Posts tagged: Music Royalties

News that Concord plans to buy Round Hill Music Royalty Fund for $1.15 per share sent Round Hill shares soaring 64.4% on Friday (Sept. 8), from $0.6875 to $1.13 per share. They finished the week up 62.6%, leading all music stocks by a wide margin.

The deal, which must be approved by at least 75% of Round Hill’s shareholders at the company’s Oct. 18 general meeting, values the rights in the fund at nearly $469 million. On March 6, an independent valuation from Citron Cooperman put Round Hill’s economic net asset value at $519.6 million, according to the company’s 2022 annual report. That puts Concord’s bid at a 9.7% discount to economic NAV — a vast improvement from the 46% discount the stock had been trading at before the deal was announced. 

Round Hill competitor Hipgnosis Songs Fund was also a beneficiary of Concord’s announcement. Shares of Hipgnosis rose 15.7% to 0.923 pounds ($1.15) on Friday, bringing the stock’s one-week gain to 16.8%. Hipgnosis shares have been trading at a steep discount to the company’s net asset value — a measure of the company’s catalog, less liabilities — and hadn’t closed above 0.923 pounds since Sept. 27, 2022. The fact that Concord found a buyer at a price close to its NAV could have signaled to Hipgnosis investors that its shares should be trading closer to its NAV. Some Hipgnosis investors may have also believed that, like the Concord deal, Hipgnosis could also find a suitor that would bid close to the NAV.

Round Hill and Hipgnosis were — by far — the biggest gainers of the week. Overall, the 21-stock Billboard Global Music Index dropped 0.8% to 1,348.41. Year-to-date, the index has gained 15.5%.

No other music stocks had a double-digit gain, and just six others finished the week in positive territory. Twelve stocks lost ground this week and one stock, music streamer Anghami, was unchanged. French music streamer Deezer gained 6.8% and was probably helped by its announcement of a partnership with Universal Music Group to adopt a new system for calculating streaming royalties. Universal Music Group shares improved 3.8% to 23.52 euros ($25.20). 

Stocks were down around the world this week. In the United States, the S&P 500 fell 1.3% and the Nasdaq composite dropped 1.9%. South Korea’s KOSPI composite index lost 0.6%. In the United Kingdom, the FTSE 100 was a bright spot with a slight 0.2% gain. 

With the help of Round Hill and Hipgnosis, the eight stocks in the record labels and publishing category on the Billboard Global Music Index had an average gain of 10.3%. The other categories saw losses; four live music stocks had a 0.9% average decline, six streaming stocks dropped an average of 3.9% and three radio stocks had a 4.7% average decline. 

LiveOne shares fell 10.4% on Friday following the company’s spin-off of its PodcastOne segment on the Nasdaq exchange. That brought its shares’ one-week loss to 21.8%. LiveOne distributed about 19% of PodcastOne shares to LiveOne shareholders of record as of Sept. 5, but the podcast company’s trading debut got off to a rocky start on Friday. Trading under the ticker PODC, shares of PodcastOne owner and operater Courtside Group fell 45.1% to $4.39 from a starting price of $8 per share.

Drake continues to make pop news in the entertainment industry. The “Heart on My Sleeve” TikTok hit sparked controversy earlier this year. A content creator, Ghostwriter, used artificial intelligence to create a fictional collaboration between The Weeknd and Drake. 

The viral song Drake was quickly taken down from streaming sites due to legal and ethical concerns. The song has this week raised some interest with what looks like a possible Grammy.

The Grammy boss’ statements

The New York Times reported that the artist is eligible for a Grammy despite the song being an AI mimic of Drake and The Weekend without their consent. The Recording Academy CEO, Harvey Mason,asserted the organization behind the Grammy’s position, that songs created partly by AI, but not entirely, would be eligible for the music industry’s top honour. 

Mason stated that they would not be awarding AI-generated material. However, creative works that AI touched would be entered into the categories. He added that discrediting any material with an AI touch would be unfair.

Mason caused a frenzy when he confirmed to the New York Times that the Tiktok hit would be eligible for a Grammy consideration since the artist wrote the lyrics thus of human origin. However, the CEO took to his Instagram Live last night to clarify the sentiments. He sought to clear the miscommunication. He said the Drake and The Weekend Mimic was not eligible for a Grammy. 

Mason clarified that despite the lyrics being written by a human, the artists’ vocals still needed to be consented to. This raised a legal concern since the respective artists’ record labels had not cleared them for wide distribution. As it stands, the song is not available commercially and thus not eligible for a Grammy award. 

He added that things were moving quickly and likely to continue evolving.” The academy will continue supporting and protecting human artists and creators”.

The Grammy boss also added that not knowing what Artificial Intelligence will mean or do in the future raises some concerns for him. However, he quickly said that AI will most likely become an integral part of the music industry and society.

Fans quickly noted that the reasons were not due to the AI generation but only the legal and commercial unavailability of the song, thus its ineligibility. Earlier this year, the Academy clarified its position on AI, stating that only human artists and creators are eligible for the Grammys’ consideration, nomination or awarding.

More of Ghostwriter 

The Heart on Sleeve hit song was released in April through Social Media, where the Artist appeared on his social media in a white sheet and sunglasses embodying a ghost. The artist also attended a meeting organised by the academy dressed as a ghost using a voice-altering device.

Ghostwriter is at it again with a new AI-generated song, “Whiplash”, another fictional collaboration between 21 Savage and Travis Scott. This time, the artist left the two hip-hop artists whose voices were mimicked a note seeking their consent for the song’s wide circulation in exchange for the generated royalties.

He also wrote in the post that it is clear that people wanted the song, and the future of music was already here. He added that artists now can put their voices to work without lifting a finger. Even after the legal and ethical concerns surrounding his AI-generated music, Ghostwriter’s persistence confirms the idea of some music recording industry leaders that AI is here to stay, and we can only adapt to it; the metaphorical technology toothpaste is already out of the tube.

The Drake AI song attracted discussions around the future of AI in the music industry. The hit’s seeming consideration for a Grammy shows that the industry is acknowledging the potential impact of the technology. This affirms that AI is here to stay, and the best we can do is embrace it to keep abreast with the industry’s developments.

It’s been revealed that Heart On My Sleeve, the track that sent shockwaves through the music industry earlier this year thanks to its use of AI vocals that closely resembled those of Drake and The Weeknd, has been submitted for two Grammy Awards: Best Rap Song and Song Of The Year.

Speaking earlier this year, Recording Academy CEO Harvey Mason Jr confirmed that songs with AI elements could be considered for Grammys providing the music was written and performed “mostly by a human”, and he’s now reiterated that stance to The New York Times.

Warner Music Group CEO participated in Goldman Sachs’ Communacopia + Technology Conference in San Francisco this week and shared thoughts on an artist-centric payment model.

At Goldman Sachs’ Communacopia + Technology Conference in San Francisco on Wednesday (September 6), Warner Music Group CEO Robert Kyncl participated in a Q&A session where he touched on WMG’s international expansion strategy, his prior experience at Netflix and YouTube and his thoughts on what a shift to an “artist-centric payment model” would realistically look like.

Kyncl made clear his stance that creating a functional alternative to the currently pro-rata payment system will require greater cooperation between music companies and streaming services.

“If you’re on the DSP side, obviously you don’t want one partner with this, another partner with that. So you want some kind of a scalable model that can function,” said Kyncl. “So I think it’s amazing that there is a push, especially amongst the major music companies, to change both revenue per user as well as the pie distribution.”

Revenue per user at the DSP level and the distribution of the money allocated to royalties are the two primary factors in determining a new payment model, says Kyncl. He notes that revenue per user among streaming services is “lagging inflation today” and that if Spotify’s monthly premium subscription fee had maintained alongside inflation since the service’s US launch in 2011, it would cost $13.25 today as opposed to the $10.99 it now charges — up from $9.99 a few months ago.

In Kyncl’s estimation, Spotify’s average monthly revenue per user is currently around $7.50, and there is a “tremendous opportunity” to raise that number. Spotify reported an ARPU of around $4.58 per user in Q2 2023 — but that number includes ad-supported users.

“Focusing on the revenue per user is a very, very important part of what the industry needs to do,” said Kyncl, who also confirmed the recent news of a joint venture between WMG and Eliot Grainge’s 10K Projects, in which WMG will take a 51% stake in the LA-based label.

“We’re bringing incredible talent both on the artist side as well as on the executive side into our pool,” said Kyncl. “Obviously, we continue to recruit and invest (in) technology talent as well as to set up the company.”

Kyncl’s call for recurring price hikes recommends the industry take a page out of Netflix’s playbook, whereby the company has systematically raised prices, especially in the US market, since 2013.

Since the streaming company rolled out its first streaming-only plan that excluded its mail-order movie service in 2011, it has incrementally increased its rates through seven different price hikes — from $7.99 to $15.49, or nearly 94% in slightly over a decade.

“The amount of work and innovation that happens around price optimization (at) Netflix is incredible,” said Kyncl. “I think we all have a lot to learn from that, and we should adopt it.”

Kyncl also touched on the issue of generative AI in the music industry — such as the fake Drake and Weeknd collaboration that went viral earlier this year.

“I think the primary responsibility sits with the consumption platforms — especially the open consumption platforms where the content will end up,” says Kyncl, referring to platforms where any user can upload content, namely YouTube and TikTok.

Kyncl compares the AI-generated content issues today to the user-generated content that grew 15-20 years ago when YouTube started gaining significant footing in the culture.

“We built a very large multiple end dollar business for our partners from fan-uploaded content of their copyrights, that was using their copyrights,” Kyncl says. “It required technology, and deal-making, and partnership and all of that, and we applied all and built it.”

Interestingly, Kyncl’s view on the development of AI violating copyright is at odds with many other rights holders, who see the developers of AI technology as carrying the brunt of the responsibility not to infringe copyright.

Several authors have launched lawsuits against OpenAI on the grounds that the company behind the cultural phenomenon ChatGPT infringed on their copyright when they used copyrighted works as part of their AI-training process.

In 2004, some 25 years after belting out the lyrics to Pink Floyd’s ‘Another Brick In The Wall’, the London schoolchildren who featured in the iconic song lodged a claim for unpaid music royalties. The ensuing drama led to a lot of fans thinking the band themselves had been sued, which was almost fitting for the song about school kids rebelling.

Released in 1979 for The Wall album, the song’s anthemic quality made it one of Pink Floyd’s most popular hits. Written by founder Roger Waters across three parts, ‘Another Brick in the Wall Pt. 2’ was meant to be satirical. When discussing the track, he explained to Mojo that the all-boys grammar school he attended in the 1950s was highly controlling, but the teachers were weak, which only encouraged bad behaviour. “The song is meant to be a rebellion against errant government, against people who have power over you, who are wrong,” he said.

The cinema and television industry has seen a significant upheaval due to contemporary technological breakthroughs, which have fundamentally altered how consumers interact with online material. The Solana stands out among other fascinating technical developments as a leading pioneer. It is a remarkable finding because of its incredible speed and exquisite design. Solana is opening up many prospects through its innovative technologies, including quick transaction processing, the expansion of non-fungible marketplaces, and its innovative use of smart contracts. Explore this article to learn how Solana’s innovative technology changes the entertainment sector.

Solana’s Lightning-Speed Transactions 

Solana has harnessed the power of cutting-edge technology known as Tower Byzantine Fault Tolerance (BFT) to pursue unheard-of speed and scalability. Tower BFT is a fundamental development in consensus techniques that distinguishes Solana from other blockchain systems by enabling it to achieve high throughput and low latency. Solana is perfect for high-frequency applications and decentralized finance (DeFi) protocols because its novel methodology enables it to execute transactions quickly and precisely.

Tower BFT offers benefits beyond dependability and speed. Even in the face of hostile nodes, its capacity to withstand Byzantine faults assures the security and stability of the network. This adaptability is essential for preserving trust and supporting a decentralized environment where users can freely connect and conduct business without middlemen.

The Solana blockchain confirms the transactions fairly immediately. Users won’t have to wait much longer or lose out on possibilities because of its fast processing times. It makes it possible to broadcast material more smoothly, with less latency and buffering. Every in-game purchase, transaction, or activity happens without a hitch in online gaming, making the experience immersive and hassle-free. Whether you love games, movies, or music, Solana’s lightning-fast transactions are revolutionizing how you interact with entertainment online. 

Tokenizing Entertainment Assets 

The concept of tokenizing physical assets is rewriting the rules of ownership, investment, and market accessibility. With Solana, the potential to tokenize various facets of the entertainment industry comes to life.

Solana’s groundbreaking technology paves the way for the seamless tokenization of entertainment assets, revolutionizing how we interact with digital content. With Solana, the potential to tokenize various facets of the entertainment industry comes to life. Digital collectibles, virtual goods, and unique experiences can now be represented as non-fungible tokens (NFTs) on the Solana blockchain.

Imagine owning a rare scene from your favorite movie, a one-of-a-kind concert recording, or exclusive in-game items, all securely stored as NFTs. Solana’s high-speed and low-cost transactions ensure that fans and collectors worldwide can easily create, trade, and enjoy these assets. The possibilities for artists, creators, and content producers are endless, as they can now monetize their work directly through tokenized assets on Solana’s cutting-edge blockchain.

NFT Marketplaces and Digital Collectibles 

Solana’s influence includes the ecology of the NFT marketplace and goes well beyond tokenization. NFT markets flourish on Solana’s blockchain, enabling the production, sale, and trading of digital items with unparalleled efficiency. By minting their NFTs with low transaction costs, artists and producers may more easily enter this developing market.

Solana breathes fresh life into digital treasures by enabling blazing-fast transaction times and a decentralized system that allows creators to retain ownership over their works. Collectors profit from a seamless experience that makes finding, purchasing, and exchanging NFTs simple. Because of Solana’s dedication to scalability, NFT markets can meet the rising demand for distinctive digital assets while minimizing their negative environmental effects.

Decentralized Content Distribution 

Content producers and distributors gain a lot from Solana’s decentralized structure. It encourages a progression in creating, disseminating, and consuming entertainment material.

Furthermore, it eliminates the need for middlemen like record labels, recording studios, and online streaming services. 

 Creators are now able to communicate directly with their audiences because of decentralization. They may now keep a bigger portion of their earnings thanks to this. 

This supports up-and-coming artists and independent innovators who sometimes struggle to obtain just compensation in established entertainment industries.

Another major benefit of Solana’s blockchain is the transparent and unbreakable smart contracts. Creators can quickly and fairly get royalties and compensation by using smart contracts. Because of the trust built by this level of transparency and the certainty that the value of their work is safeguarded, more creators use digital platforms.

With real-time streaming, gaming, and interactive experiences for content distribution, Solana’s speed and scalability let startups and smaller organizations compete in the entertainment market. Additionally, it eliminates latency and buffering problems that may reduce user interest. This improves the viewing experience and creates new options for immersive and interactive entertainment material.

Gaming and In-Game Economies 

Solana’s emergence has revolutionized gaming and in-game economies, offering players unprecedented opportunities for engagement and ownership.

The best Solana gambling sites have played a pivotal role in transforming gaming experiences and in-game economies by providing a high-speed, low-cost blockchain platform. This technology enables decentralized applications (DApps) that seamlessly empower gamers to trade, buy, and sell in-game assets. Solana’s fast transaction speeds and scalability ensure players can interact with these assets in real-time, creating a dynamic and immersive gaming environment.

Integrating blockchain technology has enhanced gameplay and item ownership by introducing transparency and security. Players can now truly own their in-game assets as non-fungible tokens (NFTs) on the Solana blockchain, granting them full control and provable scarcity. This increases the value of in-game objects and enables cross-game interoperability, giving players more flexibility and value.

A new age of player-driven economies has begun due to the integration blockchain and Solana technologies into the gaming industry, allowing players to monetize their abilities and investments like never before.

As part of this ecosystem, Sol Gambling exemplifies the fusion of gaming and blockchain for exciting, innovative experiences.

Leveraging Smart Contracts for Entertainment 

Solana’s robust support for smart contracts has ushered in a new era of innovation in entertainment. Smart contracts are self-executing agreements with the terms of the contract directly written into code. When applied to entertainment, this technology offers numerous benefits and opportunities.

Firstly, Solana’s lightning-fast transaction speeds and low fees make it ideal for creating decentralized entertainment applications that require instant interactions. This enables real-time gaming experiences, interactive live streaming, and event ticketing without the frustrating delays or high transaction costs associated with other blockchain platforms.

Furthermore, smart contracts on Solana enhance security and transparency in the entertainment industry. They ensure that content creators, artists, and performers are fairly compensated through automated revenue-sharing mechanisms. This trustless system reduces the risk of disputes and allows creators to focus on their craft while knowing they will receive their due share of the profits.

Innovative entertainment applications powered by Solana’s smart contracts are not limited to gaming and content distribution; they extend to virtual concerts, digital art marketplaces, and even decentralized autonomous organizations (DAOs) for community-driven content creation. Solana’s support for smart contracts empowers developers to push the boundaries of entertainment, creating more immersive, equitable, and dynamic experiences for audiences worldwide.

Challenges and Scalability 

Solana has drawn much attention for its scalability because of its high throughput and low latency. However, it has scalability and network congestion issues like any other blockchain.

Growing Demand: The popularity of Solana has led to increased demand for its network, which can sometimes result in congestion during periods of high activity. This congestion can lead to slower transaction confirmations and higher fees, affecting user experience.

Resource Intensive: Running a Solana node can be resource-intensive, making it difficult for smaller validators to participate in securing the network. This centralization risk can impact the overall decentralization and security of the network.

The Solana development team continuously optimizes the Solana protocol to increase its scalability. This includes improvements to the consensus algorithm, node software, and network architecture to handle more transactions and smart contract executions efficiently. Solana is exploring Layer 2 scaling solutions to alleviate congestion and reduce fees. These solutions, like Serum’s Solana-powered decentralized exchange, provide faster and cheaper transactions while still benefiting from the security of the mainnet.

Efforts are being made to encourage a more diverse set of validators to join the network. This can distribute the load more evenly and reduce centralization risks. The Solana community actively contributes to solving scalability challenges. Developers are encouraged to create applications that optimize gas consumption and reduce strain on the network.

Future Innovations and Possibilities 

Solana’s influence on the entertainment industry is poised for remarkable evolution. It may change how we interact with digital information altogether. One key development may be creating decentralized, player-owned virtual worlds where games, social interactions, and digital art fluidly combine.

These immersive metaverses could revolutionize how we experience entertainment.

Furthermore, Solana’s integration with non-fungible tokens (NFTs) might lead to a surge in tokenized content ownership. Artists, musicians, and creators could directly sell and monetize their work, eliminating intermediaries. This shift could democratize the industry, allowing emerging talents to flourish.

Partnerships with major entertainment giants are on the horizon. Collaborations with studios, streaming platforms, and content creators could position Solana as a dominant force in content distribution. Such partnerships may also drive innovations in dynamic pricing models, personalization, and content recommendation systems.

Additionally, cross-chain interoperability with other blockchain ecosystems could open doors to new possibilities. This would facilitate seamless asset transfers and interactions, expanding the scope of content creation and consumption.

Conclusion 

In the dynamic realm of digital entertainment, Solana emerges as a potent catalyst for profound transformation. With its robust scalability, intelligent contract capabilities, and lightning-fast performance, Solana can redefine how we produce, enjoy, and engage with entertainment. As Solana persists in its journey of innovation and collaboration, it encourages creators and presents audiences with unparalleled experiences, reshaping the essence of entertainment in the digital era. The horizon is boundless with opportunities, and Solana stands firmly at the vanguard of this exhilarating revolution.

The two companies developed the new model together as part of their previously announced collaboration, using their respective deep data analysis to develop an economic model that better reflects the true value of artist-fan relationships.

The collaboration to launch an artist-centric model is driven by the companies’ recognition that the current music streaming model needs to be re-imagined. While streaming has been the most significant technology advancement in music in many years, a flood of uploads with no meaningful engagement, including non-artist noise content, has necessitated reassessment of the approach that platforms, labels, and artists take to foster a thriving music ecosystem.

Based on Deezer’s in-depth data analysis the following key enhancements are being integrated into the new artist-centric model:

• Focusing on artists – Deezer will attribute a double boost to what they define as “professional artists” – those who have a minimum of 1,000 streams per month by a minimum of 500 unique listeners – in order to more fairly reward them for the quality and engagement they bring to the platforms and fans;

• Rewarding engaging content – additionally assigning a double boost for songs that fans actively engage with, reducing the economic influence of algorithmic programming;

• Demonetizing non-artist noise audio – Deezer is planning to replace non-artist noise content with its own content in the functional music space, and this won’t be included in the royalty pool; and

• Tackling fraud – continuing to drive an updated, and stricter, proprietary fraud detection system, removing incentives for bad actors, and protecting streaming royalties for artists.

Moreover, the size of the catalog available on digital platforms has exploded in recent years. Deezer’s catalog grew from 90 to over 200 million pieces of content in the past two years alone. As part of the artist-centric model, Deezer intends to apply a stricter provider policy to ensure quality and a better user experience. This includes steps to limit non-artist noise content.

“This is the most ambitious change to the economic model since the creation of music streaming and a change that will support the creation of high-quality content in the years to come,” said Jeronimo Folgueira, CEO of Deezer. “At Deezer we always put music first, providing a high-quality experience for fans and championing fairness in the industry. We are now embracing a necessary change, to better reflect the value of each piece of content and eliminate all wrong incentives, to protect and support artists. There is no other industry where all content is valued the same, and it should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favourite artist streamed in HiFi.”

“The goal of the artist centric model is to mitigate dynamics that risk drowning music in a sea of noise and to ensure we are better supporting and rewarding artists at all stages of their careers whether they have 1000 fans or 100 thousand or 100 million. With this multi-faceted approach, music by artists that attracts and engages fans will receive weighting that better recognizes its value, and the fraud and gaming, which serves only to deprive artists their due compensation, will be aggressively addressed,” said Michael Nash, UMG’s EVP and Chief Digital Officer.

He continued, “Embracing the commonly shared objectives we highlighted at the outset of this chapter in our partnership, together we’ll maintain a flexible and adaptive approach. As the ever-evolving music landscape continues its rapid transformation, UMG and Deezer will rigorously address the impact of these changes as we incorporate new insights from data analysis, and fine-tune the model, as appropriate.”

Olivier Nusse, CEO of Universal Music France, said, “After extensive engagement with Deezer throughout 2023, we are very proud to be pioneers in France in the highly anticipated roll out of their version of the Artist Centric model. This comprehensive initiative will much more effectively value fan engagement and active streaming of music created by artists.”

Highlights from Preliminary Work:

No surprise: fans listen to music by the artists they love

-Deezer’s data analysis showed that fans mostly consume music from the artists they love and show little interest in music from hobbyists or functional music.

-Content clutter is degrading the fan experience and impeding discovery of artists.

-For example, 97% of all uploaders on the Deezer platform generated only 2% of the total streams. Whereas only 2% of all uploaders—those artists attracting a consistent fanbase—had more than 1,000 monthly unique listeners.

Reward the artists that attract and retain subscribers

-In designing a fairer allocation of revenue, Deezer seeks to provide greater incentives to those artists who drive valuable engagement on the platform:

-A double boost will be given to all artists who have a minimum of 1,000 streams per month by a minimum of 500 unique listeners.

-Deezer’s data shows that these artists can come from a wide spectrum—from DIY to indie to major label. By examining user behavior over the initial period immediately after they subscribe to Deezer, and then looking at that same user’s behavior in the first month after joining, conclusions can be drawn regarding which artists drove them to subscribe and which artists kept them engaged on the platform.

-Data indicates that the artists listened to by new subscribers in their first month may drive as much as 25% to 30% of user’s streams over the first two years of their activity on the service.

-To reward artists that fans engage with, Deezer will boost the value of their streams that drive engagement on the platform.

Addressing fraud, system gaming and undue influence

-By continuing to improve safeguards to prevent fraud, system gaming and undue influence, revenue in the artist pool is likely to increase. Deezer’s data showed that this could be done in a variety of ways including:

-Fully deploying and further developing Deezer’s proprietary fraud detection system to optimize the removal of manipulated streams.

-Deezer’s best-in-class algorithm identified approximately 7% of streams as fraudulent in 2022: this algorithm uses machine learning at the user level to identify financial fraud (fake accounts, payment fraud), and potential system-gaming behaviors.

Removing “noise” content from royalty pool

-Streams tagged as “noise” represented approximately 2% of streams on the platform.

-Deezer’s intention is to replace non-artist noise content on the platform with its own content in the functional music space, which will not be accounted for in the royalty pool.

Integrating additional artist-centric components to benefit both artists and fans

-The partnership construct will enable data-based adjustments to optimize model performance and establish the foundation for introduction of future elements such as ARPU enhancements, including super fan monetization.

Other elements of the partnership

Universal will collaborate with Deezer on the development of Deezer’s fraud detection tools and AI detection, and intends to experiment with new technology and label services from Deezer.

Deezer is one of the largest independent music streaming platforms in the world, with more than 200 million pieces of content available in 180 countries, providing access to lossless HiFi audio, innovative recommendation technology and industry defining features. As the home of music, Deezer brings artists and fans together on a scalable and global platform, to unlock the full potential of music through technology. Founded in 2007 in Paris, Deezer is now a global company with a team of over 600 people based in France, Germany, UK, Brazil, and the US, all brought together by their passion for music, technology and innovation. Deezer is listed on the Professional Segment of Euronext Paris (Ticker: DEEZR. ISIN: FR001400AYG6) and is also part of the newly-created Euronext Tech Leaders segment, dedicated to European high-growth tech companies, and its associated index.

At Universal Music Group, we exist to shape culture through the power of artistry. UMG is the world leader in music-based entertainment, with a broad array of businesses engaged in recorded music, music publishing, merchandising and audiovisual content. Featuring the most comprehensive catalogue of recordings and songs across every musical genre, UMG identifies and develops artists and produces and distributes the most critically acclaimed and commercially successful music in the world. Committed to artistry, innovation and entrepreneurship, UMG fosters the development of services, platforms and business models in order to broaden artistic and commercial opportunities for our artists and create new experiences for fans. For more information on Universal Music Group visit www.universalmusic.com.

It is no secret that the current music-streaming payment model is no longer working — created more than 15 years ago, the so-called “aggregate” model, whereby artists and songwriters are paid according to their percentage of total streams, disproportionately rewards superstars while most others are earning a fraction of what the top artists are collecting.

There have been any number of theories on how to “fix” it, and Universal Music and France-based Deezer — which is approximately the sixth- or seventh-largest streaming service globally but is No. 1 in France and several other countries — have announced the launch of what they are calling an “artist-centric” streaming model, “designed to better reward the artists, and the music that fans value the most.” Deezer will launch the model in France in the fourth quarter of 2023, with additional markets to follow.  

The two companies, which announced a partnership earlier this year, say they are aiming to “develop an economic model that better reflects the true value of artist-fan relationships.” While it does not resolve the central problem of the aggregate model, it does aim to boost earnings for what they call “professional artists” and recognize which artists and songs are most engaged with by users, and de-emphasize what it calls “noise audio” — for example, recordings of water running or crickets chirping — that were created with minimal creative effort yet still earn royalties.

According to the announcement, “based on Deezer’s in-depth data analysis,” the following changes are being integrated into the new artist-centric model:

      •    Focusing on artists – Deezer will attribute a double boost to what they define as “professional artists” – those who have a minimum of 1,000 streams per month by a minimum of 500 unique listeners – in order to more fairly reward them for the quality and engagement they bring to the platforms and fans (the company’s data shows that “only 2% of all uploaders—those artists attracting a consistent fanbase—had more than 1,000 monthly unique listeners”; specifics on what that “double boost” means were not immediately available);

      •    Rewarding engaging content – additionally assigning a double boost for songs that fans actively engage with, reducing the economic influence of algorithmic programming; 

      •    Demonetizing non-artist noise audio – Deezer is planning to replace non-artist noise content with its own content in the functional music space, and this won’t be included in the royalty pool (the streamer will also work to limit uploads of such recordings); and

      •    Tackling fraud – continuing to drive an updated, and stricter, proprietary fraud detection system, removing incentives for bad actors, and protecting streaming royalties for artists.

“This is the most ambitious change to the economic model since the creation of music streaming and a change that will support the creation of high-quality content in the years to come,” said Jeronimo Folgueira, CEO of Deezer. “At Deezer we always put music first, providing a high-quality experience for fans and championing fairness in the industry. We are now embracing a necessary change, to better reflect the value of each piece of content and eliminate all wrong incentives, to protect and support artists. There is no other industry where all content is valued the same, and it should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favourite artist streamed in HiFi.”

Michael Nash, UMG’s EVP and Chief Digital Officer, said, “The goal of the artist centric model is to mitigate dynamics that risk drowning music in a sea of noise and to ensure we are better supporting and rewarding artists at all stages of their careers whether they have 1000 fans or 100 thousand or 100 million.  With this multi-faceted approach, music by artists that attracts and engages fans will receive weighting that better recognizes its value, and the fraud and gaming, which serves only to deprive artists their due compensation, will be aggressively addressed. As the ever-evolving music landscape continues its rapid transformation, UMG and Deezer will rigorously address the impact of these changes as we incorporate new insights from data analysis, and fine-tune the model, as appropriate.”

Now dig into a data-fueled VIP+ subscriber report …

Universal Music Group‘s proposed ‘artist-centric’ royalty model for streaming services has been a big talking point for the global industry this year – though the finer details of what the model might entail hasn’t always been clear.

Today (September 6) that’s all changed.

Deezer and UMG have announced the launch of what they call the “first comprehensive artist-centric streaming model”, designed, according to the companies “to better reward the artists, and the music that fans value the most”.

According to the Financial Times the model is expected by UMG and Deezer to “lift payouts to professional artists by 10 per cent”.

Deezer will launch the model in France next month (October 2023) with additional markets globally to follow in the new year.

The new model will see “professional artists” – defined as those who have a minimum of 1,000 streams per month and a minimum of 500 unique listeners – receive a so-called “double boost” to royalty payments.

In other words, when calculating their royalty payments, streams of their music will carry double the weight versus streams of ‘non-professional’ artists.

The Deezer model will also apply a ‘double boost’ – doubling the weight of streams again – for played tracks by artists that fans have actively searched for.

In effect, this will mean plays of songs by popular artists that fans have searched for will be 4X bigger than plays of songs by unpopular artists that have been algorithmically served to users.

Deezer and UMG say this will “reduce the economic influence of algorithmic programming”.

Another key element of the model: what Deezer calls “non-artist noise audio” will be de-monetized.

The definition of what constitutes “noise” hasn’t yet been defined in detail by the platform. What we do know: Deezer says it will replace all non-artist ‘noise’ content on its platform with its own ‘functional music’ content. This Deezer-made ‘functional’ content will then be excluded from the royalty pool paid out to music rightsholders.

Worth noting: Deezer has recently started making its own functional AI music for its ‘Zen by Deezer’ app.

As part of the artist-centric model, Deezer also intends to apply what it calls a “stricter provider policy” that includes steps “to limit non-artist noise content”. In other words, Deezer will limit the upload of certain music that’s deemed to be not of a high enough quality threshold.

Deezer notes that “size of the catalog available on digital platforms has exploded in recent years” and says that its own catalog grew from 90 million to over 200 million pieces of content in the past two years alone.

Indeed, amidst a rise in generative AI tools and a growing digital music distribution landscape, more recorded audio is being made and released than at any point in human history.

This vast supply of content, some of which is literally just white noise, has sparked annoyance amongst record business leaders like Universal Music Group Chairman and CEO, Sir Lucian Grainge, who calls it “oversupply”.

According to Luminate’s midyear report for H1 2023,  including ISRC ingestion activity from Q2, across the whole of H1 2023, the average number of ISRCs (i.e. new music audio files) being added to music streaming services was 112,000, with 20.2 million uploads in total during the period.

Deezer says that streams tagged as “noise” represented approximately 2% of streams on the platform.

Additionally, as part of today’s announcement, Deezer has also pledged to tackle streaming fraud, by “continuing to drive an updated, and stricter, proprietary fraud detection system, removing incentives for bad actors, and protecting streaming royalties for artists”.

Deezer says that it identified approximately 7% of streams as fraudulent in 2022

This pledge follows Deezer’s strategy that set out back in June to “weed out illegal and fraudulent content” on its platform.

“This is the most ambitious change to the economic model since the creation of music streaming and a change that will support the creation of high-quality content in the years to come.”

Jeronimo Folgueira, Deezer 

Jeronimo Folgueira, CEO of Deezer said: “This is the most ambitious change to the economic model since the creation of music streaming and a change that will support the creation of high-quality content in the years to come.

“At Deezer we always put music first, providing a high-quality experience for fans and championing fairness in the industry. We are now embracing a necessary change, to better reflect the value of each piece of content and eliminate all wrong incentives, to protect and support artists.

“There is no other industry where all content is valued the same, and it should be obvious to everyone that the sound of rain or a washing machine is not as valuable as a song from your favorite artist streamed in HiFi.”

“The goal of the artist centric model is to mitigate dynamics that risk drowning music in a sea of noise and to ensure we are better supporting and rewarding artists at all stages of their careers whether they have 1000 fans or 100 thousand or 100 million.”

Michael Nash, UMG

Michael Nash, UMG’s EVP and Chief Digital Officer, said:  “The goal of the artist centric model is to mitigate dynamics that risk drowning music in a sea of noise and to ensure we are better supporting and rewarding artists at all stages of their careers whether they have 1000 fans or 100 thousand or 100 million.

“With this multi-faceted approach, music by artists that attracts and engages fans will receive weighting that better recognizes its value, and the fraud and gaming, which serves only to deprive artists their due compensation, will be aggressively addressed.

He continued: “Embracing the commonly shared objectives we highlighted at the outset of this chapter in our partnership, together we’ll maintain a flexible and adaptive approach.

“As the ever-evolving music landscape continues its rapid transformation, UMG and Deezer will rigorously address the impact of these changes as we incorporate new insights from data analysis, and fine-tune the model, as appropriate.”

“This comprehensive initiative will much more effectively value fan engagement and active streaming of music created by artists.”

Olivier Nusse,  Universal Music France

Olivier Nusse, CEO of Universal Music France, said: “After extensive engagement with Deezer throughout 2023, we are very proud to be pioneers in France in the highly anticipated roll out of their version of the Artist Centric model.

“This comprehensive initiative will much more effectively value fan engagement and active streaming of music created by artists.”Music Business Worldwide

Sean “Diddy” Combs surprised the music industry and its observers recently when he decided to transfer rights from his Bad Boy Records catalog to some of the artists and songwriters who long ago helped make him a billionaire.

Although there has been no shortage of news coverage, there aren’t many specifics about the arrangements that Combs and the record label have with the artists: Ma$e, Faith Evans, The Lox, 112 and the estate of the Notorious B.I.G., according to various reports. The transfers come amid Bad Boy Records’ 30^th anniversary, and follow offers to the tune of hundreds of millions of dollars that the label has reportedly received for its catalog.

But advisors say the news raises issues around taxes and financial planning — and there are even some parallels when it comes to business ownership between the music and the financial advice industries.

Usually, songwriters own copyrights but have agreements with publishers to collect royalties for a certain amount of time, split with artists, said Craig Manzino, partner in charge for business management and family office services at Armanino, who works with clients in sports, arts, entertainment and media.

“It’s common that these rights do revert back to the artists at a given point — what we don’t know is why they are reverting,” Manzino said. “These deals could be complicated, and it depends on how they’re worded.”

In cases where rights are transferred, both sides in such deals need to be protected, he noted. And in some cases, publishers might want tax write-offs.

Any time that rights are transferred, “it’s having the right people involved from the beginning of the transaction that’s important,” he said.That means working with CPAs and lawyers whose advice “could change the taxability of the transaction tremendously.”

In recent years, many big-name artists or their estates have sold publishing rights or recordings of songs or entire catalogs, including Bob Dylan, Whitney Houston, Bruce Springsteen, Neil Young, David Bowie and Justin Timberlake. Some of those deals reportedly amounted to hundreds of millions.

“Sometimes creative individuals retain the rights and think of it as legacy planning. It goes to the trust, it goes to the family, [or] however they set it up,” said Tiffany Soricelli, principal of Virtuoso Advising for Artists.

“If you sign away your rights … [songs] can be utilized in ways you never intended,” Soricelli said. “I would be asking [clients] what their goals are. Some people don’t want to micromanage their own catalogs.”

While income from artists has shifted to streaming services, the publishing side includes licenses for use in movie clips, TV shows and commercials, said Justin Sroka, partner at Mann Gelon Glodney Gumerove Yee.

“That’s a really large source of revenue,” Sroka said, adding that it’s also a matter of regaining authority over how and where their songs are used. “That’ a big piece of what they’re getting back.”

CAPITAL GAINS VS. ORDINARY INCOME

Decisions to sell or retain catalogs involve big tax questions for songwriters or artists, said Adam Scott, principal at WellAcre Global Wealth Advisors.

“If you’re Bob Dylan, you’re going to get hit with capital gains, which right now is relatively low compared to paying income tax at the current rate,” Scott said.

That is, of course, if the owner is in the top tax bracket. And not selling has benefits, as appreciation isn’t taxed annually, and assets of less than about $26 million for a married couple can be passed tax-free to heirs under the estate tax exemption, Scott noted.

In theory, it’s not any different than the considerations for someone who owns a plumbing company that keeps going up in value, Scott said. Or for that matter, the owner of a financial advice business. It’s often useful to limit income and put money back into the business, he said.

“If you don’t need the income from your business, you’re better off investing in your advisory business and growing it,” he said. “That’s something I do myself. Rather than taking a lot of money out of the company, I’m investing in it.”

In Diddy’s case, it’s hard to say what any tax implications are, given the lack of details on the rights transfers.

But “it seems that this deal is probably less about a tax benefit for Diddy and more about the goodwill and being able to return those copyrights and publishing rights back to the artists, which is kind of a nice thing,” Sroka said. “Clearly, he’s profited well over the years, so it was a nice thing for him to be able to provide that back.”

The decision to sell or hold onto song rights comes up frequently, Sroka said.

“We’ve had many clients who have contemplated catalog sales,” he said. “The few things that move the needle are the cash flow impact upfront versus collecting [royalties] annually.”

For someone who’s in the top tax bracket in California, the 37% federal rate and 13% state income tax can make the 20% capital gains tax very attractive, Sroka noted.

However, with the cost of capital rising along with interest rates, the appetite for buying up whole catalogs appears to be diminishing, at least for now, he said.

When contemplating whether to retain or transfer rights, working with someone who is experienced with royalties is helpful, Manzino said.

“Certain songs have cycles. It’s not just the straight revenue trail. You might have an artist who has a Christmas song, and you can’t just look at the past four quarters, because you know it’s going to pop in the fourth quarter,” he said.

“However this is going, there is going to be the need for a business valuation,” Manzino said. “The tax treatment is going to be critical, because it could mean the difference in millions of dollars to each side.”