copyright Office, and what it does is make it so that artists cannot opt out of having their music played. Instead of having to negotiate with every single songwriter for every single song, a site like Pandora can pay a single blanket fee (based on a statutory license) to both performers and songwriters for every song and be able to play everything.

However, a recent report from the United States Copyright Office is threatening to remove that license altogether. Because artists cannot opt out of radio play, they have no strength to wager for more money. Songwriters are lobbying to remove the license and make it so that each artist and songwriter would have to reach a direct deal with anyone who wanted to perform their music. This change could get artists more money, but it could also slow down the process for performance and make it more difficult for users to access songs.

After the report came out, Dave Grimaldi, director of public affairs for Pandora, said in a statement, "The current state of opacity causes real harm to artists, listeners, and the tens of thousands of American businesses that legally play music every day for millions of consumers. Thus, statutory licenses are a necessary part of the music ecosystem." Without that statutory license, Pandora would have to directly negotiate with every single artist.

Were the compulsory license revoked, major labels could pull huge swaths of their music out of companies like Pandora without any warning until a new deal was reached that made them and their artists more money.

That, in theory, seems like a good thing. But it's not clear if, in practice, revoking the compulsory license would actually do much good. That's because the music industry as it stands has no catalog of the information it needs — such as who wrote, recorded, and owns what percentage of each song — to pay artists more, much less create a brand new structure for the entire industry.

Nobody knows how much money they are owed

The easiest way to explain the problem with transparency in the industry is like this: it doesn't exist. There is no comprehensive, unbiased database that tracks information that can be used to determine everything from who plays the bass on a popular song to who needs to be paid when a song is streamed. Instead, information is scattered around. All labels and producers and artists hold information about the work in their catalog, but there's no way for anyone else to access that information.

"The fact that you can’t pick up any piece of music and know who played bass on it is insanity. If people don’t know you played on things, you don’t get hired," Jeffrey Boxer of the C3 Coalition for Artists told me.

He's right. We have the technology at this point to completely catalogue the metadata for each and every song. Some companies, like Price's Audiam, are already doing that. Audiam works with more than a thousand artists and publishers, including Imagem, the largest independent music publisher in the world, to build metadata and get revenue from digital streams. But what they're doing is not standardized.

These difficulties in tracking information about individual songs are a problem in the streaming age.

Some songs are misattributed, and the money that streaming services owe the artists is going to the wrong people. Some songs simply aren't assigned to anyone, and no one is sure where their payments are supposed to go. That money goes into a black box before it ever gets to artists, and no one gets paid for a play.

I talked to dozens of people about how black boxes in music industry pay out, and every one of them said at least 8 percent of money isn't being paid out and at least 15 percent of money is going to the wrong person. Some people said as much as 30 percent of total revenue is misplaced every year.

"The fact that you can’t pick up any piece of music and know who played bass on it is insanity"

This is a problem that streaming services say they want to fix, but just can't.

"We are big proponents of transparency, in part because we’ve had copyright holders use the lack of transparency to negotiate with us in ways that we don’t think are fair," Mike Herring, the CFO of Pandora, told me. "If we had transparency about what everyone owns, we would have options about whether or not to play music."

Streaming services don't have the information to create a transparent catalog themselves, even if they were to put millions of dollars into building one. "When I look at a streaming service for one of my bands, not only do I not know exactly how many times a song was played, I can't dig into their databases to see if they even are paying the right people," Price told me. "[Streaming services] whine to me about how hard it is to figure out who to pay. Why don’t you go be in a band and see how hard that is?"

Price bases that distinction in passion, but it has deep roots in the music industry, too. There's a great divide between the artists who make the music at every stage and the people who help distribute that music, be they labels or technology companies.

The road to achieving transparency

Forming a system for transparency is actually pretty simple, but it requires a ton of work that no one is willing to invest the time, human resources, or money in. To have a completely transparent music ecosystem, two things are needed.

The first is that technology companies have to share with artists how often their music is being played, as well as where and when. Tech companies also need to show how many times songs are streamed and directly connect that to a payout. Some companies, like Pandora, are already doing this, but companies like Spotify could do much better, Price told me. (Spotify did not respond for comment on this story despite multiple requests for an interview.)

The second is that a database has to be created that says exactly who is responsible for which pieces and at what percentage on every single existing song and composition. That database would also explicitly state who owns each song, who owns the master copyright, and which parties were attached to every song. Ideally, this would be accompanied by the ability to attach metadata to songs that would embed this information into the actual song digitally, so that there would never be an excuse for the wrong person getting paid or no one getting paid at all.

There are plenty of people who could work to fix transparency problems, but so far few are willing to do so. Though transparency is something that benefits every single sector of the industry, it's not easy to achieve. Transparency requires time, energy, and knowledge, but it also requires a desire for action.

"If anyone actually cared about this subject and really wanted to do something, they could do something. If everyone joined up together, this really could be fixed," Price told me.

How technology could help save the music industry

How do you lament the fall of an industry and claim it is obsolete, yet be thrilled for its future at the same time? Well, you create technology that can fix it.

How that looks, of course, varies greatly. There are technology companies like the streaming platforms that distribute songs to listeners, and there are the new companies springing up inside the traditional format of the music industry and trying to make things like publishing contracts and record label deals much more transparent and much more technology-friendly. Technology, they say, will dictate everything about the future of music, even if it's going to be a messy, painful overthrow to get it there.

One of these businesses is Kobalt, a publishing company that moonlights as an international technology company founded in 2000. According to Kobalt's website, the company represents, on average, more than 40 percent of the top 100 songs and albums in both the US and the UK. When I spoke to Ryan Wright, SVP of marketing at Kobalt, in January, he told me that the company represented 65 of that week's top 100 songs. Kobalt represents songwriters and gives them the tools to see how much money they are making in real time. Kobalt partners with streaming services to get data and then, as a publisher, shows that information directly to its songwriters through an online portal. Through the Kobalt portal, all clients can access, dissect, and sort the money they are making and exactly where it is coming from. Every client has a login. Instead of looking at streams on Spotify and YouTube and Pandora and wherever else, artists can see everything in one spot.

"Thanks to streaming, today one global hit can unlock millions of different revenue streams, triggering billions of transactions and micropayments that add up to more demand and music usage than the world has ever known," says Willard Ahdritz, founder of Kobalt.

Think about that. Millions of different revenue streams. Billions of transactions. Infinite usage all of the time, from all over the world. Dealing with that, with those numbers and all of that money and the dozens of platforms being used, isn't something record executives are equipped to handle — and it's how the tech industry gained such a firm foothold in the music industry, to the point that today it's almost impossible to see where one entity begins and another ends.

Is Kobalt, a seemingly traditional publishing company that represents everyone from the B-52s and Fleetwood Mac to Max Martin, a part of the infrastructure of yesteryear, or is it a technology company trying to make money? What is Pandora? Where does Jay Z's new high-fidelity streaming company Tidal fit into the equation? The line between the technology used to distribute the money and the people representing artists is becoming blurrier and blurrier.

Technology created connections between musicians and their fans that never existed before. Artists sometimes spoke frankly to newspaper reporters, but we have never had the kind of connection that we have now when Iggy Azalea tweets about her feuds with Papa John's—for better or for worse.

Every party thinks the other party should take responsibility for the problems, but so far no one has

"Finding a fan base is actually the easiest thing now. I have so many friends that are making a really good living not on a label, selling their album and their merchandise right on their site," recording artist Niia told me. "You don't have to tour around the country. You can make a Facebook page and do the same thing."

For musicians, that means potential fans are everywhere. A band from Chicago can now have fans in Mississippi, or across the ocean. In that way, technology is the savior of bands who were lonely and underplayed and underappreciated. But it's a salvation that comes with a cost.

"We’re not in any way opposed to any technological approach to anything," Jeffrey Boxer of the C3 Artists Coalition told me. "I want to know what the business model is that says we’re going to ... use the work of artists for free." For Boxer and other advocates of artists, the greatest fear in the development of streaming is that suddenly money will stay in the hands of the technology creators and never get back to them.

Boxer knows technology isn't something artists can afford to brush off. Those who make the most of a new technology make the most money off of it. The few artists who can take a moral stance against a new technology — think Taylor Swift and Spotify — are the ones who can already afford to do so. Instead, what artists as a group have to do, and have done with most format shifts, is weather the storm and fight once the waters have calmed.

Whose job it is to fix the transparency and technological issues surrounding music is one of the greatest trials the industry has to face. Fixing the problems with transparency and infrastructure in particular will take eons of time and resources that no sector wants to put forth. Every party thinks the other party should take responsibility for the problems, but so far no one has.

Why music needs to embrace the future

People have always found ways to consume music. They will buy records again if they have to in order to hear the new Kendrick Lamar album. They will torrent music from other countries if they must. What's at stake in the future of music is whether music in America can be profitable and egalitarian enough to support the middle class of American musicians, and how the industry will have to change to accommodate that desire.

Right now it seems the easiest solution is to integrate technology into the structure that already exists. Ideally, a company like Kobalt could help bring labels and publishers and all of the groups in between to a higher level of technological competency that allows them to be more transparent with where money is going and how people will be paid, and also help companies such as Pandora and Spotify know who owns what music.

Taking away streaming at this point could collapse the industry into a Napster-esque phase of torrenting

"The more educated people are about the pros and cons of streaming, the greater the pressure will be on the music industry to be more transparent and challenge its outdated model and infrastructure," Ahdritz of Kobalt told me. "I’m excited to see this new chapter raise expectations in the industry, demanding greater transparency, efficiency, and empowerment for music creators."

Everything about the structure of the music industry is precarious right now. The streaming services that consumers love don't have great relationships with the labels and publishers who make the deals, and artists feel like they're being ripped off by putting their songs onto a streaming platform. Yet streaming is ubiquitous and rapidly becoming the standard in the music industry. Taking away streaming at this point could completely collapse the industry into a Napster-esque phase of torrenting.

But the future of music won't allow for any creativity or evolution if the structure of the music industry isn't forced to accommodate the technology of the future. Without infrastructure and transparency and technology, the fragile industry that exists right now could very quickly crumble. The last thing artists need is an industry that can't support them or their work because it's disorganized and unwilling to change.

Correction: This piece has been corrected to reflect the fact that songwriters, not performers, are lobbying to remove the compulsory license. We also removed a misleading graphic. We regret the errors.

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