The online music economy has so far shown a winner-takes-all dynamics in which a few large labels and superstar artists collect most royalties. However, there is a very long tail of creative entities who barely can make a living with the music they make. This is not only unfair, it also a direct threat to cultural heritage, e.g. concerning music that represents various (sub)cultures in a country.
In Music360, we focus on the professional use of background music. Users of music such as shops, bars, restaurants, sports clubs, cafés, radio & television stations and other venues play background music to improve the well-being of customers, create a brand identity, and eventually increase revenue. Background music may be life music, music broadcast by radio, streamed music, or music distributed through other means such as tape or disc. Together with live performances it accounts for 28% of royalty collection for lyricists and composers, more than streaming, which accounts for 21%.
While playing background music, venues are obliged to pay a fee for making music public to artists (called neighboring rights on recordings) and to text & song writers, and composers (called author rights on works). These fees are collected, often mandated by national intellectual property laws, by Collective Management Organizations (CMOs). CMOs operate on behalf of all right owners (artists, text & song writers, and composers) in a country and distribute the collected money to these right owners. CMOs may differ in the intellectual property right (IPR) they collect for. Since the decrease of the sales of CD’s and MP3’s, neighboring- and author rights are an important source of revenue for right owners.
Fees should be fair, both in terms of payments to the right holders and in terms of the amount of money to be paid. This leads to the following three objectives of Music360:
A fair distribution of neighboring and author rights based on the actual use of music. There should be a criterion how to divide the collected money over the eligible right owners. Currently, this is distributed using reference data such as the top twenty radio stations in a country. For each recording (and related to that, the works), the number of seconds a recording was played during a time period is counted. That number determines the amount of money right owners receive; the money is distributed proportional. Because only the top twenty radio stations are considered, this leads to unfair distribution of money, as local artists who are played in local restaurants, bars and shops, but are not on the radio, do not receive money.
There should be a ‘fair compensation’ for the use of music. In the past, many lawsuits took place about what a reasonable fee actually is. We advocate that this fee should be based on the actual value of the music played in a venue. The current practice is that a shop pays a fee based on the square meters it has (which has a very inaccurate relation to the number of people listening to the music). A better metric would be the contribution of music to the positive decision of the customer to buy something, or even the increase in revenue.
The information concerning the value of music should be made available widely and transparently respecting confidentiality requirements. Users of that information are the right holders, the venues but also policy makers. Policy makers often lack insight in the effect of new legislation for both music creators and users. Policy makers at the national and EU level need more data too, as the importance of cultural heritage at the local level is not measured. Also, during the Covid-19 pandemic almost all venues closed and royalties from background music significantly dropped. Without data about which music is created, distributed or used where, policy makers were in the dark about what the impact of this on musical heritage was.
