Steve and Stu answer your questions! Does the money from a stream get split evenly? Do bands get paid if a festival is cancelled? How do music-making AIs work? What is Spotify's Discovery Mode?

0:07Steve:Hello and welcome to the Price of Music brought to you by Music Ally, the show that's fascinated by the fun and games and finances of the music world as explained each week by me Steve Lemack and him Stuart Dredge and we're going to answer some of your questions this week. Thank you very much to everyone who's been in touch. We'll turn our hands to that in just a second but first as we promised last week can we return to the announcements which came from the department for culture media and sports about well referencing some new streaming reforms and in fact when when the announcement finally came it was while we were on air last week and we'd speculated about what might be included in this new report and in fact a lot of the points that your contacts had predicted did appear, didn't they, Stuart?

0:59Steve:But run us through what was exactly unveiled and what has the reaction been from the interested parties. By the way, for everyone looking forward to Stuart's big number, this story will include Stuart Dredge's big number for this week. So what did they announce and how have people reacted?

1:21Stuart:Okay, yeah, I was going to run a lap of honour for not getting anything drastically wrong. I've been celebrating for days. Yeah, so basically it's a package of measures that the labels say are going to help put more money in their pockets of musicians, including artists and songwriters. It includes some stuff that's been announced before and some stuff that's new. So one of the things that's happened is it's about legacy artists. So we're thinking here of artists who got signed to deals before 2000. That's kind of a lot of the focus here. So people who want deals before the streaming era that maybe don't cover streaming or have terrible terms.

1:55Stuart:um so one thing that's happened is the major levels are going to disregard unrecouped advances so if you were paid in advance back in the day and you haven't earned it back they're not going to wipe it they're not going to get rid of it they're just going to ignore it when it comes to streaming royalties so you will get paid right so what's happened there is some people who haven't recouped haven't received any streaming royalties it's being sucked up by the debt and that's going to change now this was happening already all three major labels announced plans to do this a couple of years ago so this is kind of an existing thing but it's they're committing to it um and we should say that there are some labels beggars group is a good example who actually wipe balances they've been doing that for a long time if you were signed to beggars before 2000 and you're unrecruped you get your balance wiped so labels can still do more than this but it's like a minimum commitment right um if an artist feels your deal is unfair like if you signed your deal a long time ago and you're like hang on a minute i'm getting absolutely nothing

2:47Steve:for streamer world is even if they do pay me you can ask for a renegotiation you can go back and

2:51Stuart:say, I'd like to renegotiate, this is unfair. And what's happened is labels are promised to respond within 60 days to your request. So no guarantee they will renegotiate or give you a better rate, but they will respond, they won't ignore it. So that's a commitment. And they're also going to give these legacy artists help to grow their streaming audience. So they're going to help with marketing, help with the management catalogue. So if you're an artist of a certain vintage, I think it's all pre-2000 signed then your label will help you to in theory grow your streams grow your listeners which then will grow your money right so those are the three artist things they're also going to pay some we talked about this they're going to pay songwriters 75 quid per dm plus expenses if they come to like a writing session so often if a label a major label's got an artist they'll bring in songwriters to do some writing for them and it turns out often you don't get paid for that time you get paid royalties for the songs you write but you don't get paid for the time and that's changing um and they've promised that money won't be taken out of the artists so if you're an artist who's having songwriters brought into work with you you're not suddenly paying them a per diem out of your share of the world right okay yeah so that's good and then finally session fees are increasing for pop and classical musicians um but this was happening i think it was agreed last year and it's kind of just restating something that's already happening right so those are the five things and all of them will put more money into the pockets and here's the big number according to the labels it could mean tens of millions of pounds in new investment support creators by 2030 and this is where the arguments start okay all right so there doesn't

4:25Steve:seem to be a lot for contemporary artists in in this as you say there's a lot for possibly for legacy artists what has the reaction been then when you say this is where the arguments start who's already come out fighting.

4:42Stuart:Yeah, so what happened was this was announced and all the Labour bodies, BPI and AIM and the Council of Music Makers, which is kind of the musicians, they all came out and they all said, we welcome this. There was an announcement from the government with the government quotes and these quotes saying it's good. But the Council of Music Makers, so this is the body, they include the Musicians Union, the MMF, the Managers Body, they include Featured Artist Coalition, producers like the people representing musicians and producers they have since come out and said yeah actually we're not happy with this this is the bare minimum um and the reason for that is so if you remember four years ago we had this big streaming inquiry in the uk which uh had a parliamentary inquiry people gave evidence then there was a report and this report recommended and the quote was a complete reset of the streaming economy the way musicians get paid and it gave these recommendations that were included um equitable remuneration where streaming royalties get divided more evenly between artists and labels before they get split up.

5:41Stuart:It recommended a right to recapture your work. I think it was 20 years after you wrote a song or released a track, you could then get those rights back, which is something that exists in the US in law, but not here. And it recommended that songs get a bigger share of the streaming pie compared to recordings. And those are all big changes, and they're not in this week's announcements. But essentially, the creative body is saying, hang on a minute, this inquiry recommend this stuff that we liked and none of it's been done um there's a quote from the featured artist coalition which says it falls significantly short of the ambition shown by parliament and is couched in vague non-binding language it does not deliver the structural change required to fix the broken economics of music streaming so essentially the the creative body is saying this is not enough it's just tweaks around the edges it's not going to change things and now they're fighting we should say there's another view, which is the label side, the BPI, the labels, they were quite unhappy with the recommendations of that report.

6:36Stuart:They've been talking a lot about how this would do more damage than good. It could harm the industry's ability to invest in artists, and then that could hurt

6:42Steve:artists.

6:43Stuart:So there are two points of view here. So I think from a label's point of view, this week is a very good compromise of stuff that will make a difference to some musicians. But the creative is saying it's not what we wanted, it's not enough, and we're going to carry on fighting. And what they've said is they're going to fight for the stuff that wasn't included this week to be made part of law next year. Perhaps when the government is doing AI laws, they're going to fight for it to be included in that so that these changes do happen.

7:06Steve:I mean, it does very much feel, I mean, we both sort of said this last week that it felt like this was going to be very much a sort of interim announcement as government attempted to bring the different parties together over the issues which you've just described, actually, like the way artists are played in the streaming era. But this feels, I don't know, it's it's it's base camp one this isn't it they've gone they've gone up the hill just a little way to base camp one but from here on in the hill gets steeper and steeper and that's the arguments

7:40Stuart:that are to come and that's it and like you know the one thing i'd say is people love to be rude about the government don't they and love to shout at ministers but everyone the one thing everyone here agrees on is they they all praise the minister uh chris chris bryant mp who kind of banged everyone's head together to get this done and they all said we appreciate his efforts we appreciate he's tried to get something committed to so they all agree on that and yeah i think um i think it is this is this is what people could agree on and it it's it's more compared to what has been suggested in the past and yeah it's going to be it's going to be a big fight i think because and this this is the other point i wanted to raise there's a lot going on isn't there at the moment there's obviously people talking about what's happening in live and the government's doing stuff with air.

8:23Stuart:But the government is also starting to figure out what its policies on AI and regulation are, how should air regulate. And specifically, that includes if you train your AI on copyrighted music and other stuff, should you pay license, so on. And the music industry is very, very keen to all be united on that and saying what they want and saying, we want you to do this and that and to make sure that we get paid. So the kind of the tensions kicking over from this streaming reform, I wonder if they could start to hamper that. If everyone's kind of cross about streaming royalties still, will it harm them coming to agreement on what they want from AI?

9:01Stuart:Will we see the creative bodies kicking off about AI and say, well, actually, hang on a minute, if you want to license music to an AI company, you've got to ask the artist's permission. They've got to have a veto. That's something they've been called for. So that argument could become more, what's the word? when you sort of draw up your battle lines. So that's the worry here, I suppose, is that some of the stuff the whole music industry does want, they're going to have to be dealing with all these tensions to make sure that happens.

9:31Steve:We shall see. Right. Shall we skip forward to – we'll go straight to any other business, I think, because we have a pile of questions. What shall we start with? Let's go with this. This is from Mark of the band Rocketsmith, who says, just found your podcast. I love it. Thank you very much, Mark. Thank you for putting this stuff out there. It says, you mentioned in a previous episode, the YouTube AI creation feature. How are they navigating training the AI? I assume it's being loaded with examples of music, in which case anyone whose music is in the LLM should benefit from revenue generated, surely.

10:15Steve:An AI without knowledge, as Mark, is just a Commodore 64. Very good. Have you got some thoughts on this, Stuart? Actually, including just for me, can you explain what LLM is? I thought you were going to say, what is a Commodore 64?

10:30Stuart:Because I've got a good 10 minutes on that. It's a computer I grew up with. So an LLM is a large language model. so it's essentially an ai model so chat gpt or the thing behind that any ai model we talk about there is a large language model large language model means text so it's the chat bots right but increasingly these things can also create images can create videos can create music so yeah essentially llm it is a technical term that's a meaning but it's it's an ai model right okay so

10:59Steve:so who who stands about who's going to get paid um how does it all work okay so um it's a

11:06Stuart:complicated question i'll try and explain so um google has various ai models within google so it has gemini which is kind of its chatbot helper thing it's got vo which is a video generating model and it's got a thing called lyria which is its ai music generator so there's a bunch of different ai models within the google youtube family um and it hasn't come out and said exactly this is what we train these things on so we've only got some reports to go on so there was a report last month talking about how google does use its catalog of youtube videos to train its AI. So it trains its AI on videos on YouTube.

11:39Stuart:But it said at the time it only uses some of them. And it said there's a quote, it honors specific agreements with creators and media companies. So we don't know if it's using all the music on YouTube or not. It hasn't said, but it does say it respects rights holders. And this comes back to a couple of years ago, YouTube actually signed a deal with Universal Music Group to develop some of its AI music stuff, which involved kind of giving a group of its artists early access to tools to give feedback. And it had this quote from like UMG boss, Sir Lucian Grange, who said, it was a deal where artists and songwriters have the ability to maintain their creative integrity, their power to choose and to be compensated fairly.

12:16Stuart:So with that in mind, if YouTube was training its AIs on all the music without permission, Universal is very, very hawkish on that. You wouldn't expect to stand for it. So that's a pointed towards YouTube doing things in a way the music industry likes. Equally, in January last year, Billboard, the trade publication, had this report, and it said that Google had trained its music model on a large set of music, including copyrighted major label recordings, and then went to show it to rights holders. So that report suggested that YouTube had built a musical AI, it trained it on music without licensing, but rather than just release that model and let people use it, it had then gone to the label and said, look what we've built, this is what it is, now how can we work together so it's kind of a halfway house there of it's not it's not it didn't sign license to that front necessarily but it has been going to labels and saying we want to work with you so i would say on the grounds of things youtube seems to be trying to walk that line well of we're going to respect rights holders and of course not have them sue us um but with so many as ais it's very rare for me i say here is exactly what we trained it on so we don't know exactly um But if we take the universal announcement for granted, the principle here is that artists whose music is used to train should benefit.

13:34Stuart:How much, how, when, those details aren't public.

13:38Steve:A question from Bob Bright, who says, welcome back. I've missed you. We've missed you too, Bob. Just a minute. We had all this stuff in our heads and no one to share it with. So it's nice to be back. Bob says, there have been a few local festivals cancelled this year. Am I right in thinking the bands slash artists are paid up front and conversely, if they pull out, they have to repay the fees? And I'll be brutally honest with you here, Bob, and I'm slightly embarrassed to admit this, but I thought that can't be right, can it? Because that just sounds too complicated. But Bob, I can tell you now, yes, you are actually sort of right.

14:18Steve:because I put this question to our secret live agent who then completely baffled me because I didn't know what an escrow account is or even if that's the way you pronounce it. And I don't know whether that's just an average 70s comprehensive school education or just because I'm not very, you know, fiscally, worldly wise. But an escrow, I'll give you the definition and then I'll get to answering your point, Bob. But an escrow account is a temporary legal arrangement where a trusted third party, often a bank or an escrow agent, holds funds or assets on behalf of two parties involved in a transaction.

14:58Steve:This account ensures that the payment is only released when all terms of the agreement are fulfilled, thereby reducing the risk of non-payment or fraud. So bearing that in mind, this is how our friendly agent responded to your question by saying actually the answer is yes the money the fee the payment is held in escrow until the event has happened if the festival doesn't happen then contractually the agreement is often settled on a 50 cancellation fee so the artist will get 50 of the fee despite the fact that the gig was pulled however our agent continues what's what's been happening a bit recently what often happens in the current climate is that the festival is in financial difficulties so you don't receive a deposit in a timely fashion and then the festival folds and the band ends up with all the costs like accommodation buses and crew wages that still have to be paid even if a gig doesn't happen and as a bonus and he says and they're not very happy with the agent either so there you go so in theory you're sort of right bob so the money is held ready for payment but it's not actually in the artist's account uh there may well be a clause in the contract saying that if the show doesn't go ahead then the artist is still entitled to 50 % of their fee.

16:29Steve:But obviously, as our friendly agent says, due to the problems facing festivals at the moment, which are various and many, this is a problematic time when it comes to festivals folding. I mean, this is something which we're hoping, we're actually hoping to get a guest to talk about this hopefully sometime in the next month. But yes, festivals folding sometimes leads to artists being left out of pocket, especially it's mainly, I think it's the upfront costs really. And I say this with some authority because I was booked for a festival a few years back in Hampshire and I don't get any approaches from festivals.

17:16Steve:I don't know why. I mean, no sarky comments here, please. I don't get any, no one ever comes to us saying, do you want to play a festival? So anyway, I thought, yeah, well, and it looked like a good festival. So I said, yes. The only downside was that it was the day after, the festival was the day after I was doing a two-night stand of my one-man show at the Edinburgh Festival. But I thought, that's fine, it'll be really exciting, it'll be like being on a proper tour. um so anyway i said yes booked flights for myself and my tour manager uh which i mean tour manager it's just my best mate tom who points me in the right direction you know make sure i make sure i don't oversleep um but anyway we're all set uh early flight out of edinburgh to southampton all all ready to go festival cancelled and so i looked into booking some new flights direct back to London but in the end that didn't really make any financial sense so in the end we did the two nights in Edinburgh then got up early flew to Southampton anyway spent an hour in the bar at Southampton and then got a train back to London but so so yes if you have booked the cheapest non-refundable hotels and flights you might lose you might lose a bit of money the artist might lose some money i mean at the same time you know we have to say i mean our heart goes out to all the people who who are attempting still to put on festivals but to say for a variety of reasons they're having to pull the plug and you know they'll undoubtedly uh be um disappointed and out of pocket as well um but this is why i guess this is why you see i guess sometimes you'll see

18:57Stuart:an artist when if something's been cancelled they'll be they'll be arranging a new gig of their own won't they a local venue and that's not just because they're kicking their heels for a night and wants them to do it's probably because they're thinking right we've got the crew we're here yeah probably need to earn some money back to kind of to cover the last week maybe the rest of

19:11Steve:us yeah uh anyway bob hope that answers your question or confirms the fact that you already knew uh this is good right because this is this is our best pseudonym of the week we don't often get uh questions set by people using pseudonyms i'm presuming this is a pseudonym roy alties from crew well done uh roy says uh i know that when you stream a song both the person or people who wrote the song get paid as well as the person or label who owns the audio recording of it so when a song gets streamed on a platform like spotify is the royalty payment split 50 50 is it 50 50 between the songwriting and recording stewart over to you here we go uh in a word no

20:00Stuart:and this is one of the arguments we talked about earlier on. But yeah, actually I've got some recent stats that I can use to show this. So I've got some US stats and UK stats and they kind of agree. So there's an organization called DEMA, which is like the trade body for the streaming services. So Spotify, Apple Music, their members. It published a report and it broke down where every$100 made from a streaming service goes. So every$100 that a streaming service makes on average, it keeps about$26.30 a bit. and so 73 dollars 70 cents goes to rights holders and of that around just under 80 percent goes to recording and just over 20 percent goes to the song so songwriters um in the uk when we had our streaming inquiry there's a report that actually broke down that too and they said yeah but about the same about 78 percent of the royalty payouts go to recordings about 22 percent go to songs so for a million streams they reckon it's around four thousand pounds to the recording rights holders and about 1 ,150 to the publishing rights holders.

21:03Stuart:Okay. But there was a twist to this. So that sounds terrible for songwriters. And this is one of the things that people are, but songwriters get a much bigger share of the royalties that go to their side than artists do of the recording royalties.

21:17Steve:Oh, okay.

21:18Stuart:Right. So according to the UK inquiry, songwriters get about 75%, so three quarters of the money that pay out. so they get around 865 quid per million streams if they were the you know so whoever the writers are whereas artists if they're on like a 20 deal might get 800 quid the recordings royalties so there's kind of a nuance here and that there's a lot a lot bigger share goes to recordings but songwriters get a lot bigger share of their royalties and that the the amount that gets left with the musicians at the end isn't so different and that's the thing in the u.s and

21:51Steve:And that's because of the way the deals are structured, the difference between a record deal and a publishing deal. The publishing deal is weighted more favourably towards the actual artist, the writer.

22:03Stuart:Yeah. So in the US, out of that$100 spent on a streaming service, on average, around about$9.23 ends up with the artists and around$8.24 ends up with the songwriters. And of course, all of this is subject to individually what deal you're on, how many of you are there if you're if you're the sole songwriter of an Ed Sheeran hit you're doing well you're doing a lot of money if you're one of 17 songwriters on something else you know so it all it on an individual level there's no set figure but yeah about 80 20 recordings to songs

22:35Steve:there you go uh thank you very much uh for that one and we fit one more in I think um shall we do Alan's question thank you Alan uh Alan said this this is a good discussion I think which I think you'll prompt here, Alan, says, have either of you read Liz Pelly's book, Mood Machine, The Rise of Spotify and The Cost of the Perfect Playlist? She's clearly not a Spotify fan, and I think it's a quite one-sided book. That said, there's some interesting insights on how Spotify creates playlists and also encourages labels to take a lower royalty in return for promotion. I think it's significant that apparently none of the major labels have taken advantage of this it's just the independents do you think this is payola that's quite load I've you see I've not read the book I've seen it talked about but haven't had a chance to actually read it myself so I don't know what claims it makes or or whether we'd get in trouble for repeating them have you have you have you come across it have you read any of it do you know what it alleges Stuart

23:43Stuart:Yeah, yeah. I followed her work for a while, actually. She probably is the journalist who has been the most critical of Spotify for the longest time.

23:51Steve:Right, okay.