Music rights in the age of prospecting

Prospectors, as they were known, could stake a mining claim simply by occupying a promising piece of land (their ‘prospect’) and by actively trying to extract gold from it. In a fiercely competitive environment, some found success while many were ultimately forced to sell their claims to bigger mining companies, which had the necessary equipment and expertise to extract value from the pockets and seams in the rock.

Note the curious position of the prospector here: In the form of their mining claim, they have something of value – often, in the true spaghetti western motif, worth killing and/or dying for. Yet, this value is only hypothetical until it is realised. It still requires an enormous – and often disqualifying – investment of time, energy and capital to deliver on its promise.

This curious economic position “You have nothing until you have it all” strikes me as a powerful analogy for artists in the current music industry setup.

What does this mean for music creators? In the days of physical distribution, by having a recording, musicians already had the precious ore they needed. It was mined and ready to take to market. Now, in an age where music is expected to be free and available across all platforms, recordings are no longer the precious commodity that you sell. Rather, the intangible qualities that music possesses – the rights it attracts as a work of art – are increasingly functioning like Gold Rush-era prospecting claims, and their value as speculative assets is growing within the industry day by day.

How should this fundamental change impact the way artists think about their music? Should it shift the ways they look to earn money from their work, and even how to structure their careers?

The rest of this article looks at some major recent industry trends regarding the management of music rights. (Note: if you need a refresher on the different types of music rights and how they work, read this article from our Revenue Streams for African Musicians series.)

Publishing rights

This talk about prospecting might have put you in mind of speculation and financial markets, and this is unfortunately accurate. One of the most notable recent trends in the global music industry is private equity firms, such as Hipgnosis Songs Fund and Primary Wave, buying up the publishing rights of musicians’ back catalogues.

Artists such as Bob Dylan, Bruce Springsteen, Stevie Nicks and Shakira have all received top dollar for the publishing rights to their back catalogues – and lesser-known artists are also finding opportunities to cash in, as a clutch of “about 12-15 private equity firms” rush to purchase prospective income that will be derived from composition rights (through broadcasting and streaming revenues, synchronisation deals, etc.).

But why is this happening now? Publishing rights have been there, available to purchase, for many years. So why the sudden clamour to buy them over the past year or so?

We must remember that the era of streaming is also, of course, the era of data. And just like prospective mines can be mapped and scanned, and their expected value projected over time, the same calculations can be made about future streaming performance.

The message to music creators is clear: in an age where it is harder to make money once the music has been recorded, the option to cash in on your publishing rights becomes ever more attractive.

For songwriters, this means ensuring that your compositions are dressed and ready for the marketplace. Ensure that every song in your catalogue is correctly registered with the appropriate copyright authorities and consider finding a rights agent to take advantage of this window of opportunity.

Sound recording rights

It is true that streaming is by far the most dominant sector in the recorded music industry, with a 67% market share, according to the latest data from the International Federation of the Phonographic Industry. However, it also seems that the entire streaming model – which has always been hard on artists – is increasingly not working for its other major players.

Although Spotify recently announced it had 205 million paid subscribers, it also recorded losses in excess of $500m. And record companies are also starting to cry foul. Universal Music Group CEO Sir Lucien Grainge has weighed in on the debate, saying: “What’s become clear to us and to so many artists and songwriters – developing and established ones alike – is that the economic model for streaming needs to evolve.”

It’s galling to hear people like Sir Lucien complaining about the situation. But his words also betray a vulnerability on the part of record labels, and they hint at the possibility that we may be approaching an important juncture in the music business.

One important trend for artists to take note of is directly related to the record companies’ diminishing role in the distribution of music. Increasingly, songwriters are exploiting the fact that, if the value of music is no longer tied to a physical object (such as a CD), there are other ways to increase the value of their prospect. For example, releasing off-label recordings to their loyal fan bases – or even re-recording new versions of old favourites.

The most high-profile example of this trend is Taylor Swift, who has been rerecording songs from her back catalogue since 2020 and actively asking her fans to stream ‘her versions’ instead of the original recordings.

Remember that Spotify currently pays out about 66% of every dollar to rightsholders. Of this royalty payment, 80% goes to the holders of the sound recording rights, with the other 20% going to the publishing rightsholders. When the sound recording royalty is finally paid out, it is not uncommon to see a 20% split for the artist (and 80% for the label) – which finally works out to about 16% of the total audio-stream value going to the artist and 64% going to the label.

When we’re talking about millions of streams, small differences in these percentages can add up to large payday differences. As Charlie Harding and Nilay Patel laconically put it on Vox’s Switched on Pop podcast: “Make sure you’re earning the full fraction of the penny, not just a 10th of the fraction of the penny.”

The music industry has been hit by seismic changes over the past 20 years. While many of these are purely technological in nature, others cut far deeper – reordering the basic economic relationships within the music industry. How should musicians react to these changes? One important consideration to factor into a career plan is how best to capitalise on your music rights in the ‘age of prospecting’.