A2IM Lobbies Congress, Argues Majors' Digital Compensation Rates 'Out Of Proportion'

Coming in the wake of last week’s protest by European indie record labels over YouTube’s insistence on signing away their music rights for their reported new streaming service, U.S. independents are lashing out against the majors in the ongoing battle over digital dollars, according to a report by the N.Y. Post’s Claire Atkinson.

The American Association of Independent Music (A2IM) – a group whose artists include Adele, Taylor Swift and Mumford & Sons – have argued that the two largest record groups – Universal and Sony – have formed a virtual “duopoly” by grabbing a disproportionate share of streaming music royalties because of their distribution clout.

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This was one of the outcomes cited by regulatory agenciesas a deterrent before finally approving UMG’s acquisition of EMI in 2012, and a major reason why Lucian Grainge pursued the deal.

A2IM, which represents approximately 325 indie labels in the U.S., has been lobbying Congress to re-examine music licensing in a filing submitted to the federal Copyright office last week.

A2IM accuses the major record groups of using their distribution muscle to extract a majority of the royalties from services such as Spotify and Pandora, leaving the indie labels to settle for whatever is left.

The group, headed by Rich Bengloff, claims indie labels represent 34.6% of U.S. marketshare, making them bigger than any of the majors, though leader Universal pockets the biggest paychecks because it claims 38.9% of the market, a figure the group argues is “fallacious” in the filing as it includes the shares of distributed indie labels which are responsible for the likes of Adele (XL), Mumford & Sons (Glassnote) and Taylor Swift (Big Machine).

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Digital downloads and streaming now accounts for 60% of the U.S. music market – making it even more crucial that all copyright owners are treated fairly, the group said in the filing.

Royalty rates are set by the federal Copyright Royalty Board.

Non-interactive radio services like Pandora operate under a deal that compels music copyright holders to grant them licenses so long as they pay the CRB rates.

A2IM argues that big music companies avoid these blanket, compulsory licenses by saying that Spotify and other services, which the ability to choose a song from a vast library, fall into the “interactive” category, which allow them to negotiate directly with the music labels for guaranteed payments and advances, which diminishes the role of the per-streaming rate split with artists.

“For independent music labels to accept discounted rates from digital services, after the ‘so-called’ major record labels have done direct licenses with compensation rates out of proportion with their real market share percentages, is wrong,” according to the filing.

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At the same time, antitrust laws limit the ability of indie labels to collectively negotiate direct licenses with streaming services, undercutting their competitiveness, A2IM says in the filing.

“When rights owners license to fixed-pie digital services — those where there’s an income pie to share, rather than wholesale price — Universal demands more than their share, and that ends up coming out of the indie’s share,” Martin Mills, chief of the UK’s Beggars Group, which discovered Adele, told the N.Y. Post.

On the other hand, indie labels associated with majors benefit from that alliance, enabling them to use that collective clout in their own negotiations. 

  • This article originally appeared in THR.com.