Show Me the Money - Independent Artists v. Social Media Sites

by Kimberly Korn

May 2008

© 2008 Hrbek Law LLC.  All Rights Reserved.

On March 13, 2008, AOL announced it was acquiring the social networking site Bebo for $850 million.  Bebo combines community interaction and entertainment to enable its users to create, discover and share content.  As a result of the AOL deal, many people walked away with a lot of money.  Notably absent among the beneficiaries were the musicians who upload music to the site.  Should a company such as Bebo pay musicians who upload original works to the site some form of royalties for the privilege?

In a recent NY Times Op-Ed article, artist Billy Bragg explained that he had complained to MySpace that the site was denying unsigned musicians residual rights from original songs posted on Myspace. As a result, MySpace changed its terms and conditions to state clearly that all rights to material appearing on the site remain with the originator.

The founders of Bebo have said they want their site to work for musicians and it is the musicians’ interests that are held first and foremost.  Bebo, however, has decided against paying royalties to the musicians even though their music draws subscribers and advertising.  Bragg argues that musicians who post on Bebo are similar to investors in a start-up in that their investment is their free music.  Once the company, that formerly had no liquid assets, starts making money, musicians deserve a return for their sweat equity.

Additionally, the argument that sites such as MySpace and Bebo are doing musicians a favor by promoting their work doesn’t seem to cut it for some as performing rights organizations such as ASCAP, BMI, or SESAC do pay artist’s royalties when their music is promoted on the radio, but not for their digital equivalents.

The problem, however, is that Myspace and Bebo were not created as a means of marketing musicians, but a means of social networking.  The service of these sites in providing to musicians is to offer them exposure.  In fact, the term “musicians” is used here loosely, as anyone can post music on these sites.  The likelihood of most of them making it on the radio is very slim, thus their bargaining power at this point is nonexistent.  Radio stations, on the other hand, pay royalties because the songs aired are by musicians who have a track record or whom their labels believe will be successful.

In practice, both social networking sites and musicians gain from their relationship with one another.  The sites clearly gain in value because of the high quality original content that the artists provide.  Musicians get visibility on these sites they might not otherwise be able to obtain. If a musician posts a song on a site that ends up increasing their exposure, this may ultimately result in interest from a record label.  The musician does not owe anything to the website that gave them the platform nor would they want to pay any royalties to the website where the song was posted, even though but for the exposure the record deal may never have happened.

Both social networking sites and musicians are looking for the same thing, exposure.  The way things work today, if that exposure results in a buy-out for the networking site or a record deal for the musician, neither pays the other for the help they received from one another for their commercial success.  If artists want residual rights from  networking sites of which they posted original songs, then they may need to consider sharing the proceeds of a successful record deal with the networking sites that got the label's attention.  In the end, the status quo may be simpler for all parties.