See RIAA Chairman & CEO Mitch Glazier’s Medium commentary on the report here.

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Jonathan Lamy

Executive Vice President, Communications and Marketing, RIAA

Certification summary updated 6/13/2018

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We are excited to officially launch a new microsite, musicfuels.com.  We all know that music dominates social media, right?  But when you start to break it down and look at the most followed accounts on Twitter, Facebook and Instagram on a daily basis – with their tens of millions of followers – the dominance of music and musicians is truly startling.

Our new site is updated daily.  The technological tool behind musicfuels.com checks the top accounts of those three social media platforms and updates the follower numbers.  It’s designed to be a living, breathing dynamic resource for everyone who cares about music.  And each day, you’ll find that the overwhelming majority of most followed accounts are those of artists.

It’s probably obvious why we chose the term #musicfuels.  Music – and the record labels that help musicians find and grow their audience — is the fuel for so much of online conversation and pop culture.  We’ve often said how musicians drive social media (see here, here, and here for examples). That fact is especially true during music awards shows. For example, this year’s Grammys in February saw more than 13 million tweets about the broadcast during monitoring hours, according to Nielsen. And August’s MTV VMA Awards logged more than 21 million tweets. In fact, according to Nielsen Social, the VMAs was the most tweeted-about non-sporting event in the nearly four years it’s been keeping track of social media.

Music also plays a defining role in our culture. Just look at some of the most popular or buzzed about TV shows – HBO’s upcoming ‘Vinyl’ set to premiere in January 2016, FOX’s always hot ‘Empire,’ ABC’s ‘Nashville’ continues to impress in the ratings, and NBC’s ‘The Voice’ are just a few music-focused shows that viewers tune into time and time again, creating plenty of fodder for the social media ‘water cooler.’

There are many reasons WHY musicians are often the most popular figures on social media. It’s partly because music speaks to us in a personal, evocative and human way, more so than any other art form.  It is that connection to the music – and the performer giving it life – that draws fans in.  The research firm MusicWatch recently confirmed this, finding that connecting through music and artists had the highest importance to users’ social media experience.  Clearly, artists are tastemakers and cultural drivers.

#Musicfuels many things in our society.  Our new site is one way to demonstrate that.  We hope you like it as much as we do.  Check it out, tell your friends, and of course, keep on following your favorite artists!

Cary Sherman
Chairman & CEO, RIAA

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It’s telling that Apple continues to pour significant time and energy into music. It confirms once again that music is a dynamic space worth investing in. As we have said often, music “punches up” and drives the online conversation far more than the relative economic size of the business.

For some context, the paid subscription market has grown quickly both in the United States and globally. According to our data, revenues from paid subscriptions in the United States alone were up 26% to just shy of $800 million in 2014. The number of paid subscriptions also grew 25%, reaching 7.7 million for the year. And that’s just part of an even larger global trend. According to IFPI, about 41 million people subscribed to paid services worldwide in 2014, up from just 8 million in 2010. The growth is encouraging, but here’s the key part: it only captures a small part of the overall market of music listeners. Ninety seven million people watch or listen to music on YouTube and Vevo in the United States (source: MusicWatch, Inc.). Twenty seven million subscribe to SiriusXM. Forty million subscribe to Netflix. There’s a huge appetite for music and engaging entertainment, delivered by sleek and consumer-friendly platforms. The potential is there, so it’s incumbent on everyone to make sure there’s a fair playing field so services like these can continue to grow.

That’s partly why we don’t subscribe (no pun intended) to the narrative of any new service being a “[insert streaming company name here] killer.” There’s a healthy market for many services and lots of competition! We can expect lots of innovation in the streaming marketplace as digital services compete for subscribers. Nor will it be one size fits all. The record labels have been progressive in embracing a variety of models, so that consumers can have music when, where and how they want it. Our revenue numbers reflect that diversification: there’s now a healthy mix of revenues of about 1/3 each for streaming, downloads, and physical products.

It’s also worth noting that healthy competition and a vibrant marketplace where various services angle to attract listeners is a good thing for both fans and the music business. More digital services spending more of their energy and time thinking about expanding the music pie and attracting more paying subscribers is a win-win for labels, artists and songwriters. It’s gratifying to see the news coverage enumerate all the licensed options for music fans.

Apple Music? The more, the merrier.

Jonathan Lamy and Josh Friedlander
RIAA

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First, the numbers. A label P&L (balance sheet) looks far different than the blog portrays. Labels don’t “keep more than 80% of the money they receive” – labels invest that money in finding and developing talent, marketing and promotion, and distribution. Fortunately, there’s a wealth of facts and figures in a report — “Labels At Work: The Music Business In The Digital Age” — we submitted to Congress this summer. Here’s some food for thought:

• In the last decade, the major labels spent more than $23 billion on talent, of which roughly $18 billion went to artists. Artist royalties have increased by 36% over the last decade as a percentage of label revenue, remaining steady in dollars as label revenues have plummeted.
• Artist royalties alone are three times more than label operating profit. That’s right – at the end of the day artists receive 3x what the label does, and that doesn’t include money such as endorsements that artists derive once their careers are launched by the labels’ investment.
• Labels spend more as a percentage of their revenue on R&D – finding and cultivating artists – than other industries such as pharmaceuticals, biotech, computer software and high-tech hardware. And yet successful new music releases remain elusive – 80% of releases sell less than 100 copies and roughly 95% sell less than 1000 copies.

What’s behind these numbers? A lot of work. Labels spend tens of thousands of hours on the road and online to find great artists; connect great musicians; and bring together the producers, engineers and technology to bring a song to life. Labels design campaigns for a new release and tours, and help build a fan base to launch a career. And let’s give credit where it is due: labels have reinvented their businesses by creating the infrastructure and licenses necessary to bring music to fans everywhere. One illustration? Look at the dozens and dozens of digital services—a diverse array of consumer-friendly models—licensed by the major record companies listed on www.whymusicmatters.com.

These financial and creative investments show labels are far from mere “middlemen” as the blog states. Many recognize that today labels are more important than ever. Let’s face it: ideas from a decade ago like the “long tail” or that artists could easily and single-handedly develop a massive online audience have been laid to rest by the cacophony of the Internet. How many thousands of bands toil in obscurity on YouTube and other places online? How many other entertainment options are thrown in the faces of consumers every day? Bottom line: competing for consumer attention is more intense than ever, and labels provide a critical role to help artists break through the clutter and find an audience.

And let’s not forget that the labels’ creative and financial fuel seeds and supports an entire music ecosystem. Music drives terrestrial and online radio, digital retailers such as iTunes and music services such as Spotify, and touring companies and ticketing services, just to name a few. And countless others benefit from music’s draw, whether YouTube or bars and restaurants.

So I come back to the point David cast aside at the beginning of his blog — how to sustain and ensure a healthy music ecosystem so investments in music like those made by labels continue to flow. That requires continued work by labels to build partnerships and help open new markets in an ever-changing world. But it also requires others to step up, such as terrestrial radio paying for music and others paying older iconic artists for pre-72 recordings. And in a world of converging functionality between music services, we need rational rate structures to ensure a fair return to artists and labels lest their critical investments to create music dry up. But that’s a subject for another blog.

Steven Marks
Chief, Digital Business & General Counsel

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The House Judiciary this morning convenes a second subcommittee hearing on music licensing.  Cary Sherman, CEO of the Recording Industry Association of America (RIAA), will testify.  In his opening testimony, Sherman calls for a series of reforms, including:

• Grant a broadcast performance right for sound recordings
• Make sure artists who recorded before 1972 are paid
• Allow rights to be bundled and administered together
• Create an across-the-board market-based rate standard
• Consider a one-stop shop for musical work licenses

He also touts a new report from the RIAA, submitted to the committee on Tuesday:  “Labels At Work:  The Music Business In The Digital Age.”   In his testimony, he cited some of the new facts and figures unveiled in the report:

In the process of embracing digital distribution, record labels have revolutionized the business, streamlining their operations and allocating a higher proportion of their revenues to investing in artist career development. Record labels provide the investment on which everyone in the music value chain depends, “seeding” the entire music ecosystem with $20 billion in U.S. talent investment – including artists, songwriters and music publishers – in just the last decade (and that’s just from the major labels). The majors also invested an additional $6 billion over the same period to market recordings in the U.S.

And even in tough times, our investments in creators have been significant. As a percentage of U.S. net sales revenue, over the last decade major label payments for artist advances and royalties have increased by 36% and mechanical royalties for songwriters and music publishers have increased by 44%.

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“Modernizing the licensing system for musical works is a win for everyone…must be a collaborative exercise,” says RIAA CEO

WASHINGTON – Simplifying the licensing system for musical works is key to further expanding the digital music marketplace, providing fans with more music options and creating healthier revenue streams for music creators, according to the Recording Industry Association of America’s (RIAA) official comments filed as part of the U.S. Copyright Office’s examination of music licensing. But simplification will only occur, RIAA notes, if all stakeholders in the music community engage with an open mind.

The RIAA’s comments examine the complex world of licensing the underlying musical work in a sound recording, a system that industry leaders throughout the music business would like to see modernized.  Today, a new release by a record company can require a vast number of licenses to meet consumer demand.  For example, RIAA notes in its comments that one record company responsible for a current, successful release had to obtain 1481 mechanical licenses for the project.  Digital music services face challenges launching with millions of songs.  RIAA argues that a new system should simplify licensing by aggregating rights under a blanket license, much like ASCAP and BMI offer; ensure that owners of musical works receive fair market value for their works; and cover all the rights needed to bring modern music releases to market.

In its filing, RIAA emphasizes its desire to work with its partners across the music community in exploring new ideas to tackle the challenge:

…While the systems for licensing sound recordings are working reasonably well in many respects, everyone agrees that the systems for licensing musical works are not…We believe that fixing this system will require all stakeholders to work together to take bold steps, rather than just a little tinkering… The key is to update the systems that address the inherent challenges of musical work licensing in a way that all can agree will fairly and appropriately serve creators, rightsholders and the marketplace. 

The groundbreaking proposal that RIAA hopes to work through with its industry partners would encourage blanket licenses that include all the necessary rights instead of multiple licenses from multiple entities with overlapping rights; and it includes a suggestion that publishers and songwriters be compensated with rates negotiated and agreed to by industry partners rather than those set by courts:

It is understandable that reform will be neither possible nor desirable unless songwriters and music publishers believe that it provides for rates that are more market-based than rates determined by the Copyright Royalty Judges or rate court. …One possibility would be…a rate that is an agreed, consistent, set percentage of label revenues from modern music products…Only if a precise percentage were negotiated and agreed by stakeholders might it then be suggested as legislation, so that no party would be agreeing to reform without understanding its economic consequences. This would be a market-based royalty, because labels’ deals are negotiated in the marketplace, and publishers and songwriters would receive the percentage of that deal that they had previously negotiated with record companies. 

Some of the potential advantages to such a licensing structure, according to the RIAA, include:  market rates for publishers and songwriters; more consumer choice as simpler licensing procedures attract funding and development of innovative services; more revenue for services and higher royalties for creators resulting from savings from simplified licensing and payment procedures; improved accuracy of payments, transparency, and audit rights for publishers and songwriters; and viability for ASCAP and BMI, which would, among other things, continue to license radio, TV and venues as they always have.

“Modernizing the licensing system for musical works is a win for everyone — from digital music services to songwriters, music publishers, artists, labels, and fans,” said Cary Sherman, CEO, Recording Industry Association of America.  “That’s the only way this will work – it must be a collaborative exercise.  We don’t pretend to have all the answers.  But we know the status quo is not working like it should.  It’s time to have this conversation.  It’s time to think outside the box and begin to build a modern music marketplace – based on market-based concepts — that work for all music creators.  We appreciate the efforts of Congress and the Copyright Office in undertaking its examination of the complex licensing system.”

RIAA also proposed incorporating pre-1972 recordings into the federal statutory license system and echoed the Copyright Office’s call to establish a terrestrial performance right so that artists and labels can be paid when their music is played over AM/FM radio.

For a copy of RIAA’s filing please contact Cara Duckworth Weiblinger at cduckworth@riaa.com.

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“I just want to be one of the last great storytellers,” said NE-YO when describing his music career. “The greatest compliment I’ve ever been given – I’ve had people walk up on me and say, ‘Me and my wife’s first dance was to one of your songs,’ or ‘I was going through a really tough time with a breakup and your song helped me get through it.’ This is why I do what I do.”

As SVP of A&R for Motown Records, NE-YO is responsible for discovering new talent and bringing talent to the label. Asked by Sherman what he looks for in an artist he signs, NE-YO responded, “For me, it’s always about passion…if there’s no passion behind [your music], it becomes very ‘for the moment.’ And nothing ‘for the moment’ is ever worth it…”

“And you can definitely see it on a person. If there was no money, if there was no fame and fortune, he would still be somewhere with a guitar in his hand – that’s the guy I’m trying to sign.”

In his conversation with Sherman, NE-YO touted the benefits of being signed to a record label. “The label is support,” said NE-YO. “When you want [your music] to move a little further than just your block or your city, that costs money. It’s not a cheap thing. It’s not an easy thing. From a standpoint of distribution, from the standpoint of marketing and promotion, there’s a million things that you can do yourself, but when you need that extra long arm to get you even further, that’s where the label comes in.”

Check out more of their conversation here:

A triple threat singer, songwriter, and actor, NE-YO’s hit “Let Me Love You (Until You Learn To Love Yourself)” was certified RIAA Platinum in 2013. Three of NE-YO’s albums — 2006’s “In My Own Words,” 2007’s “Because of You,” 2008’s “Year of the Gentleman” – have gone RIAA Platinum and produced several popular hits, including “Miss Independent,” “Sexy Love,” “Because of You,” “Mad” and “Closer.” NE-YO has also appeared in several films including Stomp The Yard, Save the Last Dance, Red Tails, and Battle: Los Angeles and written music for films such as The Princess and the Frog, Precious: Based on the Novel ‘Push’ by Sapphire and I Can Do Bad All by Myself.

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One way to view and consider just how much music is driving culture and innovation today? Look no further than top social networking and entertainment sites Twitter, YouTube and Facebook. You’ll find that 7/10 most followed on Twitter are musicians, 9/10 most watched videos ever on YouTube are professional music videos and that 9/10 most “Liked” celebrity accounts on Facebook are those of musicians. Take a look:

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