Radio killed the Internet star. Inequitable royalty calculations are hurting artists.

Reading an article in the NY Times recently about a brewing royalties dispute left me stymied.

Apparently, there is a bill circulating that would reduce the amount of money streaming radio stations pay for the right to broadcast music.

The proposal would bring streaming royalty rates in line with those paid by satellite and terrestrial stations, which are about five times less.

The issue has come to a head as Pandora, arguably the most successful model for streaming radio, struggles to stay afloat in light of royalty rates which amount to half of its profits.

Pandora argues that the rates for streaming radio services should be calculated on the same basis as satellite and terrestrial services.

The current calculations render widely disparate results, such that many streaming services are grappling under the oppressive weight of these fees.

Fundamental to the argument being made by streaming services, like Pandora, is the fact that the exorbitant rate charged streaming services is a barrier to entry.

By stifling new entrants, it reduces the overall number of streams and thus, the royalties artists could potentially earn.

Fewer streaming services, fewer streams, fewer royalties.

It’s not rocket science.

But the music industry doesn’t see it that way.

They argue that streaming services are profiting handsomely, and the efforts to reduce the rate is driven by greed and the desire to increase profits at the expense of musicians.

They point to the ad-supported nature of most streaming services, in support of this position.

This argument would have merit if streaming services were paying the same royalties as satellite services and then sought a reduction.

But the issue is that streaming services pay a disproportionately higher share of their revenues for the right to stream than similarly situated non-Internet services.

And there is no rational basis for the disparity.

Currently, streaming services pay a fraction of a cent each time a song is streamed whereas satellite services, like Sirius, pay a fixed percentage of their revenue to artists and labels.

The two different standards exist because at the dawn of the Internet age, no one knew how big streaming over the Internet would get.

A fraction of a cent per stream seemed reasonable when they were few, if any, true streaming models to base a formula upon.

But services like Last.fm, Pandora, Spotify, iHeartRadio and their progeny, have demonstrated that streaming radio is growing and viable.

And where streaming revenues were thought to once be a thing of folly, they are now very much a reality.

An entirely new market has developed around it.

However, this fraction-of-a-cent revenue model has proven to be inequitable in its application.

And it should be abandoned in favor of one that continues to provide revenue for streaming services and consistent royalties to artists and labels.

This issue is far from over, and I’ll definitely keep you posted with any updates.

If you like your streaming services, I’d suggest you contact your elected officials and make a stink.

Because if the music industry has it’s way, streaming radio will go the way of the record labels and be extinct before you know it.

Chris Anokute: The Making of A Music Mogul

Kissed a Girl. California Gurls. Yeah, Chris did that.

A little over 12 years ago, I met this young man eager to make it in the music industry.

One day, a motley entourage of Black men, pushing some blond dreadlocked artist, walked into my office looking for an entertainment attorney.

At the center of this mass of Black men was an R&B singer named Don Conner.

In addition to Don, there was a ‘manager’ whose name escapes me (but claimed he was behind numerous successful boy groups), and a ‘money guy’ named Isaac Morgan.

A few other non-descript hanger-onners rounded out the posse and filled up my (then) small office.

And the very back of the office, sat Chris.

Mr. Manager started jabbering about how talented Don was, and how he was the next Jaheim.

Money Morgan talked about the distribution agreement they were ‘just about’ to sign, and the need to make sure that they had all their ‘paperwork’ in order.

Don said he simply wanted to sing and to ensure that his people were ‘taken care of.’

Their mouths moved a lot during that meeting, but very little was actually said.

The person who spoke the loudest to me, never opened his mouth.

That was Chris.

The entire meeting, he sat in the back of the room, listening, clearly taking it all in.

When the talking heads stopped, Mr. Manager-whose-name-I-can’t-remember got up and assured me that we were ‘going to do business.’

Mr. Money promised to follow up, once they had ‘things in place.’

The various hangers-onners gave pounds, head nods or blank stares as the entourage filed out of the room.

Chris politely shook my hand, and joined the large moving mass of Black men making their way out of my Montclair office.

Needless to say, nothing ever became of Don Conner.

Turns out he was already being managed, under a production contract with a distribution agreement in place to deliver six records.

A few years later, who should walk into my office, but Chris.

There was no motley entourage or talking heads.

Just Chris, solo.

This time, he came to ask for my advice on the best way to make it in the music industry.

Since that day he visited my office those many years ago, he remembered our initial meeting.

I impressed him as someone who shot straight, even if I said things that you didn’t want to hear.

We spoke at length about all the things he had done to this date, including working in Whitney Houston’s camp, promoting independent artists and hosting parties, along with waiting tables and going to school.

He told me that he had a passion for music and felt that God had given him the gift of an ‘ear.’

He could hear a hit instantly. We’ll talk about this platinum ear in at length in another post.

Although I felt his ‘ear’ was immaterial at the time, he impressed me as an individual with singular purpose and drive.

It was clear that he had experience in production, management, and promotion.

And had a hustler’s get-it-done-at-all-costs mentality, which was impressive for someone so young.

I told him that he was on the right path, because he was seeking out knowledge and advice from people in the industry.

The only thing I felt he was missing from his repertoire, was an understanding of the business side of the industry.

The music industry is a business, first and foremost.

And without the ability to understand the rights, liabilities and obligations of the respective parties to transactions, you were simply spinning your wheels.

So I gave him an internship.

A few years later, we started a management company.

Signed a few acts (Alkatraz and JUS). Hmm…wonder where are they now?

Got our first publishing deal.

Fast forward to 2010, and Chris is one of the youngest and most successful A&R’s in the music industry.

After a three year stint as Senior A&R pop at Virgin/Capitol Records, he is now Sylvia Rhone‘s most recent executive acquisition at Universal/Motown, charged with giving the label a pop presence.

For the guy who A&R’d Joss Stone, found Katy Perry, Stacie Orrico (and many more) he’s up to the task.

Check out Christian TV.

I’ve skipped over some of the juicy bits of Chris’ rise to fame.

But that’s for another time.