Musicians Are Attacking The Wrong Enemy

Music royalty payments are at an all-time high. So why are artists turning on the streaming companies?

According to the companies that collect royalties for songwriters and publishers, times are good. ASCAP and BMI, the two performance rights organizations (or PROs) that represent almost all songwriters and publishers, are falling over each other to brag about how much money they've collected.

In March, ASCAP announced that it was the first PRO in the world to report $1 billion in revenues. The nonprofit boasted of "historic high" distributions of over $883 million to its members. In September, BMI also announced "record breaking revenues" of $1 billion with digital revenues exceeding $100 million for the first time ever.

And yet, songwriters and musicians are complaining loudly that they aren't getting their share of the pie. They are demanding royalty rate increases and a larger direct cut of streaming companies' revenues, which already operate at half-mast by paying out 50% or more of revenue to royalties.

Where is this disconnect coming from? On the one hand, it seems like streaming is the engine that is finally starting to turn things around for the suffering music industry. Consumers are embracing platforms like Pandora, iHeart and Soundcloud instead of piracy and as a result, they are once again paying for music with subscriptions or by willingly listening to ads.

But there are plenty of stories of artists getting pennies for their music.

These creative people have a legitimate gripe. But by attacking the streaming companies, they are going after the wrong enemy. As Berklee College of Music music professor Allen Bargfrede said in a recent story in The Economist, "The back end of the music industry is just a nightmare."

We know for sure that money is flowing out of the streaming companies. According to BMI and ASCAP, it is more money than the music industry has ever seen.

But we also know that money isn't reaching artists.

The bottleneck is somewhere in between. The PROs and the record labels are the ones who seem to be profiting at the artists' expense. The recent Sony hack revealed that the music label received $42.5 million in advances from Spotify and $9 million in free ad space on the site. None of that money filtered down to artists.

Artists need to turn their attention to the lions that are already in their den. By attacking the streaming companies, they risk stifling the one source that is actually generating evergreen revenue for them.

What they need is the one thing they lack: transparency. Artists have a right to know how much of each dollar is going to labels and the PROs instead of to the people who created the songs. Right now, there is no way to track that. Record labels still work "breakage" fees into their deals, which was money that was originally meant to cover the cost of records or discs broken in transport. In the streaming world, that's just no longer an issue and it is one tangible example of money that's being funneled away from artists not by the streaming companies, but by the labels.

Artists are doing the right thing by speaking up for their rights to be compensated for their work. But they're misidentified the boogeyman. It's time for musicians, songwriters and publishers to acknowledge that streaming companies aren't the problem. For now at least, they are the solution.