Exploration Weekly - Transparency Obligation for AI Companies Proposed in US Congress / U.K. Parliament Urges Action on Low Streaming Returns for Songwriters / PPL Revenue Up 4%

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A Glossary of Music Industry Terms

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In this newsletter:

Organizations from across the music industry have welcomed proposals introduced into US Congress that would force AI companies to declare what content they have used as part of the training of any one generative AI model. The proposals have been made by Democrat Adam Schiff.

The U.K. Culture, Media and Sport Committee is pushing for a package of reforms that would include changing the revenue split between recording and publishing.

In 2023, PPL saw a revenue increase of 4%, reaching £283.5 million, its highest ever. Net revenue grew by 5%, with operating costs reducing. However, international income declined, contrasting with the 7.8% growth achieved the previous year.

Now, the details...

Exploration Weekly - April 12, 2024
Compiled by Ana Berberana

Transparency Obligation for AI Companies Proposed in US Congress

US Congress member Adam Schiff has proposed a new law that would force AI companies to disclose what copyright protected works they have used to train their generative AI models. The obligation would apply to existing and future models, and failure to comply would result in fines. The proposals have been widely welcomed by the music industry, with the RIAA applauding what it sees as a solution to an “urgent and foundational issue”. “AI has the disruptive potential of changing our economy, our political system, and our day-to-day lives”, says Schiff, a Democrat member of the House Of Representatives. "We must balance the immense potential of AI with the crucial need for ethical guidelines and protections”. “My Generative AI Copyright Disclosure Act is a pivotal step in this direction”, he adds. “It champions innovation while safeguarding the rights and contributions of creators, ensuring they are aware when their work contributes to AI training datasets. This is about respecting creativity in the age of AI and marrying technological progress with fairness”. There is an ongoing dispute over the obligations of AI companies that use existing content to train their models which has resulted in lots of litigation and lobbying. The creative industries - including the music industry - have two main demands, that AI companies must get permission before using any content as part of their training processes, and that they must also declare what content and data has been used. Obviously, without the transparency obligation, copyright owners wouldn't know which AI companies require a license. The creative industries insist that current copyright law obliges AI companies to get permission to train their models with copyright protected works. Many AI companies do not agree and various lawsuits are underway which will see the courts interpret what the law says in this domain. However, regarding the transparency obligations, that will probably require new rules. For example, the recently passed EU AI Act does include some transparency provisions.

U.K. Government Must Address ‘Pitiful’ Streaming Returns for Songwriters, Says Parliament Committee

A U.K. Parliament committee has issued fresh calls for a “fundamental reform” of music streaming to address what it describes as “pitiful returns” for songwriters and publishing rights holders. A report from the Culture, Media and Sport (CMS) Committee published Wednesday (April 10) calls upon the British government to “do more to make sure music makers are paid fairly” and to press ahead with a package of sweeping copyright reforms. Those reforms include changing the revenue split between recording and publishing rights from music streaming, currently set at around 55% for recording and 15% for publishing. That weighting “does not reflect the importance of songwriters, composers and publishers in the music streaming process,” says the committee. Its members want government ministers to bring forward a consultation with fans, creators and industry stakeholders to “incentivise an optimal rate” for publishing rights that will “fairly remunerate creators for their work.” Other recommendations in the CMS report include the introduction of a statutory “private copying” levy like what exists in other European countries such as France, Germany and Italy. That would require a small tax to be charged on the purchase of electronic devices and blank media that can be used to store songs, which is then paid out to artists and songwriters via collecting societies. The introduction of such a scheme would generate between £250 million ($313 million) and £300 million ($376 million) a year, claims the CMS committee, and safeguard reciprocal payments from other markets where private copying mechanisms exist. “Not only does a lack of such a scheme in the U.K. prevent British creators from receiving payments from the domestic market, but it has also put their payments from abroad under threat,” says the report, calling for the introduction of a private copying levy within the next 12 months.

PPL Revenue Up 4% as International Income Dips in 2023

PPL generated £283.5 million of revenue in 2023, a year-on-year increase of 4% and the highest level of income in its 90-year history. The collective management organization (CMO) licenses the use of recorded music for public performance and broadcast in the UK, and collects similar royalties on behalf of performers and recording rights-holders around the world. Net revenue after operating cost and other deductions – the money available to be passed on to PPL members and other CMOs through a network of international agreements – grew by 5%, with the cost as a percentage of revenue reducing from 13.3% to 13% compared to the previous year. However, there was a mixed picture with international income down in 2023. The 4% growth in 2023 was almost half of what PPL achieved in the prior year (7.8%). Income from the use of recorded music in public places (shops, bars, nightclubs, offices, factories, etc) increased by 11% to over £111 million in 2023 (2022: £100.8 million). This revenue is collected by Leicester-based PPL PRS, a joint venture between PPL and PRS for Music, which launched in 2018. “These revenues have now surpassed the pre-pandemic high and continue to demonstrate the value to businesses of investing in music as a driver of customer and employee engagement,” said a statement. PPL’s revenues from the licensing of recorded music for radio, TV and online increased by 2.5% to £96.4 million in 2023 (2022: £94 million). Growth in TV revenues was driven by the negotiation of several new licenses, including with Discovery and S4C for their TV services, and a new long-term deal with the BBC for its public service activities across radio, TV, BBC Sounds and iPlayer. International revenue, collected by PPL for the use of members’ music around the world, dipped to £75.4 million in 2023 (2022: £77.8 million). PPL saw annual growth in collections from the majority of CMOs in 2023. Payments were received for the first time from CMOs in Guatemala and Indonesia, and the company signed deals to open up new markets, including with the Indian Singers’ and Musicians’ Rights Association (ISAMRA) and RAYS in Azerbaijan.

Spotify Plans to Let Subscribers Speed Up Songs - And Pay Rightsholders When Those Modified Tracks Are Streamed

‘Manipulated audio’ (i.e. tracks that have been sped up, slowed down, or otherwise tweaked, before being uploaded to the internet) is becoming a major story for the record industry in 2024. In February, Pex published a study that analyzed 100 million audio tracks on TikTok and estimated that comfortably more than a third (38.03%) of all songs found on the platform were speed or pitch-modified in 2023. Not only that, but Pex estimated that the share of tracks on TikTok that are modified is increasing – up from 24.55% in 2022 to 38.03% in 2023. In a bid to compete with the popularity of such modified audio on TikTok, Spotify is reportedly working on a feature that could let its users create sped-up or slowed-down versions of songs. That’s according to the Wall Street Journal, which, citing sources, reported today (April 11) that Spotify hopes the plan will “appeal to young users, while generating new revenue for artists”. As per the sources cited by the WSJ, music rightsholders would be paid for streams of the user-edited versions of tracks on the platform. It added however that “discussions about the tools are early and licensing agreements have yet to be worked out”. The reported plans could entail letting listeners save songs that have been modified using the new tools to “virtual collections” on the platform, but they won’t be able to share those versions of songs on platforms outside of Spotify. According to the Wall Street Journal, the “basic” elements of Spotify’s song modification features will be accessible by the platform’s $10.99-per-month Premium subscribers.

GEMA Reports 2023 Revenue, Distribution Growth in Its ‘Most Successful Financial Year’ To Date

GEMA has reported $1.39 billion (€1.28 billion) in revenue for 2023, which the Berlin-based organization’s CEO is touting “as the most successful financial year in GEMA’s history to date.” The 91-year-old PRO and collecting society reached out with its 2023 financials today, after posting double-digit revenue growth for 2022. According to the newer of the performance breakdowns, GEMA’s aforementioned $1.39 billion in revenue represents an approximately 8.3 percent year-over-year (YoY) improvement. Within the 2023 sum, GEMA acknowledged $210.79 million/€194.24 million in expenses (up 15.2 percent YoY), consisting of $85.34 million/€78.65 million in staff expenses and $125.40 million/€115.56 million in “material costs” (up 12.1 percent YoY). Minus those expenses, GEMA pointed to a corresponding total of $1.18 billion/€1.08 billion in capital made available for distribution during 2023, up 7.3 percent YoY. Digging into GEMA’s 2023 showing by category, the biggest revenue jump arrived in “field service collections,” which spiked 24.2 percent YoY to hit $481.67 million (€443.99 million), per the resource. Noteworthy hikes also reached international collections (which grew 12.7 percent YoY to $89.14 million/€82.10 million), remuneration rights (up 26.4 percent to $79.52 million/€73.24 million), and the other category (up 112.1 percent YoY to $19.53 million/€18 million). On the “online collections” side, the report shows a nearly three percent YoY uptick to $336.87 million/€310.28 million. Nevertheless, GEMA identified YoY slips in reproduction collections ($48.48 million/€44.65 million total) and broadcasting ($330.94 million/€304.82 million) as well. Shifting to membership changes, GEMA pinpointed 2023 additions of 5,849 (including 2,403 individuals between the ages of 21 and 30), for north of 94,000 members overall. The youngest of these members is 11 years old, and the eldest is 90 years older than that, GEMA relayed.

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