MBW Explains is a new series of analytical features in which we explore the context behind major 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 behemoth 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 “bewildered”.
SIAE claims that it was asked to accept a licensing deal proposed by Meta, “regardless of any transparent and shared evaluation of the actual value of the repertoire”.
Elaborating on this claim, SIAE tells MBW that “Meta presented a ‘take it or leave it’ economic offer, threatening to remove the content if the offer was not accepted by SIAE”.
SIAE says it didn’t accept this offer, and that Meta – which has apparently had no active license for SIAE repertoire since January 1, 2023 – “suddenly and unilaterally” started to remove its content.
“SIAE is being asked to accept Meta’s unilateral proposal, regardless of any transparent and shared evaluation of the actual value of the repertoire. This position, along with Meta’s refusal to share relevant information for a fair agreement, is evidently in contrast with the principles established by the Copyright Directive for which authors and publishers across Europe have strongly advocated.”
press statement issued by SIAE on Thursday (March 16)
SIAE says that Meta’s decision to remove its content applies to all works directly managed by SIAE, except those obtained through sub-licensing, and, as its a multi-territory license, is effective in all European countries and beyond the EU territory (excluding several countries, such as the US).
SIAE claims that it officially communicated to Meta that it was “[impossible] to accept the offer” because the Facebook parent “never shared the fundamental information necessary for a fair negotiation”.
SIAE adds that its “objections concern the fact that Meta offered a lump-sum value without providing the necessary information to SIAE to evaluate whether it was actually a fair compensation for the rights holders”.
SIAE claims that Meta’s explanation for its non-negotiable offer came down to “a budget limit”.
WHAT’S the background?
There’s a two-part background behind this story.
Part one: this news arrives at a time when the music industry’s relationship with Meta has been looking up.
Last summer, Meta announced that it was changing the way artists and music rightsholders were going to be paid from Facebook – and that it would be moving to a ‘revenue-share’ model for user-generated video content.
This is a policy many in the music industry are now calling for TikTok to implement, too.
Meanwhile, Meta has in the past year signed new multi-territory licensing deals with industry giants including Universal Music Group, Warner Music Group, and Kobalt Music Publishing.
Also: according to its latest Music In The Air report, Goldman Sachs estimates that Facebook contributed 29% of all ’emerging platform’ advertising revenues paid to the record industry in 2021.
That 29%, MBW calculates (based on Goldman/IFPI numbers), equated to just over $400 million.
Remember: That’s just for one year, and only covers money paid to the record industry (not the music publishing business)
Part two: we now turn to the financial health of Meta.
Meta is treating 2023 as what Mark Zuckerberg recently referred to as its “Year of Efficiency“.
This month, Meta announced a fresh round of layoffs, with 10,000 employees expected to lose their jobs in the cost-saving measure.
That followed another widespread lay-off at Meta announced in November, totaling 11,000 redundancies. Ergo, across two rounds of layoffs within the same six-month period, Meta is letting over 20,000 employees go.
Writing to Meta employees earlier this week, Zuckerberg said: “For most of our history, we saw rapid revenue growth year after year and had the resources to invest in many new products. But last year was a humbling wake-up call.
“The world economy changed, competitive pressures grew, and our growth slowed considerably. We scaled back budgets, shrunk our real estate footprint, and made the difficult decision to lay off 13% of our workforce.”
“We should prepare ourselves for the possibility that this new economic reality will continue for many years.”
Mark Zuckerberg, Meta
He added: “At this point, I think we should prepare ourselves for the possibility that this new economic reality will continue for many years. Higher interest rates lead to the economy running leaner, more geopolitical instability leads to more volatility, and increased regulation leads to slower growth and increased costs of innovation.
“Given this outlook, we’ll need to operate more efficiently than our previous headcount reduction to ensure success. In the face of this new reality, most companies will scale back their long term vision and investments.”
Meta’s certainly not the only tech giant to announce layoffs and other cost-saving measures of late of course, with Google and Microsoft both making significant reductions to their workforces.
But if Meta’s “budget limit” is a key reason behind its decision to pull SIAE’s repertoire from its platforms – and as it looks for cost-saving opportunities across its business – could its future music licensing costs be in the firing line?
Furthermore, could the SIAE fallout signal the start of tightened budgets having a knock-on effect on music licensing negotiations between other tech giants and rightsholders?
WHAT HAPPENS NOW?
Following the removal of SIAE’s repertoire from Meta’s platform, users in Italy and Europe will no longer be able to use music from this repertoire on either Facebook or Instagram.
SIAE tells us however that it “doubts Meta’s ability to completely remove the SIAE repertoire from all its platforms”.
What that means in practice is that, with no active licensing agreement in place, any music represented by SIAE that’s used on Facebook and Instagram going forward will be unlicensed. (Expect SIAE to issue a rash of takedown requests as and when this happens.)
The blow-up between SIAE and Meta in Italy has already caught the attention of the global music publishing community.
On Friday (March 17) ICMP – the trade body representing the music publishing industry worldwide including the major publishers, Ununiversal Music Publishing, Sony Music Publishing and Warner Music Publishing – weighed into the dispute.
ICMP Director General John Phelan said in a statement: “The goals of the Italian and European music sector are straightforward – to ensure companies such as Meta observe 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 companies such as Meta now obey the law, which is crystal clear thanks to the Italian government showing strong support for the new EU Copyright Directive. That law says that if companies like Meta and services like Facebook want to use others’ music, they must take a license and pay creators.
“What Meta is doing is using unsurprising strongarm tactics of demanding a ‘take it or leave it’ fee and when not happy, removing music to try and devalue the deal.”
John Phelan, ICMP
Added Phelan: “What Meta is doing is using unsurprising strongarm tactics of demanding a ‘take it or leave it’ fee and when not happy, removing music to try and devalue the deal.
“Today’s music catalogue spans more than 100 million music tracks, of more than 5,000 genres. A company like Meta refusing to pay the appropriate licensing fee for the use of these works impacts the livelihoods of millions of creators and music professionals.”
The Independent Music Publishers International Forum (IMPF) also weighed in, calling the move “nothing short of a bullying tactic used to force SIAE to accept a one-sided proposal that disregards any reasonable, shared evaluation of the value of music”.
“Meta’s move is nothing short of a bullying tactic used to force SIAE to accept a one-sided proposal that disregards any reasonable, shared evaluation of the value of music.”
Independent Music Publishers International Forum
IMPF added: “Furthermore, Meta’s refusal to share relevant information to establish a fair agreement is in direct contrast with the principles established by the Copyright Directive, which has been strongly advocated for by authors and publishers across Europe.”
The question now is, will this criticism from the music publishing business be enough for negotiations to result in an agreement between Meta and SIAE?
A FINAL THOUGHT…
This isn’t the first time a tech giant has fallen out with the music industry in a territory outside the Top 10 major music markets in recent weeks.
If you’ve been following our coverage of ByteDance-owned video platform TikTok over the past few months, you’ll remember that TikTok is currently trying to prove that it doesn’t need major label music on its platform in Australia.
In February, TikTok started restricting access to some music in Australia – effectively ‘muting’ some major record company-signed tracks on existing videos –in what TikTok claims to be a “test” by ByteDance to see how it affects user behavior.
MBW’s sources tell us that TikTok is aiming to use the results of its test in Australia in its licensing negotiations with the record companies.
Could Meta’s alleged refusal to negotiate a higher licensing fee with SIAE – and the tech giant’s decision to remove SIAE’s content from its platform – also be an experiment that it’s planning to replicate elsewhere?
Interestingly, within the statement issued by ICMP’s John Phelan today, he said that Meta’s “strongarm tactics” are “not new” and that “they were tried in France, Australia, Denmark, Canada and now Italy”.
He added: “They failed in these other countries and, they will not be allowed to succeed in Italy.”Music Business Worldwide