Viewpoint: AIM's Paul Pacifico on the DCMS Committee inquiry & why outdated deals need refreshing

Viewpoint: AIM's Paul Pacifico on the DCMS Committee inquiry & why outdated deals need refreshing

In late November, the #FixStreaming debate ended up in Parliament for the first session of the DCMS Committee inquiry into the impact of DSPs, with top names including Guy Garvey, Nadine Shah and Radiohead’s Ed O’Brien all giving evidence. 

On December 8, the inquiry will continue with Nile Rodgers, Fiona Bevan and Soweto Kinch giving their perspectives as performers and composers on the impact of streaming.

The second session in the Economics of music streaming inquiry will focus on copyright and will also hear from Maria Forte (MD, Maria Forte Music Services Ltd), Kwame Kwaten (vice-chair, Music Managers Forum and owner, Ferocious Talent) and José Luis Sevillano (director-general, Artistas Intérpretes o Ejecutantes).

MPs will consider a model operated by the Spanish government to implement a form of ‘equitable renumeration’ for streaming that protects artists’ income. 

Ahead of the next installment of the DCMS committee, AIM CEO Paul Pacifico has written a new piece christened ‘What does “good” look like for the music industry in the 21st century?'. Here, he looks at the modern music industry and asks the question of what can be considered a ‘good’ degree of success in the modern industry, and how it works for an artist in the ‘middle ground’ between the super successful 1% and those that aren’t able to make a living out of music. 

You can read the exclusive piece below in full…

What Does ‘Good’ Look Like For The Music Industry In The 21st Century? – by Paul Pacifico (CEO, AIM)

The DCMS Select Committee investigation into the economics of music streaming is now well underway. This comes whilst a study is already ongoing into “Creators’ Earnings In The Digital Age”, funded by the Intellectual Property Office.

It is no surprise that government is interested in how the streaming market works in music. On the one hand, they read regular updates in the music press of record growth and profits in the sector from its biggest players, while we hear daily of the struggle to make a living as a songwriter, artist or small business owner.

There are some observations to be made at the outset about the exponential growth in the number of artists trying to establish themselves, about the number of tracks released per day on the main platforms, and it remains true that ours is an aspirational industry – lots of people want to make it and far fewer will succeed than try, but for those that do succeed, the rewards should be ample.  

That might be fine if you are one of the top 1% of artists or songwriters, but there is clearly a piece of this jigsaw missing. What about the creators in the middle? Those who have successfully built a loyal following, that (Covid aside) tour regularly and viably and who operate at a level at which they shouldn’t have to subsidise themselves with side-hustles or a straight job? What kind of career does that look like in this day and age? And to get there, what kind of team do they need around them? And what constitutes the basis for well-balanced commercial relationships?

In other words, if you are trying to make it work in the music industry in the 21st century, what on earth does ‘good’ look like?

As the number of artists in the industry has grown dramatically, it may be easy to assume that for labels, it has become a ‘buyer’s market’ – with deals becoming less generous. However, the reality is far more complex. Technology has enabled the proliferation of choices available to artists about how they release their music, from distribution companies that offer a basic, platform-style approach through to a white-gloves ‘label services’ deal to various licensing options, profit shares and still the existence of more traditional royalty-based recording agreements for the assignment of copyrights. In truth, many labels have had to offer increasingly generous terms to convince artists not just to turn down other labels, but all the other routes to market now at their disposal.


Contemporary deals cannot and should not look like deals from 20 years ago if our market is going to work

Paul Pacifico, AIM


These market conditions are reinforced for artists by easier access to savvy specialist lawyers and managers – all of which means the pendulum of power in negotiation has swung more in the artist’s favour than at any previous point in commercial music. But clearly not everything is rosy, and the system is not working for everyone.

One advantage remains scale. The bigger the label, the more revenue they receive every month from their catalogues which translates to more capital to invest and greater mainstream media influence, but also greater central costs and a higher-risk business model. Big businesses have to take big bets which exacerbates the hits-driven market and that can, in turn, lead to a ‘churn and burn’ mentality. It can also exclude all but the biggest players from the very top of the market making it an increasingly closed shop, with the odd very notable exception.

At the other end of the market, we have a very long tail of content that is dividing a vast number of micro-payments between them – earning some money from their music, but by no means representative of a living wage. I believe it is positive that the old world gate-keepers have been swept aside and that anyone who wishes to can release their music and explore their potential in the market, but it is not realistic to think that everyone who chooses to release music would automatically make a living from it.

So what about the middle ground? 

Making and releasing music remains a complex business. From the creation of the music itself to the administration of rights and negotiation of the array of technical deals needed to the project management skills and marketing nous that all need to align in the right time and place to launch a successful release, it is no wonder making money from music is considered to be a high-risk form of alchemy.

The fact that each artist has their own bespoke revenue mix from across their business activities further increases opportunity, but also complexity in making sweeping generalisations, for example physical vs digital, recorded vs live, sync or other brand deals etc. There is no guaranteed formula for success, but you certainly improve your chances with a good team around you.  

From an AIM perspective, I spend a lot of my time discussing and debating these issues with members that range from the larger, more established independent labels and distribution companies to self-releasing artists of very differing levels of experience and, increasingly, managers who are setting up rights-owning vehicles for their artists or in joint venture and who are effectively becoming record labels for themselves. For contemporary music entrepreneurs, the old-world separations between artists, record labels, music publishers, managers and promoters are certainly breaking down and choices in how to structure and grow a music business are opening up. The decision to self-release, license or assign copyrights is becoming as much a strategic decision about identity for the artist as it is one of commercial or structural necessity. 

A few things are clear. Contemporary deals cannot and should not look like deals from 20 years ago if our market is going to work. The independents pioneered that view through initiatives such as the ‘Fair Digital Deals Declaration’, published by the Worldwide Independent Network in 2014 and which I helped draft from the artist’s perspective. This set of commitments describes what ‘playing fair’ looks like in digital deals, including the sharing of non-attributable revenues and so-called ‘black box’ income.

Furthermore, out-of-date deals need to be refreshed through a contemporary lens. Artists that signed away their rights in a pre-streaming era should be treated fairly in renegotiations, for example with the removal of deductions for CD packaging where in some cases, they are being applied to digital streams. Streams do not come in boxes and artists should not be required to pay for things that don’t exist.

In terms of how revenue is split, it must reflect the individual circumstances of each deal – I think it would be terrible to prejudice successful artists who could negotiate for a higher rate, just as I think it would be unhealthy to prejudice a label taking a risk on an unknown artist and needing to try to see a return on their investment. 

But one very clear conclusion from the data I see from AIM Members is inescapable – whilst perhaps not earning the megabucks of superstars, successful mid-tier artists on fair deals, and with the support of an effective specialist team, are seeing more success than ever before, with more creators earning more than would ever have been possible in the old world.

It is clearly a very good time to review practices and ensure a well-functioning market, but if we want a framework through which to measure what ‘good’ looks like, the practices of the UK’s community of independent music entrepreneurs would be a very good place to start.

* To read our report on the DCMS Committee investigation, click here. To make sure you can access Music Week wherever you are, sign up to our digital edition here.


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