Think tank or a Research Initiative to really look at some of this and try to foster innovation in the Music Industry and try to foster a sustainable musical ecosystem for them. Host well, lets two questions. Number one is when somebody downloads or uploads a tune from itunes, pays 1. 99 for one song, where does that go . Who gets it . Guest so typically in a download from itunes, about 30 of that is kept by apple, 70 is paid out to the rights holders, and thats generally split roughly 10 in the u. S. To the songwriters and Music Publishers and about 670 to 60 to music labels and the artists they represent. Host and the artists themselves, how much of that, how much do they get out of that 70 . Guest it depends really on the contractual deal between the record label and the artist. Typically, its 1525 royalty depending on the negotiating power of the artist, and then there are a variety of deductions that come into, come into play as they are paid out by the record label. Theres also recoupment of cost, so often time record labels will charge back the cost of recording an album, other costs of marketing, third party promotion, tour support. It depends on a casebycase basis, but the typically its 1520 of the 70 . Host so, professor bargfrede, when is this structure, this payment structure, is it set by the industry and by the interested parties, or does the federal government have a role in this as well . Guest ing the federal government plays a pretty big role in the Music Publishing and songwriter side. Regulating rates such as mechanical royalties, the royalties paid for the reproduction of a song or a musical composition, and then on the sound recording side and, remember, theres really two copyrights in music. Theres the Music Publishing side which is the underlying words and lyrics and music, and then theres the sound recording which is the recording of that musical composition. On the sound recording side, typically those rates are negotiated on a fair market basis. So some would argue that the song writers and publishers are at a slight disadvantage because they are being regulated while the sound recording side is not. Host joining us here in our conversation is jim phillips with communication daily. Good morning. Professor bargfrede, a lot of the informationing in your report information in your report looks at how the industry can Work Together to advance some of these ideas but, obviously, compromise has been fairly difficult thus far. So to what extent should, to what extent are the recommendations that youre proposing going to require congressional mandates as opposed to Industry Collaboration . Guest i mean, i think in the Music Industry you see a very fractured industry, and part of that is because there are two copyrights, theres two sides to the revenue split on the publisher side and the record label side. A lot of times you see the two sides ending up in a fight over who gets what particular pie, and there doesnt seem to be a lot of collaboration as to how to grow that pie into a larger size so that everyones slice is a little bigger. I think the registerer of copyrights in the u. S. Has been pretty active in looking into some of these issues. They put out a 245page report on music licensing earlier this year, and i think that some of the recommendations she has made have recommended have required governmental intervention. I think in other areas there may be a role for an ngo or for a nonprofit to get in and try to play an agnostic role in trying to to help solve some of the problems we highlight in the report, but i do think that, ultimately, congressional activity may be required as well. Host professor bargfrede, we recently talked with Carrie Sherman of the Recording Industry association of america, the ceo and president , and heres a little bit of what hes calling for when it comes to changes in the Music Industry. Guest we would want to be paid by am fm radio. I think its remarkable, most people are shocked to learn that in todays day and age am fm radio pays nothing to artists and record labels when they broadcast their music. They do pay the songwriters and publishers, but they do not pay artists and labels. This is a 16 billion industry where theyre earning 16 billion in advertising revenues every year from, basically, the use of music, and they pay nothing for i. Theres for it. Theres no other copyrighted work that is discriminated against that way, and there are virtually no other developed countries in the world that discriminate recordings that way. Yet special exemption in u. S. Law, a unique u. S. Situation. Wed want to fix that. Wed want to pix the below market rate standard that siriusxm enjoys. For some reason they were grandfathered at a time when they were a startup. That grandfather still exists even though theyre making money hand over fist. They ought to be sharing their revenues more fairly with the people who create the music on which their service is based. That needs to be fixed as well. We really need to do something about making sure that all creators are paid fair market value regardless of the platform that theyre on. Host professor bargfrede, do you agree with Carey Sherman . Guest yeah. I think its pretty shocking if you look at the trillionized nations industrialized nations around the world that are paying or providing this performance for sound recordings, that we dont have it in the u. S. I believe the other countries that are not paying that performance right include china, north korea, iran. But you look at those who are, its all of europe, its a lot of latin america be, south america, and here we sit as really the worlds wealthiest country, and were not providing this as a right to our artists. To me, its been a little bit shocking that, you know, theres been congressional activity on this pretty much in the last several congressional sessions, and it hasnt moved forward. Right now theres a fair play, fair pay act that careys probably referencing to try to provide that performance right. And i think, uni, you know, f you look back over time, generally labels didnt care about not being paid for it because they viewed it as a promotional tool. Everyone was happy. But weve shifted now to this era of listening. Its no longer about listening as a product as weve moved to spotify and other streaming Services Like youtube. Were living in an era of access to music and an era of listening. And in that era, i think that, you know, listening on the radio is another form of listening that should be paid for. Host jim phillips. Should the, a lot of the should the issues that are involved with the music Licensing Industry like whats being addressed in the fair play, fair pay act, should those be detached from the larger copyright act review that the House Judiciary Committee is considering . A lot of, a number of stakeholders are concerned that some of the wider issues like the placement of the Copyright Office could get swallowed up, could swallow up concerns within the music try and other industries. Guest yeah. I mean, i think theres room to move forward on this immediately. I think that a wholesale rewrite of the copyright act or at least a wholesale revision of the copyright act probably needs to take place. Maria has acknowledged that with her report that came out earlier this year, but theres no reason this particular issue cant be advanced, you know, this year. And again, we are the worlds wealthiest country, and its a right that were not providing, yet theres a contravening bill in to prevent right from happening. Host and what is that bill . Guest the it is the local radio freedom act, and its supported by nearly half of the house. Host but at the same time, i think that with that bill and the supporters of that bill argue that, hey, this artist is getting great promotion in this free play. Guest ing right. And i think that has traditionally been the argument, and i think that labels and artists have been happy, you know, over the past several decades to be able to sell a cd. But again, weve moved into an era where people are being paid by listens. So if you look at some of the complaints about low streaming rates from digital streaming services, i think some of that comes from the fact that were looking at a totally different Business Model and a totally different model for people to consume and listen to music. Youre being paid every time someone listens to your song, not every time someone goes out and buys a product and maybe listens to it once or maybe listens to it a thousand times later. Host professor bargfrede, in your rethink music report transparency and payment flows in the Music Industry, you call for greater transparency. What do you mean by that . Guest well, i think theres really two facets to that. Theres what i would call revenue transparency, and then theres what i would call rights transparency. And so revenue transparency is really giving artists and creators, songwriters more insight into where their money is coming from, how those payment flows are making their way to them, whos taking a cut along the middle, what are the rates that are being paid by spotify and other Digital Services. I mean, i think everyone knows what itunes is paying for a download, its a little more difficult to know how that pie being split up by spotify. On the rights transparency side, theres a big issue created by a lack of requirement for copyright registration, and that comes under the byrne convention, the International Copyright treaty, that requires for International Copyright protection that you cannot require a copyright to be registered. So if i create a song today, i have immediate copyright ownership of that. Im not required to send it to the library of congress or the rebelling thesterrer of copyrights registererover copyrights, but what that means is often times its difficult to know who owns what copyright. A songwriter may write a song, do a publishing deal, the publisher may subsequently sell that copyright to someone else, and you end up with Digital Services or anyone else who may want to use that particular musical composition in a place where they may not know who to pay. So thats the other part of this transparency piece. Host professor, when it comes to the payment transparency, is this something new in the past 15 years in the digital age, or has payment to musicians always been a little bit opaque . Guest i think, you know, certainly the narrative of artists and songwriters not understanding where their money is coming from is not new. But i think were living in a world today where everything is trackable. The nsa can know where i am, where you are, what youre talking about on your cell phone. Theres no reason that artists and creators shouldnt be able to know where their songs are being streamed and how theyre being paid for that. And not on a significant time lag either. I mean, you still have songwriters that are receiving checks from performing Rights Organizations that may come in depending on where in the world the song was played they may come in up to 18 months after the listen or the sale happened. Professor bagger field, one of your bargfrede, one of your major recommendations in the report is to use a nonprofit to meet a global database. How would a nonprofit succeed in this area as opposed to some of the industry efforts that have sort of stalled over time . Guest if you look at the european commission, the e. U. Tried to create a database roughly between 2008 and 2012. They spent more than ten Million Euros investigating this, and the project ultimately fell apart. Over issues like who was going to pay for it and who was going to put the day into it. And we really believe that bringing in an agnostic ngo that can perhaps bring folks together in order to create a rights database can help to solve that issue. But i think, you know, we also look at it as something where we try to solve the issue on a goforward basis. One of the problems in the past has been trying to get folks to agree to give their data on older recordings and older musical composition. What were saying is today theres 30 million songs available on spotify. The estimate is that in 2025 there will be 100 million songs available for listening on spotify. Can we just start to collect and aggregate that rights informs for the 70 million information for the 70 million songs that are going to come over the next decade, and is there a role that an ngo can jump in and play and, hopefully, drive a market shift to, hopefully, create some rights transparency but maybe even create a system that leads to greater licensing revenue by allowing more licensing of music because folks can actually find where the music should be licensed from. What should the industrys role be in all of this . Guest ing i think the, you know, we at berkeley are considering the possibility of working in a University Consortium to develop this ngo, and i think that we want active involvement from all facets of the industry. We dont believe we can move forward without input from the riaa, the mpa, the major publishers, major labels, also independent artists, independent labels. But i think as the e. U. Project kind of proved, getting everyone within all of hose stakeholder groups those stakeholder groups to agree on every single point is going to be very, very difficult. So, you know, i think were looking at it as we want folks to be involved, we want folks to provide us with advice. And whether its berkeley as part of a University Consortium or some other ngo that moves forward, i do think you have to have those stakeholder groups involved. Host professor bargfrede, could you just speak to the Digital World that were living in now when it comes to music and how thats changed, how we get our music in the last 15 years . Guest yeah. I mean, i think if you look back to, say, 1995, 20 years ago, people would listen to am fm radio, they would hear a song that became a hit on country or hiphop or a pop station, they would like it, and they would go down to their tower records, and they would buy a cd. And they would buy a cd for a pretty significant amount of money, you know . Roughly 20 for a cd. And i think the Music Industry became very accustomed to selling an expensive product. There were a lot of people who were also upgrading their vinyl and cassette collection, older music that they had, they were rebuying it on cd, and then that shifted in 1999 when napster came around. And the Music Industry was fairly slow to adapt to napster. It wasnt until that steve jobs convinced the Music Industry that there should be a Download Store in the form of the itunes music store. And then really weve begun to shift to this Music Subscription Service model. Its not really a new model anymore. Its been around since 2004, 2005 with a more legitimate mapster, there was a yahoo Music Subscription Service also available at that time. But it wasnt until spotify arrived in the u. S. In 2011 and integrated with facebook so that people could see what their friends were listening to and offered the social component that i think the fans and the Customer Base began to really be aware of that access model of music. And so now weve moved into this era where, you know, i dont want to say everything is free, but everything feels like free. And i think part of that has been and its something the Music Industrys fighting piracy. Take a 10 subscription fee or 20 subscription fee in the form of some hifi services is and give folks all you can eat access to music. And were still in a nascent phase, i think. We dont yet know where thats going to end up. Certainly, Subscription Services are growing very quickly. I think theyve already announced that the number of streams this year is double the number of streams at this point last year. Subscriber bases are up, and i think that youll really see over the next probably two years where that model is going to, where were going to end up with that model. Host and in your view, what groups or who does the Current System benefit the most . Guest ing i think that the Current System benefits probably major labels and major publishers because they are the ones with the negotiating power. I think its an unfortunate reality, but i think that, you know, perhaps the smaller artists just dont have the power that, you know, a major Public Corporation does when theyre negotiating with some of these groups or some of these Digital Services. Professor, i was interested in what you had to say on the role Block Chain Technology can play on the future of music rights management. Could you explain how that would work . Guest yeah. And im not going to pretend to be a block chain expert, but i do think its something that that should be explored. So if you look at concept of a decentralized rights registry thats created by an ngo, having a block chain component to that where the money or the royalties are shared via smart contract on block chain. For those of you who dont know, block chain is the system that powers clip toe currencies like crypto currencies like bitcoin and allows payments to be made and verified across a distributed computer network. And with block chain and music, i think theres a lot of investigation about can you have whats called a smart contract that allows more those royalties to be for those royalties to be paid at source. In a hypothet