The ‘NDA culture’ surrounding the licensing of catalogues from labels to digital services has left music’s economic model “pretty well broken” – and it’s predominantly the major labels’ fault.
That’s according to the long-term manager of Nick Cave and PJ Harvey, and co-manager of Radiohead, Brian Message.
Message delivered a rousing speech in London yesterday at the launch of the new Manifesto from the Entertainment Retailers Association.
He reserved particular ire for NDAs signed by digital services, and claimed that he was now “reasonably sure that it’s the corporates owning the major labels driving this agenda”.
While he said he understood the motivations behind such deals – especially “non-attributable [advances] that add up to tens of millions of pounds” – Message warned this practice was creating “value lost to the economic chain”.
And he predicted that Spotify would turn its first worldwide profit when its figures for FY 2014 are released.
Brian Message: On NDAs, streaming’s growth and music’s value chain
“Thank you ERA for inviting me to say a few words. I’m somewhat fortunate to have a platform today given I see that music is now less than 20% of entertainment retail sales; mind you, maybe i’m here because music provides you with 80% of your headaches.
“Last summer I stepped down from the MMF chair to focus my commitment to the organisation on streaming, technology and the new business models developing in the music space. So it’s opportune for me to be able to stand here and talk to key drivers of change and innovation, you the retailers and digital service providers.
“It’s also relevant from my perspective to be here today because I see us, the professional creator and management community, beginning to align ourselves much more with those operating at the coal face of the paying fan; It isn’t lost on me that the 2 biggest contributors to MMF funding are now retailers and digital service providers.
“As a segue, for those of you unfamiliar with the MMF, we are an organisation representing over 350 UK music managers. Our office works to provide support to our members who increasingly are building business solutions that appeal direct to fans across the very wide scope of an artists offering. It isn’t therefore too much of a stretch to suggest that with us being close to our artists and their creative process, much as you are close to your consumers, fans, and their purchasing habits, that together we can add real value to the economic chain from creator to fan.
“That economic chain isn’t without its challenges however, as you probably know just as well as us; in fact, many of my colleagues would go as far as to say that it’s pretty well broken and needs fixing. For us, central to this structural failure is the NDA culture that is now ingrained in the licensing of creator catalogues to retailers and digital services.
“The lack of transparency and the very real erosion of trust felt by many creators and managers in how the economic value chain now operates is an issue that the MMF and ERA needs to focus on together so we can add real value to our members. Since taking on my new role and having now met with whistle-blowers, law makers, artists, managers, label personnel, digital service providers, lawyers and litigators on all sides and pretty much everyone else in the chain, I’m now reasonably sure that whilst it takes two parties to sign an NDA, it’s the corporates owning the major labels that today drive this particular agenda.
“I understand how corporate bosses and their lawyers get to a place where they feel the catalogues they have amassed on behalf of their corporation are assets to leverage as they so wish, I get how they can justify their actions at a time of huge economic change for their businesses, but it becomes a problem for you and us when deal terms remove significant value from the economic value chain.
“When the price of getting a license from a licensor is a non-attributable fee and those fees add up to tens of millions of pounds, then not only is this an issue for creators, but licensees cannot spend that money converting fans to paid for subscription services. When the price of getting a license is a stake in the digital service provider and that stake is attained at less than market rates or at the expense of per play revenue then that is value lost to the economic chain.
“Overhead contributions, technology fees, advances that can’t be recouped, unattributable advances, equity positions at the expense of streaming rates, the dropping of litigation to receive shares that then get sold and other such clever tactics distort the market and ultimately don’t allow it’s development for the benefit of everyone.
“It is why I applaud the likes of BMG and Kobalt and the other independents who are leading the charge as to how a 21st century rightsholder should operate.
“2015 will no doubt be another momentous year for us all. We’ll see the launch of Apple‘s service in the summer, hopefully we’ll see youtube’s subscription service move out of beta, Spotify will likely report their first profit but probably most important of all to me, is that we’ll see ever growing engagement in this issue from the creator and management community.
“2014 saw Irving Azoff get busy in the rights management space and no doubt he’ll have an impact at retail and then this year we’ve already seen artist power begin to flex it’s muscle with the purchase of Tidal by Jay Z. I am confident that we will see further artist and manager led initiatives this year that will seek to impact how the value chain evolves.
“Top amongst these I hope ought to be an ever growing relationship between the management community ie those people closest to the creators and retailers, ie those people closest to the fans.”Music Business Worldwide