Kobalt is pulling its 700,000 songs from Facebook and Instagram. Is the music business headed for a historic crisis with Meta?

MBW joked the other day that the global music business had gotten a bit “cozy” this summer, with a distinct lack of companies (publicly) falling.

Please, faithful reader, allow us to erase this idea from the record.

Today (July 24), MBW confirmed this Kobalt Music Publishing – house a 700,000 songs – is pulling its entire catalog from Facebook and Instagram in the US.

Why is Kobalt taking this action?

According to a memo sent to Kobalt writers and partners yesterday (July 23), obtained by MBWKobalt’s existing US license agreement with Meta (parent company of Facebook and Insta) has expired and the two sides have not reached a new agreement.

“For several months, we have worked diligently and in good faith to reach an agreement covering a new license for Kobalt’s repertoire,” reads the note (which you can see in full below).

“Unfortunately, there have been fundamental differences that we have not been able to resolve in your best interest, 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.”

The note adds: “We’ve always stood up for songwriters first, and we’re proud to continue to do so. We remain fully committed to reaching an agreement with Meta.”

Kobalt’s decision to pull its catalog has ramifications far beyond its own company.

Kobalt likes to be the composer editor behind 40% of the top 100 tracks and albums in any typical week in both the UK and US.

The removal of Kobalt’s publishing catalog will therefore inevitably affect a wide range of hits distributed/signed to the three major labels, not to mention the various independent distributors/labels worldwide.

Interestingly, today’s news comes just days after another prominent music rights holder: the Valued at $1.4 billion Epidemic Sound in Sweden: Filed a lawsuit against Meta in the US, claiming “unauthorized use” of his works on Facebook and Instagram “is rampant.”

The epidemic demands damages greater than 142 million dollars of Meta due to this alleged infringement.

Epidemic’s complaint (which you can read in full here ) reads: “Meta has refused to sign a license with Epidemic, even though Meta has done so with many other rights holders.

“Maybe Meta hopes to get away with it for as long as possible. Maybe Meta hopes it will intimidate a company like Epidemic into bowing to Meta rather than incurring the disruption and expense of a lawsuit. The meta is wrong.”

After Epidemic’s lawsuits, and now the confirmation of Kobalt’s copyright withdrawal from Meta, some obvious questions begin to arise:

  • What’s behind Kobalt’s refusal to sign a new deal (so far) with Meta? It could have to do with the quality of data its composers are receiving, the amount of money are their composers receiving, or both?
  • Could more big-money lawsuits follow as a result, pitting the wider music business against one of tech’s most powerful giants?
  • Will other major music rights holders imitate Kobalt’s refusal to sign a new deal with Mark Zuckerberg’s company?
  • What will be the consequences if hits created or co-created by Kobalt writers, now without an official license for use on Facebook and Insta, continue to be published on these platforms?

One thing we know for sure: A batch money is at stake here.

According to his latest Music in the air report, Goldman Sachs estimates that Facebook contributed 29% of all “emerging platform” ad revenue paid to the record industry in 2021.

this 29%calculates MBW (based on Goldman/IFPI numbers), equivalent to little more 400 million dollars.

Remember: this is only for one year and only covers money paid to the record industry (not the music publishing business).

Sources tell MBW that Meta currently continues to pay for the music business through upfront advances that are not tied to precise music consumption on its platforms.

Calls seem increasingly strong for Meta (as well as TikTok) to change this payment model to a “revenue share” system, under which music rights holders would receive a direct share of the advertising revenue that generated their copyright on the platform.

Denis Ladegaillerie, CEO of Believe, discussed this topic in an interview earlier this month.

“Yes [we want to see a Content ID equivalent from Meta], and this is something we expressed to them. But I would also say with Facebook and Instagram we’ve seen better data quality [than from other social media services].”

Denis Ladegaillerie, Creieu

We asked him if he was “getting impatient” with Facebook’s failure to launch a direct equivalent to YouTube’s Content ID system for music rights holders.

He replied: “Yes, and this is something that we have expressed to you. But I would also say with Facebook and Instagram we’ve seen better data quality [than from other social media services].

“We’re very happy with that. And the level of monetization [paid out, versus the consumption happening] on Facebook/Instagram is aligned with what it should be when you look at usage.

“Also, we can see reports on track usage [account to] artists, as we should do”.Worldwide music business

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