The MMF's Dissecting the Digital Dollar report is a big piece of work which tackles a wide variety of issues. It's also a balanced and unhysterical piece of work which just might help move things forward, David Balfour suggests.

16 October 2015 - Editorial

The MMF's Dissecting the Digital Dollar report, released this week, is certainly a thorough bit of work. We won't pretend that we've yet managed to properly digest all 75 pages, this is going to take a while. It's not only a massive document but it's massive in scope too.

We feel that amongst the diverse areas covered in this report, one thread stands out most prominently. The report provides a clear and detailed picture of the types of music rights in play in today's markets. Needless to say, that's a complex picture. Divisions between recording and song rights, mechanicals and performances, direct and compulsory licensing approaches, 'implied' rights and so on all come under examination here.

The report does a good job of explaining how all of those rights originated in a pre-digital era, meaning that their application in a modern digital landscape has led to an complex and difficult-to-understand ecosystem where the process from creation to payment could hardly be less logical if you were to build from scratch now. The arrival of the streaming model in particular has made things more complex than ever, to a point where any artist or manager would be well-justified in feeling that they don't understand what's happening with their music, which rights come into play in different usage scenarios and under what terms licenses are granted to make each of the new models work. Active label or publisher-led licensing is complex enough, when collective licensing applications via collecting societies are added to the mix, transparency becomes even harder to achieve.

We feel that the tone of the MMF report is notable. It's presented very much as a starting-point for discussions about how things can and might change. It's by no means an exercise in label-bashing, in fact the report is expressly non-blaming in nature throughout. Rather than provoking a battle mentality, the MMF is asking 'how can we all work to find a better way'. 

It doesn't take too much reading behind the lines however to assess what the MMF identifies as the biggest problems. Perhaps the section where the real meat is contained here is in the 'fifteen key questions for the wider music industry to discuss, consider and answer' (p13). Here, questions are certainly asked about the powers which large rightsholders can and should exercise in the digital world. The 'making available right' under which many labels license pre-digital era recordings onto services, typically without express consent from the artists involved, is examined at several points. Clearly the MMF feels that such types of 'implied' rights are problematic for their members, and the report suggests that making available rights can and should be much more tightly regulated, or defined. 

Other big questions are addressed here. Not least of which is the question about whether the current value split between recorded music and publishing rights is fair. It's a question that has already been raised repeatedly so far this year, generally with a guaranteed response from labels that 'yes the split if fair', and from publishers of 'this split is unfair'. Managers actually occupy a useful position in this debate. They, more than labels or publishers, often have an interest in both camps. Whilst the report doesn't make any strong suggestions about whether things should change here, the finding that only 11% of managers feel that the current split is fair makes a powerful point in a non-sectarian way.

It's unsurprising that the report also highlights the 'transparency' issues around licensing of digital services, both by labels and collecting societies. The MMF feels that managers need more tools to understand how value is paid out by streaming services, in particular, and whether their artists are enjoying a fair share of the money which flows to labels. Managers are correct to point out that when a signifiant proportion of the value in label deals might come in the form of minimum guarantees, advances, equity stakes or ingestion fees, those deals often favour the position of the label and its short-term priorities, rather than the protection of longterm revenue flows to artists.

The report questions include whether equity cash-outs, or breakage sums resulting from advances or minimum revenue guarantees should be shared with artists. The fact that 46%  of the MMF's survey respondents “had no idea what charges and deductions their artists' labels are making on digital income” pretty much speaks for itself.

We feel that we'll be returning to this report again and again over coming months, not least as it covers many other areas including safe harbours and compulsory licensing. These are deep and complex subjects to even understand, let alone move forward. Again we'd say that the tone of this report is really significant however. Whilst it could perhaps be easy for managers to accuse labels of being crooks who structure their businesses deliberately to hide money from artists, this is not what is said in the report – it recognises that the world is more complicated. Instead, it suggests that the first step towards achieving realistic improvement is to understand exactly what is going on and why, before attempting to address whether it's also fair.

The report also recognises that many issues of concern actually originate outside the industry. The increasing use of NDAs in streaming agreements is highlighted as a particular killer for transparency. Of course, such NDAs are often demanded by the services, rather than being led by labels. When they become as powerful as the NDA which prevents PRS for Music from explaining rates in its YouTube deal to its own members however, they are clearly very problematic. Should the industry continue to allow itself to be forced into this position by tech giants? That's another question to consider. Again, this is what the report does really well: it exposes that failings in transparency are varied in nature, and not always deliberately or maliciously intended. 

Transparency is becoming such a catch-all term that it's arguably starting to become to broad for the issues at stake in our industry. Of course, transparency is a good thing. Getting anywhere nearer to achieving it however can only happen if we understand that within such a complex and fragmented world, the transparency test can only be usefully applied to really specific questions, as the MMF suggests. Is this contract fair? Is this revenue split fair? Am I being paid quickly enough, with accurate royalties? These are all questions which can reasonably be addressed. Is this industry transparent? That's just too wide. We fully support the MMF's attempt to get under the skin of each specific issue, rather than to draw dramatic conclusions. This is how progress is made.