Question

How do licensing agreements help artists earn money from their music? What are the various licensing arrangements? With the advent of technology and applications such as Spotify and Pandora, many songwriters and recording artists are questioning the loss of royalties and profits from their music because of the way monies paid by such music providers are siphoned through the music companies. Conduct research and discuss the legal and ethical issues faced by such entities. Address questions such as should artists and songwriters be entitled to a greater share of the monies paid by Spotify and Pandora, or are these entities compensating artists and songwriters fairly through promoting their music, which ultimately leads to profits generated by tour ticket and merchandise sales?

Answer 1

To begin with: “Royalties” are the sums paid to rights-holders when their creations are sold, distributed, embedded in other media or monetized in any other way. For music listeners, a song is a song is a song. But for the music business, every individual song is split into two separate copyrights: composition (lyrics, melody) and sound recording (literally, the audio recording of the song).For the majority of times when somebody listens to a song, both types of copyright kick in, generating two sets of royalties that are paid to the respective parties. Here’s a handy chart, put together by Citigroup’s research team in a recent report on music finances, that shows how both types of copyright generate and receive money:

(Attached image)

Artists take home only one-tenth of national industry revenues. One reason for such a meager percentage is that streaming services — while reinvigorating the music industry at large — aren’t lucrative for artists unless they’re chart-topping names like Drake or Cardi B. According to one Spotify company filing, average per-stream payouts from the company are between $0.006 and $0.0084; numbers from Apple Music, YouTube Music, Deezer and other streaming services are comparable. That creates a winner-takes-all situation in which big artists nab millions and small ones can’t earn a living wage. Ideally, Spotify are also in the business to earn money and such profits