🥊 Facebook’s Battle With The Music Industry

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What’s up everyone?

Kobalt Music Group- one of the biggest music publishing houses in the world, with over 700,000 songs in its catalog and home to artists such as Paul McCartney, The Weekend, Childish Gambino, Diplo, Foo Fighters and Marshmallow just sent out a memo to artists declaring that they’ll be pulling all its songs from Facebook and Instagram.

In case you’re confused with the difference between a Record Label and a Music Publishing Company, here’s a blog which breaks it down well

Why would Kobalt Music Group do that?

According to the memo, Kobalt’s existing US licensing deal with Meta has expired — and the two parties have failed to reach a new agreement.

“Over the course of several months, we’ve worked diligently and in good faith to come to an agreement covering a new license for Kobalt’s repertoire”

“Unfortunately, fundamental differences remained that we were not able to resolve in your best interests , and as a result Kobalt’s repertoire is in the process of being removed from Meta’s services, including Facebook and Instagram, in the United States.”

Kobalt’s Memo to its stakeholders and artists

At this point you must be wondering, how does this music company hold so much leverage such as to bring the mighty Facebook on its knees for license of the music it has rights to?

Well, in the music publishing business, Kobalt is no spring chicken 😤

Home to some of the biggest artists in the world, it estimates that the songwriters on its roster are behind over 40% of the Top 100 tracks and albums in any typical week in both the UK and US 🤯

Kobalt Is Not The Only Music Company Giving Facebook A Headache 🤕

Earlier this week, Swedish Music Production company- Epidemic Sound, slapped Meta with a $142 Million lawsuit for infringement of copyrights, for using music owned by the company on Facebook and Instagram.

Epidemic Sound is described in the filing as the owner of “a catalog of over 38,000 top quality music works in over 160 genres, for use in video content, television and film productions, podcasts, music streaming platforms and other media”.

The company, founded in 2009, and led by co-founder and CEO, Oscar Höglund, was given a $1.4 billion valuation in March last year when it took on a $450 million funding round.

Epidemic Sound enables creators to access music for their creative projects

In the lawsuit, Epidemic Sound did not hold any punches when describing its exact grievance with Meta’

“Meta has refused to enter into a license with Epidemic, even though Meta has done so with many other rights holders.

“Perhaps Meta is hoping to get away with it for as long as possible. Perhaps Meta is hoping that it will intimidate a company like Epidemic into bowing to Meta rather than incurring the disruption and expense of a lawsuit.

Meta is wrong.”

I don’t know about you but ending a sentence with ‘Meta Is Wrong’ sounds like the lawsuit equivalent of Roman Emperor Commodus giving a thumbs down to gladiators in the Colosseum.

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According to Epidemic Sound’s lawsuit, Meta’s alleged “unlawful conduct” has resulted in more than “80,000 new instances of theft of Epidemic’s works per day”.

Elsewhere in the filing, Epidemic claims that it learned that Meta “has been storing, curating, reproducing, and distributing Epidemic’s music without authorization, offering Epidemic’s music for free without proper attribution or license”.

Epidemic claims that Meta is offering its works through its own music library “for any of its users to use, including to download, stream, or incorporate into video content, for free, without license or other authorization”.

Why Is Facebook Suddenly Under Fire?

When it comes to paying the music industry, Facebook ranks right up there among the top digital platforms 🔝

According to its latest Music In The Air report, Goldman Sachsestimates that Facebook contributed 29% of all ‘emerging platform’ advertising revenues paid to the record industry in 2021.

That 29%, according to Music Business Worldwide, equated to just over $400 million.

Facebook pays the most to the Music Industry in terms of licensing fees

Last week, we spoke about TikTok and its controversial payout mechanism to artists that does not take into account the actual views on its platform, and typically gets into license deals with Record Labels for a fixed sum of money.

Turns out Facebook is pretty much using the same playbook to deal with the Music Industry.

By de-coupling the license fee they pay right holders from the actual consumption of music on its platform, Facebook is not compensating artists based on the views their songs get on its products like Instagram Reels.

And this isn’t very thrilling for major Labels and Publishers, as seen with the recent examples of Kobalt Music and Epidemic Sounds.

What’s The End Game Here?

Even though the Music Industry (read Labels & Publishers) has largely benefitted from Social Media platforms using music and the licensing money that is generated from it, it suddenly has become a question of the tail wagging the dog.

What do I mean?

The Music Industry’s argument lies in the fact that platforms like Facebook and TikTok are riding off the back of music created by artists and driving their own growth, while the platforms stake claim to the argument around artists and songs becoming more discoverable because of Reels and TikTok videos with such content going viral.

None of them are wrong though, right? This is exactly what has resulted is a stalemate 🤷‍♂️

It’ll be interesting to see how this tussle plays out, Kobalt Music generally has a history of being at the forefront of major changes in the Music Industry.

Is this a watershed moment in the battle between Social Media platforms and the Music Industry?

Watch this space for more on how this battle plays out 😉

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Originally published at https://incentify.substack.com on July 26, 2022.