Jon Webster is CEO of the Music Manager’s Forum, which represents artists and
managers in the recording industry.

We recently spoke to Tim Westergren of Pandora, which was forced to close its UK service due to what he saw as excessive new royalty rates, demanded by the recording industry.

This, in addition to  the proposed royalty rises in the US, has threatened several online broadcasters – Jon gives us the view from the artists and managers’ perspective.

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Tell us about MMF. What does it do and who does it represent?

The Music Managers Forum represents artists and their managers. We have nearly 400 members from the largest with multi million pound deals with the major record or publishing companies to self-managed artists who are just starting out.

Formed in 1992, our aim is to educate and train our members, to represent their collective views and to fight for an equitable share of remuneration for artists. We are part of the International Music Managers Forum – the worldwide body.

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What’s your stance on digital music distribution? What are the key issues, as you see it?

It’s very hard to compete with free. Suing individual consumers is pointless. We are all searching for a model that remunerates creators fairly for their endeavours.

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Do you feel that digital music providers are helping or hindering the music industry, and why?

Digital music providers are one of the conduits by which the product of our industry (the music industry) reaches the consumer. Like all new entrants to the market they need to purchase the products that they want to sell on to the consumer.

You cannot therefore expect licensing bodies such as PPL (for the record music/performers side) and MCPS/PRS Alliance (for the songwriters and publishers) to just let any business walking in off the street to use 9 million+ tracks for free and to pay later based on what income they generate and at a rate that they determine. It is not the job of the music industry to effectively fund new businesses.

It would be like someone saying that they want to set up as a carpenter and then they walk into the only timber merchant in town and say “give me all the timber you have and I will see what my customers want to have built and what they will pay and then I will pay you what I think it’s worth”.

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How are you measuring the effects of these services on your industry?

Well obviously we see the effects in our income streams and how they are changing. Record royalties are falling, live performance income for the successful is increasing. At the same time our artists see their music being used to promote, and included in, digital services often without their permission and without remuneration.

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Presumably not all of these online music services are ripping off musicians? Which ones are fair, and which ones are unfair?

Pretty obviously the fair ones are where music is paid for in some way and the unfair ones where it is not. We are in a state of flux with the internet and in many ways it’s like the Wild West. Services set up using the whole gamut of recorded music.

Some approach relevant licensing bodies and some do not. Many did this before the licences even existed and the services are often so new and are constructed in such ways that they do not fit into standard industry models that have systems based on pre-internet modes of doing business.

Please remember that for every artist who is happy for their music to be shared free and exposed on music networking sites there is another absolutely furious that their music has been appropriated without permission or payment and used to build a business that is then sold for millions of dollars.

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I have bought many new CDs and downloaded music as a direct result of discovering artists on services like Last.fm. Isn’t that a good thing? Aren’t these services reducing marketing costs for the music business?

Many of the new services have dual effects in much the same way as radio did in analogue days. Yes there is obviously some sort of promotional effect in people hearing new music but the same process produces millions of pounds worth of business for the radio station owner.

This argument has of course existed in the radio world for ever. One of the smartest responses I ever heard to the argument was from a record company boss and it was “When you play the track I want played at the time I want it played then it’s promotional”. It never happens.

Also if you can hear all the music you wanted on the net whenever you wanted to hear it (the celestial juke box) why would you ever buy anything? Conventional radio pays for its music in all civilised countries in the world. The exceptions are ,I believe, Iran, North Korea, Rwanda and strangely enough the United States of America.  Why should digital be different?

And that’s why these services are not reducing marketing costs – because the digital provider is dictating what’s played not the record company or artist.

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Can it be argued that the internet is bad for major artists but good for minor artists? If so, isn’t the industry making more money from the ‘long tail’ (shifting more units from minor artists)?

Well there is one study that has shown that the long tail sales pattern is a myth. A mobile operator told me last year that 99% of sales were from 0.7% of tracks they had available. I don’t think the internet differentiates between major and minor or artists. It may well differentiate between well marketed and not.

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How are the royalty rates divided up between record companies, publishers and composers? Do you feel that artists get a fair share?

I feel a book coming on! After the recent Copyright Tribunal decision the publishers receive a percentage of income from a download or stream. How income is defined is complex but there are also minimum rates to protect them from companies giving music away i.e. they receive a minimum per track rate even if a download is given away.

Record companies tend to receive a rate per track per stream model for streaming and a wholesale price for a download. Artists writers are paid according to their contracts with record companies and publishers respectively.

It is the contention of the MMF that too many unjustified deductions are made by record companies before artist royalties are paid.

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 Is there any room for compromise on the royalty rates paid by online music services like Pandora? Or is Pandora’s situation simply the result of a business model that isn’t viable?

I think there is always room for compromise but things like the Copyright Tribunal decision make it difficult for publishers. As above – should the music business fit into someone’s new model or vice versa? There is always a spectrum of opinions and they are changing faster now than ever.

There are parallels with controversial subjects like covermounts. Some saw these as a way of making large amounts of money in the short term. Others as another nail in the coffin of the music business for promoting the idea that music is free.

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Do you think that the MCPS/PRS and PPL will change their mind about rates in the future?

I can’t answer for them apart from to say that rates always change and never more so than in a fast moving environment.

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Content providers such as CBS have struck deals with YouTube, allowing the site to show its content in return for a share of ad revenue – wouldn’t a similar deal with stations like Pandora be a better idea?

If you mean Sony/BMG then I think that all the majors have done deals for the record company side. Where are the indies in this though? And all the one off performers from around the world? That’s why they have set up Merlin -  to fight for their share.

In the UK the MCPS-PRS Alliance have licensed You Tube which is to be welcomed but what about the rest of the world?

As I understand it Pandora and the licensing bodies have agreed a deal. It’s just about what cost.

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Tim Westergren of Pandora has said that forcing services like his to close will lead to increased music piracy online – do you agree with this?

No. I think that people who want to pay nothing for music will continue to use illegal P2P with all that entails. Have you seen the Radiohead In Rainbows figures? No.1 downloaded album on i-Tunes in the USA in the week of release. And that for an album that was available legally free for 3 months beforehand. We live in interesting times.

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