An interesting debate has since sparked, following the revenue creation through music royalties article that we published on the in June 2016. It’s a known fact that traditional radio and TV stations usually make money through advertising revenue and subscription fees. In all forms of media (print included), the assumption has always been that media communications, as a service, were paid for by the consumer.
However, the Internet era has presented independent artists with a variety of platforms to ply their trade on, with some being free. This is one of the reasons why social media as a free service, has become the most popular method for musicians to market their music and content.
The big question is, if consumers are not directly paying to be entertained, how does one justify royalties to be paid out to musicians? This also leads to the question of whether, shouldn’t social media platforms such as Facebook and YouTube pay out royalties to musical content providers? Taking into consideration the latest streaming service that Facebook has incorporated for example, it points to the fact that Facebook is a fully functional business that is making money from content providers, and is a source of entertainment. No longer can Facebook be considered just a social networking and communication tool. To answer these questions, one should look at the possible income streams for a social media platform such as Facebook.
For the most part, Facebook would be making its money from advertising revenue. The platform allows for free registration and doesn’t require its users to pay a fee to register a profile, therefore foregoing the subscription model. On the platform’s side panel, one can notice little adverts that pop up. Businesses (including artist pages) have the option to boost/ promote their posts or pages as a mode of advertising in order to reach a wider audience on the platform. Due to the fact that Facebook allows the exclusivity of being able to load content on its platform for an artist to accumulate views/plays, that has left the debate open for musicians to be entitled to royalty payouts. Especially considering that each time a person clicks onto a link, it is an opportunity for Facebook to screen an advertisement to the audience.
As one can see, there is a clear justification for artists to earn royalties. However, it is Facebook’s platform and to use it, one must agree to their terms and conditions. Which means that at this given moment of going to press, royalties disbursements are not within Facebook compensatory plans for content providers. Remember, in business you get what you negotiate for and have to accept what you agree to.
Another aspect that contributes to social media platforms not paying out royalties to content providers is due to the fact that advertising is an ad hoc type of income on these networks. This means when companies choose to advertise on social media platforms, they are doing so for a particular reason and specific campaigns. This is not an ongoing constant cycle of money stream from one source at all intervals of the financial year. For a platform like Facebook to commit to royalties disbursements, it would first need to take stock of how strong their financial reserves are, over a period of some years, before making such a big commitment to content providers. In this era where production consistency by artists is key, services such as YouTube (who are powered by Google) award content providers who consistently produce quality content that draws an audience. For Facebook to keep up with this trend, they would have to reward artists to exclusively use Facebook to distribute content. This would mean Facebook would have to pay artists a higher rate compared to rival platforms, in order to keep the artists from using alternative platforms to distribute their content.
At the moment, for a platform like Facebook to compensate artists for provision of content, would require pressure from competitors. If another social media platform were to perhaps offer what Facebook is offering plus a compensation plan for artists, then in all likelihood Facebook would up its ante in that regard. Royalties, like most things in entertainment, are all based on demand and quantitative acceleration (for example per play of song). As for now, artists will just have to live with distributing their content for free on social media, ‘til alternatives present themselves. Royalties, like most things in entertainment, is all based on demand and quantitative acceleration (for example per play of song).