UK ministers call for music streaming reform as artists 'lose out'

London, UK - July 31, 2018: The buttons of the music streaming app Spotify, surrounded by Podcasts, Apple Music, Facebook and other apps on the screen of an iPhone.
At the moment, Spotify is reported to pay between £0.002 and £0.0038 per stream, while Apple Music pays about £0.0059. Photo: Getty

MPs have called for an overhaul of music streaming to fairly reward performers and creators who are “losing out”.

Following a six-month wide-ranging inquiry, ministers are urging for a “complete reset” of the market to stop poor returns, or artists being frozen out of payments altogether.

Currently performers, songwriters and composers receive only a small portion (16%) of streaming revenue due to poor royalty rates and the lower valuation of song-writing and composition, compared to the value of a song’s recording.

A report into the economics of music streaming by the Department for Digital, Culture, Media & Sport (DCMS) found that comprehensive reform of legislation and further regulation was needed as consumers continued to access music multimedia online at record levels.

The committee said there were fundamental problems within the recorded music industry and the balance for songwriters, performers and composers needed redress. MPs said that artists must be given a legal right to a fairer share of revenues, asking for an introduction to a right to equitable digital music remuneration.

Read more: Spotify Losing Market Share To Faster-Growing Subscription Music Rivals

Although performers have a right to equitable remuneration where a commercially published sound recording is rented (broadcast via the radio, or played in public), streaming exploits the “making available” right for recordings under UK copyright law.

Services that host user-generated content gain significant advantage on copyright, MPs added, with YouTube emerging as a dominant player.

At the moment, Spotify (SPOT) is reported to pay between £0.002 and £0.0038 per stream, while Apple (AAPL) Music pays about £0.0059. YouTube pays the least – about £0.00052 (or 0.05 pence) per stream.

The report warned of “deep concerns” about the unassailable position of the major music companies with a call for the Competition and Markets Authority (CMA) to examine whether competition in the recorded music market is being distorted.

The DCMS said that although consumers enjoy music that is historically cheap, more personalised and more readily available than ever before, streaming’s short-term pricing structure puts music at risk in the long-term.

DCMS survey results regarding remuneration from streaming. Chart: DCMS
DCMS survey results regarding remuneration from streaming. Chart: DCMS

“While streaming has brought significant profits to the recorded music industry, the talent behind it - performers, songwriters and composers - are losing out,” chair of the DCMS committee Julian Knight said.

“Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do.”

He added: “We’ve heard of witnesses being afraid to speak out in case they lose favour with record labels or streaming services. It’s time for the government to order an investigation by the Competition and Markets Authority on the distortions and disparities we’ve uncovered.”

The move, which accused the three major labels, Sony (SONY), Universal (UVV) and Warner Music (WMG) of a “lack of clarity”, was welcomed by businesses and artists in the sector.

"This is an impressive report from the DCMS Committee. In a short space of time our members of parliament have been able to distil why the songwriter and artist are not being remunerated properly with some accuracy and we both applaud and support their efforts,” Merck Mercuriadis, founder of Hipgnosis Songs (SONG.L) and The Family (Music) Limited, said.

“This is essential to ensure that the unhealthy control that the major recorded music companies have over streaming negotiations is addressed and to expose the fundamental flaws that exist within the music industry. Our wish is that this will lead to songwriters being paid fairly and equitably and in a manner that recognizes that without the song we have no music industry.”

Read more: British music festivals face second ‘lost summer’

The music industry, like many others, has been hit hard by the coronavirus pandemic last year, with some 90% of UK festivals being cancelled to prevent the spread of COVID-19, while 93% of grassroots music venues faced permanent closure.

A quarter of the music industry workforce, including 42% of respondents to a Musicians’ Union survey, also did not qualify for the self employed income support scheme, and producers and sound engineers lost an average of 70% of their income, the DCMS warned.

Nile Rodgers, songwriter, producer and artist, said: "The way the system is set up now, with all of these relationships between the labels under NDA, we can no longer see. We don’t even know what a stream is worth. Does anyone?... Can anyone tell me what a stream is actually worth? You can’t and there is no way you could even find it."

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