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Merck Mercuriadis responds to NMPA chief and UK government on impact of majors on song royalties

By | Published on Thursday 23 September 2021

Merck Mercuriadis

Hipgnosis founder Merck Mercuriadis penned an open letter on Tuesday – as Universal Music listed on the Dutch stock exchange and the UK songwriting community gathered for the annual Ivor Novello Awards – again insisting that the songwriter is being consistently short-changed in the digital music economy, in no small part because of the dominance of the major music groups in music publishing.

Mercuriadis has been increasingly vocal about the way streaming monies are split between recording rights and song rights in the last year, as the economics of streaming has been very much in the spotlight, especially in the UK as a result of the inquiry instigated by Parliament’s Digital, Culture, Media & Sport Select Committee.

Under the current system, approximately 50-55% of streaming revenues are allocated to recording rights, while 10-15% go to the song rights. Compared to the split on physical discs, the share allocated to songs on streams is about double. However, on things like radio and sync, the split between recordings and songs is normally more like 50/50.

An argument frequently made by the songwriting community – and Mercuriadis – is that songs should be getting a bigger slice of streaming monies, but that the current system is favoured by the majors, meaning it’s hard to push for a re-slicing of the digital pie in the favour of songs.

That’s because the majors are big players in both recordings and songs. However, under industry conventions, record deals tend to result in labels keeping the majority of recordings income, whereas with publishing deals, the majority of the money goes to the writer. Therefore it’s in the interest of Universal Music, Sony Music and Warner Music for more streaming money to flow through their respective record labels, rather than their respective music publishing businesses.

With Mercuriadis being particularly forthright in presenting this argument of late, the boss of the US National Music Publishers Association, David Israelite, recently hit back in defence of his major publisher members: Universal Music Publishing, Sony Music Publishing and Warner Chappell. Those companies, he argued, fight hard in the interests of songwriters, and are not swayed by the interests of their parent companies or their sister record companies.

Writing in Billboard, he stated: “Whether it is in the halls of Congress, in courtrooms across the country, or behind the scenes in board meetings that set the agenda for the industry, I can attest without equivocation that ‘major’ music publishers fight equally as hard to promote songwriters and the value of songs as their independent publisher colleagues. In fact, I have never experienced a single instance when the interests of a record label or parent corporation in any way inhibited that advocacy”.

Israelite then ran through various efforts by the American music publishing industry to boost song revenues over the years, including where that meant battling against the interests of record companies.

Responding to that op-ed in his new open letter, Mercuriadis wrote: “[David] feels I am ‘dead wrong’ in my opinion that the major publishing companies are not advocating adequately for songwriters as a result of being owned and controlled by their recorded music parent companies. David took this to be a criticism of those publishing companies. It is not. It’s a condemnation of a paradigm that limits this industry’s collective ability to advocate for songwriters to be paid more”.

“Many people working in the ‘major’ publishing companies are my friends, and people I am proud to know. I am sure they would like to do more to improve the earnings of songwriters they identify, sign, and develop – and who deliver hits to recorded music divisions within the same companies. Yet I believe the ability for many of these people to do so is limited by the recorded music divisions that control them”.

“I note that none of the major music publishers gave evidence at the recent [Parliamentary] hearings on the ‘economics of streaming’ in the UK”, he went on. “I’m certain the leaders of those companies would have been eager to contribute. Perhaps it wasn’t deemed in the best interest of their parent companies? My question for David is this: if I am ‘dead wrong’, then why does the songwriter remain the lowest paid man or woman in the music industry’s economic equation?”

Later in his letter, Mercuriadis wrote: “Songwriters and publishers have alignment with each other about 70% of the time. Within that 70%, we fight side by side and are a united force in harmony: see the Copyright Royalty Board or Music Modernization Act [in the US] as but two excellent examples. But crucially there is 30% of the time when what’s in the best interest of the publishing company – and the recorded music company that owns and controls it – is not in the best interest of the songwriter. And that’s where my focus is”.

The dominance of the majors in both recordings and songs – and the potential impact that has on how monies are shared between the different music copyrights – was a key reason why the Ivors Academy, and others, used the recent Parliamentary inquiry to call for the UK’s Competition & Markets Authority to investigate the control the major players have over the music rights business.

The select committee recommended such an investigation, and the UK government yesterday urged the CMA to consider a market study focused on music rights and the majors. That happened shortly after the publication of Mercuriadis’s open letter.

Commenting on this latest development, Mercuriadis said: “The government’s decision to refer the major music companies to the CMA is a very positive next step in our collective efforts to rebalance the industry in favour of songwriters and artists. The government’s recognition of the imbalance that exists for the songwriters, artists and producers, without whom there is no music business … gives us many reasons to be cheerful”.

“The CMA and the government must now act rapidly to tackle these issues”, he added, “and Hipgnosis is committed to playing an active role in the important discussions ahead advocating on behalf of songwriters and artists to ensure that the necessary steps are taken to give them a bigger slice of the pie. It’s a timely response with Universal’s very successful IPO yesterday and the positive knock on effect it has had on Warner Music”.

“This demonstrates there is plenty of abundance in our industry to share with the creators that are our lifeblood”, he concluded. “In the wake of that, I also believe those companies will come to the conclusion that it’s in their own best interest to be important catalysts for the changes that are critical not only to songwriters and artists, but to their own future wellbeing”.

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