Artist streaming revolt: Former Universal Germany boss thinks modern record labels ‘keep disproportionate amount of income’

Schlager Armageddon! 

The so-called artist streaming ‘revolt’ in Germany continues to bubble away, with the above headline splashed across news service ExtraTipp today, complete with the suggestion that leading artist managers in the market have “declared war” on the music industry “with drastic consequences”.

Okay, so that might be over-egging things just a little. But it speaks to how much this incident has become a national (and international) news event in Germany.

As you’ve no doubt read on MBW by now, 14 managers and/or lawyers repping stars in Germany (including Helene Fischer, Die Toten Hosen and local Schlager artists) last month wrote to the four biggest recorded music companies in the country (Universal, Sony, Warner and BMG) via a sternly-worded letter concerning the streaming income of their clients.

According to local reports, the letter “attacks record companies” and is “of the opinion that [the majors] are taking too much of the streaming millions”.

Further evidence suggests part of the letter may also call for a ‘user-centric’ style of payment from the streaming services, and encourage the major record companies to construct licensing deals to make this wish a reality.

One intriguing reaction to the news has now arrived via a company owned by an influential and respected figure in the German industry.

Tim Renner (pictured) knows very well what it takes to run a major record company – he was Chairman and CEO of Universal Music in Germany from 2001 to 2004.

After that, Renner established the independent Motor Music which, across its recorded music, management and publishing arms works with artists such as Alice Phoebe Lou, L’aupaire, Marius Müller-Westernhagen and Max Raabe.

On Monday (January 27), Berlin-based Motor Music posted a reaction to the artist streaming ‘revolt’ via a blog on its own website. It said that it stood in “solidarity” with the protesting artists – and didn’t hold much back from that point on.

Translated, the blog applauds the managers who undersigned the letter, suggesting that some artists are seeing “absurdly low participation… [of] streaming income”.

The company points out that streaming is driving the growth of the modern business which, according to IFPI stats, saw the 2018 global record industry generate 85.2% of the money it did at its peak, in 2002.

Tim Renner’s company then says that, unlike the CD-led era of 2002, the labels have been able to boost their margins in the streaming age due to the ability to cut down expenditure on “manufacturing, sales, shipping / billing, GEMA, etc.”.

Motor Music’s blog claims that Universal’s marginal costs were reduced by 41% in 2018 compared to its 2002 financial statements – though no source is provided for this claim. It adds that at “Sony or Warner [the numbers] look very similar”.

The crux point of Motor Music’s blog: even though global industry revenues were at 85.2% of their annual peak in 2018, the margin savings afforded by streaming versus the CD era are bulking up profits at major record companies – and these savings are not being passed on to artists.

The blog reads (translated): “The music industry is more profitable than ever, [but] it keeps [these] savings due to old contracts that [are based on] the marginal costs incurred in the physical business [which] accordingly keep the artist [royalties] low.”

This point from Motor Music echoes a statement from BMG on this matter over the weekend, which read: “We do not find it justifiable in a world in which record companies no longer have the costs of pressing, handling and delivering physical product for them to try to hold on to the lion’s share of streaming revenues.”

Continues the Motor Music blog: “The now articulated, long overdue protest [in the letter] is based on this [argument]. Because finally some clever managers have realized that it is not the streaming portals that pay badly, but [their artists’] partners who keep income disproportionately.

“The only way to solve this is by changing the distribution [of royalties] and only taking into account the costs that arise [in the streaming era]. If there are hardly any more costs in the production and distribution of music, then the record label [becomes] a service provider for administration and [marketing].”

The blog points out that Motor itself offers a label services deal for clients whereby the artist keeps an 80% share of streaming revenues, with the label on 20% – “exactly the opposite of the old world”.

[Photo credit: re:publica/Jan Michalko]Music Business Worldwide

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