MBW Explains is a new series of analytical features in which we explore the context behind key music industry talking points – and suggest what might happen next…
This week, The Italian Society of Authors and Publishers (SIAE)which represents tens of thousands of songwriters in Italy, issued a press release announcing that US tech giant Meta had decided to “exclude” its music repertoire from services such as Facebook.
According to SIAE, the decision to remove its members’ songs has left Italian authors and publishers “perplexed”.
SIAE says it was asked to agree to a licensing deal offered by Meta, “regardless of any transparent and shared assessment of the real value of the repertoire.”
Elaborating on this claim, SIAE tells MBW that “Meta presented an economic ‘take it or leave it’ offer, threatening to remove the content if the offer was not accepted by SIAE”.
SIAE says so doesn’t accept this offer, and that Meta – which apparently no longer has an active license for the SIAE directory since January 1, 2023 – has “suddenly and unilaterally” started removing its content.
“The SIAE is asked to accept Meta’s unilateral proposal, regardless of any transparent and shared assessment of the real value of the directory. This position, together with Meta’s refusal to share relevant information for a fair deal, is obviously in contrast to the principles established by the Copyright Directive for which authors and publishers across Europe have strongly pleaded.
press release published by the SIAE on Thursday 16 March
SIAE indicates that Meta’s decision to remove its content applies to all works directly managed by SIAEwith the exception of those obtained by sublicense, and, as a multi-territory license, is effective in all European countries and beyond the territory of the EU (excluding several countries, such as the United States). United).
SIAE claims to have officially communicated to Meta that it was “(impossible) to accept the offer” because Facebook’s parent company “never shared the fundamental information necessary for a fair negotiation”.
SIAE adds that his “oThe objections relate to the fact that Meta offered a lump sum value without providing the information necessary to SIAE assess whether it was indeed fair compensation for the rights holders.
SIAE says Meta’s explanation for its non-negotiable offer came down to “a budget limit.”
WHAT is the background?
There is a two-part background behind this story.
Part one: This news comes at a time when the music industry’s relationship with Meta is improving.
Last summer, Meta announcement that it was changing how artists and music rights holders were going to be paid by Facebook – and that it would move to a “revenue share” model for user-generated video content.
It’s a policy that many in the music industry are now asking TikTok to implement as well.
Meanwhile, Meta last year signed new multi-territorial licensing agreements with industry giants including Universal Music Group, Warner Music Group and Kobalt Music Publishing.
Also: according to his latest music in the air report, Goldman Sachs believes that Facebook contributed 29% of all “emerging platforms” ad revenue paid to the recording industry in 2021.
This 29%calculates MBW (based on Goldman/IFPI figures), which works out to a little more $400 million.
Remember: this is only for one year and only covers monies paid to the recording industry (not music publishing)
Second part: Now let’s move on to Meta’s financial health.
Meta is treating 2023 as what Mark Zuckerberg recently called its “Year of Efficiency.”
This month, Meta announced a new round of layoffs, with 10,000 employees expected to lose their jobs as part of the cost-cutting measure.
This followed another widespread layoff at Meta announced in November, totaling 11,000 dismissals. Ergo, out of two rounds of layoffs in the same six-month period, Meta leaves more than 20,000 employees go.
Writing to Meta employees earlier this week, Zuckerberg said, “For most of our history, we have experienced rapid revenue growth year after year and had the resources to invest in many new products. But the last year has been a lesson in humility.
“The global economy has changed, competitive pressures have increased and our growth has slowed significantly. We cut our budgets, reduced our real estate footprint and made the difficult decision to lay off 13% of our workforce. »
“We must prepare for the possibility that this new economic reality will continue for many years to come.”
Mark Zuckerberg, Meta
He added: “At this point, I think we have to prepare for the possibility that this new economic reality will continue for many years. Higher interest rates lead to a leaner economy, greater geopolitical instability leads to greater volatility, and increased regulation leads to slower growth and higher innovation costs.
“Given this outlook, we will need to operate more efficiently than during our previous downsizing to ensure success. Faced with this new reality, most companies will scale down their long-term vision and investments.
Meta certainly isn’t the only tech giant to announce layoffs and other cost-cutting measures lately, with both Google and Microsoft making significant headcount reductions.
But if the “budget limit” of Meta East one of the main reasons for its decision to remove SIAE’s repertoire from its platforms – and as it looks for cost-cutting opportunities across its business – its future music licensing costs could- they be in the line of fire?
Moreover, could the SIAE fallout signal the onset of budget crunches having a ripple effect on music licensing negotiations between other tech giants and rights holders?
WHAT HAPPENS NOW?
Following the removal of the SIAE repertoire from the Meta platform, users in Italy and Europe will no longer be able to use music from this repertoire on Facebook or Instagram.
SIAE tells us, however, that he “doubts Meta’s ability to completely remove the SIAE repertoire of all its platforms”.
This means in practice that, without an active license agreement in place, any music represented by SIAE that is used on Facebook and Instagram in the future will be unlicensed. (Expect SIAE to issue a series of withdrawal requests as this happens.)
The explosion between SIAE and Meta in Italy has already caught the attention of the global music publishing community.
On Friday March 17, the ICMP – the trade body representing the music publishing industry worldwide, including major publishers, Ununiversal Music Publishing, Sony Music Publishing and Warner Music Publishing – weighed in on the dispute.
ICMP chief executive John Phelan said in a statement: “The goals of the Italian and European music industry are simple: to ensure that companies such as Meta meet their obligations to pay musicians for the use of their work. on services such as Facebook”.
“Today the music publishing industry is negotiating to ensure that companies such as Meta now comply with the law, which is abundantly clear thanks to the Italian government which has strongly supported the new European copyright directive. This law states that if companies like Meta and services like Facebook want to use other people’s music, they must license and pay the creators.
“What Meta is doing is using no-surprise heavy-handed tactics to demand a ‘take it or leave it’ fee and, when they’re not satisfied, remove the music to try to devalue the deal.”
John Phelan, ICMP
Phelan added: “What Meta does is use tough no-surprise tactics to demand a ‘take it or leave it’ fee and when not happy remove the music to try and devalue the deal. .
“Today’s music catalog includes over 100 million music tracks, from over 5,000 genres. A company like Meta that refuses to pay the appropriate licensing fees for the use of these works is impacting the livelihoods of millions of creators and music professionals.
The International Independent Music Publishers Forum (IMPF) also weighed in, calling the move “nothing less than a bullying tactic used to force SIAE to accept a unilateral proposal that disregards any reasonable assessment and shared value of music”.
“Meta’s decision is nothing less than a bullying tactic used to force SIAE to accept a unilateral proposal that disregards any reasonable and shared assessment of the music’s value.”
International Forum of Independent Music Publishers
The IMPF added: “Furthermore, Meta’s refusal to share information relevant to establishing a fair deal is in direct contrast to the principles established by the Copyright Directive, which has been strongly advocated by the authors. and publishers across Europe.”
The question now is whether these criticisms of the music publishing industry will be enough for the negotiations to lead to an agreement between Meta and SIAE.
A LAST THOUGHT…
It’s not the first time a tech giant has fallen out with the music industry over territory outside the Top 10 of major music markets in recent weeks.
If you’ve been following our coverage of the ByteDance-owned TikTok video platform over the past few months, you’ll recall that TikTok is currently trying to prove that it doesn’t need major label music on its platform by Australia.
In February, TikTok began restricting access to certain music in Australia – ‘disabling’ some major label-signed tracks on existing videos – in what TikTok claims is a ‘test’ of ByteDance to see how it affects user behavior.
MBW’s sources tell us that TikTok aims to use the results of its test in Australia in its licensing negotiations with record labels.
Meta’s alleged refusal to negotiate higher licensing fees with SIAE – and the tech giant’s decision to remove SIAE content from its platform – Also be an experience he plans to replicate elsewhere?
Interestingly, in the statement released today by ICMP’s John Phelan, he said Meta’s “tough tactics” are “not new” and that they “have been tried in France, Australia, Denmark, Canada and now Italy”.
He added: “They failed in those other countries and they won’t be allowed to succeed in Italy.”The music industry around the world