Straight talk about streaming

Koda’s revenues from streaming continued to rise in 2017, providing those members whose music gets streamed the most with a lucrative income. However, distributions remain modest for members whose streaming audiences fall into the medium category, and Koda’s Managing Director is unable to promise golden days ahead.

Koda’s revenues from streaming have grown significantly over the last decade. Online consumption of music has boomed. Partly because we listen to music via services such as Spotify, and partly because we watch film and TV series on services such as Netflix – and that content includes plenty of music too.

Streaming is not amongst Koda’s primary sources of revenue: it accounts for approximately 13 per cent of the total turnover. However, this area is a particular cause of frustration among Koda’s members.

Koda’s Managing Director, Anders Lassen, certainly understands the dissatisfaction amongst those members who receive very small distributions within the online area – or none at all. However, he is keen to dispel one particular myth:

”There’s this myth that no-one makes any money from streaming. That’s simply not true. For example, Koda receives approximately 12 per cent of the funds distributed by Spotify here in Denmark. We pass that money on to our members. As far as streaming is concerned, approximately 30 Danish Koda members received an average sum of DKK 250,000 (EUR 33.557)  in 2017 from streaming alone. And around 500 Danish members received more than DKK 10,000 (EUR 1.342),” Anders Lassen states.

It is true that it takes a lot of air plays on various music and film services before a track yields any substantial earnings for those who created the music. In Koda, a rule of thumb states that one play on a streaming service will yield DKK 0.01 or 0.02.

A reviled distribution 

”You might say that streaming is only a significant source of income for composers and songwriters with an international hit. Most of our members only receive negligible amounts. Around 18,000 members receive an average of DKK 60 (EUR 8) a year,” says Anders Lassen.

That is also why streaming has become a much-reviled phenomenon among many of those music creators who occupy the middle strata of the business in purely financial terms, i.e. those who previously could make a decent living from releasing albums on a regular basis. According to Koda’s Managing Director, the streaming era has turned many things upside down. Summing up the developments, he explains:

”The music business experienced a huge economic boom with the advent of the compact disc in the 1980s, when everyone was busy replacing their vinyl albums with CDs. That’s why the vast decrease in sales was extraordinary when the file sharing service Napster arrived on the scene in 1999. File sharing and home copying was rife, and an entire generation got used to thinking that music is free. But, in the noughties it turned out that many consumers were willing to pay for legal downloads. Apple’s iTunes helped pave the way, and eventually the streaming area gained ground with services such as TDC Play and Spotify. However, the days of the lucrative album release economy were over. We now use and consume music in entirely new ways. In the past, we paid considerable sums for an album – or gave CDs to others as gifts – and might end up listening only to a few tracks. Downloads minimised the risk of wasting money on music you would never listen to anyway. Streaming eliminated the risk altogether: music has become something we rent rather than own. Legal downloads and streaming meant that the music business started making money again. However,just when things were beginning to look brighter, YouTube had a massive breakthrough with a portal where users could watch video clips for free. It became an attractive alternative to streaming services such as Spotify. Sadly, this brought us right back to a state of affairs similar to the time when Napster and piracy had such a major negative impact on the business,” says Anders Lassen.

Loophole in the law must be closed 

For some years, Koda has engaged directly with online tech giants such as YouTube who benefit financially from cultural content, including music. Still, these businesses avoid paying fair remuneration to those who create that content. YouTube and others exploit an old loophole in the EU legislation; a loophole that releases them of all responsibility for the content uploaded by their users.

”It’s a huge problem. It completely distorts the streaming market,” Anders Lassen states and continues: ”When we negotiate with YouTube, they can practically name their own price. If we refuse their offer, they might choose to pay nothing at all, pointing to the so-called ‘Safe Harbour’ exemption. But the Safe Harbour rule is completely obsolete and out of date with our present situation. There can be no doubt that YouTube mediates cultural content just like other media. This also means that they should abide by the same rules as other media. Koda and our fellow collective rights management societies have pushed for changes to the legislation for years now. The year 2018 may provide decisive for us; many signs suggest that the European Union is about to finalise the legislation on copyright. We have enjoyed constructive dialogue with politicians in the Danish and European Parliaments, so I have every faith that this loophole will be closed. Even so, it may take a long time for such changes to enter into force. In the meantime, our members miss out on several millions every year,” explains Anders Lassen.

Price dumping

Koda’s members are not the only ones who suffer here. The same holds true for services such as Spotify and iTunes, who fairly and honourably send most of their turnover onwards to those who created the music.

”When YouTube refuse to pay reasonable fees, they drive down the prices within the entire industry. Spotify hesitate to raise their prices when consumers have access to a free alternative,” says Kaare Struve, Head of Broadcast and Online at Koda. He would like to see the price of subscription to music streaming services doubled. ”The price has remained unchanged for almost ten years. Compare this to a Netflix subscription: the fee has gone up steeply in just a few years, and the consumers aren’t leaving. Quite the contrary: more are signing up. Our own studies also show that Danes are willing to pay for streaming music.”

”Many pay around DKK 1,000 month to watch TV and films if you include their TV subscription, streaming subscriptions and media licence fees. And - you still don’t get access to all TV stations and movies. But a subscription to a music streaming service gives you access to all recorded music for just DKK 99 a month. That price is too low,” says Kaare Struve.

Koda’s job is to ensure that its members receive the largest possible remuneration for their work. Kaare Struve emphasises that Koda fights to bring about the best possible deals with the online giants. According to him, the objective is to rank among the societies with the best deals in Europe: ”We won’t avert from difficult negotiations, skirmishes or long legal battles in court,” says Kaare Struve.

Being realistic

”However, we and our members must be realistic,” adds Anders Lassen: ”In the years to come we may indeed see even more money coming in for those members who already receive considerable streaming-related distributions from Koda. But streaming will never become a significant source of income for those who create niche music. This is partly due to the fact that the amount of music on offer has exploded in recent years: recording and publishing music has become cheaper and easier than ever. As a result, Koda’s membership is growing rapidly, which means that an ever-growing number of people need to share the revenues generated. Let’s imagine a dream scenario: that Spotify’s subscription fees double, and Koda successfully negotiates a bigger slice of the streaming cake. Then the 18,000 members who are currently getting around DKK 60 (EUR 8) a year might get DKK 240 (EUR 32) a year instead. Sadly, these are the realities of the situation. We should also remember that Koda only receives between 12 to 15 per cent of the total sum paid out by streaming services such as Spotify. Most of the revenue – approximately 55 per cent – ends up with the music companies. So it’s a good idea for any artist to be fully aware of the terms of their contract and how much they get from the company they’re with,” advises Anders Lassen.

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