From the ways we gather to hear live music to how we buy our groceries, there’s hardly a single thing the COVID-19 pandemic hasn’t turned upside down. The disruption has hit many industries including the working musicians who have had to cancel tours and other live events, and forcing music creators to think on the fly as they transition to virtual concerts and other inventive ways to keep their revenue sources intact.

But behind the scenes, the publishing industry isn’t just hanging on; it’s actually surging. In 2019, publishers in the United States saw a sizable increase in revenue over the previous year. What’s more, that increase beat out the gains labels saw, a clue to the ways the landscape is reformatting itself. 

But it’s not all wine and roses, at least not yet. Digital service providers Amazon, Spotify, and Pandora are lobbying against larger payouts to rights holders. What’s behind it, and what does it mean for songwriters and other music creators? Read on to learn more.

2019: A Banner Year for Rights Holders

Even as the music publishing landscape rearranges itself around digital platforms and technology, there’s greater demand than ever for musical content. COVID-19 aside, most forecasters predict the industry to see a compound annual growth rate (CAGR) of anywhere from 5.8% to 7.1% over the coming five years. In dollars-and-cents terms, that means publishers, here in the United States, earned some $3.7 billion dollars in 2019, an 11.6% increase over the previous year. That tallies out to a cool $10 million each day.

Globally, the projections are even stronger. Latin America experienced the fastest growth—a whopping 17.6% year-over-year—driven largely by growing smartphone usage and an overall increase in disposable income. Likewise, the Asia-Pacific region is poised to drive potentially massive increases for publishing in the coming years. 

Best of all, due to recent rulings by the Copyright Royalty Board (CRB), songwriters are keeping more of that share.

Meanwhile, record labels weren’t slacking in 2019 either. Last year, US-based labels pulled in roughly $7.3 billion dollars in the same time period. But the gains for publishers outstripped those for record labels by nearly 10% (11.6% vs 10.6%). That’s hardly a landslide, but it’s a potential clue as to where the industry is headed: Away from traditional record labels and contracts, and towards a more decentralized and independant arrangement. As a report from Transparency Market Research notes, 

“An upsurge in the global entertainment and media industry has been a key driver for the music publishing industry…benefits offered by music publishing companies to artists will also impel growth. However, music companies could lose lucrative business opportunities to artists who publish their own compositions and albums.”

In other words, despite their strong earnings, the traditional recording industry, exemplified by the “Big Three”—Sony Music Group, Universal Music Group, and Warner Music Group—sees that the landscape is changing. Driven by new opportunities, like the explosion in streaming demand and third-party platforms like online games, there’s more room than ever for independent players like self-publishing songwriters to enter the field.

That said, stream-for-stream, labels still keep the lion’s share of all royalties. As a publishing-industry recap of 2019 in Rolling Stone points out, rights owners typically earn a fifth of the money paid out to performers and labels. 

Why do labels account for more of the earnings? While there is a lot to inform this, such as more financial investment on the label side, much of this comes from royalties on the master side. As you’re already well aware, a given recording of a song earns royalties on behalf of both its composition (the “publishing side”) and its recording (the “master side”). Until last year, when Taylor Swift’s very public battle with manager Scooter Braun spilled onto the front pages, most people weren’t aware, or understood to what degree, record labels typically owned their artists’ masters.

What’s more, master royalties represent the majority of all royalties paid out by streaming services. According to media analysis company MIDiA, rights owners’ royalties typically account for about 21% of payouts, which is about 3.6 times less than master royalty payouts. And while some recent legislation promised a change to this arrangement, now some of the biggest players in the streaming arena— Amazon, Spotify, Google and Pandora—are fighting to keep it that way.

The Pushback: DSPs Resist Paying Rights Owners 

The 2018 passage of the Music Modernization Act and the concurrent revamping of the CRB represented a landmark advance for the publishing industry. Needless to say, not everyone agreed though. Since then, some DSPs have fought hard to keep from distributing higher payouts to rights holders. In 2019, following the CRB’s announcement of significant increases in rights holders’ royalties, Amazon, Spotify, Google and Pandora lodged official appeals.

Arguing that they were blindsided by the royalty rate increases, the four DSPs claimed that the CRB’s rate increases were predicated on the notion that record labels would voluntarily reduce their own royalty payments so that more of them would end up with rights holders (an assertion not backed up by a close reading of the CRB’s Final Determination). This earned a fiery rebuttal from David Israelite—CEO and President of the National Music Publishers Association—who wrote, among other things:

“What can we expect from Spotify? We can expect them to attack songwriters to cut what it pays them, and then try to deceive you about what it is doing.” 

The case made it to the D.C. Circuit Court of Appeals. Earlier this year, it reached an ambivalent ruling; citing procedural errors on the part of the CRB, the question is in effect back in the CRB’s court. 

Needless to say, this is potentially a very big deal for songwriters and other rights holders. And while we hesitate to sound alarmist, it has the potential to erase many of the hard-fought gains of the last few years. We’ll keep our eye on this important case and keep you updated as information becomes available.

What Does This Mean for Songwriters?

It might be tempting to view music publishers’ gains as yet another example of large companies profiting off of independent songwriters’ labors. But while it’s often said that “a rising tide lifts all boats,” in this case, we’re banking on it actually being true. 

Why? As we noted earlier, the Music Modernization Act laid the groundwork for an historic reordering of the playing field when it comes to how music rights holders earn money for their property. With overall publishing royalties increasing—and a greater share of those royalties going to songwriters—the CRB’s royalty increases for digital streams felt like confirmation that the new legislation actually had “teeth.”

The recent kickback of the DSP lawsuit leaves the publishing industry in something of a limbo as we await the CRB’s amended ruling. But even if we’re playing a waiting game, that doesn’t mean we have to be silent. We’ve written previously on ways you can advocate within the music industry, and there’s never been a better time. Just as in the music we take so much care to craft, our voices truly are stronger when they’re raised together. 

As always, if you have questions about music publishing, royalties, or Songtrust, we’re just an email away

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