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Artists' managers, royalty collectors turn on iTunes

Download payments too low, they claim

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Having lauded the arrival of legal music download services likes Apple's iTunes for saving it from online piracy, the music industry is now complaining that the digital domain is not sufficiently recompensing artists.

According to a report in today's Times newspaper, the Music Managers Forum (MMF), a trade body of artists' representatives, are bemoaning the 4.5p performers make out of every 79p iTunes download. That figure, which translates into a rate of six per cent is half the rate they get from physical singles.

“Sale prices and royalties have gradually been eroded to the point where an artist needs to sell in excess of 1.5m units before they can show a profit, after paying for recording time and tour support," Jazz Summers, MMF chairman and manager of Snow Patrol, told the paper.

Separately, the Mechanical Copyright Protection Society (MCPS) and the Performing Rights Society (PRS) both want to up the writer's royalty to 12 per cent from today's 8.5 per cent rate, though they have said they are willing to knock it down to eight per cent cent for the next two years for new services.

Summers' comment echoes a point made recently by Tim Clark, co-founder of ie:music, the company that represents Robbie Williams and others. Clark told a meeting convened by industry networking organisation MusicTank that iTunes was giving most artists just 3-4p per download.

For all his complaints about iTunes and Steve Jobs, Clark's problem really lies with the labels. iTunes, Napster, Virgin Digital, Wippit and co. are all retailers - performance royalties are negotiated by the labels and artists' managers, not by the retailers.

That's something Summers appears to appreciate: he said recording companies had been "caught with their pants down" by the legal download services. Fearing the illegal download arena, they quickly accepted the pricing dictated to them by Apple and co.

Now they're beginning to feel short-changed - witness last month's comment from Warner Music CEO Edgar Bronfman that Apple's uniform pricing policy is unfair, and should be replaced with a differential pricing plan, typically with new material costing more than older, back-catalogue songs.

Of course, that's still not going to benefit the artists, many of whom are awaiting the end of their current recording contracts with labels so they can negotiate better download royalties. In some cases, it can be argued that if managers were more astute, many artists would already have better royalty arrangements than they do today.

Market size

It's also worth mentioning at this point that while Apple is singled out for most of the blame - after all, it owns more than 80 per cent of the UK, if not global, digital music download market - the segment in which it's a player only accounts for a few percentage points of the overall music market. Factor in all the products sold that have a music connection - including hi-fi kit, media and, yes, iPods - its an even smaller percentage.

Again, that puts the emphasis on getting ready for the time when it's a much more important part of the business. Clark said he believes that stage is going to come much sooner than most people believe. Indeed, he let slip that Robbie Williams' £80m four-album recording contract with EMI, signed in 2002, is timed to come to end just as the download market really starts to take off.

How good Clark's timing is will determine how successfully Williams can leverage the digital music market. It's up to other artists' managers to similarly plan ahead. Given how easy it is for indies to partner directly with iTunes and so on, that could lead to significant trouble for the labels, certainly if the established acts, who largely bankroll everything else the labels do, choose to cut their own download deals.

Worse, newer acts may choose the direct route too. Paying for recording is the same whether the result is a download or a physical single, said Alun Taylor, MD of indie label Roots Music Group, but a download is a lot cheaper to offer and far less risky than putting out a potentially unsuccessful physical single. ®

The smart choice: opportunity from uncertainty

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