Thursday, 31 May 2012

Online Radio - Does It Pay?

This post looks at what is broken in the way online radio services gain licenses from rights holders of recordings for their public performance. I want to explore how it could be improved without the need for a major overhaul of the system or even making any changes to the current stakeholders.

Customised Radio is becoming an increasingly popular feature for music services. It brings one-button-push, user-tailored recommendations to online streaming. Depending on the service a user can specify their favourite Artist, Genre, Mood, Album or Track which provides a pre-determined constant stream of music, and sometimes further selectable recommendations past their original choice (my favourite service for that feature is: On services like, Nokia Mix Radio and We7, a few clicks and the user is listening to music, which they'll probably enjoy. As far as I am aware, none of these services inject audio adverts into the 'playlist', unlike many of the 'freemium' interactive/on-demand streaming services from companies like Spotify. Without these audio ads, the result for these radio services is that they are quite pleasant for the listener, hence their popularity. The main reason for the lack of adverts is that the cost to the provider is much lower per play than the interactive/on-demand streaming which is normally offered once a user subscribes to a service. That 'cost to the provider', are the royalties due to record companies. But are they all being paid?

For those unfamiliar with the differentiation, when an online service has music streaming which is non-interactive or billed as 'Radio' (or Customised Radio Service), they can in the UK get one license for the performance of the record from the PPL. This is in place of a direct license from the record companies or distribution companies like INgrooves Fontana. The songwriters and publishers, like with all online music services are paid by the PRS for the performance of the song, note this is different from a mechanical payment which occurs when a copy (download) is made, so in this case that isn't due. Most other key digital markets have equivalent societies, and normally reciprocal deals exist so that money flows between them for exploitation in the various territories, it is also a way of sharing data between the societies. 

The below concentrates on the the PPL license, and the need for greater interaction between record companies and membership societies like the PPL.

The performance of a recording
This post won't go on to suggest the work the PPL do is sub-standard. It is more to highlight a process inefficiency that in today's music industry can be solved using technology correctly.

The PPL is a membership society, and all record companies and performers are welcome to sign up to it and register their recordings, or their performance on recordings.

Any record company or performer who would like to know more, can visit:

The PPL are in a difficult situation. They rely on record companies and performers coming forward and registering their recordings or performances. They can collect revenue from a variety of sources, be it on TV, FM Radio, in a bar or hairdresser's, etc. Historically, for the PPL new members coming forward has been their only real option in linking royalties generated with the owner. They want to make payments to rights owners, as once collected, it is their main function. They can collect these royalties, as well as many others, but they need to know what is represented and by whom. This is the message displayed when you click on the above link:
"If you have performed on recorded music that has received UK radio or television airplay, or has been played in public, we could owe you money."


"If you are a record company, self-releasing artist or any other owner of the rights to recorded music, we could be making you money."

So where is the problem?
When speaking specifically about licensing music services for online Radio, and not necessarily about full membership to the PPL, it initially it exists in two places:
  1. Awareness of this form of exploitation, and its increasing value
  2. Laborious and, for this form of exploitation licensing, an over complicated registration process
The lack of participation created by these problems, leads to a further two issues:
  • Licenses being granted by societies to music services, where the performance right isn't actually represented by them, so consequently;
  • Incomplete royalty reporting after exploitation has taken place for those recordings
To be clear, I am not suggesting a change to the current process of collective licensing for this usage type. Customised radio services serve as a fantastic way to introduce music to the listener, and the last thing that needs to happen is to make obtaining the required license more difficult before a service can launch.

What is the solution?
In short, there should be better integration with the record companies by the collection societies, and responsibility for un-matchable royalties should be shared with the music service. Identifying recording ownership is critical to solving the incomplete royalty distribution that occurs today.

This isn't as hard as it sounds, for two reasons:
  1. These days record companies have their catalogue information digitised and residing in an online database somewhere, like the One Digital platform. These platforms communicate on a regular basis with;
  2. Music services, who receive clean data from companies like INgrooves Fontana. Their 'Radio' service is often an introductory or supplementary service, using the same assets (data, audio and artwork), as an on-demand consumer paid for service, normally on a subscription basis
What collection societies need to do is work harder at finding a way of importing that data from both entities. This will give them a much better chance of knowing who owns the rights to the recordings, even if from a legal point of view they can't distribute the money till a membership mandate or two is signed. The main point here is that they should be proactive in trying to connect with the record companies in the way that record companies want to operate in the digital space. This is not, via an online form which requires them to input data duplicating the work they have already done (see point 1 above).

I know there are exceptions to point 2 above, like US based Pandora, who do not for the most part accept asset deliveries from record companies, and therefore have no relationship with them. This can't be helped, and consequently there will always be an element of 'fuzzy matching' taking place. The PPL and the other societies have a role to play, that is not in dispute.

Any service who has a relationship with the record companies for another reason, should be in a good position to help the societies complete their royalty distribution, or perhaps even take on the responsibility of contacting rights owners on behalf of the PPL. Whether they actually send the money on to the record company or not is another matter, but they could easily produce a statement detailing what was generated, and point them in the direction of the PPL for payment (which would require sign up and official data submission). If this were to happen, a record company or their digital distribution partner, would then be in a position to make an informed business decision about how much resource they dedicate to claiming these royalties, rather than where we are today which is just 'unknown'. Interestingly for current 'direct' members it would act as a form of audit against their society statement, as it is data coming from the source. Technology can provide transparency.

This segway's into another point. Whilst I understand why the PPL only make annual reports and payments from 'offline' exploitation, why should this mean that royalties generated from customised online radio services be treated in the same way. There is no argument for this at all, especially when the services they are collecting from make a monthly or quarterly distribution for their on-demand services to record companies. In fact SoundExchange in the USA makes quarterly reports and payments to members for this form of exploitation.

What happens to the un-matchable royalties?
Not working for either the PPL or a music service with a radio feature, I can't actually state clearly the process. But my understanding is that the money is offered back to the service by the PPL in either a payment or a credit against future royalty distribution. In other words, revenue is un-coupled from the exploitation which created it. The hope is that it's sitting in an escrow account somewhere.

Conclusion: Implementation
Technology is already in place to implement successful owner and Recording identification outside of what is already sitting in the central repertoire database of a society like the PPL. Societies should move away from focusing solely on a self-registration solution that requires all data to be completed for every exploitation type via a web form. As discussed, the PPL can collect not just non-interactive online performance royalties, but traditional radio, TV and other public performance royalties. I concede there are complications with individual performer information. This isn't necessarily going to be centralised in the online databases used by the record companies, but once the record company owner has been identified, research is possible in order to find the correct Performers.

It is a shift in thinking that is required. Data feeds from any repertoire owner should be pulled into each society's database, regardless of missing 'mandatory' information like 'country of recording', and 'performer line-up'. These are not necessary for the distribution of the royalties due to the record company. It would do half the job, but 50% is better than 0%. As a by-product it would likely increase awareness of the missed opportunity in revenue collection, and due to the normal close knit relationship of performers who appear on indie record company albums, that data would soon appear to claim the now quantifiable royalty due i.e. the other half of the record performance royalty which has now been paid to the record company.

Record companies have a tough time. They exist to develop and promote the artists signed to them. Administration of 'metadata' or 'label copy' is a necessary evil, and for indie record companies, this administration is often performed by someone as a secondary role (or more likely, one of many secondary roles). Thanks to the popularity of digital retail services which now provide a significant portion of their revenue, they have either invested in technology in-house, or have found a digital partner who they have outsourced this to. The societies need to play catch up. They can learn from their music service customers like Spotify, We7, Deezer,, etc on how to work with multiple data feeds and provide regular reporting and payments, which today get's easier thanks to developments like DDEX. In most cases the data exists, it just needs to be used.

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