PLAYS AND PAY

THE STORY OF THE UK’S PARLIAMENTARY INQUIRY INTO MUSIC STREAMING ECONOMICS

From the earliest days of Spotify there have been news stories about artists and streaming royalties, but in 2020 they came to a head – first with musician Tom Gray’s Broken Record campaign calling for industry change, and then with the parliamentary inquiry into music streaming economics which that campaign sparked.

Music Ally has been reporting on the campaign, the inquiry and the developments around them throughout, in our daily news bulletin and online coverage. In this report, we have gathered that coverage together. It’s the story of how Gray’s campaign gathered momentum, and how an inquiry that many people expected to slam streaming services ended up focusing more on labels and industry structures.

We’ve made this publication free for Music Ally subscribers. If you have received a copy and are interested in becoming a subscriber, you can find more details on that here, or by emailing our commercial director Anthony Churchman. The cover image is a photo by Simon Rae sourced on Unsplash. And (as you may have noticed) whenever you see red text, it should be a clickable link!

INTRODUCTION

“While the industry’s ability to infight like a sack of furious badgers remains unparalleled, the inquiry has

provided much of the information it needs to plot a constructive path forward”

~ Music Ally, July 2021

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This is a long book: more than 77,000 words of coverage all-in-all. While you certainly can read it cover to cover, if you’d rather start by jumping to some of the key pieces, here is a quick guide.

CONTEXT

p10 Our analysis of how streaming services could pay musicians morep25 An interview with Tom Gray about the aims of Broken Recordp41 Spotify CEO talks artist earnings – and sparks an almighty rumpusp160 An interview with BPI boss Geoff Taylor making the case for labelsp171 Our analysis of Spotify’s website promising transparency on payouts

HEARINGS

p83 Artists and equitable remuneration take center stage in the first hearingp97 The three bosses of the major labels’ UK subsidiaries give evidencep119 Independent labels (and their representative body) take their turnp127 The BPI and MPA session focusing on labels and publishersp132 ‘ The Ivors Academy and Musicians’ Union give evidencep136 YouTube and SoundCloud testify in the first DSPs sessionp144 Spotify, Apple Music and Amazon Music testify in the secondp181 Ministers give evidence with their responses to the inquiry so far

AFTERMATH

p214 The inquiry’s report comes out, and we analyse its recommendationsp224 Then the music industry’s representative bodies offer their responses

TL;DR?

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Hindsight note: This was the first time Music Ally wrote about Tom Gray, the musician whose Broken Record campaign would later spark the UK’s streaming inquiry. A couple of years before the tweetstorm that kicked off that campaign, he was already voicing his criticism of music industry structures.

"Cancel the unrecouped debts for all artists that were profitable to them and set the remaining debts at whatever the actual loss to the company was. I think it’s morally justifiable anyway, but seeing as how you’ve just made billions, and these artists are still not making a single penny from their work. It’s hard not to see the logic..."

That's musician Tom Gray speaking (or to be specific, tweetstorming) about his ideas for what major labels should do next following any windfall from selling their equity in Spotify. Gray's band Gomez were signed to a major label – they're currently touring the 20th anniversary of their 'Bring It On' album – and his experience has led him to brainstorm a new policy for the majors.

"The majors are all making huge profits from the sales of their Spotify shares and they say they will distribute monies to artists based on the number of streams they’ve had," wrote Gray. "However, this is flawed. The ability of the companies to buy those shares in the first place (and at such a reduced cost) was based *entirely* on the leverage of owning all the existing copyrights going back 70 years. Spotify needed the owners of most existing copyrights on board or their model couldn’t work."

He went on to argue that a number of those bands remain under contracts that are more in the labels' favour than theirs.

"An example: a band had a sub-20% royalty and are given £200k (for recording and living); another £100k was spent on marketing; they sold 200k copies; the company made around £700k profit; the artist is still £100k in debt. These deals abounded and, when you speak to most “legacy” artists, you’ll find that most of us have the same story to tell."

AFTER SPOTIFY WINDFALL, SHOULD MAJORS CANCEL LEGACY ARTISTS'

UNRECOUPED DEBTS?

23 MAY 2018

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Hence his idea for the cancellation of unrecouped debts for artists who were profitable to those labels. Gray added that such a policy could cut major labels’ accountancy fees; reduce the number of expensive audits; and give artists who haven’t been fully behind streaming “a stake in the game”.

There is a precedent for this from the independent-labels world in the form of Beggars Group, whose digital boss Simon Wheeler told Music Ally last November about how it had tackled the unrecouped-artists issue as streaming took hold: that for older catalogue-artists who hadn’t released a new record for a certain amount of time, if they had an unrecouped balance, it would be written off.

"So that when the streaming royalties came through, they actually got paid something, rather than it just going to offset the unrecouped balance,” explained Wheeler, adding that the total amount of the write-off was “a really big number” – albeit one he wasn’t able to share.

“Martin said he’d made up his mind that he was never going to get that money back, so it was kind of gone for him. And then because he has very much an artist-friendly take on things, that was his way of saying now there’s actually some money coming through from listening, we are going to pay that through on a very generous streaming rate,” said Wheeler. “Hopefully it’s going to make some difference to a number of our artists.”

Could it also make a difference to bands like Gomez and other major-label legacy acts? There are likely to be plenty of arguments against Gray's idea – and needless to say, such a write-off could be a really big number – but as is often the case, the debate could at least highlight other ways of approaching this issue.

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Hindsight note: *coughs awkwardly* Music Ally didn’t actually cover the initial #BrokenRecord tweetstorm, although we did refer to it here shortly afterwards, as Gray began his campaign in earnest with an interview setting out his thoughts.

Musician Tom Gray, who's also on the boards of PRS for Music and the Ivors Academy, has been raising a rumpus on Twitter recently with a campaign hashtagged #BrokenRecord, focusing on the inequities of streaming and the modern music business for artists and songwriters.

Now he's been explaining the motivation behind the campaign to music website God Is In The TV. Among his suggestions: "The platforms and major labels need to come to the table with creators and re-negotiate the division of payment. It most probably will require a 25% price rise across the board in the streaming market," said Gray.

He later returned to that theme. "Stop saying it’s price-sensitive; Kids pay £8 for a skin in Fortnite and we can’t ask for £12.50 for the entirety of all recorded music? Give me a break."

Gray's other suggestions include treating streaming – or at least elements of it, like programmed playlists – more like broadcasting in terms of how the royalties are distributed. He's also keen to find out why Deezer hasn't been able to launch its trial of user-centric payouts yet.

"Whenever platforms try to progress things they get shut down by one of the major labels. I direct you to look into what happened to Deezer’s attempts to introduce Usercentric (where your money goes to your music) into their payment model. I’d be amazed if you can get a straight answer..."

TOM GRAY CALLS FOR 25% RISE FOR STREAMING SUBSCRIPTIONS

30 APRIL 2020

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Hindsight note: Recorded music industry figures are a really important backdrop to the debate about artist royalties. Streaming rescued the industry from what had seemed like an unstoppable decline, but every announcement of new figures showing the industry’s bouncebackability increased agitation among those artists who felt they weren’t seeing a fair share of this growth...

Music industry body the IFPI was due to publish its annual Global Music Report in March, with data on worldwide recorded music revenues in 2019. The launch was postponed due to the Covid-19 pandemic, but the report has now been published today. The headline figure: global recorded music revenues grew by 8.2% to $20.2bn in 2019, fuelled by streaming, which for the first time accounted for more than half of the total. In fact, it was 56.1% with $11.4bn of revenues.

That streaming income grew by 22.9% in 2019, including a 24.1% increase in paid subscriptions, which is now 42% of the total. The IFPI says that there were 341 million 'users of paid subscriptions' at the end of 2019, up by 33.5% year-on-year. That includes non-paying users of family plans.

The overall total is the highest since 2004, when global revenues were $20.3bn. Streaming's growth once again more than made up for the decline in physical music sales (down 5.3% in 2019) and download sales and other digital revenues (down 15.3%).

The IFPI says that global performance rights revenue fell by 3.6% in 2019, but said this was "largely attributable to one-off settlements in 2018" which spiked that year's total. Meanwhile, sync revenues from advertising, film, games and TV grew by 5.8%. Understandably, the IFPI isn't crowing about the growth stats, given the current coronavirus situation. "Importantly, the strong foundation we built over the past several years helped deliver growth in 2019," said chief executive Frances Moore.

"While the numbers we are reporting are a snapshot of the business last year, the COVID-19 pandemic presents challenges unimaginable just months ago. In the face of a global tragedy, the music community has united behind efforts to support those

GLOBAL RECORDED MUSIC INDUSTRY GREW BY 8.2% IN 2019

4 MAY 2020

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affected. This is a critical and ongoing priority as our member record companies work to continue to support the careers of artists, musicians and employees around the world." Here are some other talking points from the report:

• Growth has stopped accelerating. According to past IFPI reports, global revenues grew by 3.2% in 2015; 5.9% in 2016; 8.1% in 2017; and 9.7% in 2018, before the 8.2% growth in 2019 revealed in today's report. In absolute terms, that's still $1.5bn of additional revenue (compared to $1.7bn in 2018) so nobody's panicking.

• Keep an eye on the deceleration of streaming revenues however: their growth was 60.4% in 2016, 41.4% in 2017, 34% in 2018 and now 22.9% in 2019. Within that, subscription revenues have seen their growth move from 45.5% in 2017 to 32.9% in 2018 and now 24.1% in 2019. Again, this is a deceleration in growth NOT a decline. It's just a reminder that now's a good time to be continuing discussions, as an industry, about how and where growth might be coming from in the next few years, and what needs to be done to make it happen.

• (Now the caveat: one thing we know about last year's Global Music Report, covering 2018's figures, is that there was a big spike in revenues calculated for China – up by 79.6% from $295.8m in 2017 to $531.3m in 2018 – based on actually capturing data from Chinese digital services for the first time. Of the 9.7% global growth measured by the IFPI that year, China thus accounted for just over 1.3 percentage points. Today, the IFPI said that China's market grew by 16% in 2020, so that played a part in the global deceleration.)

• Japan was the only one of the world's top 10 recorded music markets not to grow in 2019. It fell by 0.9%, with a 4.8% decline in physical sales carrying a bigger weight in what's still a largely physical market. Meanwhile, to answer a question from earlier this year about whether Germany had overtaken the UK as the world's third biggest (behind the US and Japan) market... Nope. The IFPI's list has the UK remaining in third place and Germany in fourth. The US market grew by 10.5%, the UK by 7.2% and Germany by 5.1%. China remains in seventh, and in fact the only change in the top 10 ordering is Australia and Canada switching places (eighth and ninth respectively in 2019).

• Breaking it down by regions: Asia grew by 3.4% in 2019 (dragged down by Japan – the region grew by 11.5% if it's excluded); North America grew by 10.4%; Europe by 7.2% – encouraging, as it only grew by 0.2% in 2018; Latin America by 18.9%; and

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Australasia by 7.1%. We haven't got the full report yet, with country-by-country figures, but it seems Africa and the Middle East are once again not included (although the report does include a case study of Warner Music Group's partnership with Chocolate City in Nigeria).

• The report includes some 2019 charts, but these were published already earlier in the year: Taylor Swift was the top artist; Billie Eilish's 'Bad Guy' the top track; and Arashi's '5x20 All the Best!! 1999-2019' the top album.

• Deezer's advert within the free version of the Global Music Report may be a talking point. "We're French. Being revolutionary is our thing," reads the ad, which promotes the streaming service's desire to launch a trial of 'user-centric' royalty payments in its homeland. "Help us make streaming fair. Support our UCPS Pilot in 2020." Industry gossip about why the pilot hasn't launched yet – and specifically which major label(s) might be declining to take part – has been buzzing in recent weeks.

• Rather than a focus on piracy or the 'value gap' – although as a follow-on from the latter debate – the report this year sets out "four pillars of fair marketplaces for music" from the music industry's perspective. They are: 'music's value should be recognised'; 'copyright frameworks should be clear and provide for legal certainty'; 'all parties should be free to agree the terms of their relationship'; and 'adequate tools should be available to prevent music from being made available illegally'. The Covid-19 crisis has made a lot of people forget that the European Union's member states are still implementing its recent copyright directive, but it's clear that the four pillars will be the focus for the IFPI's lobbying for how that implementation should be handled, as well as for the copyright modernisation it would like to see in other parts of the world.

• Remember that these reports measure recorded music, rather than the entire music industry. Former Spotify exec Will Page publishes an annual calculation of the 'value of the music copyright business' which includes publishing, but the unavoidable lag in collecting the data means that his figures for 2018 only came out in March this year (they showed the music copyright business was worth $30.1bn in 2018, up by 9.3% year-on-year). As for live music, consultancy firm PwC has predicted that live music will have generated $27.9bn in 2019, including just over $22bn from ticket sales and the rest from sponsorships.

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Now the IFPI report is out, we can compare its official figures with the unofficial ones published by research firm Midia Research in early March. It claimed that recorded music revenues grew by 11.4% to $21.5bn in 2019, with streaming up by 24% to $11.9bn. That means Midia is estimating $1.3bn more global revenues in 2019 than the IFPI is reporting, with Midia's total including $873m of 'artists direct' revenue – for artists without labels. It's fair to say that the IFPI and Midia hold differing opinions on how well those revenues are tracked in the official figures...

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Hindsight note: This article had been bubbling for a while, as we watched and wrote about the debate around artists and streaming royalties, and our frustration grew at how often it was boiled down simply to ‘Spotify should pay more’. This piece tried to explore constructively how that could happen. This was one of the Music Ally articles that was shared approvingly by people on opposing sides of the debate, which is hopefully a sign that we tackled the issues fairly!

Earlier this week, we covered the IFPI’s latest figures for global recorded music revenues, which grew by 8.2% in 2019. Artist rights group the Future of Music Coalition made an important point when it shared our story on Twitter:

“Remember, changes in gross revenues for any one income stream doesn’t tell you anything about distribution or about how individual workers (like musicians or songwriters) are faring. So while revenue is an important metric, it’s not a proxy for the health of the industry.”

It’s true. In 2019 the recorded music industry enjoyed its fifth consecutive year of growth, taking it nearly back to its 2004 level. Meanwhile, outside the recorded sector, publishers are also seeing their revenues grow, while collecting societies are regularly breaking their records for payouts.

All of this is being driven by streaming (and particularly by paid streaming subscriptions), yet this growth is accompanied by a resurgence in unrest from the musicians whose work has made that growth possible. Many are worried that streaming royalties aren’t providing a sustainable income.

The contrast between these fears and the rosy industry figures is sharpened now, during the Covid-19 pandemic, with the live music industry having shut down entirely in many countries, with an anticipated hit to public performance royalties to come.

Spotify is the lightning rod for this unrest, partly because it’s the biggest subscription service and the one most closely identified with the emergence of the music-streaming model; partly because memories are still fresh of it going public

SPOTIFY SHOULD PAY MUSICIANS MORE? LET’S TALK MORE ABOUT HOW

5 MAY 2020

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(current market cap: $27bn); and partly because its numbers (users, revenues, losses etc) are published every quarter.

This is why the debate about streaming royalties often gets boiled down to ‘Spotify should pay artists more’ – from petitions calling for the company to triple its payouts “immediately” to articles suggesting that ‘Spotify’s ‘tip jar’ is a slap in the face for musicians. It should pay them better‘.

This week, musician Tim Burgess (of the Charlatans, who’s also behind the excellent #TimsTwitterListeningParty co-listening movement) addressed Spotify directly on Twitter, suggesting that “we should look at how much you give to artists... It’s just not fair at the moment”.

This, plus the #BrokenRecord campaign being built by fellow British musician Tom Gray (of Gomez, but also the boards of PRS for Music and the Ivors Academy) show that for all the positive industry figures, many musicians still see a big problem with streaming, but also potential to solve it.

‘Spotify should pay artists more’ is a good rallying call, but it’s not a solution until you address the question of ‘how?’ That’s a discussion based around several more questions, which we’ve presented below. but first, some baseline framing of the debate:

A.Spotify doesn’t pay musicians

Bar a now-closed experiment with direct uploads, Spotify doesn’t pay artists or songwriters directly. It pays labels, distributors, publishers and collecting societies, and they then pay musicians.

It’s a crucial point, and only partly because musicians’ streaming earnings depend on the contracts with and calculation processes of those rightsholders and royalty collectors. It’s also important, because many of the changes that might boost those earnings require the agreement of these companies before they can happen.

B. Spotify doesn’t pay by the stream

This is really important: Spotify can’t triple the amount it ‘pays per-stream’ because that’s not how it pays out. Instead, it has a royalties pool (often described as 70% of its revenues, although it’s closer to 65%) that it pays out based on the share of streams on its service.

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You can turn that into a per-stream rate, as an artist, by dividing your royalties by your number of streams. That’s why you’ll see these figures in the press, based on data that an artist or label has shared with them.

(For example, artist-rights blog The Trichordist publishes a really useful annual chart based on figures from a mid-sized independent label – its 2019 figure for Spotify was $0.00348 per stream).

Anyway, the point is that these are post-payout calculations. Spotify doesn’t pay out $0.00348 per stream, so it can’t suddenly decide to triple that to $0.01044. To triple its payouts, it would either have to triple the percentage of its revenues that it pays out (to, er, 195%) or triple the size of the royalties pool itself.

C.It’s all about the pool – and how it’s divided

This is the key question to focus on: how Spotify can increase the size of its royalties pool. It’s been happening naturally, of course, as Spotify’s revenues have grown every year, but for the purposes of this debate, we’re talking about other ways to increase it.

The debate is also about whether there are ways to divide that royalties pool that are ‘fairer’ for musicians – both before the money leaves Spotify, and after it arrives at their rightsholders.

As we said, we’ve structured it as questions, because this article isn’t pretending to provide a set of neat answers. We’ve used ‘Spotify’ throughout to reflect its lightning rod status, but almost always you can read that as ‘streaming services’. Let’s crack on with it.

1. Should Spotify pay a higher percentage of its revenues out?

Spoiler: Spotify is never going to announce that it’s now paying 195% of its revenues out in royalties, however many people sign that petition. But could the company up its payout rate from 65%?

In some parts of the world, the percentages aren’t entirely within its control. In the US, the Copyright Royalties Board sets the percentage that on-demand streaming services pay out in mechanical royalties to publishers (and thus songwriters), and those were due to rise from 10.5% of a service’s revenues to 15.1% by 2022.

Spotify, along with Amazon, Google and Pandora, appealed against those new rates, which sparked fury among the US publishing community, which sees it as

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evidence that Spotify will fight any attempt to get it to pay out a higher percentage of its revenues as royalties.

Step outside that row though. If the appeal is lost (or hadn’t happened in the first place) and Spotify was paying more like 70% of its revenues out again, is that still too low? Why not 80% or even a Bandcamp-style 90%?

Critics will point to swanky offices and high salaries. Spotify will point to the amount it’s investing in its platform (more than €1.8bn on research and development between 2015 and 2019 alone according to its financial results, plus another €2.6bn on sales and marketing).

There are some sensible questions to be asked about how wisely Spotify spends its money, and also some blunt realities around the company’s value not just being in the music, but the technology it has invested in around it.

Still, the fact that the 30% cut of download sales taken by Apple’s iTunes Store in the downloads era wasn’t that controversial suggests that Spotify’s rev-share may not be the big problem here.

2. How do we get more people to pay for a music subscription?

Let’s focus on something simple then: the streaming royalties pool will grow faster if more people start paying for subscriptions, rather than listening for free.

Spotify’s conversion rate is actually pretty good: 45.5% of its listeners are on Spotify Premium, although that includes people on half-price student plans, and also members of family plans. Still, that leaves 163 million Spotify listeners who aren’t paying... yet. What will persuade them?

This is a long-established debate in itself. The music industry has mulled (and occasionally forced Spotify to introduce) restrictions on its free tier to prod people towards paying.

Spotify prefers a combination of aggressive discount promotions of the three-months-for-a-dollar variety, plus – and it’s very keen on this argument – the cumulative effect of all its clever features (see: that R&D budget) that means the longer people are on Spotify, the more likely they are to pay.

Zooming out: the IFPI says there were 341 million people using paid subscriptions at the end of 2019. That’s 229 million more than were doing it at the end of 2016. How many more can be signed up in the next three years?

That’s a question that will be answered through the collective efforts of music companies, streaming services, artists and fans alike.

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3. What’s the right price for a music subscription anyway?

Spoiler: there is no right price: how much people will pay depends on where they are in the world; their personal financial status; and their level of engagement with music. $9.99 a month is not the global standard, despite the regular conference-stage laments suggesting that it is. Still, in western developed countries, the $9.99 figure may be under pressure – to rise. Tom Gray recently gave an interview in which he proposed increasing it by 25%.

“Stop saying it’s price-sensitive; Kids pay £8 for a skin in Fortnite and we can’t ask for £12.50 for the entirety of all recorded music? Give me a break,” he said.

In its developed markets, Spotify has not raised the price of its standard subscription since it launched in 2008, even though some other digital services (Netflix is the frequent comparison) have done, without obviously suffering from customer rage.

If subscribers will swallow it, increasing the price of a music streaming subscription seems like a straightforward way to increase the pool of royalties.

In the past, Spotify’s senior executives have tended to push back on this idea, but there was a small but significant shift in CEO Daniel Ek’s tone when asked about it last week during Spotify’s latest quarterly earnings call: he hinted that based on its tests in a few countries, Spotify is open to the idea “when the economy improves”.

Alongside the ‘$9.99 is too cheap’ discussion, though, there’s also still the chance to experiment with even cheaper subscriptions – often limited by catalogue, features and/or how many devices listeners can use – to bring even more of those billions of free listeners in to the paid music world.

4. Would ‘user-centric’ payouts make streaming royalties fairer?

The recent unrest around artist royalties has also seen a fair few mentions of ‘user-centric’ payouts as a possible solution. This is something we’ve been writing about for several years, and although it’s far from a panacea for musicians’ complaints, it does deserve further investigation.

To explain it super-quickly: the current ‘pro rata’ system used by streaming services divides their royalty pool by each track’s share of streams in a given period. If Drake gets 5% of the streams, his rightsholders get 5% of the royalties. Which means that even if you never play Drake’s music, he’s getting 5% of your subscription.

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However, under a user-centric model, the royalties from your monthly payment would only go to the tracks that you listened to.

As a system, user-centric ‘feels’ fairer: your money goes to your favourite artists. That alone might be a helpful selling point when trying to encourage more people to sign up to subscriptions (see point 2). The calculations required are complicated, but perfectly manageable for streaming services.

Here are the two challenges. first, we still don’t know exactly what going user-centric would mean: there have only been a handful of publicly-available studies (here, here and here) using real data from streaming services to sketch out the likely impact.

Their findings were nuanced. Yes, user-centric would redistribute some royalties from the biggest tracks and artists to those in the mid and long tail of the streaming catalogues.

It’s no Robin Hood-style ‘rob the majors to feed the indies’ dynamic though: the majors’ big back catalogues would benefit from the change. Nor does it mean that every smaller, independent artist would be a winner from the change: it depends on how intensely their fans stream them.

User-centric wouldn’t be a sudden cure for the royalties unrest, then. We need more studies and, even better, actual commercial trials of the new model to understand how significant its impact would be. Which brings us on to the second, bigger challenge.

Deezer wants to do a trial of user-centric. It’s been talking about the idea since 2017, and last September it announced its desire to run a pilot by early 2020. The pilot would be in just one country, France, and only with labels, not publishers or collecting societies.

The pilot has yet to launch. Industry gossip varies on which major label(s) are the reason for the delay, but it’s a blunt, bleak illustration of the difficulties in store for user-centric. If one streaming service can’t get a single-country recordings-only trial off the ground, what hope is there for global, industry-wide adoption any time soon?

It’s not a reason to give up on the idea, yet. But if you’re calling for user-centric payouts as a solution for the royalties issue, you’ll need to come with some good ideas to cut through the industry politics. Bleak, but true.

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5. Should musicians get a bigger share of streaming royalties?

Streaming royalties aren’t a single can of worms: they’re a mega chain of WormCanMart supermarkets having an annual worm-can opening festival.

It’s an issue whose tensions go beyond ‘streaming services versus musicians’ into some of the long-simmering dynamics of the music industry – from dodgy artist deals to the splits between recordings and songs (compositions).

Some of these issues are hard to solve retrospectively without expensive lawyers – if you have a terrible label deal, your streaming royalties will be terrible – but are easier to swerve now and in the future.

A lot of effort has already gone into figuring out what a fair artist deal is in the streaming era. Artists and managers have more leverage in those negotiations, partly because they have more options for releasing music now. At the same time, labels (and label alternatives) are making their cases for their share of the revenue, and the good ones are proving their value.

Other tensions are more... intractable. Publishers (and thus songwriters) get a much smaller share of streaming royalties than labels (and thus performers) do. It’s not a new complaint, but it might just be coming to a head soon in a battle where Spotify is just a bystander – it certainly won’t want to be the referee.

These and other arguments about how streaming royalties are divided aren’t happening in a vacuum either. What would it mean, for example, if a label was getting both a smaller share of the overall streaming royalties, and paying out a bigger share of what it does get to its artists? Once again, there’s no easy answer here: just more questions, and a reminder of the complexity of ‘fairer’ royalties.

6. Should fan funding play a bigger role in streaming?

More than 50,000 artists are using Spotify’s new ‘Artist Fundraising Pick‘ feature, which enables them to raise money from fans for themselves and their teams, or for charities.

But there’s also a backlash from some musicians who see it as a tacit admission by Spotify that its royalties are paltry, and an insulting device to push the responsibility onto fans. Another way to look at this, though, might be that ending the historical separation of streaming and fan-funding might be a good thing.

From Bandcamp’s recent revenue-share-waiving sales days to the bonds being forged between creators and fans on platforms like Patreon or Twitch, there are plenty

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of reminders right now that paying people because you give a shit about them and their work can be... wonderful.

Why shouldn’t that be part of the streaming ecosystem too, whether it’s monthly artist-focused micro-subs on top of the baseline subscription, tips economies based around video livestreams and fan communities, or something else? Could streaming services do something truly meaningful here?

Again, it’s a question, not an answer. For a Spotify or Apple Music to bolt on its own version of Patreon and Twitch is hardly a simple tweak. How many artists would be comfortable with audio-streaming giants playing a dominant role in their direct-from-fan revenues?

Not to mention the challenges of providing the expected content and access, and/or navigating the ‘asking for money’ requirements of tips-economy success? These models can work brilliantly for some creators, but not all.

If we make them the engine of a new music economy, there’ll be implications, and that’s something that needs – stop us if you’ve heard this one before – a lot more discussion.

7. What else can musicians do to survive and thrive?

This is a positive point. There’s no contradiction between musicians calling for change in the way the streaming economy works, while also working hard to create opportunities for themselves within the system as it stands. It’s what they’re doing already.

They and their teams are mastering mailing lists; serving their superfans; figuring out social marketing; being smarter with their merchandise; exploring new models like livestreaming; using tech and services to make sure their metadata is accurate and their royalties are collected; making clever use of the ‘on-platform’ creative and marketing tools of the streaming services... they’re taking control of their businesses and hustling to make the most of the current systems and structures.

It can be tough, particularly when you’re not yet at the level of having a team to delegate any of this to. There’s no single playbook for success, and the competition in terms of the amount of music being released is ferocious, and daunting. Some musicians, like non-performing songwriters, simply don’t have some of the opportunities listed above.

Still, the body of experience and ideas for how artists can build sustainable careers for themselves in the streaming era is growing, and while some of it comes

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from friendly partners trying to synthesise and share that knowledge (plug: Music Ally is one of them) much of it comes from artists being as creative with technology and business as they are with their music.

What’s more, these experiences can and will inform artists’ activism when they criticise streaming services or call for changes in the way royalties flow. The industry would be very unwise not to listen.

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Hindsight note: The Broken Record campaign was starting to pick up pace, as shown by the way it was sparking responses from some of the industry bodies – managers here – in the UK.

Yesterday was quite a day for Music Ally on social media: our piece exploring how streaming services can generate more royalties for artists was shared approvingly by both Daniel Ek and David Lowery – surely a first, and hopefully a sign that we approached the subject in a constructive and respectful way. Other industry figures continue to add their views to what (in the UK at least) is coming together around the #BrokenRecord campaign. 

MMF boss Annabella Coldrick published some thoughts yesterday for example, suggesting that the Covid-19 crisis might be the opportunity to "re-evaluate streaming shares". The potential to switch to 'user-centric' payouts is one of her key points. "The drive to reconnect what a subscriber pays for and who receives their subscription fee appears more compelling than ever. Not only economically, but also psychologically and even morally," she wrote, later adding: "The counter arguments to reform, and to reevaluate licensing blueprints established in the mid-2000s, are almost laughably obtuse, and it feels there are few incentives for winners under the current system to upset the status quo and commit to a rigorous study of other – and potentially fairer – licensing and payment models."

Also see Midia Research boss Mark Mulligan's latest blog post, digging into the economics of streaming and some of the levers that might be pulled to alter them. He is blunt about some of the hoped-for changes. "Streaming royalties can be increased meaningfully if prices are increased and rates revisited but it may slow the streaming market. Now is probably not the best time to be increasing streaming prices for consumers. Even a big increase is not going to offset the fall in live income," he wrote.

Mulligan's 'blended, pragmatic solution' involves increasing royalties at a "middle option rate" but only after the upcoming recession; artists encouraging fans to buy their music from platforms like Bandcamp; progress to "professionalise and

MMF BOSS SLAMS 'LAUGHABLY OBTUSE' RESISTANCE TO STREAMING REFORM

7 MAY 2020

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commercialise the livestreaming sector, with a strong focus on charging for events in order to create some live income"; and creating more "virtual fandom products to drive new, additional income streams".

Nobody has a silver bullet, but the fact that more people are accepting this and thinking around the challenges pragmatically is a good step forward in itself. The key task will be turning this talk into meaningful action.

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Hindsight note: This was a slightly confusing moment, when it seemed like there were two separate musicians’ rights campaigns, each with their own hashtag (well, two in the case of this new one: #FixStreaming and #KeepMusicAlive). Still, it showed momentum, and an early public call for politicians to investigate.

The UK's Musicians' Union and The Ivors Academy have teamed up for a campaign called 'Keep Music Alive' which the two organisations say "aims to ‘fix streaming’ and calls for industry stakeholders to come together to agree an equitable, sustainable and transparent model for royalty distribution in the streaming era".

It kicks off this morning with an online petition calling for the British government to "urgently undertake a review of streaming" to "ensure that the flow of money is transparent and fair for the whole music ecosystem". It's already closing in on its initial target of 1,000 signatures, after being emailed to musicians this morning.

The campaign is related to (although also distinct from) the #BrokenRecord movement that's been building a head of steam in the UK in recent weeks, started by musician Tom Gray, who's also on the songwriter committee of The Ivors Academy. Note, the 'Keep Music Alive' campaign is aimed at labels as much as it is at streaming companies.

"The recorded music industry must play its part in shoring up the individuals on whose talent and creativity it so heavily relies. We have been asking for a fairer deal on streaming for years and it is long overdue. Our members can no longer accept the record labels taking the biggest share of income. We have to fix streaming now," said MU deputy general secretary Naomi Pohl. "Music creators are clear that the industry must change. The current models are broken. It is wrong for a few corporations to make billions from streaming while thousands of creators seek hardship support as their livelihoods evaporate," added Ivors Academy CEO Graham Davies.

The Guardian has interviewed some of the artists and industry figures who are backing the campaign, including Ivors Academy chair Crispin Hunt's idea for splitting streaming revenues equally between DSPs – something he went into in more depth in

KEEP MUSIC ALIVE CAMPAIGN AIMS TO 'FIX STREAMING NOW'

11 MAY 2020

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an interview on website Live4ever. "The ten quid that gets divided at the moment goes: £3 Spotify, £1.20 to the songwriters and the rest to the record labels. I think, personally, that it needs to go four ways: 25% to the platform, 25% to the song, 25% to the singers and 25% needs to go the sellers. The other answer is to raise the price. You either divide the money fairly so that it’s more proportional, or you raise the price."

At this point, this is a UK-focused campaign, but it's one that has the potential to spread to other parts of the world. Two things are particularly interesting to us about the nature of the current protests. First, that it's not just a case of musicians criticising streaming services as it has been in the past – labels are now firmly in their sights too. Perhaps this will draw more labels into the debate in a constructive way, which would be positive.

Second, that the campaigners are not just calling for royalties to be higher, but are talking about how they think/hope this could be accomplished. That's a point we were making too in our analysis of streaming last week. Calling for systematic reform carries more weight when you're starting off by suggesting what some of those reforms might be.

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Hindsight note: Goldman Sachs’ music industry reports get cited a lot within the business, especially by companies who are trying to raise money or go public, and win investor confidence. While Covid-19 put a dampener on this particular set of forecasts, the longer-term predictions were more important context for the determination of campaigners to change the economics of how streaming revenues were divided.

Nobody can know exactly what the overall financial impact of Covid-19 will be on the music industry in 2020, but that isn't stopping analysts from guessing. Goldman Sachs made its prediction last week, and it's a sobering one. "Global music revenue will drop by 25% in 2020 on our estimates, largely due to the widespread disruption to live events," it claimed in a report, albeit while adding that "we expect a strong rebound in 2021" and further growth in the years after that.

To be clear: that 25% drop is for all forms of music revenue, live included. Clearly that's the sub-category pulling the total down most: Goldman Sachs expects 2020 to see a 75% drop in live music revenue, whereas it predicts that streaming revenues will grow by 18%, helping recorded music revenues to grow by 3% – "the first year of meaningful slowdown since the market returned to growth in 2015". It's predicting that music publishing revenues will grow by 3.5% this year.

Goldman Sachs has been notably bullish about the music industry's future in recent memory: remember its prediction in 2017 that recorded music would be a $41bn industry (in terms of annual revenues) by 2030? It was swiftly pointed out that as a company with investments in and partnerships with firms including Universal Music's parent company Vivendi and Spotify, Goldman Sachs' high predictions might need to be taken with a pinch of salt. 

(In fairness, these investments and relationships are set out in its reports: it currently owns shares in Tencent Music and Vivendi, and has provided investment banking services to Alphabet, SiriusXM, Spotify, Tencent Music and Vivendi in the last year for example.)

GOLDMAN SACHS: 'GLOBAL MUSIC REVENUE WILL DROP BY 25% IN 2020'

18 MAY 2020

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Keep the salt handy for Goldman Sachs' updated predictions then: it expects annual music industry revenues of $142bn by 2030 – remember, this is not just recordings – which would represent an 84% increase from 2019's estimated $77bn. The company expects streaming music alone to be worth $75bn a year by 2030 – 86% of global recorded music revenues that year – thanks to 1.2 billion paid music subscribers. With Spotify accounting for a third of them.

Make a note in your calendars to check back on this in 2030, not that anyone ever really checks back on decade-ago analyst predictions. Of more immediate comfort to the music industry might be Goldman Sachs' prediction that after a slowdown in growth to 3% this year, the recorded music market will bounce back with 26% growth in 2021 and 18% in 2022, with the live music industry "nearly returning to its pre-Covid-19 level by 2022".

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Hindsight note: Happily, Music Ally never went down the ruinous ‘pivot to video’ road that scuppered a number of news organisations in recent years! We have, however, been experimenting with our own ‘TV Show’ broadcast live on Zoom then archived on YouTube. We wanted to pick Tom Gray’s brains on what Broken Record was about, and what he hoped to achieve.

The #BrokenRecord campaign started by musician Tom Gray in the UK is gathering steam. Next Sunday (24 May) will see an online Tim’s Twitter Listening Party Festival allied to the campaign, which is calling for changes to the music streaming ecosystem that will benefit artists and songwriters.

Last Friday (15 May) Gray was one of the special guests on our weekly Music Ally TV Show, along with Deviate Digital CEO Sammy Andrews, who is also backing the campaign. You can watch the full show below (or here on YouTube) but we’ve also pulled out some of the highlights in this article. Gray has been careful to steer the campaign away from targeting a single company or group of companies (Spotify or major labels, for example), but rather to focus on the key problems he sees with the system, and potential solutions.

In his introduction on the show, though, he spelled out a warning to the industry on why it should take the current unrest around streaming royalties seriously.

“This is Covid-19. Live [income] has gone, PRO money is going to dry up shortly. Whatever anger you think there is in the industry now towards streaming, imagine it in six months’ time when the last of the money that’s in touring musicians’ bank accounts has gone, and when their PRS and PPL cheques go through the floor,” said Gray.

“This has been problematic for such a long time, and that’s why I call it ‘Broken Record’ because there’s nothing new about this. I’m just saying basically the same things that you’ve heard a million times. But the context has completely changed.”

#BROKENRECORD: ‘IT’S ABOUT SAYING WE ALL RECOGNISE THIS IS PROBLEMATIC’

18 MAY 2020

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“The problem is that streaming always cannibalised culture and gave all of the income to a very small amount of the market. It always did that. It’s just now it’s deeply unhealthy. Now it’s dangerously unhealthy.”

Gray added that he prefers to see #BrokenRecord as a pressure group rather than a protest movement.

“It’s about saying collectively and as an industry we all recognise that this is problematic. We all recognise that this was never really right, and surely we’re all bright enough and dynamic enough and willing enough collectively to do something about it,” he said.

Gray has also been trying to make sure music fans receive this message, rather than just people who work in the music industry.

“It’s twofold. One is: your money doesn’t go to your music. And two, if your music is in any way niche or off the beaten track, it has been severely defunded by streaming. And we’re not doing anything about that. Streaming has been built by corporations for profit margins. It hasn’t been built with any sustainable cultural remit in mind,” he said.

Andrews offered a characteristically blunt summary of the current situation. “When we talk about the elephant in the room here, there’s a room full of them!” she said, backing Gray in his desire not to focus on a single ‘villain’.

“To point a finger at a particular streaming service is ridiculous. No stream is equal, no service is equal, no deal is equal, no rate is equal. But some of those things were set by people behind closed doors, some for large advances – for large amounts of money! – and equity... There’s so many parts to this equation,” she said.

Andrews pointed out that she is a long-time advocate for streaming, reminding the audience that it has returned the industry’s recorded music revenues to several years of healthy growth, after a decade-and-a-half decline. She also said that all the different companies, streaming services and major labels, will need to be part of any changes to the system.

“This conversation’s never going to move forward unless every stakeholder has it, and has it at the table,” she added, while warning that “we know there’s a million opinions on this, and we know also that it’s within a lot of people’s interests not to change things”. There’s a theory that it’s more often artists who (like Gray’s band Gomez) signed record deals in the pre-streaming era who are most angry about streaming royalties, whereas newer artists who’ve built their careers entirely within that era – particularly the last few years – may feel happier navigating its economics.

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Gray pushed back at that theory, talking about his efforts to sign up younger artists for the Tim’s Twitter Listening Party Festival.

“I went through about five, ten young acts who really wanted to, but were afraid of how the platforms would receive it if they were seen to be being critical of the situation. And were worried that they’d lose playlisting,” he said.

“Their managers in particular were very, very worried that if they didn’t have those relationships, or if it damaged those relationships in any way, their lottery ticket to possible income might disappear.”

“There’s dozens and dozens of young artists coming to me on Twitter every day going ‘I’ve got however many million plays, I have two hundred thousand monthly listeners, I do not make minimum wage’... There’s not enough money coming through to the artists in half of the label deals that are out there, however they’re being done.”

#BrokenRecord isn’t just about label deals. Another aspect concerns the split in on-demand streaming royalties between songs (compositions) and recordings – i.e. between publishers and labels.

“The song is massively undervalued. 13% [of streaming revenues] is a joke, considering that when someone listens to a piece of music, they’re probably there to hear the song,” suggested Gray.

“Songwriters were in deep trouble well before Covid. It’s ridiculous. And the only way they’ve managed to make money is by carving their way into the master right. So that’s become really common in America: they just go ‘Right, well we’re writing a song for you and you’re gonna give us five per cent of the master or ten per cent of the master, and that’s how we’re gonna work it out’. In Britain, unfortunately, that hasn’t become the norm.”

Gray sees the Covid-19 pandemic, and its impact on musicians, as a key moment to press for change on this and other issues.

“What are we trying to do with recorded music? The people who put the value in, are we going to try and extract that value and give it back to them? Or are we just going to say ‘Well, the winners are the winners and the losers and the losers’?” he said.

“If the view is ‘Oh, the ship sailed’. Well, okay, the ship sailed. Let’s go and talk to politicians, because they’re not going to like this mess. And if you guys can’t get your act together and figure this out amongst yourselves, maybe we do need to step in. Maybe the threat of statutory things – which nobody wants – is the threat that we all need to get our act together.”

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Andrews called for a constructive approach, but expressed her concerns that persuading the different parts of the music industry to even get together to discuss potential changes, let alone to implement them, will be difficult.

“Everyone has known that this hasn’t worked for a while, but then we have to start looking at solutions, and I think that’s where this becomes so damning. Our industry can’t agree on anything!” she said.

“We’re arguing in the press about stuff they shouldn’t be arguing about in the press. We’re trying to speak to government leaders through Covid, and you’ve got a million trade groups going at each other in the tabloids. Well done everyone!”

“But this discussion requires that level of conversation. It requires the stakeholders to come to a table – I would prefer not out in public necessarily for those conversations – and go ‘right everyone, hands up if you stand to benefit or not from this situation’. I know I’m being idealistic and stupid, and I don’t care. I think it needs that level... we need to understand the crux of the problem.” One long-running industry debate, about the potential for streaming royalties to be calculated using a ‘user-centric’ system rather than the current ‘pro-rata’ model (our recent explanation of all this is here) is also part of the #BrokenRecord conversation.

The demand is not just a demand for an immediate switch to a user-centric system across all the streaming services. It’s as much about calling for more (and more open) research studies into the model.

“I know for sure that tests have been run across independents and majors with real data sets to show what would come from user-centric streaming, and what would come from the existing system. I’d like to see that actually run for artists and for songwriters in the same way. If the labels are allowed to see what that looks like, why’s everyone else not allowed to?” said Andrews.

On the wider issue of artist and songwriter royalties, though, she suggested that there is the desire for change. “I’ve been private messaging a lot this week about this, and people both within the services, within the major labels, within the publishing houses, all think that this needs addressing. They just can’t say it publicly,” she said.

Research, not just on user-centric but on other potential changes to the system, is high on Gray’s agenda.

“We know where the systemic problems lie. We have to find solutions. If we’re going to be really simplistic about it, let’s create five solutions, game them all out. test them all. Research them to see how they play out. We have all the data, it’s not that hard to do,” he said.

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“There are, I’m sure. lots of incredibly talented economists in the world who’d be very happy to do this for us if we gave them the job for the summer. It really isn’t that hard.”

Among those possible changes: “You could change it to licensing. The entirety of streaming could be a licence. There you go. It becomes a 50/50 artist/label straight down the middle. Bang. Deal with it. Next! What happens if you do that?” he said.

“What happens if you look at the way it’s distributed? What about it when the music is pushed out to you via a playlist or an algorithm? We know that that’s paid within Spotify contracts at a different rate to music that people choose. We all know that. So is that distribution or is that a different service? And if it’s a different service, should it be remunerated through the PROs? Should the PROs be saying ‘we think that money is ours’? Maybe they should!”

“The point is unless you look at these and properly inspect them and get the actual numbers up and make the effort, you’re never going to fix it!” added Gray.

How easy will it really be to get everyone – streaming services, labels, publishers, collecting societies and more – in a room in the first place?

“The biggest problem we’re going to have with this is the biggest companies that are doing it just answer to their shareholders. So how do we get them in the room? How is it in their interests to help us to sort this out, when they are only really answerable to their shareholders. And it’s a really complicated question,” he said.

One change that has been mooted, and which seems to be meeting the least resistance even from companies like Spotify, is raising the price of a standard streaming subscription from $9.99 a month.

Regular Music Ally TV Show guest Henriette Heimdal, market development coordinator for CD Baby, was also part of the show.

“Spotify tried it in Norway and it was successful. They maintained and even increased their subscriptions there,” she said – a point also touched on by CEO Daniel Ek during Spotify’s earnings call earlier this month.

“Unfortunately this shitstorm of Covid now hits, which has probably put a little bit of a dampener on any plans to increase subscription prices, because you are going to risk quite a lot of bad PR by increasing prices when the world’s going to go through a massive, massive recession,” said Heimdal. “Which is a shame. I absolutely think there was an appetite for it.”

She delivered her own warning: that a price rise for streaming subscriptions would need to come with a better argument about why this was well worth paying for.

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“I don’t think personally that as an industry we’re very good at communicating the value of music to fans,” she said.

The conversation turned back to user-centric payouts, with anecdotal evidence suggesting that a lot of streaming listeners don’t realise this *isn’t* how the system works already.

“The reason that user-centric has been so useful in the conversation that I’ve been having with lots of different people, is that it gives people real insight into the fact that their money isn’t connected to the value that they assign to music. It just goes in and it disappears off. ‘Why doesn’t my money go to my music?'” said Gray.

“What we’re saying, all of us... Can we just agree on one thing, that it’s not right. Can we agree that there is a problem, and then look at all these solutions? User-centric needs more research. It needs funded, properly huge at scale [research].”

Heimdal agreed. “I wish there was a lot more data available. Public data, so that not just the execs can form their opinions about this, but [also] those of us who are going to be working in this industry for quite some time!” she said.

“If any of the major platforms was brave enough and could manage to work it with the major labels, to offer a different offering which gives more money to artists and writers, we would all move across to that platform the next day,” added Gray.

“If there’s a helluva selling point for a platform, it’s that you are about the music. They all try and pretend that they are, and then get themselves involved in legal disputes in other countries which make them look like they’re not.”

Andrews cut in. “Without naming names, every major streaming service that I’ve spoken to, off record, says that if it was proven that user-centric worked, they would move to it immediately. Because it doesn’t matter who they pay out. They pay the same money out regardless! That’s what everyone forgets in this.”

As the show started to wind to a close, the panel offered their ideas for practical first steps that can be taken now.

“We need a streaming summit,” said Gray. “With everybody represented in the room, with the knowledge that what we’ve got isn’t right.”

Heimdal: “I think we need to come together as an industry and be able to decide on a messaging towards the public. Coming back to the whole thing about the value of music, potentially increasing prices etc. I think we have a lot of work to do there: why that needs to happen and why we need to pay artists more.”

“Definitely both of those two things, and I would also want to see wide-scale research commissioning that is actually made available... I’m aware that there is data that exists that we’re not seeing,” said Andrews.

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“In order for us as an industry to not look like a bunch of idiots, we need to make an informed decision from every stakeholder’s point... A conversation like Tom’s suggesting is the only way this works. And no, not everyone’s going to like every result, but can we do some give and take across several subjects, and make it palatable for everyone, and allow our artists to eat and pay their rent?”

Gray had the final say, answering a question about artist contracts from the pre-streaming era, and their impact on the current debate.

He claimed that major labels had not taken an opportunity a few years ago to follow some independents’ lead where the latter “got rid of unrecouped debts and got rid of breakage” clauses in existing contracts, in order to increase the streaming royalties for catalogue artists.

“With catalogue, if you wanted to free it up, if you wanted all of those artists to re-engage and get excited about selling their music in the streaming era, how do you do that? You take your boot of their neck, that’s how you do it. Then everyone would get excited about streaming!” he said, while stressing that this is not the crux of #BrokenRecord.

“I don’t make my money from streaming. I can’t make money from streaming because I’ve got a pre-2001 record contract. I make my money as a composer writing for theatre and film,” he said.

“One of the reasons why I feel so comfortable talking about this is because I’m only speaking out for my friends and colleagues. I’m not speaking out because I’m trying to liberate my rights from a silly contract that I signed when I was a child.”

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Hindsight note: Another industry body, this one that represented the streaming services among other retailers. Looking back, it’s interesting to see the fears that the Broken Record campaign might be ‘smashing’ the streaming services. The ultimate inquiry and its report would be pointing its hammer much more at labels.

The #BrokenRecord campaign has been gathering momentum in recent weeks – and was even the subject of our own Music Ally TV Show last week. Now ERA, the body that represents retailers and digital music services in the UK, has weighed into the debate. ERA CEO Kim Bayley has published a blog post with her thoughts on the topic, walking the line between supporting artists and defending the streaming services.

"ERA is a strong supporter of artist’s rights. Putting the interests of creators as well as consumers at the heart of all we do is one of our five key priorities," she wrote. "I fear, however, that amid this heated debate the contribution of DSPs to the revival of recorded music is being forgotten and numbers are being bandied about which are just plain misleading."

Bayley's blog post turned the spotlight back towards labels."In some cases old contracts and old assumptions first made in the age of the

vinyl LP have been transplanted one to one to the new world of streaming in a way some artists may feel is unfair. But these are not contracts with streaming services themselves and DSPs can’t be held responsible for them"

She also backed cross-industry dialogue, while adding another warning."Everyone involved in the debate should recognise that you don’t mend a

#BrokenRecord by smashing the record player. The streaming revolution saved the record business. It would be short-sighted and self-defeating if in attempting to #FixStreaming, we ended up undermining it."

ERA BOSS KIM BAYLEY JOINS THE #BROKENRECORD STREAMING DEBATE

21 MAY 2020

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Hindsight note: Industry body the BPI has been the main public defender of labels during the Broken Record debate, and thus also a lightning rod for some of the anger of those campaigners. Here’s an early example of its views generating incoming fire.

Geoff Taylor, head of British music industry body the BPI, gave his views on the #BrokenRecord campaign to Music Week on Friday, sparking some sharp responses on Twitter.

#BrokenRecord, remember, is the campaign involving a range of British musicians calling for a range of industry changes: from a rise in the cost of a streaming subscription and the introduction of 'user-centric' payouts to improvements in label deals, and a bigger share of streaming royalties going to songwriters. In his interview, Taylor called for more recognition of the investment labels make in artist development and marketing.

"That’s why we’ve got to look at this as a joint endeavour. Our focus should be on growing the streaming pie rather than trying to argue over where that streaming pie should go. The market takes care of that bit. The market takes care of the allocation of the monies that are earned from streaming," said the BPI boss.

Cue Twitter, where former UK Music boss Michael Dugher (now heading a body representing the gambling industry) claimed Taylor was "advocating the music industry’s equivalent of trickle down economics and, just like trickle down economics, it’s a fallacy". Songwriters body The Ivors Academy also clapped back: "The market plainly doesn't work when labels enjoy huge profits while the majority of creators cannot sustain a living from streaming."

BPI BOSS SPARKS DEBATE WITH VIEWS ON #BROKENRECORD CAMPAIGN

1 JUNE 2020

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Hindsight note: Politicians in the UK were slowly but surely taking note of Broken Record and the streaming royalties debate, as were some media outlets. At this point, the idea of user-centric payouts was a big talking point – much more so than by the time the inquiry reported just over a year later.

The debate about streaming royalties and 'user-centric' payments – primer here if needed – has largely been confined to the music industry so far. Could politicians get involved? Jo Stevens of the UK's Labour Party, who's the shadow secretary of state for digital, culture, media and sport, got involved during a radio discussion last night. Asked by presenter Colin Murray whether she supported a switch to a user-centric system for royalties, Stevens agreed.

"Yeah, we support it. The Labour Party position is that we support this. Why should it be any different for musicians than it is for any other profession or trade?" she said. "If a plumber comes to fix something in your bathroom, you will pay the plumber for the work that they've done. If a musician creates something, and it's being used and enjoyed and listened to by people, then through that platform musicians should be paid for their work, because they own it, they create it." Stevens also compared streaming royalties to the hospitality industry.

"It's not right. It's like: you order a takeaway online and what you pay for the takeaway then goes to a different restaurant. You wouldn't stand for that if you were ordering a takeaway, why should you stand for that if you're streaming a piece of music?"

Note: the Labour Party is not in power: it's in opposition to a government with an 80-seat majority, so Stevens' power to mandate change on this score is extremely limited. Even so, it's an interesting intervention that will buoy the supporters of user-centric within the British music industry.

UK'S LABOUR PARTY THROWS WEIGHT BEHIND USER-CENTRIC PAYOUTS

24 JUNE 2020

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Hindsight note: Music Ally has been writing about Zoë Keating and David Lowery for years now: she was the first artist to publish detailed data on her streaming royalties, while he has been a prominent campaigner for artists and songwriters, including a famous class-action lawsuit against Spotify. We wanted to bring them together for our TV show to get an across-the-Atlantic take on Broken Record and the wider issues around streaming.

Besides being musicians, Zoë Keating and David Lowery have been two of the most prominent voices for artists’ rights in the streaming era.

Solo artist Keating has regularly published her streaming income data to further transparency around payouts for artists. She was an early adopter of Bandcamp, went public with her concerns about YouTube’s artist contracts in early 2015, and was one of the first artists to talk about the potential of blockchain technology for music.

Lowery combines his music career (Cracker, Camper Van Beethoven) with teaching at the University of Georgia’s Terry College of Business, running artist-rights blog The Trichordist – which publishes its own annual table of average per-stream rates – and also filed a class action lawsuit against Spotify on behalf of independent songwriters in late 2015. The lawsuit was settled in 2017.

Earlier this month, Music Ally brought Keating and Lowery together (via Zoom) for a conversation about streaming and artists. Specifically, in the light of recent public discussions about how the model pays off for musicians – #BrokenRecord in the UK for example – how they think streaming could and should improve.

You can watch the full interview – conducted by journalist and music business tutor Joe Sparrow – here, but this article runs through some of the main talking points from the conversation.

The Covid-19 pandemic has sharpened some of those discussions around artists’ incomes. “Generally whenever I discuss this topic, there’s a large percentage of people who say ‘Shut up you whiny artist!’. Or it used to be ‘Get out there and tour, sell merch!’” said Keating.

ZOË KEATING AND DAVID LOWERY TALK STREAMING, FANS AND MUSIC ARTISTS

14 JULY 2020

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“This [Covid-19] is a terrible thing that’s happening, but one tiny silver lining is that everybody can really see that you’ve just taken away a large percentage of our artist income… Now people can see ‘Oh yeah, maybe this doesn’t work. We need to come up with something’.”

Lowery suggested that many artists had been “distracted” from the payouts debate by touring over the last decade, with revenue from concerts – the same revenue that abruptly crashed this year – offsetting the decline in their income from recordings.

“We used to tour to sort of generate sales of music, and your touring was kinda break-even. You made a little bit of money and the ticket prices were definitely a lot lower,” he said.

“In the digital age, we slowly shifted where we started charging more for tickets, we started playing more shows. And this kind of distracted us, cos in a way it seemed like we were making the same amount of money. Perhaps more money.”

Note ‘seemed’ in that sentence: as Lowery pointed out, the actual profit from touring once the costs were factored in and everyone (crew included) had been paid was not quite as rosy.

“Ultimately as an artist you didn’t really make that much touring, so I’m kind of excited in a way – sort of a perverse way! – that we’re now looking at what the actual recorded music generates, and perhaps we can get back to a healthier, more sustainable system,” he said.

What is a healthier system? For Keating, it’s going to be about strengthening the bond between artists and their audiences.

“Having less middlemen, less people mediating that experience. That’s something that artists are really good at: connecting with people. And sometimes I feel like everything about the digital music industry is designed to sever that relationship, so that other people can take some of the money!” she said.

“It’s only when pressured that services like Spotify have added ways for their users to connect with the artists. They want to keep everybody inside their sandbox, and they don’t want people [in her case] to leave the ecosystem to go to me.”

One thing that the Covid-19 lockdown has done is lead more artists to experiment with livestreaming video, with Keating hailing the sense of a “Wild West” of different platforms and startups, and artists trying to figure out what works best for them.

“I always enjoy it when there’s a lot of different experiments happening and there’s no consolidation yet. I’ve felt a sense of dismay over the last few years as all the

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services have kind of consolidated into just a few, and that’s when number one, power starts being taken away from those at the bottom, and also it’s sort of boring!”

“The ability to sort of disintermediate again, where we can directly engage our fans and have economic transactions with them and stuff like that, we’re going to have to figure out a way to do it whereby there’s a platform, but a larger share of the revenue comes to us,” agreed Lowery.

Both artists are using Bandcamp to put their music out, and approve of the control it gives musicians over that process.

“Yes, it’s a platform, they do take a fee, there’s a lot of artists on there, but you set your own prices and the way that your music is released,” said Lowery, who uses Bandcamp as part of a wider ‘windowing’ strategy: he sells his albums on Bandcamp first, then when they reach a certain age, he puts them on streaming services.

“I’ve windowed, like the movie business! All I’m really doing is what the movie business did,” he said. “I do respect that a lot of labels feel that that’s not right, but I’m telling you it works for me. What I’m getting at is I think there’s not a one-size fits-all solution here, and what we really need is for a hundred flowers to bloom. We need a hundred experiments going on. We need people trying different things to figure out a new way to monetise the music.”

Keating also praised Bandcamp, where the audience she has built over the years helped her to plug the income gap when she had a tour cancelled in the early stages of the Covid-19 lockdown. She’d made some live recordings in London last November, and for one a friend had filmed a video of the concert, so Keating put it on Bandcamp for $1 and emailed her mailing list.

“One huge problem we have right now is how do you reach people when Facebook makes it so you can no longer reach the followers in the audience [without paying]. You built that, right? You built those fans and now you have to pay to reach them. All these companies put barriers between me and my audience. And the most powerful thing is my mailing list and Bandcamp,” she said.

“Anybody who has purchased anything or subscribed, they get a message. So suddenly, 15,000 people got a message that I had a new recording for sale, and I just made $5,000! That’s immediate, and that’s real. So I think more things like Bandcamp. There’s still a big gap in livestreaming. I would like to be able to easily do livestreams this way and release them.”

Lowery pointed out that he and Keating are both established artists who’ve built up good mailing lists over their careers, which is what makes this model work. When he talks to younger artists, he doesn’t tell them to keep their music off Spotify (“even

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though I’m the guy who sued Spotify!”) as he understands why that isn’t really an option for emerging acts.

It illustrates his previous point: “There’s not a one-size fits-all plan out there. And in some ways we fooled ourselves into thinking that streaming is that one-size fits-all. One price, flat price per month, when in actuality different people will pay different things and go jump through different hoops depending on how engaged of a fan they are, and we need to engage some of that more, cos we’re leaving money on the table.”

Keating agreed, saying this is one issue she has with Spotify. “Their model is one-size fits-all for a particular kind of popularity contest, and we’re way more diverse than that, and our fans are way more diverse,” she said.

“I want to capture out of the 10 people listening, one of them is going to really care and want everything, and the other nine might be casual listeners, and you need to be able to reach both of them, and you might reach them in different ways.”

The conversation ranged over YouTube (“Probably at least 40% of all music consumption,” said Lowery. “The big gap here – the value gap is I think what the industry is calling it now – is that YouTube pay so little, depending on which part of their platform it’s as little as one twentieth of what we would normally see…”) and label deals as the pair discussed how musicians’ streaming lot could be improved.

Lowery considered some of the trends around dealmaking for major labels, suggesting that there may be some dangers looming even for those large companies.

“Possibly, because if you’re coming in later once an artist is popular, which seems to be the case – somebody goes viral on YouTube and then you come in later – what does that artist really need? What is the value add?” he said.

“I do think labels signing artists after they’ve gone viral means they’re probably paying a lot more for those artists, and the question of the value add is… it’s questionable, right?”

Some of those questions may also be spurred by artists’ growing knowledge of the tools available to them to reach fans directly, mailing lists and platforms like Bandcamp included. Key to making this work is talking frankly to fans about what supporting an artist financially means for their ability to sustain a career.

When Keating first started releasing music, she realised that her job was “to let people know that I was a real live person with no one representing me… to educate my audience that if they liked my music they could support me, and it goes right to me and it’s not going to anyone in a suit. Unless I wear a suit!”

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She admitted that even now, fans who’ve happened upon her music on a digital service can still be shocked by the realities of how she makes money. “There are a lot of people who are very shocked that actually I don’t earn anything from YouTube!” she said.

(Keating recently had a public exchange with YouTube on Twitter, questioning why – with more than 10,000 subscribers to her channel, more than 23k watch hours and 25m views of videos with her music in them, she doesn’t meet its threshold for monetisation. The company’s support team replied saying she didn’t have enough ‘public’ watch hours to qualify.)

Keating and Lowery have also been following the industry discussion about ‘user-centric’ payouts from streaming services, and whether they’d be a fairer way of distributing streaming royalties. Lowery pointed out that many listeners think this is how streaming works already.

“So I think it’s a good idea in that it meets the consumers’ expectations for what they are doing,” he said, before suggesting that it will also be a timely shift for the musicians who need it most.

“Niche artists and middle-class artists, the mid tier of artists, are the ones that are really struggling right now, and they tend to be the ones with the paid fans, and the super fans.” he said – referring to these fans as being most likely to pay for a streaming subscription.

“What you have here is not necessarily that the top artists are suffering. All artists aren’t suffering in the new streaming environment. What you have is the middle tier and the niche artists are suffering. And it’s not really income redistribution, but the money would go to the artists who need it the most, the ones who are creating more of the paid demand. So I’m generally for it.”

Keating would like to see more transparency around streaming payouts, and the wider models, more generally.

“The services, sometimes it’s in their best interests to not have their users know how things work. So one thing I would love to see is discussions, public ones, about how things work now, how they could work, and what systems could we make that would be transparent,” she said.

“The music industry is guilty of keeping things hidden as well… In the music industry a lot of people have a vested interest in appearing larger than you really are, because that’s how deals work… I think the way forward is transparency, as uncomfortable as that might be.”

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Will transparency nudge more fans towards directly supporting artists, or at least upgrading from free accounts to paid streaming subscriptions? Lowery isn’t sure.

“A lot of music fans are actually kind of Jacobins! They’re sorta like ‘these rich artists! They’re just making all this money! Yeah, take their money from them, steal their music! So I’m a little more pessimistic that consumers will rally around artists in this way,” he said.

“However, look at all the things like fair trade coffee or ‘we’re a clothing maker and we don’t use sweatshop labour’… It can be done, and I think we certainly should try it” – ‘it’ being enlist music fans in campaigns to boost artist royalties, and support the services who are making the most effort in that direction.

The conversation finished with a discussion of whether governments and regulators could (or should) get involved in the issues around musicians’ income.

“We might actually have a window here right now, because I know the US government is trying to figure out a next round of the stimulus, and there’s a fair number of musicians that I know who have not only got unemployment, but… it’s possible that maybe we could have some sort of stimulus to artists: ‘Hey, we’ll match your streaming revenues’ or ‘we’ll double your streaming revenus’ or something like that for six months. It’s not out of the realm of possibilities,” said Lowery.

Keating suggested that now is the time to continue shouting about the value to wider society of music, the people who make it, and the teams around them.

“Everybody is aware that artists – musical artists, performers – were the first to lose our jobs, and we will be the last to go back,” she said. “I think a lot of people are unaware of the size of our industry. When we go on tour, we put a lot of people to work! People travel to see my shows, people stay in hotels. Restaurants. It’s actually a huge economy, and it’s not respected, and not taken seriously. We quickly give the airlines a bailout, but people would laugh at the idea of giving the entertainment industry a bailout. But wait a minute!”

Keating sees some green shoots here: for example recently-formed lobbying organisations in the US for booking agencies (the National Independent Talent Organization) and independent venues (the National Independent Venue Organization).

“Everybody’s recognising that you need to have a voice, and we need to get a story out,” she said. “That’s the positive thing right now. There is more awareness and more of an opportunity to get a story across that we need some changes.”

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Hindsight note: The interview that launched one of the biggest Twitter pile-ons we’ve seen in the digital music world, as artists criticised Spotify’s CEO for his comments about musicians, work-rates and release strategies. We were careful to transcribe his words in full and present them in context, but as other outlets picked up the story (and zeroed in on the controversial bits) the anger grew.

Spotify announced its latest financial results yesterday, with growth in listeners and subscribers at the top end of its forecasts, despite the Covid-19 pandemic. CEO Daniel Ek talked to Music Ally after the financials were announced, starting with his view on the growth.

“It’s very encouraging. Already last earnings call we were seeing a lot of the numbers stabilising and it was looking very promising, so it’s nice to see that stability and to see more and more regions get back to normal again, with a continuing trend from Q1,” said Ek.

One of the lines that jumped out of Spotify’s Q2 earnings announcement was “Gone are the days of Top 40, it’s now the Top 43,000” – referring to the fact that the streaming service’s ‘top tier’ of artists – those accounting for the top 10% of its streams – now number more than 43,000, compared to 30,000 a year ago.

What does that mean in the big scheme of things? “The real thing is that there are more relationships being formed to more artists,” said Ek.

“This is something that’s been near and dear to us for some time: it’s in our company mission to enable more artists to live off their art, and it’s really coming through in the numbers. More and more artists are breaking through in a big way, being impactful and creating new fan relationships.”

He suggested that compared to 10-15 years ago “the average consumer has way more diverse tastes: through the various genres, and they know of a lot more artists”.

That company mission was originally expressed by Ek at Spotify’s investors day in March 2018, ahead of going public, when he talked about “helping one million artists to be able to live off their art”.

SPOTIFY CEO TALKS COVID-19, ARTIST INCOMES AND PODCASTING

30 JULY 2020

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However, in 2020 more than any other year since Spotify launched, there’s been a surge of musicians talking publicly about their streaming royalties not being enough to live on – including a campaign in the UK (#BrokenRecord) that has trained its sights not just on streaming services, but on labels and the wider industry structures.

Labels and streaming services have been pretty quiet amid this debate, so we put the question to Ek: why is there this gap between Spotify’s stated ambitions, and the experiences of the musicians who have been speaking out? And what’s needed to bridge that gap?

“There are two different trends here worth picking apart. We realise that a lot of artists are impacted in the short term by Covid and the impact it has on the live industry. As you very well know, a lot of the income today that artists are getting [pre-Covid-19] is from touring and live performances. A lot of artists are struggling because of that,” said Ek.

“As a music fan, I’m hopeful and keeping my fingers crossed that we can go back to going to live shows again. That will be super meaningful.”

Critics of streaming would agree that Covid-19 has had a grim impact on the incomes of many musicians who’d been reliant on live revenues (and everything associated with them: merch etc) before the pandemic struck. However, some of their criticism has focused on the question of why it had become accepted that recorded music – streaming specifically – would be such a low portion of many musicians’ revenues.

(Our recent interview with David Lowery and Zöe Keating voiced this. “We’re now looking at what the actual recorded music generates, and perhaps we can get back to a healthier, more sustainable system,” said Lowery.)

Ek has some criticism of his own, which may ruffle some feathers it’s fair to say.“It’s quite interesting that while the overall pie is growing, and more and more

people can partake in that pie, we tend to focus on a very limited set of artists,” he said, referring to the reporting of views on streaming royalties.

“Even today on our marketplace, there’s literally millions and millions of artists. What tends to be reported are the people that are unhappy, but we very rarely see anyone who’s talking about… In the entire existence [of Spotify] I don’t think I’ve ever seen a single artist saying ‘I’m happy with all the money I’m getting from streaming,” he continued.

“Stating that publicly. In private they have done that many times, but in public they have no incentive to do it. But unequivocally, from the data, there are more and more artists that are able to live off streaming income in itself.”

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“There is a narrative fallacy here, combined with the fact that, obviously, some artists that used to do well in the past may not do well in this future landscape, where you can’t record music once every three to four years and think that’s going to be enough,” said Ek

“The artists today that are making it realise that it’s about creating a continuous engagement with their fans. It is about putting the work in, about the storytelling around the album, and about keeping a continuous dialogue with your fans.”

Ek cited Taylor Swift’s activity around her new album ‘Folklore’ as just one recent example of an artist benefitting from that kind of effort.

“I feel, really, that the ones that aren’t doing well in streaming are predominantly people who want to release music the way it used to be released,” he said, as the interview ended.

Earlier during the conversation, we also asked Ek about podcasts, and specifically about their role in the startling growth in Spotify’s market cap (value) this year: from around $29bn at the start of 2020 to $50bn now, including noticeable spikes accompanying some of its big podcast announcements.

What’s going on here, for investors? “I can’t really speak to why other people are valuing Spotify in the way that they are,” said Ek, before venturing an opinion.

“If I made a guess, we’ve been talking about this audio-first strategy for quite some time, and now people have started understanding what we actually meant by that strategy… and understanding that not only are we talking about the music business, we’re going after all of radio, which is obviously a much bigger addressable market.”

There has been some unease within the music industry as it watches Spotify’s strategy playing out, including references by some major label executives to the need to ‘ring fence’ their royalties from Spotify, rather than see them potentially cannibalised by podcasts. Are those the kinds of negotiations going on?

“I can’t really talk about the specifics around that. We renewed the Universal Music deal, and I’m pretty sure they wouldn’t have renewed that deal if they didn’t feel comfortable about where this was heading, and being happy about the economics they receive from Spotify,” said Ek.

Chief financial officer Paul Vogel weighed in to point out that Spotify keeps 100% of podcast advertising revenues on its platform – labels don’t get a slice of those anyway.

But as podcast listening grows on Spotify (it’s up to 21% of the company’s listeners now) there may be more debate to come about the extent to which Spotify’s

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subscription revenues are driven not just by music, but by podcasts too – and whether that has implications for the share of those revenues paid out to the music industry.

Other journalists also interviewed Daniel Ek yesterday, in between Spotify’s financials announcement and its earnings call with analysts.

Variety’s is worth a read, for the part digging into what the Universal Music deal means in terms of making UMG “early adopters” of Spotify’s new marketing tools.

“They’re really leaning in and they want to be the first to test more of these products and experiment with us and be very clear about what their threshold is for deeming something a success, or [whether it] needs to be improved,” said Ek. “This is a great learning experience and we’re obviously going to take that learning and extrapolate from the rest of the marketplace, including all the other labels and the independents as well.”

As for the earnings call (a transcription of which is here on Seeking Alpha) there are some extra takeaways from that too:

• Taylor Swift’s ‘Folklore’ helped her notch up the biggest single day of streams on Spotify this year so far: 98m.

• More on that UMG deal, its access to new tools early, and the difference to deals with other labels: “The big difference here is really Universal’s willingness to experiment and go all-in on marketplace,” said Ek. “Universal has seen the early success and is very excited by it. And they want to make sure that they can get behind and experiment a lot more with the paid tools of the marketplace, but also the organic tools that allows artists to create more fans, engage with those fans and monetise those fans better.”

• On whether the UMG deal includes a ‘carve out’ for podcasts listening time on the premium tier. “I think what we have said is that, from a podcasting perspective, the advertising related to podcasting will be a 100% Spotify’s and not shared. Beyond that, I am not sure we have commented much on any other terms of the deal,” said Ek.

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Hindsight note: The Broken Record campaign is about artists who are struggling to earn a living in the streaming era. However, some artists are doing well, and regularly in the last 18 months labels and distributors have tried to make that point, usually to support their own role as a positive force for musicians. Here’s an example from AWAL, talking artist earnings and independence. The company has since been acquired by Sony Music.

Music distributor AWAL says that "hundreds" of its artists now earn more than $100k a year from streaming, and that this number (of artists) has grown by more than 40% in the last year.

The company also said that "dozens" of its artists earn more than $1m from streaming every year. This is all a step on from the announcement in March 2018 by AWAL's parent company Kobalt that hundreds of artists were then earning more than $50k a year.

Speaking to Music Ally, AWAL's CEO Lonny Olinick declined to say how many hundreds of artists are now breaking the $100k threshold, but said it was a "sizeable number". He also claimed that the potential to earn these amounts while staying independent is driving business to AWAL.

“People now understand the value of being an indie artist. Building sustainable careers with no ceiling has been a huge driver of wanting to be part of AWAL," he said.

With the announcement, Kobalt and AWAL aren't just putting a message out there about annual earnings for musicians, but also about the value of the catalogues they are building.

“If you have $100k and control your rights, the value of the masters is a million dollars in the saleable value of your rights," Kobalt chairman Willard Ahdritz told Music Ally, adding that by this calculation, AWAL already has some artists with catalogues worth $100m+.

 'HUNDREDS' OF AWAL ARTISTS EARNING $100K+ A YEAR FROM STREAMING

19 AUGUST 2020

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It's not just AWAL talking about these kinds of 'artist direct' careers. In March, Midia Research claimed that artist direct revenues grew by 32.1% to $873m in 2019, accounting for 4.1% of the global recorded music market.

Meanwhile, investment company Raine Group published a report the same month claiming that the 'independent artist recorded music sector' will generate $2.12bn of revenues this year – 9% of the global total – although its analysis covered a larger group of artists than Midia's: artists using indie-focused distributors, including earnings from YouTube monetisation; artists using ‘mid-tail’ artist services companies; and sync / production music.

Both Ahdritz and Olinick pointed to that March 2018 announcement by Kobalt, which also included the promise to invest $150m in the AWAL business.

"It’s absolutely helped grow the business. We have 150 people across ten offices - we have the infrastructure that looks like a major company. Nothing like that has existed in the history of the music business," said Olinick. "Before, you had to choose between being independent and being local, or signing with a major. That investment allowed us to get rid of what we think is a false choice.”

Ahdritz, meanwhile, talked about an "overlooked middle tier" in the global artist community, and said that these musicians have considerable potential for growth.

“The middle tier is from $25k to $1m in revenue, and we believe that will be a $7 billion market in 2025, coming from almost nothing. We believe that section will have 100,000 artists in 2025," he said.

"We are now going to move up. We have a lot of artists making over $1m and significantly more making $25k - so it’s just about delivering a scalable, great service for the whole pyramid. We have natural growth as artists build their catalogue and fanbase," he continued.

"In the traditional system it was Russian roulette: 5% succeeded. In this system, I say ‘get rich and NOT die trying’! We take care of 40,000 writers and artists, and on average on AWAL, you’re making two times more on recording royalties than you make on touring. At times like this [the Covid-19 pandemic and live-music shutdown] that is even more important."

Olinick agreed with the prediction of future growth, and opportunities for AWAL (although by extension, also companies like it).

“I firmly believe that there will be more artists who want to be an artist like this - it’s a trend across the board in every piece of data we see. What I know is that this part of the business will continue to grow faster than the rest of the market.”

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Hindsight note: Nowadays, we have a broad idea of what kind of royalties a single stream generates, so when ‘artist X earned Y from Z streams’ stories emerge – when Y is much lower than it should be – alarm bells ring. Here’s an example of an artist trying to puzzle it out.

Pitchfork's article about 'how musicians are fighting for streaming pay during the pandemic' isn't new: it was originally published in June. However, after the site re-shared it on Twitter yesterday with some stats on classical violinist Tasmin Little's earnings, it's sparking debate.

There's definitely something puzzling afoot. The article references a tweet from Little in May revealing that she was paid £12.34 (around $16.16) for six months of plays – "around 5-6 million streams" – on Spotify.

Here's why we're puzzled: according to the '2019-2020 Streaming Price Bible' data shared by artist-rights blog The Trichordist earlier this year, Spotify's average per-stream rate (for a mid-sized independent label) was $0.00348 – so around $3,480 per million streams on average. Tamsin Little's 5-6m streams should have generated label payouts of between $17.4k and $20.9k. How that translates to just over sixteen dollars for the artist is puzzling.

"Something is definitely going wrong but I have checked with my two main record companies and I don’t think the problem is there," tweeted Little yesterday. "I know that publishers receive quite a bit. It’s a mystery and rather frustrating!"

THE MYSTERY OF TASMIN LITTLE'S MISSING SPOTIFY ROYALTIES

25 AUGUST 2020

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Hindsight note: Music streaming services have their own trade body now, and this was the point where it made a prominent intervention in the artist royalties debate, including a fairly pointed breakdown of how much labels and publishers take – a point sensitive enough that the individual streaming services usually avoid talking too much about it in public. No such qualms for their representative body!

The US-based Digital Media Association (DiMA) is the lobbying body for music streaming services from companies including Amazon, Apple, Pandora, Spotify and YouTube. Its new 'Streaming Forward' report – produced with consultancy firm Midia Research – thus focuses on the positive aspects of streaming's impact on the US music industry.

Its data from 2019 notes that there were $10.3bn of streaming revenues in the US ("$28.2m per day generated for the music industry") and that by the end of the year there were 87.2m streaming music subscriptions in the US and 99 million subscribers. That's an interesting number, hinting that around 11.9% of American music subscribers aren't paying themselves – for example because they're on family plans paid for by someone else in their household.

[Note, the '87.2m subscriptions' figure is different from US industry body the RIAA's official 2019 figure of 60.4m paid subscriptions. That's because the RIAA's stat was an average across the year, while DiMA's is a year-end figure. DiMA's report also offers a figure for the number of ad-supported music listeners in the US at the end of 2019: nearly 117 million.]

More talking points: 17% of US music streaming users search for song lyrics at least every month; 21% of US consumers listen to podcasts on a monthly basis, but that rises to more than 40% for music subscribers and smart speaker owners; 47% of US smart speaker owners pay for a music subscription compared to 21% of overall consumers; and there's a forecast that US streaming revenues will grow from $11.7bn in 2020 to $17.8bn by 2026.

DIMA REPORT HAILS MUSIC STREAMING'S IMPACT IN THE US

28 AUGUST 2020

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There are some obvious gaps: no mention of the appeal against the Copyright Royalty Board's new songwriter royalty rates (all of DiMA's members bar Apple appealed) for example. Recent complaints by musicians about streaming payouts are also swerved, with the emphasis on success stories like BTS, Tones and I and Lil Nas X.

Here's a fun thing though: a separate infographic created by DiMA to illustrate 'Who gets paid and how much?' from US on-demand audio subscription revenues, breaking down how each $100 collected from consumers is divided up. Not just in terms of the '$31 to the service and $69 to the rightsholders' split, but beyond that too: how the $55.21 that goes to recording rightsholders and the $13.31 that goes to song [publishing] rightsholders is split between the various entities.

These can only ever be illustrative average figures: label, publishing and management deals vary so much after all. But it's very interesting to see the DSPs' lobbying body putting an infographic out claiming that of the $55.21 of recording royalties generated from $100 of subscription spending, labels get $43.54 (79%) while artists get $6.63 (12%). Quite the conversation starter...

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Hindsight note: This is an idea that came and went without that much discussion in the wider industry, which is perhaps a shame. If not artists on the boards of streaming services, why not at least artist advisory boards?

In a guest column published by Music Ally, Austin Robey - co-founder of Ampled, the cooperative Patreon-like platform for artists - takes aim at Spotify’s ownership model, and offers an alternative. His critique is clear, and it’s structural: “As a for-profit, publicly traded corporation, Spotify has no responsibility to artists.” 

His accusations are provocative and blunt: “All of Spotify’s $47bn market cap is created by artists, but not a single artist sits on the board and has any real say.” (Spotify would probably argue that their value is at least partly due to the technology and user-facing services it provides, not just the artists’ music.)

Robey’s platform - profiled by Music Ally here -  is collectively owned by its artists and workers, and his solution for Spotify also involves artist ownership to, "address the underlying problem that drives [Spotify's] incentives and decision making.” He’s not suggesting turning Spotify into a co-op - he just wants artists on the board.

If this sounds like a radical step, he points to Germany, where, “companies with over 2000 employees are required to have half the supervisory board of directors as worker representatives.” 

The Ampled founder is explicitly targeting Spotify, but his proposal would apply to many DSPs. And Spotify, it must be noted, pay approximately 65-70% of their revenue to rights holders. In Q2 2020, that total revenue was $1.89bn.

This is the complexity at the heart of some artists’ complaints about streaming payments. In his interview with Music Ally in July, Spotify’s CEO Daniel Ek observed that while he heard a lot of criticism, he hadn’t, “ever seen a single artist saying ‘I’m happy with all the money I’m getting from streaming.’” Perhaps bringing artists onto the Spotify board would be useful in helping bridge this perceived communication gap.

AMPLED CO-FOUNDER: “ARTIST OWNERSHIP IS THE WAY TO FIX

SPOTIFY’S BROKEN STREAMING MODEL”

1 SEPTEMBER 2020

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Spotify also see themselves to be, “in the still early days of growth,” and would argue that this potential continued growth is only a good thing for artists: the more money that comes in, the more they will get.

So could Robey's modest proposal actually happen? He says it requires Spotify to, “issue new shares and create a significant trust of ownership for artists… $1bn worth of non-trading shares and place it under the control of artists on its platform.”

The next step would be persuading Spotify to do it. Robey says that artists will need to place pressure on the company to do so - and there is already significant momentum building in focused campaigns like #brokenrecord.

This is a provocative and polarising suggestion - but it’s also a useful thought experiment: if Spotify is indeed still in the early days of growth, a call for worker representation at board level in developing businesses is not without historical precedent.

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Hindsight note: Another helpful piece of context with industry figures: this time showing just how fat the ‘fat head’ of streaming’s long tail is. More than 1.4 million musicians sharing 0.6% of total streams is a figure worth a sharp intake of breath!

The question of how long the 'long tail' of streaming is – and also how miserable it might be – has long been a subject for debate in the music industry. US analytics firm Alpha Data has some new figures to contribute, but they may not make reassuring reading for musicians lower down that tail.

Rolling Stone, which uses Alpha Data for its charts, has the story. "If you were to take the more than 1.6 million artists who released music to streaming services in the past year and a half and ranked them by their total streams, you’d find that the top 16,000 of those artists pulled in 90 percent of the streams," it reported.

What's more, the top 10% of artists – that's 160,000 or so – accounted for 99.4% of those streams. Which means that more than 1.4 million artists are scrapping for 0.6% of streams. "Almost half of the artists analysed saw fewer than 100 streams," added Rolling Stone.

This is useful data, and it chimes with Spotify's recent announcement that 43,000 artists account for 90% of its streams. In March 2018 CEO Daniel Ek told investors that Spotify had three million artists on its platform. We don't have an updated artists figure, but if it had stayed at three million, that would mean just over 1.4% accounted for 90% of Spotify streams. Assuming the number of artists has grown, it'll be closer to Alpha Data's 1% stat.

But of course, share of streams only tells part of the story: share of money – and how much of that money is left by the time it actually gets to the musicians – is the key to understanding how many artists are making a sustainable living from streams of their music.

1% OF ARTISTS ACCOUNT FOR 90% OF STREAMS SAYS ALPHA DATA

10 SEPTEMBER 2020

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Hindsight note: We’re now entering the ‘Kanye’ mini-section of this book, with West making headlines for several days by going public with his anger over the contracts he’d signed, and the wider issues around artists and labels. The masters ownership issue would emerge as an important strand of the UK inquiry later.

A busy day for Universal Music's legal department yesterday, as Kanye West tweeted a bunch of his contracts with the major label, page by page, as part of a sudden campaign seemingly hoping to buy back his masters. And it really was page by page, after an initial, unfortunate attempt to post PDFs (not a feature that Twitter supports.

"In the streaming world master ownership is everything... that is the bulk of the income ... in COVID artist need our masters ... it’s more important than ever before," was one of his early salvos, before a period of all-caps blasts ("UNIVERSAL WONT TELL ME WHAT MY MASTERS COST BECAUSE THEY KNOW I CAN AFFORD TO BUY THEM" and "MY CHILDREN WILL OWN MY MASTERS ... NOT YOUR CHILDREN ... MY CHILDREN ... MY CHILDREN ... MY CHILDREN"), then the contracts with an exhortation for "every lawyer in the world to look at these".

Which, indeed, they are. Some thoughts: Artist ownership of their masters is an important topic in 2020; sharing contracts with the world is an... unusual negotiating tactic; and these contracts may not be the smoking gun of Big Evil Label that West thinks – early interest seems to be focusing on the size of the advance for 2013 album 'Yeezus' instead. But they're quite the conversation starter.

KANYE WEST POSTED HIS UNIVERSAL MUSIC CONTRACTS ON TWITTER

17 SEPTEMBER 2020

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Hindsight note: Part of this story has put us off taking a job as Kanye West’s trophy-room cleaner forever. But his thoughts on deals raised some of the points that Broken Record would also touch on.

Fresh (well, maybe that's not the best word) from expressing his views on the music industry by tweeting a video of a Grammy award being urinated on, Kanye West offered some more constructive suggestions for how he'd like to see the industry change. In a series of tweets yesterday, West outlined some "new recording and publishing deal guidelines", having already tweeted out a selection of his own contracts with UMG last week.

West wants artists to own the copyright for their recordings and songs, and lease them to the label and publisher "for a limited term. 1 year deals", with those "service provider" partners taking a 20% cut of the income.

West also had guidelines for lawyers ("We need Plain English contracts. A Lawyers role is to IMPROVE deals…. not charge for contracts we cannot understand or track. Re-write deals to be understandable from FIRST READ"); demanded "NO MORE blanket licenses... If your song helps a deal over the line you invested in that store / app same as they did"; hit out at advances as "just loans"; called for every label to have its own royalty department, and analytics portals that aren't just for royalties.

"Every audio file, every asset, every deal stored WITH the money. Money and Music must stay together. When your term ends, download it all. Leave."

KANYE WEST OFFERS GUIDELINES FOR RECORDING AND PUBLISHING DEALS

21 SEPTEMBER 2020

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Hindsight note: And more Kanye, although things went quiet after this story, both on what would happen with West’s own contracts, and his ambitions to help fellow artists regain ownership of their recordings.

The music industry may still be picking its way through Kanye West's self-leaked Universal Music Group deals, but West is making it clear that his campaign around artist contracts is more than just a moment on Twitter.

"The desired effect will only be achieved when every artist owns their masters. I’m Team 'Free Artists.' I’m committed to doing whatever is necessary so artists own their own copyrights," West told Billboard in an interview published last night.

West said that he is now working with advisors including lawyer Joel Katz, Hipgnosis Songs founder Merck Mercuriadis and Loud Records founder Steve Rifkind on his plans, amid "discussions" with UMG and its parent company Vivendi.

"The music business is new now. You sign to a major, you put your songs in a huge pot of titles they use to negotiate with. Their power now comes not only in selling but investing our songs into Apps, DSP platforms and so on," said West.

"We create their value in getting our songs to earn us sales, but also equity... Our catalogs, combined with other catalogs, equals power. If we contribute to that power, we get paid. Period. That’s for all. Every single record involved in helping get an equity play over the line is a shareholder in the equity it gained."

These are important talking points, although it's also true that artists did get paid from the most high-profile example of an equity play getting over the line – when Spotify went public, with the major labels and Merlin (via its indie members) all sharing their windfalls with artists.

The bigger point is that those windfalls were voluntary: while there was a degree of pressure in the media, sharing the windfall was not mandated in artists' contracts, which is what West is calling for.

One quirk of his campaign: it's bringing him into the same territory as Taylor Swift. The pair's past fallouts are well known, but besides publicly slamming the

KANYE WEST ON CONTRACTS CAMPAIGN: 'I WILL HELP SET PRECEDENTS'

24 SEPTEMBER 2020

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situation that leaves her masters out of her control, Swift also claimed in 2018 that her new deal with UMG included a stipulation that "any sale of their Spotify shares result in a distribution of money to their artists, non-recoupable".

What we're getting at is this: slowly, but surely, major established artists are evolving into artist-rights activists, and stressing their determination to use their clout not just for their own deals, but for the system itself. And there's evidence that they can have an impact.

"I will help set precedents, I will help develop better royalty portals and deal shapes. I will design how this flows with them," said West. "I will work to rip apart the structure we are attached to that pays people for music. We cannot have designed streaming, but not designed a new method for payment and ownership around it where we all benefit."

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Hindsight note: Another Music Ally TV Show, this one trying to get to the bottom of why Deezer hadn’t been able to launch a pilot of user-centric payouts. Again, as a streaming service it can’t really openly criticise labels (including saying which one(s) were blocking its plans) but for anyone interested in user-centric, it was a useful update on the company’s still-flickering ambitions. It’s also on YouTube to watch.

Just over a year ago, music streaming service Deezer announced its desire to launch a pilot of a ‘user-centric payment system’ (UCPS) by early 2020.

You can read our primer on the user-centric model here, but in a nutshell, it ensures that the money from your streaming subscription only goes to the music you listen to.

It feels like a fairer way to divide out streaming royalties than the current system, where the royalties from your subscription go into a big pool divided by overall share of streams.

[In another nutshell: if BTS or Taylor Swift or Drake or whoever get 5% of everyone’s streams, they get 5% of your subscription even if you never listen to them.]

Nobody’s quite sure exactly who’ll benefit from a switch to user-centric: there have been a few academic studies, and they were all cautious about drawing big, bold conclusions.

That’s exactly why Deezer wanted to run a pilot, in just one country (France) and only with labels (not publishers or collecting societies), to gauge the impact. The company said it had “the majority of French labels” on board, yet a year later the pilot still hasn’t launched.

Yesterday, for a special episode of our Music Ally TV Show, Deezer’s chief content and strategy officer Alexander Holland joined us for an update, and to talk about why the company is still keen to test UCPS.

The show also included Lottaliina Pokkinen, head of legal affairs for the Finnish Musicians Union, which published the most recent of those academic studies in March 2018.

DEEZER STILL PUSHING FOR USER-CENTRIC PAYOUTS: ‘WE WILL

CONTINUE FIGHTING…’

1 OCTOBER 2020

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Deezer clearly doesn’t want to alienate its key partners by pointing the finger of blame, and Holland was suitably tactful on the reasons for the pilot not yet launching. However, it’s clear that one or more major labels are yet to commit.

“We are chipping away here for many years already,” said Holland. “This can only happen in the context of agreement with our label partners. We cannot unilaterally introduce UCPS and say ‘this is the way we do it’.”

Holland went on to outline what Deezer sees as the main benefits of UCPS, starting with fairness and transparency.

“I would consider it is more fair if my money goes to the artists that I love, rather than running through a black box. It is definitely more transparent if we run it through a UCPS system,” he said.

“It also leads in our view to better allocation of the money across the spectrum of artists and genres… and it might create almost a pension fund. Even artists that in the short term might lose, in the long term might get this money back as their audience grows older, and their frontline catalogue becomes back catalogue.”

That’s an important point in the user-centric debate: the likely impact isn’t so much about shifting royalties away from major labels and towards independents, or from big artists towards medium and small ones.

If anything, it’s more about shifting the centre of gravity for royalties away from the heaviest (and often youngest) users of streaming services, and towards the lighter (and often older) listeners.

(Hence Holland’s point about UCPS’s impact on an artist potentially moving from negative to positive as their audience gets older in the future.)

It’s also reflected in some of Deezer’s findings from its internal modelling of UCPS’s impact, in this case the UK, shared with Music Ally during the show.

The chart analyses the impact on genres: in general, those more likely to be listened to by older listeners are more likely to benefit, while those more likely to be listened to by younger listeners are more likely to suffer.

Yes, the phrase ‘more likely’ is doing some heavy shifting in that sentence. And yes, pop is an outlier, genre-wise, because it includes such a wide range of music, past and present.

“In general the divide here is along the lines of the age of the user,” said Holland.Pokkinen also shared some data from the Finnish study, which drew on real data

provided by Spotify, and used it to analyse a sample of 10,000 tracks.The researchers found that the ‘top tier’ of this music – the tracks that got more

than 100 streams in the period covered by the study – was just 0.4% of the catalogue.

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The ‘mid tier’ of tracks getting 10-99 streams accounted for 9.6% of the catalogue, and a whopping 90% got fewer than 10 streams. Pokkinen said that the study showed that under UCPS, none of the top-tier artists would get more money, and in general that they would lose money to those in the lower tiers.

This, however, wasn’t the big surprise from the publication of the Finnish study.“The biggest ‘aha!’ from the public wasn’t the results: it was the fact that there is

no user-centric at this moment,” she said. “People who were used to buying CDs thought that [with streaming] their money was still going to the artists that they listened to. So that was the actual news.”

The big question around the user-centric model is whether it will ever happen: and about what’s needed to persuade all of the labels to at least sanction a pilot, let alone a full switch.

“I want this to happen and I’m sure it can happen. This is why we’re relentlessly working on this over the years, and I think the time is really riper than ever,” said Holland, who’s well aware of the recent Covid-19 and live-lockdown fuelled resurgence in debate about artists’ earnings from streaming.

“It’s very very important, and it also creates a closer connection between the artist and the fan if the fan knows that his money goes to the artists he listens to,” added Holland. “The interest in the subject is growing, and the public support is growing.”

Convincing the labels is the key. Pokkinen suggested that as early investors in services like Spotify, the major labels had the clout to shape the current market-share system of streaming payouts with their early licensing deals.

“They must have thought that it was profitable for them, and since they have big back catalogues, it’s very likely that their music is being mass-used,” she said – mass streaming being the key to a high share of streaming royalties under that system.

“Although having talked with some major label CEOs who are also willing to switch: they have also seen what Alexander said: that they might lose some in the short run, but in the long run they wouldn’t lose that much due to people listening to the catalogues.”

Pokkinen also thought that the Covid-19 pandemic could boost the campaigns for introducing UCPS, not least because it would offer streaming services an artist-friendly narrative.

“It has shown that live income, at least for the artists, is the biggest, and when you take live out of the equation, people can’t live off what they make in royalties,” she said.

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“So this would be a perfect time to say ‘We switch to user-centric so you can support your favourite artists by listening to them on your streaming platforms’. Because now you can’t really do that because you don’t know where the money goes.”

The talk returned to Deezer’s efforts to convince all the labels to sign up for its pilot. “We shared a pile of data with them, and I think we have come to the end of that exercise. They understand relatively well the detail and the granularity of what UCPS means for them, for their artists, for their frontline and back catalogue,” said Holland.

“Public support… and ideally artist support will be able to sway them over time to at least try it out with us,” he added. “Our ambition is to run this and roll it out globally. But we think it’s easier to digest for all of our partners to say ‘Let’s try this market and see how it goes’… And we are ready to implement that.”

In fact, Holland said that Deezer’s systems have been ready for UCPS since June 2019, albeit after “many months” of work to prepare them.

“We have been reporting to labels and key partners in both ways so they can compare and analyse the data,” he said. Meanwhile, more than 75,000 people – music fans – have visited Deezer’s UCPS website to read up on what the switch would mean for the artists they listen to. “This is a topic that we have to be patient with, and just keep the fire burning, and not give up on the discussion,” said Pokkinen, who thinks that artists could have an important impact on the debate.

“It would be interesting if a big artist said ‘I won’t give my music to this service unless it’s user-centric’, or ‘I will only give my music to the platform that is user-centric'” she mused. Holland agreed that if streaming is to switch to a user-centric model, it’s a marathon rather than a sprint to bring all the necessary rightsholders onside.

“First and foremost, patience. We will continue fighting for that, and we will gain in my view more and more support on the side of the audiences, on the side of the artists, and at some point I’m convinced our label partners will say ‘Okay let’s try it out, let’s see how it treats us and how it behaves’ – so we bring it out of the scientific analysis into the real world and push it out there,” he said.

“I see that in the not-so-distant future, although I have been over-optimistic in that respect before, so let’s hope we can do it sooner rather than later.”

“You have to remember that we are talking about big businesses,” added Pokkinen. “We have to use some force, but we also have to have a common goal, and good examples like Deezer to show it’s still a profitable business [for labels] to do it like this. We have to keep on going, and trying and pushing, otherwise nothing will happen.”

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Hindsight note: What do music fans think of the way streaming rewards their favourite artists? Do they think about it at all? Broken Record hoped to show they they do, and that they were as unhappy about the status quo as its artists.

The UK-based #BrokenRecord campaign has been agitating on the issue of musicians’ streaming royalties for several months. Now it has published the results of a survey of 2,069 British adults, weighted to be representative of the population, about the topic. It found 77% saying that artists are not paid enough; 76% saying that songwriters are underpaid; 83% saying that most record labels are paid too much; and 68% saying streaming platforms are overpaid.

Here’s the rub: just over 53% of the respondents pay for a music streaming subscription. That means 24% who think artists aren’t paid enough, but aren’t paying for a subscription themselves to help to solve that problem. Another question asked if people would be prepared to pay more for their subscription under the current distribution model, and found 69% saying no.

However – and this ties in to the campaign’s interest in user-centric distributions – when they were asked if they’d pay more if their subscription went ‘directly to songwriters and artists they listened to, around half of the naysayers (the 69% from the last question) changed their tune and said they’d pay more.

“Consumers want a fairer share of streaming income to go to artists, songwriters and musicians,” said #BrokenRecord founder Tom Gray. “The system is unethical and unsustainable and needs to be sorted out by the industry or, if necessary, via government intervention.”

#BROKENRECORD CAMPAIGN REVEALS RESULTS OF STREAMING SURVEY

13 OCTOBER 2020

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Hindsight note: The British government wouldn’t be investigating streaming just yet, but here was the announcement that a parliamentary committee would be. And as its list of key questions showed, it meant business. But note again the emphasis on the streaming services as the potential villains, much more than labels.

For several months, the #BrokenRecord campaign in the UK has been calling for the government to step in to the debate about musicians’ streaming royalties. Today, there’s been a significant announcement on that front.

No, not legislation (yet). The British parliament’s Digital, Culture, Media and Sport (DCMS) committee has launched an inquiry into the economics of music streaming. “MPs will examine what economic impact music streaming is having on artists, record labels and the sustainability of the wider music industry,” it explained.

“Music streaming in the UK brings in more than £1 billion in revenue with 114 billion music streams in the last year, however artists can be paid as little as 13% of the income generated.”

The inquiry will have a wider remit than just artist royalties, however. It will also consider “whether the government should be taking action to protect the industry from piracy in the wake of steps taken by the EU on copyright and intellectual property rights”.

The first step is for industry experts, artists, labels and streaming services to submit their written views, with a deadline of 16 November. It’s particularly interested in these questions:

• What are the dominant business models of platforms that offer music streaming as a service?

• Have new features associated with streaming platforms, such as algorithmic curation of music or company playlists, influenced consumer habits, tastes, etc?

BRITISH PARLIAMENT LAUNCHES INQUIRY INTO ECONOMICS OF MUSIC

STREAMING

15 OCTOBER 2020

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• What has been the economic impact and long-term implications of streaming on the music industry, including for artists, record labels, record shops, etc?

• How can the Government protect the industry from knock-on effects, such as increased piracy of music? Does the UK need an equivalent of the Copyright Directive?

• Do alternative business models exist? How can policy favour more equitable business models?

Judging by the comments from the DCMS committee chair Julian Knight MP, the inquiry may be a particularly bumpy ride for the DSPs.

“While streaming is a growing and important part of the music industry contributing billions to global wealth, its success cannot come at the expense of talented and lesser-known artists. Algorithms might benefit platforms in maximising income from streaming but they are a blunt tool to operate in a creative industry with emerging talent risking failing the first hurdle,” said Knight.

“We’re asking whether the business models used by major streaming platforms are fair to the writers and performers who provide the material. Longer-term we’re looking at whether the economics of streaming could in future limit the range of artists and music that we’re all able to enjoy today.”

While these are important issues, the inquiry will surely also explore the economics of streaming after the royalties have been paid out by the DSPs, including the much discussed of late topic of artists’ contracts and revenue splits with labels.

If the inquiry looks at the potential for user-centric payouts, that could also prove sticky territory for labels, if it yields more information on which companies have blocked Deezer’s attempts to test the user-centric model, and their arguments for doing so. That said, labels will welcome the inquiry’s focus on whether the UK needs an equivalent of the European Copyright Directive, given their fears that post-Brexit, the UK will turn its back on the legislation’s approach to user-uploaded content platforms.

All this is a localised story, but these kinds of inquiries – especially when televised hearings are involved – can have knock-on effects elsewhere in the world. We’ll thus be following the DCMS’s investigation closely in the coming months.

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Hindsight note: This was more a Covid impact story than it was a streaming royalties story, but it’s more important context for the unrest among artists.

Since March, we've tried to find the good news within the Covid-19 pandemic, in terms of relief efforts and innovation to help musicians and their teams. Sometimes, though, we have to bring you the unvarnished bad news about the difficulties being faced in this crisis. The latest survey from UK charity Help Musicians is one of those stories.

The charity surveyed more than 1,300 musicians in the UK, and found that 96% have lost "the majority" of their income, while 55% aren't earning anything at all from music at the moment. Only 19% expect their income to return to normal by April 2021, while 89% are worried about the next year of their career, and 76% are worried about whether they can even stay in the music industry longer-term.

Meanwhile, 43% said they are worried about losing their home, while 81% are anxious about paying their household bills. It's a grim picture of the totality of the UK music-making sector: not just featured artists, but session and touring musicians, songwriters and more. It's the feeder and support ecosystem upon which the higher levels of the music industry stand.

"Our new research shows the situation is awful – almost half of musicians are already worried about losing the roof over their head.. What’s more their options to find alternative jobs are severely limited because the economy is in recession," said Help Musicians CEO James Ainscough. A UK story, but the sobering survey results will be reflected in a number of other countries.

The charity's hardship fund has already paid out more than £11m  ($14.3m) to musicians since the start of the pandemic, and a recent £1m donation from the UK's Arts Council is helping it extend the fund until the spring of 2021 – but with an "avalanche" of new applications expected in the next few weeks, Help Musicians is seeking more donations "large and small" for the fund.

55% OF UK MUSICIANS ARE CURRENTLY EARNING 'NOTHING' FROM MUSIC

19 OCTOBER 2020

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Hindsight note: What were we saying about potential villains? Hipgnosis was one of the companies trying to turn the gaze of the DCMS committee towards rightsholders, and specifically labels. Hipgnosis owns songs (the underlying compositions) so has a clear interest in pushing for royalties to be diverted from the recordings side of the business. Still, its founder would successfully help to put this issue firmly onto the inquiry’s agenda.

Merck Mercuriadis isn't just snapping up catalogues left, right and centre for his Hipgnosis Songs Fund; he's also wading in to the debate about musicians' streaming royalties. Well, more accurately he's responded to a journalist's question about the issue in relation to the UK's #BrokenRecord campaign, but his answer to the BBC's Mark Savage was pretty punchy.

"Yes, streaming services need to pay songwriters more money. Where I think the #BrokenRecord campaign is imperfect is that their focus is on the streaming services [when] the real villains are the major record companies that are taking the lion's share of the money," said Mercuriadis, who went on to focus on how the 70p in every pound that goes to rightsholders from streaming is divided.

"As it currently stands, 58.5p out of that remaining 70p is going to the record company. The artist is getting, at best, one sixth of that [meaning] 11.5p is going to the song," he said. "We think it's time that the record companies stepped up and recognised that there's a real imbalance between what's being paid for recorded music versus what's being paid for the song."

HIPGNOSIS BOSS CRITICISES LABELS FOR SONGWRITER ROYALTIES

19 OCTOBER 2020

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Hindsight note: Broken Record was born in the UK, but across the Atlantic a similar campaign has been picking up steam. This was our first sight of ‘Justice at Spotify’, which as the name implies focused much more on that specific streaming service (albeit as a proxy for streaming generally) than on labels.

Spotify is firmly in the sights of a new artist-focused campaign launched by the Union of Musicians and Allied Workers (UMAW) in the US. Called 'Justice at Spotify', it's a series of demands for the streaming service.

They include: paying artists and rightsholders at least one cent per stream – "Many claim that such wages are not compatible with Spotify’s current economic system. Our demand is that this model be adjusted so that artists can be paid fairly. If Spotify's model can’t pay artists fairly, it shouldn’t exist" – switching to a user-centric payouts model; and publicly disclosing all its contracts with labels, distributors and management firms.

More transparency around its finances; stopping "payola" (seemingly a reference to paid on-platform advertising for music: "Spotify encourages labels and management companies to pay for plays on the platform..."); full credits for "every musician, producer, audio engineer, mastering engineer and all others involved in the work of recordings"; and ending its appeal against new songwriter royalty rates in the US.

These are important topics, but the campaign is a reminder that one company isn't solely responsible for, and certainly can't solve, many of these issues alone. For example, Spotify can't unilaterally introduce a user-centric system without the agreement of labels (one or more of whom's resistance has so far blocked Deezer from even trialling such a system), publishers and collecting societies.

Detailed credits would be excellent, but Spotify can't magic them up: they would need to be provided by rightsholders. As fun as it would be to see Spotify channeling Kanye West and tweeting out all its contracts, there are two sides to every NDA, so

JUSTICE AT SPOTIFY CAMPAIGN TAKES AIM AT STREAMING SERVICE

27 OCTOBER 2020

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that's another demand that could only be met if its industry partners agreed. Which they won't.

As for one cent per stream payouts... Spotify doesn't calculate payouts per stream: they're based on a percentage of its revenues, divided by share of streams on the platform. Doubling or tripling the payouts wouldn't involve changing a 'per stream' figure on Spotify's system: it would require doubling or tripling the revenues, and thus the royalties pool.

There are valid discussions to be had around how Spotify can increase that pool significantly, from raising its subscription prices to shaving its share of the revenues. We explored those in this article in May. But as the #BrokenRecord campaign in the UK has acknowledged, the wider context is of questions for everyone in the royalties chain – labels, publishers and collecting societies included – about increasing musicians' earnings from streaming.

That's the nuance that a campaign training its sights on streaming alone – and indeed, a single streaming service – misses. UMAW's mission statement includes "ensuring musicians receive the royalties they are owed" and "establishing more just relationships with labels" too, so it is aware of the bigger picture, at least. It's really good that organisations like this are getting involved in the streaming debates though. The more they can tie the strands of the bigger picture together, the better the chances of securing positive changes for their members.

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Hindsight note: It does seem a little strange, in retrospect, that Spotify would choose the eve of a streaming economics inquiry to announce a new royalties-related feature that was guaranteed to be controversial: accepting lower royalties in return for a promotional boost on certain parts of its service. In traditional Music Ally style, we talked to Spotify and explained its thinking, but also analysed some of the potential problems we saw with it.

Spotify is testing a new feature that will enable artists and labels to boost specific tracks in the recommendation algorithms for its radio and autoplay features – if they agree to a "promotional" (i.e. lower) royalty rate for those streams.

Autoplay is the feature that automatically plays other songs when you reach the end of an album or playlist, while Radio is the section of Spotify that generates radio-like stations based on specific songs and artists.

Spotify is calling the new feature 'Discovery Mode' (an industry-facing term) and will initially test it with artists and labels in the US, rolling it out further if it is successful. The promotional rate will only apply to recording royalties: the publishing royalties for these tracks will remain the same.

Here's how the streaming service is describing its plans in a blog post this afternoon:

----------"In this new experiment, artists and labels can identify music that’s a priority for

them, and our system will add that signal to the algorithm that determines personalized listening sessions. This allows our algorithms to account for what’s important to the artist — perhaps a song they’re particularly excited about, an album anniversary they’re celebrating, a viral cultural moment they’re experiencing, or other factors they care about.

To ensure the tool is accessible to artists at any stage of their careers, it won't require any upfront budget. Instead, labels or rights holders agree to be paid a promotional recording royalty rate for streams in personalized listening sessions

SPOTIFY'S NEW ARTIST TOOL COULD BOOST STREAMS (WITH A DISCOUNTED

ROYALTY RATE)

2 NOVEMBER 2020

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where we provided this service. If the songs resonate with listeners, we'll keep trying them in similar sessions. If the songs don't perform well, they'll quickly be pulled back. Listener satisfaction is our priority—we won’t guarantee placement to labels or artists, and we only ever recommend music we think listeners will want to hear.

We’re testing this to make sure it’s a great experience for both listeners and artists. To start, we’ll focus on applying this service to our Radio and Autoplay formats, where we know listeners are looking to discover new music. As we learn from this experiment, we’ll carefully test expanding to other personalized areas of Spotify."

----------Music Ally talked to Spotify's product marketing lead Charleton Lamb ahead of

the announcement, to understand what the streaming service is doing with the latest of its promotional tools for artists and labels.

"Historically, a lot of those tools have been focused on promoting new music: really focused on release week. We are driving 16 billion discoveries a month. That's 16 billion times fans are listening to artists they've never listened to before on Spotify," said Lamb.

"So artists are really happy with those tools, but when we talk to them, they say they want more tools outside of release week, and especially for catalogue music. And we agree."

Some of Spotify's previous promotional tools have charged labels: its 'Marquee' full-screen pop-up album recommendations for example. Discovery Mode is the first where the payment will come in the form of a discounted royalty rate.

It's a bold move, to say the least, coming in a year when artist unrest around streaming royalties has surged – as (and, indeed, because) their live incomes have fallen off a cliff. Lamb outlined Spotify's argument for its new feature.

"What was really important was that we wanted to be accessible to artists at any stage of their career. It won't require any budget upfront. The model is accessible, democratic, it's more fair. You don't have to pony up cash," he said.

Lamb reiterated that the promotional rate only applies to streams from Spotify's radio and autoplay modes when an artist or label has opted in to Discovery Mode.

"It does not mean lower royalties," he added. "If a track is performing well, rightsholders can see a positive ROI [return on investment]. And if they don't, they can turn it off."

That's going to be an important thing for artists and labels in the test to figure out: whether a track can generate more money in total with Discovery Mode turned

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on, even with the lower rate from radio and autoplay streams, than it would have made without it.

The obvious question: what is that promotional rate? Spotify isn't saying at this point, although you can expect it to quickly leak once the first royalty statements arrive for artists and labels who are part of the test – even if they have signed an NDA, these figures have a habit of finding their way into the media.

As for the geographic rollout: "We're just in pretty early days of testing, working with a small number of partners in the US," said Lamb. "But our intention is to make this globally available, and as we've done with other artist tools, we start small and take it larger."

He confirmed that songwriters will not take a hit from artists and labels opting in to the new feature – "It is only for recording: publishing won't be affected" – and that the test does not involve Spotify's personalised playlists like Discover Weekly.

(Note the "As we learn from this experiment, we’ll carefully test expanding to other personalized areas of Spotify" part of the blog post on that score, however.)

One question Music Ally had: could a label opt in to Discovery Mode without an artist's permission, or vice versa? Who gets to control this? That's something that Spotify is leaving down to labels and artists/managers to agree between themselves.

They will be able to opt in to Discovery Mode for several tracks at once, not just one at a time. Deciding which, when and for how long will (hopefully!) be part of the regular marketing discussions between artist teams and labels.

Another key question: will artists feel pressured to use the new feature, in fear that their music will be discovered less often in Spotify's radio and autoplay modes if they do not? Lamb presented it as a positive tool instead.

"This is an opportunity to add an extra signal [to the recommendation algorithm] when you think your songs are underperforming. Our job is to give you the data to be able to make that choice, and to really understand it and make an informed decision about what you're trying to do with your music," he said.

Radio and autoplay are "a pretty significant chunk of listening on the platform: the place where a lot of music discovery is happening" but Lamb stressed that there are a number of other places on Spotify for that too, and that Discovery Mode is still only one signal among many that feed in to the algorithm.

"There are over 300 million listeners we're making personalised recommendations for. There's a lot of room to be successful," he said. "We're going to try to build tools that scale with those numbers."

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As with any Spotify announcement, it's important to remember two distinct audiences who'll be responding to it: musicians and the music industry on on side, and investors on the other.

Investors (and the analysts who represent them on quarterly earnings calls) are keen on Spotify's artist tools and wider 'two-sided marketplace' strategy, so a new tool that could lower the royalty rate for listening on a "significant chunk" of streams may go down well.

Spotify's share price in the coming hours will be a quick indicator of what Wall Street makes of Discovery Mode in the coming hours. For later reference, the company's share price was $233.99 and its market cap $44.33bn just under an hour before the announcement.

And the other audience? We'll get the response of the music community almost as quickly, via social media for musicians and (if they're not happy) via the usual trade outlets for labels.

Will artists outside the test be concerned that those within it are getting plays that might otherwise be theirs? And will they feel pressured to opt in once it rolls out more widely, for fear of losing out if they don't? We'll be monitoring the reaction this evening, while bearing in mind that there will undoubtedly also be artists keen to try out the new feature.

Another quick thought. Spotify testing different royalty rates for some 'passive' streams (i.e. served up to the listener by the algorithm, rather than chosen by them) will be of intense interest to the people preparing for the UK Parliament's upcoming inquiry into streaming economics.

One of the strands of that enquiry is likely to be a discussion of whether passive streams should be treated like radio spins, with "equitable remuneration" ensuring a bigger chunk of the royalties go directly to artists (well, via public performance collecting society PPL) rather than to labels.

To be clear: the announcement of Discovery Mode has nothing to do directly with the debate on equitable remuneration. But advocates for the latter model may well be encouraged by today's news as a sign of Spotify's technical ability to separate out (some) passive streams, and use a different payouts model for them.

One final note. Discovery Mode is a test, and not all Spotify's tests end up rolling out globally, even if that's the initial intention.

The company launched a tool for artists to upload their music directly to its service in September 2018, but after a... let's call it 'spirited' response from labels, the tool was shut down in July 2019.

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All the more reason to see how labels react to today's announcement, and how they calculate its potential impact on their revenue from Spotify. Calculations, of course, that will rely on the data generated by exactly the kind of test that Spotify is launching.

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Hindsight note: It felt important to follow up by reporting on artists’ responses to Discovery Mode, although it was very early days. Spotify has since claimed that some independent artists have been among the success stories in these tests.

"We’ll get the response of the music community almost as quickly, via social media for musicians," we wrote yesterday, in our report on Spotify testing a 'Discovery Mode' that will enable artists and labels to flag particular tracks to the recommendation algorithm for its radio and autoplay features, in exchange for accepting a discounted royalty rate.

Well, the social media response from musicians is in, and if you work for Spotify you might want to pour a stiff gin before scrolling through the quote-retweets for our tweet about the news, or those for The Fader's post on the story. It's fair to say that a lot of independent artists are deeply unimpressed.

Some common themes jump out. A lot of people are calling Discovery Mode 'payola' or 'rent-seeking'; many are pointing out that lower royalties is exactly the opposite of what recent artist campaigns have been asking for; there are plenty of recommendations of Bandcamp; umpteen variants on the 'I didn't think Spotify royalty rates could get any lower' joke; and a barrage of 'f*** Spotify' tweets.

"Spotify’s share price in the coming hours will be a quick indicator of what Wall Street makes of Discovery Mode," was another thing we wrote. A bump has yet to manifest itself: at 1pm when the announcement was made, Spotify's shares were trading at $230.45, and they closed the day three hours later at $231.60. With it being election day in the US, we suspect share prices may be bouncing around a bit for the rest of the week, making this metric probably useless from tomorrow morning for tracking reaction to Discovery Mode.

Spotify will have been expecting the negative response from artists, and it clearly didn't put the company off launching the test – which, as we pointed out yesterday, could be shut down relatively quickly if Spotify feels the heat is too great, or if its strategic objectives change.

ARTISTS RESPOND TO SPOTIFY’S DISCOVERY MODE ANNOUNCEMENT

3 NOVEMBER 2020

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It will need to keep tabs on the 'payola' criticism though. Particularly in the US, that's a very loaded word historically, and could ping some radars in policymaking / regulatory land. We wouldn't be surprised to see Apple seize on it too: with Spotify attacking that company alleging anticompetitive behaviour as a platform owner, having the 'p' word floating about isn't an ideal situation for the streaming service.

As the initial furore settles, though, the music industry will be modelling the economics of Discovery Mode carefully. There's still a sensitive series of questions at the heart of this. If artists opting in see their autoplay and radio streams boosted, does that mean those not using the scheme will see theirs decline? If that's the case, will there be pressure on artists to opt in if and when the feature opens up to all?

If the majority of artists opted in, would that dampen down the stream-boosting factor, leaving lower royalties for all as the principal impact? But also, if the majority opt in, will that strengthen Spotify's case for expanding this system to recommendations elsewhere on its service?

We're not predicting all this as inevitable: Spotify may have strong answers to assuage these fears. Our point is that it will need them. There's a Parliamentary Inquiry into streaming economics underway in the UK, and a US campaign by the Union of Musicians and Allied Workers (yesterday's tweet: "This is payola. Sign onto our Justice at Spotify campaign to demand an end these practices") angling for the attention of policymakers.

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Hindsight note: With the start of the inquiry hearings approaching, all the industry bodies were working on their written evidence submissions, and sometimes publishing them (or at least summarising them publicly).

The latest salvo in the debate about music streaming's economics – and particularly royalties for artists – comes from the European Music Managers Alliance (Emma).

In a statement issued this morning, it has praised streaming for returning the recorded music industry to growth, but claimed that "the fact that streaming services are still licensed on the basis of the world as it was ten years ago – not the world as it is now – means too little of that $1m per hour is reaching those who create and perform the music we love".

Emma has identified four areas where its manager members would like to see change. They include updating artist contracts ("Analogue royalty rates should not apply to digital income, outdated deductions should be removed, and un-recouped balances reviewed after a reasonable period of time...") and eliminating 'black box' distributions ("While unidentified and non-matched writers revenues... will frequently belong to the lowest earning songwriters, they are typically reallocated by market share to the highest-earning, or to those with inside knowledge of Performance Rights Organisation (PRO) mechanisms...")

Emma is also calling for "a full and transparent trial of what are known as user-centric payment systems" and is pushing for "EU-wide strategies to restart and reopen, financially supporting artist-businesses to return post-pandemic". The body's new campaign comes ahead of the British Parliament's inquiry into streaming economics, and can be seen partly as a preview of some of the arguments that will be made by manager and artist representatives for its hearings.

Today's statement is also notable for what's not included. There is no demand for streaming services to raise their subscription prices to increase the royalties pool, as some other artist-focused campaigns have called for. For now, Emma is training its

EUROPEAN MUSIC MANAGERS CALL FOR CHANGES TO STREAMING ECONOMY

5 NOVEMBER 2020

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sights squarely on labels – even the user-centric demand, since Deezer's attempts to launch exactly such a trial have so far failed to secure the agreement of key labels – and collecting societies, rather than on attacking streaming services directly.

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Hindsight note: Another look at what was bubbling across the Atlantic with UMAW and Justice at Spotify. Damon Krukowski is another artist who has been talking about streaming and its impact on artists for years and years. Here he outlined the thinking behind the US campaign, including its strong emphasis on royalties as a labour issue. Although UMAW is a union, so that’s not a big surprise.

We reported last month on the launch of the Justice at Spotify campaign by the Union of Musicians and Allied Workers (UMAW) in the US. Now one of its prime movers, artist and author Damon Krukowski, has been talking to Vice about the campaign's goals – including its demand that Spotify pay a minimum of a penny (one cent) per stream.

"A penny per stream is the driving force for me. Just the bottom line of they don't pay us enough. It's a classic labour struggle. Capital is keeping the money and not paying labour," said Krukowski, who later elaborated on the demand. "Even at a penny a stream, to make the equivalent of [a] $15-an-hour living wage, you still need 250,000 streams a month. Those numbers are per band member, and not counting a label's cut or a manager's cut," he said

"While you'd need that many streams to make $2500, at least it's not the absurd per-band member figure of around 660,000 to make that kind of money. It would be a huge improvement over what we got. My God, it would help an awful lot."

DAMON KRUKOWSKI EXPLAINS PENNY-PER-STREAM US ARTISTS

CAMPAIGN

16 NOVEMBER 2020

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Hindsight note: More encouragement from the musicians community for policymakers to take an interest in Spotify’s Discovery Mode. The wheels of politics can move slowly, but as you’ll read later in the book, those policymakers would come round to the idea eventually.

The brickbats keep flying for Spotify over the recent announcement of its 'Discovery Mode' for boosting selected tracks in its radio and autoplay features, in return for a lower royalty rate. This time it's the European Composer and Songwriter Alliance (ECSA) putting the boot in.

"Spotify’s suggestion to promise more exposure in exchange of lower royalty rates shows once more its profound disrespect to the community of creators who struggle to make a living," claimed ECSA in a statement published yesterday. "Music creators are at the very source of all music on Spotify and have effectively subsidised its lack of a proper business model for years. They should not be financing yet another broken idea and deserve more respect from this company, whose current model prevents an overwhelming majority of them to make a living."

ECSA wants European policymakers to take note. "We encourage them to engage in critical assessment on the functioning of music streaming services including on the tools (such as playlists) they provide..."

'PROFOUND DISRESPECT' – ECSA ATTACKS SPOTIFY'S DISCOVERY MODE

17 NOVEMBER 2020

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Hindsight note: Universal Basic Income (UBI) as a support for artists was not one of the topics discussed at the UK inquiry, nor was it a recommendation in its report. But looking back at this story, it feels like UBI might be worth another look...

Amid the ongoing debate around artists’ income from streaming, and the impact of Covid-19, here’s a curveball: what if musicians were paid a universal basic income (UBI) to sustain their careers? This isn’t just whimsy on our part: it’s an idea mooted in a new report by Ireland’s Arts and Culture Recovery Taskforce, commissioned to plot the path forward for the arts and culture sectors there post-Covid.

It’s the report’s main recommendation, in fact: “Pilot a universal basic income scheme for a three-year period in the arts, culture, audiovisual and live performance and events sectors.” Which, if you’re new to UBI, means a payment from the state to cover basic living costs plus some financial security, with no conditions attached.

The report suggested that such a pilot would be opt-in, for artists, creators AND other workers in the cultural sector, and would be set at minimum-wage level (which is about to go up to €10.20 an hour in Ireland – around $12.12). The scheme would be aimed at both employed and self-employed people, with its costs calculated based on the current ‘PUP’ (Pandemic Unemployment Payment) in Ireland. The report suggests a UBI scheme would cost €2.5m a year per 1,000 participants, over and above the current PUP cost.

It’s a report making suggestions in a single country, with no guarantee that such a pilot will be introduced, let alone rolled out to the entire arts and cultural sector. But (and this is the reason we’ve picked it as our lead story today) with discussion warming up around the world about UBI for the general population, now might be a good time to think about how the model might apply to arts and culture in particular, and how we as a society value the people working within it.

We’ll be keen to see how musicians and the teams around them react to the idea both in Ireland and elsewhere, as well as monitoring the response of the Irish government to the report’s recommendation.

IRISH TASKFORCE PROPOSES UNIVERSAL BASIC INCOME FOR ARTS

18 NOVEMBER 2020

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Hindsight note: All systems go! We perhaps didn’t realise it at the time, but the choice of first-hearing speakers would be crucial to the inquiry, in terms of its focus and key questions.

We reported last month on plans for a parliamentary inquiry in the UK into the economics of music streaming. Industry bodies, artists, DSPs and other interested parties have been submitting their evidence, and now we know who's going to be offering their views at the first oral evidence hearing next Tuesday (24 November).

The session will kick off with evidence from the founder of the #BrokenRecord campaign Tom Gray, as well as Clintons Solicitors partner Tom Frederikse and CC Young & Co streaming auditor and accountant Colin Young. It'll be followed by a session of artists: Elbow's Guy Garvey, Radiohead's Ed O'Brien (also a Featured Artists Coalition veteran) and Nadine Shah. Further hearings and speakers have yet to be announced.

UK'S STREAMING INQUIRY REVEALS FIRST ORAL-EVIDENCE SESSIONS

19 NOVEMBER 2020

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Hindsight note: Some more hopes from a particular quarter of the industry (managers, here) about the inquiry’s potential direction and recommendations.

Tomorrow sees the first session in the UK Parliament's inquiry into music streaming economics. Ahead of that, the chair of managers body the MMF, Paul Craig, has outlined his hopes for the inquiry, as well as his concerns about the current streaming environment. He warned of a "dangerous disconnect" between the streaming-fuelled growth of the recorded music industry, and the struggles being faced by artists.

"The way in which DSP licensing deals and label contracts are constructed means too few have a stake in its financial success," wrote Craig. He outlined three changes that he wants to see: contract reform including "the writing-off of unrecouped balances after a set period of time, say 15 years, and a modern and fair artist royalty rate on all digital revenues", and tackling 'black box' unpaid royalties and "for genuinely unattributed revenues to be directed to artist education and artist-focused charities such as Help Musicians".

The third is for artists and managers to get "far greater transparency over how licensing partnerships that directly impact their income are constructed".

MMF CHAIR SEES 'DANGEROUS DISCONNECT' IN STREAMING ROYALTIES

23 NOVEMBER 2020

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Hindsight note: as the UK prepared for the first inquiry hearing, UMAW was taking its campaign down a musical road. We were right about ‘New Music Friday’...

"Dear Spotify, show us where your money comes from..." The latest ambient banger on the streaming service is, well, it's about the streaming service. 'Dear Spotify' is one of five tracks on a new EP called 'Justice at Spotify' by hotly-tipped emerging artist the Union of Musicians & Allied Workers and...

Okay, it's not a hotly-tipped artist, it's the US-based union that recently launched a campaign called 'Justice at Spotify' focusing on streaming royalties and other artist-rights issues. Now that campaign has been taken to Spotify itself, with the EP's other tracks including 'We Demand One Cent Per Stream', 'Pay Us', 'Pay Artists 1 Cent Per Stream', and 'If Spotify Can't Pay Artists Fairly, It Shouldn't Exist'.

The tracks are also featured in a bigger playlist created by UMAW to promote its campaign. We'll make a bold bet that they won't be popping up on 'New Music Friday' though...

JUSTICE AT SPOTIFY TAKES ITS CAMPAIGN... TO SPOTIFY ITSELF

24 NOVEMBER 2020

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Hindsight note: This was, we think, the moment that music industry rightsholders realised just how big a fight they had on their hands at the inquiry. Tom Gray and the three artist speakers set the tone for future sessions, and they had a clear message that of all the possible changes, ‘equitable remuneration’ was the one they wanted most. Nadine Shah’s testimony was also a key moment: presenting the politicians with a critically-acclaimed musician worrying about paying her bills. A tough argument for labels to counter without seeming insensitive.

This morning saw the first two oral evidence sessions in the British Parliament’s inquiry into the economics of music streaming, focusing on musicians and their advocates. Two words loomed large: equitable remuneration.

It’s already clear that ER is the biggest change that this side of the debate – artists and their representatives – is going to be pushing for the Digital, Culture and Sport Committee to recommend in its ultimate report.

ER already exists in the UK: it’s the system used to pay royalties from broadcast usage of music, with collecting society PPL splitting them 50/50 between labels and artists.

What today’s speakers want is for legislation to extend that system to some (not all) streams on services like Spotify and Apple Music. For example, their more radio-like ‘passive’ listening modes and playlists.

“Equitable remuneration does what it says on the tin,” said Tom Gray, founder of the #BrokenRecord campaign. “It’s equal pay for equal work... when it gets paid to PPL, it is split 50-50 between the artists and the labels, and a small portion of the artist side goes to the non-featured artists: the backing performers.”

“If you just apply equitable remuneration, to some extent, to on-demand, suddenly for the first time in history money goes directly into the pockets [of the artist] from the first stream – irrespective of what awful contract terms an artist has,” he continued.

EQUITABLE REMUNERATION TAKES CENTRE STAGE AT UK STREAMING

ECONOMICS INQUIRY

24 NOVEMBER 2020

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“This produces an income from stream one for artists, and an income for our entire music community. It’s a very, very simple solution.” It’s also a solution that’s already been put high in mind for the politicians on the committee. In his evidence, Tom Frederikse, partner at Clintons Solicitors, referred to it being mentioned in “many of the written submissions” to the inquiry.

Meanwhile, a follow-up question to Gray from the committee made it clear that some submissions from labels have already raised objections to applying ER to streaming: that streaming isn’t broadcasting; that it might go against some of the UK’s treaty obligations; or that it might stifle industry (i.e. labels’) growth and investment.

“They have some valid points,” said Gray. “We are not saying streaming is broadcasting. I agree, streaming isn’t broadcasting. It is one-to-one algorithmic playlisting, and equitable remuneration can be applied to it. You [addressed to the committee of MPs] have the power, legally, to do it.”

Colin Young, streaming auditor and accountant at CC Young & Co, suggested that such a move would merely bring the recorded music industry into line with how the publishing business treats streaming in the UK: dividing royalties into mechanical and performance payments.

He contrasted that with the current system for recordings where streams are treated essentially as physical sales – reproductions rather than performances.

“Streaming is fundamentally different to the physical model,” he said. “What is being suggested is, on the record, is that distinction be made. Should part be physical and should part be public performance? And that’s where equitable remuneration would kick in, if you make the same distinction as we do in publishing.”

It’s early days in this inquiry, but there was certainly a feeling that labels – particularly the majors – will be under the spotlight in this inquiry as much or even more than streaming services are. The committee heard about how recoupment clauses in label contracts work; about why ‘breakages’ are still a thing in streaming-era contracts; and heard Gray suggest that equitable remuneration would recapture money from “a few multi-national, foreign based corporations”.

“If we rebalance this, money goes into the UK economy. It goes into UK PLC. It goes into every single one of your constituencies. It seems like a bit of a no-brainer as far as I’m concerned,” he told the committee. “We need to protect our talent pipeline.”

Gray was asked about artists who are doing well from streaming, and he accepted that some are, but that “they tend to be a solo artist, they tend to be fully independent... and they tend to be working in a genre that is highly playlisted”.

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He contrasted that with the situation for bands, citing Spotify’s figure that 43,000 artists account for 90% of the royalties paid out by that service – a number that has been increasing over time.

“That works out at about £70,000 average [a year] for each of those artists. But their work produces £70,000: they’re not saying the artist gets £70,000,” he said, suggesting that in label deals with an 80-20 split, the artist “if you’re not indebted” will get around £14k. “If you’re in a band, with a manager and you’re paying tax, imagine how far that £14,000 goes...” The conversation later turned back to equitable remuneration, with Gray claiming that songwriters have seen their PPL royalties from radio declining because of a listener shift towards streaming.

“18-35 year olds are not using linear broadcasting any more, and so our PPL has been going down steadily. ER, the existing right, is going down by about 5% every single year,” he said. “So there’s another reason for introducing this right into streaming: young people are going to be using this service as their broadcast... It is replacing it. It is substitutional for broadcast, even if it isn’t broadcast.”

The hearing threw up some fun stats and gossip. Young talked about a recent audit for an independent record label in which he found that it earned £884 per million streams from Spotify’s free tier, and £4,191 per million streams from its various premium tiers – “And with Spotify, when I was doing that audit, for this particular record label there were 31 different subscription rates that I was looking at...”

Young also talked about crunching Warner Music’s financial results, and noticing that A&R has gone down as a percentage of its overall revenues from 31.92% in 2017 to 28.03% in the last six months this year.

Gray, meanwhile, said that “I’ve heard regularly people say that around 30% of all listens on Spotify are pure algorithmic”. Getting to the bottom of that metric would be important as part of any move towards introducing ER for streaming royalties in the UK.

“No one is suggesting that there should be a wholesale change to the infrastructure here. Labels are very good at what they do,” said Frederikse, later in the session. “What we’re talking about is that over the past 20 years, and particularly over the last five years as there’s been a [recorded music industry] recovery... there does seem to have been a shift in the resulting profits.”

“There are a number of ways the government could address this. One is equitable remuneration, and it’s difficult not to recognise that expanding the mandate of PPL in

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the UK would go some way towards levelling up, and creating new opportunity in the UK record industry.”

Labels and their representative bodies may disagree – they’ll have the chance to explain why at future hearings in this inquiry – but they’ll be more aligned with Gray’s views on YouTube, expressed with reference to a songwriter friend’s royalties from that platform.

“This is a very successful Scottish songwriter. He’s making £70 per million streams on YouTube,” said Gray, who referenced the attempt with the EU’s new digital copyright directive (and whatever the UK chooses as its equivalent post-Brexit) to modernise the ‘safe harbour’ protection for platforms like YouTube which let users upload content.

“The continuation of safe harbour is up to you,” Gray told the MPs on the committee. “But it’s an obscenity as far as I’m concerned.”

However, Frederikse noted the challenges in creating effective legislation to modernise safe harbours. “It’s incredibly difficult to find wording that will catch exactly what we’re trying to catch, and not have unintended consequences,” he said. “Witness how difficult the implementation processes [of the directive across the EU’s member states] have been.”

What about user-centric payment systems for streaming? The topic did come up, raised by the MPs, but while Gray professed to be a big advocate for the idea, he suggested that with it being “at the core of the contracts between the DSPs and the labels... the centre of a private contract” it may not be something a government could or should step in to enforce.

“The biggest problem for me is remuneration, and I don’t want that to fall down the list,” he said, shortly after delivering another salvo in favour of ER.

“Artists sit on the board of PPL. If you introduce equitable remuneration, you give a right to the creators within streaming. Artists will have a say in the licensing of that money for the first time,” he added.

“By introducing this right, you’re not only putting money for the first time directly into the pockets of artists and performers instead of foreign-based corporations, but also you’re going to break up the power here. Rights are always associated with power,” he continued. “It’s going to change the balance of the entire market.”

That first session was followed immediately by a second involving three artists: Ed O’Brien of Radiohead (and a prime mover in the Featured Artists Coalition since its early days); Guy Garvey of Elbow (and 6Music DJ); and solo artist Nadine Shah.

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They offered some more personal takes on streaming’s impact – for better as well as for worse – and stressed why they want action to be taken.

“The system as it is, is threatening the future of music,” said Garvey. “That sounds very dramatic, but if musicians can’t afford to pay the rent, if they can’t afford to live, we haven’t got tomorrow’s music.”

Garvey made it clear that he is a fan of streaming as a listener, calling it a “bit of a miracle” for the way it opens up the last century of recorded music.

“The fact that you have access to every recording every made, in your back pocket for 10 pounds a month is a miracle. Almost,” he said. “It’s almost a miracle. If musicians are equitably paid, then it’s a miracle, because then it’s sustainable, and then it’s something for everybody to be proud of.”

O’Brien, meanwhile, said that Shah was an example of the kind of musician who is successful in terms of fans, radio play, critical acclaim and awards nomination, but who is nevertheless struggling financially, who shows why change is needed.

He also praised streaming for having seen off the existential (certainly at the time he was first involved with FAC more than a decade ago) threat of filesharing piracy, and cited Spotify’s freemium system – where people can sign up and listen legally without paying – as a positive thing for the industry.

“It just needs some parity and fairness in the system. Not many artists are profiting from the spoils of this.” Shah talked about her personal situation. “The earnings from my streaming? They’re not significant enough to keep the wolf away from the door,” she said.

“I have a substantial profile, a substantial fanbase, and [I’m] critically acclaimed, but I don’t make enough money from streaming. I’m in a position now where I’m struggling to pay my rent, and I’m embarrassed to talk about these issues publicly.”

Why? Because, Shah said, money is still to some extent an indication of success in music. “I am a successful musician! I’m just not being paid fairly for the work that I’ve made,” she said. “Musicians in the same position as me, they are struggling. They can’t afford to be musicians... The reality is that we could lose lots of musicians. Lots of great music.”

Garvey agreed. “I’d argue we’ve already lost an awful lot of music,” he said. “So much of the new music that I play, I don’t hear album two, I don’t hear album three, and I know why it’s happening.”

He acknowledged Shah’s embarrassment about talking publicly about financial struggles, but hoped that her decision to speak out will encourage other artists to follow suit.

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“What I hope happens is that an awful lot more musicians are honest about their income. However leaky the boat has got, young musicians don’t rock it. But if they don’t rock it, they can’t make ends meet.”

“We’re not after Robert Plant’s third limousine!” he said later – as in, artists aren’t demanding 70s rock star level royalties. “What we’re talking about here is allowing people to live as working artists, to provide something that we all need.”

“A meaningful income is what I ask for. I don’t want to throw anybody under the bus either,” said Shah. “What Tom Gray was saying about equitable remuneration: equal pay for equal work. And then a meaningful income from streaming.”

“I truly believe that it’s entirely possible to fix streaming, and to make it work for everyone. The labels, and the streaming platforms, and the artists. It has to be fairer. I think right now, presently, it’s wrong. Ultimately it is wrong and it is unfair.”

Garvey came back to the idea of user-centric payments, which he thinks would be “very, very valuable” but like his fellow speakers, hit on ER as the priority he’d like to see the parliamentary committee focus on.

“Right at the top. Something that isn’t negotiated in any way, that is a right,” he said. “That is a viable first step that the committee can recommend. Something it could do right now, that would have a lasting effect.” Garvey also returned to the positive side of streaming, and how it has enabled Elbow to find audiences they didn’t expect across the world. “We went to Mexico in January,” he said. “We wouldn’t have known we had an audience there if it wasn’t for streaming. I think it’s a wonderful thing. It’s close to being the future.”

He also dampened down some of the anti-labels rhetoric, noting that he has worked with “people who I have known and loved within those labels who I have known to be motivated positively” to work for artists’ benefit.

Shah also praised Spotify. “I don’t want to be in a fight with streaming platforms. I also think Spotify is brilliant, and I use it and pay my subscription to Spotify,” she said, adding that it’s opened her up to a wealth of “really quite obscure artists”. Although she does worry about whether they’re getting paid fairly for her listening.

As to what the parliamentary committee should recommend: “Equitable remunerations. This seems to be equal pay for equal work. I do make a meaningful income from my PPL, so I don’t see why that shouldn’t be able to translate to this model as well,” she said.

“I don’t believe this will answer all of my questions or solve every problem, but I do believe this will be a step in the right direction, and the knock-on effect of providing this legislation could be phenomenal for us musicians.”

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The strength and repetition of this message – that ER could make a difference, and that it should be the top priority – is important, because to some extent it sets the tone for future hearings in this inquiry.

When the labels, their representative bodies, and the streaming services give evidence, they can expect to be asked why this model shouldn’t be introduced.

They’ll also have their own talking points to hammer home, of course. Labels are likely to focus on the YouTube and safe harbour debate, for example, and what the British government plans to introduce as its equivalent to the EU’s new copyright directive.

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Hindsight note: Nice musical career you’ve got here! Shame if something... happened to it... Mafia-style threats aren’t what happened here, and while we enjoyed the ‘will brook no interference’ tone, if there’s a reason artists are worried about speaking out on streaming, it’s more a general fear that they might not get playlisted in the future, rather than any specific arm-twisting being done by the streaming services (or, indeed, the labels).

The UK's parliamentary inquiry into music streaming economics took a strange turn yesterday, when the inquiry's chair delivered a public warning.

"We have been told by many different sources that some of the people interested in speaking to us have become reluctant to do so because they fear action may be taken against them if they speak in public," said Julian Knight MP.

"I would like to say that we would take a very dim view if we had any evidence of anyone interfering with witnesses to one of our inquiries. No-one should suffer any detriment for speaking to a Parliamentary Committee and anyone deliberately causing harm to one of our witnesses would be in danger of being in contempt of this House. This Committee will brook no such interference and will not hesitate to name and shame anyone proven to be involved in such activity."

Which may be over-egging things a bit: artists' reluctance to criticise big streaming platforms in case it harms their chances of getting playlisted certainly exists, but we're not aware of any explicit (or even implicit) threats actually made by DSPs on this score.

UK STREAMING INQUIRY CHAIR DELIVERS INTERFERENCE WARNING

2 DECEMBER 2020

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Hindsight note: We’re very, very sorry Nile. This was the one hearing that Music Ally didn’t watch live and write a lengthy report about, but instead picked it up from other coverage the following day.

Yesterday was the second day of hearings in the UK’s parliamentary inquiry into music streaming economics, and the star turn was Chic’s Nile Rodgers.

“We don’t even know what a stream is worth... there’s no way you can find out,” he told the committee of politicians. “We must have transparency... I look at the record labels as my partners. And the interesting thing is that every single time I’ve audited my partners, I find money. Every single time. And sometimes, it’s staggering, the amount of money.”

Like the speakers at the first hearing, Rodgers suggested that equitable remuneration – treating streams more like radio broadcasts, with royalties split 50/50 between artists and labels – might help. Other speakers yesterday included musicians Soweto Kinch and Fiona Bevan: read the BBC and the Guardian‘s reports for more on their testimonies.

Meanwhile, songwriters body The Ivors Academy has published its submission to the inquiry for anyone to read, in which it calls for regulation of major labels and publishers; a package of copyright reform; and a shakeup of collective rights management systems.

It’s important to note that the inquiry has not heard yet from any streaming services, labels or collecting societies. Nor has it heard from any artists who feel like they’re doing well from streaming. There is plenty of time yet for more hearings, but particularly on the equitable remuneration issue, the first sessions have set a strong tone – it will be interesting to see how labels and societies respond to that.

NILE RODGERS ON STREAMING: 'WE MUST HAVE TRANSPARENCY'

9 DECEMBER 2020

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Hindsight note: The BPI releases these consumption figures at the start of every year, so they were not a direct response to the streaming inquiry. However, the data on the artist doing well (in volume terms) would become a significant plank in its arguments in the months ahead.

As consumption data and revenue figures emerge for the music industry’s 2020, we’ll get a fuller picture of the Covid-19 pandemic’s impact. Early out of the blocks, as usual, is British industry body the BPI, with data showing that music consumption rose by 8.2% in the UK last year – a sixth consecutive year of growth – including 139bn audio streams, up by 22%.

If you’re wondering, the corresponding growth for 2019 was 25.6% to 114.2bn audio streams. Given the ongoing parliamentary inquiry into streaming’s impact on musicians, it’s interesting to see that one of the BPI’s key points in its figures release concerns the scale of streams for artists.

The body’s release noted that nearly 200 artists were streamed more than 100m times in the UK in 2020, with the top 10 each doing more than 500m. Meanwhile, 8,000 artists surpassed 1m streams last year in the UK, with “more than six times as many artists achieving 100,000 streams as the equivalent number of sales in 2007”.

The BPI sees this intensifying competition as supporting the need for labels, their marketing expertise and A&R investment. “It is harder than ever for artists to achieve success – so that continued support and investment from record labels in marketing and production is crucial,” said boss Geoff Taylor.

Tom Gray, founder of the Broken Record campaign, had already been taking the BPI (well, its major label members) to task with an alternative view before the figures were released. The debate over streaming, labels and artists continues, and watch out for more arguments and counter-arguments this month as the parliamentary inquiry continues – especially when submissions from the various parties are published.

BPI REVEALS 8.2% RISE IN UK’S MUSIC CONSUMPTION IN 2020

4 JANUARY 2021

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Hindsight note: This was a strong hint that the inquiry would be training its sights on major labels as much as on streaming services: the use of the phrase ‘market-dominant’ in particular.

The British music industry will be clearing some diary time next Tuesday (19 January) for the next sessions in the UK parliamentary inquiry into the economics of music streaming. The second session will see the three major labels' UK bosses – UMG's David Joseph, Sony Music's Jason Iley and WMG's Tony Harlow – giving evidence together.

What kind of reception will they be getting from the committee of MPs? Judging by the way the session was described by the committee's own announcement yesterday, there could be fireworks. "MPs are expected to focus on the benefit to market-dominant labels from the production and licensing of streamed music, addressing underlying issues which have led to calls for a review of the distribution of streaming revenues in a more equitable way."

It's a sign of how the artists and songwriters giving evidence in previous sessions appear to have successfully set the tone and direction of the inquiry. While Joseph, Iley and Harlow will be keen to talk about the positive role their labels play in helping artists to build their careers, the framing in the committee's announcement suggests they may be playing defence a lot too.

Amid the anticipation for what parliamentary-inquiries tradition dictates we should describe as a 'grilling', the other session next Tuesday should not be ignored. PRS for Music and PPL bosses Andrea Martin and Peter Leathem will be giving evidence on collective licensing. The announcement notes that PPL's mandate "covers recording copyright for TV, radio and online broadcast but not streamed music".

That's a simple statement of fact, but it's another pointer to the direction that the inquiry is taking. It's clear that earlier sessions have successfully planted the seed of 'equitable remuneration' in the committee's mind. That's the idea that at least a portion of streaming royalties – likely those from the most radio-like listening

UK STREAMING INQUIRY CALLS IN 'MARKET-DOMINANT LABELS' BOSSES

15 JANUARY 2021

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methods: playlists and personal radio features – should be paid to PPL and split 50/50 between labels and artists.

It will be fascinating to hear what PPL think of that idea, and we strongly suspect the three label bosses will also be asked why equitable remuneration shouldn't be introduced. Remember, politicians in this kind of inquiry love to come out of the process with One Big Thing They Can Do To Change Things For The Better. After Tuesday's session, we'll know if 'ER' remains in pole position to be that One Big Thing from this inquiry.

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Hindsight note: More data for the BPI, ahead of the session in which its major-label members would be (as was now clear) on the defensive.

Much of the UK's music industry are clearing their diaries schedules and grabbing several bags of popcorn in readiness for this morning's sessions at the British parliamentary inquiry into music streaming economics. The three major labels' UK bosses will be fielding questions from MPs on their business practices – we've been led to expect that those questions will be punchy, to say the least – while collecting societies PRS for Music and PPL will also be in the spotlight.

British labels body the BPI has got out in front of the anticipated grilling with some new stats defending its members' role in the music ecosystem. "Around 1,800 artists achieved more than 10 million streams in the UK alone in the past 12 months – 72% more than the total of 1,048 artists who achieved the equivalent 10,000 album sales in the CD, LP and download market of 2007," announced the body.

"Streaming has also made the market more “democratic”: the top 10 artists dominated less of streaming (5%) in 2020 than was the case for CD sales (13%) in 2005. Moreover, global streaming data show that the top 1,500 artists in the UK generate on average nine times as many streams outside the UK as they do at home... with 300 British artists now achieving 100 million global streams or more annually."

The BPI also claims that artists are receiving a higher share of revenues from streaming than they did from CD sales – a 20-30% share versus 15-20% minus deductions. The body also broke down the £4.33 of gross revenues that labels receive from a typical £9.99 streaming subscription: it said £1.33 goes to artists on average, while labels spend £2.49 of their £3 share on "investment into artists such as A&R and global marketing".

The announcement is a preview of the arguments that UMG's David Joseph, Sony's Jason Iley and WMG's Tony Harlow will be keen to get across during their session today. The BPI would like the committee to train its attention more on "addressing issues with certain user-upload services" (hi YouTube!) as well as tackling

BPI DEFENDS LABELS AHEAD OF STREAMING ECONOMICS INQUIRY

SESSION

19 JANUARY 2021

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"industrial-scale piracy, which continues to drain some £200 million annually from the UK recorded music economy", supporting exports and helping the live sector get back on its feet after Covid-19.

It's fair to say sensitivities are currently heightened around the streaming economics debate. Witness the undignified Twitter row yesterday between Broken Record founder Tom Gray and Ditto Music CEO Lee Parsons, following the latter's guest article for MBW offering his view that "this is a historically amazing time to be a recording artist: especially an independent recording artist", and criticising the "noisy anti-streaming tone that much of the lobbying around the Committee’s investigation has taken".

It's discouraging to see two people who, really, are on the same side – getting musicians paid – going at it online. And that's the wider story here: within independent and major labels alike there are plenty of those people too, working hard to make the most of streaming for their artists. It's right that this debate acknowledges that, just as it's right that the business practices and deals of those labels and their DSP partners are poked and prodded in public too.

Sitting on the fence tends to end in both sides lobbing garden implements at you, but if the ultimate goal is a music industry that works fairly for everyone, this kind of inquiry and its surrounding debate should be less of a war and more of a parley. But as ever, we're optimists! Today's sessions start at 10am UK-time: you can watch live here, and we'll be publishing a full report later in the day.

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Hindsight note: It’s fair to say this hearing... didn’t go brilliantly for the major labels. The three UK bosses did get a number of their arguments across, but there was a clear sense of scepticism and even disapproval from the committee.

It’s actually pretty rare to get genuine smoking-gun ‘gotchas’ from political inquiries in the moment.

When they work well, it’s more about patient, forensic questioning that elicits genuinely enlightening answers – and sometimes quotes that later come back to haunt the speaker.

Did we get that from this morning’s sessions at the UK parliamentary inquiry into music streaming’s economics? Yes and no.

There were some very well-briefed questions for the three major labels’ UK bosses that got to the heart of some of the key issues in the debate about musicians and streaming income... and there were some moments that made me want to bang my head against the desk.

Sometimes unfairly, perhaps. When one MP asked labels why there’s no collective licensing for recordings literally right after taking evidence from recordings collective licensor PPL, they probably just forgot to include ‘for streaming’ in their question.

And when PRS for Music’s boss seemed to be avoiding answering a question about whether a lack of competition is stifling innovation – a topic raised in the collecting society’s own written submission to the hearing – it may have simply been a misunderstanding of the question.

And when the boss of the world’s biggest major label’s UK arm seems to come out in favour of user-centric licensing while slamming the recommendation algorithms of streaming services, but the questioners don’t follow up on either... Well actually, that IS worth an enthusiastic head/desk bang.

Having watched the whole morning: one session with PPL and PRS, and another with the majors, here are some of the key points made.

MAJOR LABELS GAVE EVIDENCE TO THE UK’S MUSIC STREAMING ECONOMICS INQUIRY… SO WHAT DID WE LEARN?

19 JANUARY 2021

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But wait! First a quick note on balance. Music Ally sits in between all of the entities involved in our industry, and where there are disagreements – i.e. all the time! – we work very hard to give proper space to the different viewpoints.

The writeup below takes the same approach in reflecting the major labels’ views as our report on the inquiry’s first session did for the views of the Broken Record campaign.

Surprise! Labels want to negotiate directly with DSPs

From the very first session of this inquiry, the committee members have been steered towards the idea that The One Thing They Can Do To Improve Things is to extend the ‘equitable remuneration’ model used for broadcast music royalties in the UK – splitting them 50/50 between artists and labels – to the more passive forms of music streaming consumption: like playlists and ‘radio’.

That would be collective licensing, likely overseen by PPL, whose boss Peter Leathem essentially said today that it would be happy to take such a role if asked, but is staying well out of the arguments about whether it should happen. “If there were those rights, obviously PPL could play a role there...”

This won’t be a shock: the three major label executives strongly defended their model of licensing streaming directly.

“We believe that that direct relationship gives the maximum for negotiation, and is underpinned ultimately by the ability to say no to any licence,” said Tony Harlow, chief executive of Warner Music UK.

“We have the ability to walk away from the table if we need to, so that’s why we prefer to negotiate our rights with the respective streaming services,” said Sony Music UK’s chief executive and chairman Jason Iley.

“Whereas with PPL... there isn’t essentially the ability for them to walk away from the conversation. We have [in the past] walked away from the conversation. Our interests are to protect our artists and to get the best deal for our artists, so that’s why we believe we should be in control of those conversations.”

‘Sale’ or ‘rental’ is a hot potato for the labels

Key to the equitable remuneration debate is whether a stream counts as a ‘sale’ (like a CD or vinyl sale) or as a ‘rental’ (more like a broadcast, and thus tipping the

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revenue share more in artists’ favour). The committee zeroed in on this question, and the parrying was instructive.

“It’s a very interesting debate actually... my view is that the modern world is living in subscription, which gives artists more of an opportunity... a bigger opportunity than ever before to have their music heard, and we as record companies pay those artists on the basis of their royalty rates from their subscription,” said Iley.

It was a carefully pre-prepared line, which he repeated when pressed. “I have to just answer the same. We’re in a subscription model. It becomes almost a legal conversation in the sense of what the definition is. And we’re in a subscription model where people have the ability to subscribe, and more artists have a bigger opportunity than ever before to have their music heard, and we pay them a royalty based on that.”

Harlow, meanwhile, took the ‘sale or rental?’ question and equally carefully turned it into a ‘sale or broadcast?’ question, asserting strongly that the existing ‘making available’ right in the UK shows that streams are more like sales.

“Streams are generated by deliberate choices. You can play what you want when you want it, and you can skip when you don’t,” he said. Harlow anticipated the next question by extending this to playlists.

“It will feed me artists based on the choices I’ve made before. I can decide how long i want to listen to. That’s not like broadcast,” he said. “I can skip, and cache... in all those ways it is like a sale, and it’s covered by that making available right.”

Universal Music UK chief executive and chairman David Joseph later compared streaming to record stores to hammer home the ‘sale’ argument.

“Streaming is 24-7 in every country in the world, that you can listen to the greatest record store ever,” he said. “It’s clearly a sale, it’s not radio. It’s on demand: you can go whenever you want.”

“It’s really important that it’s not radio,” continued Joseph, suggesting that considering it as such “underestimates the creative curiosity of the fan” – adding that “86% of all listening on the services” is ‘self-selection’, and that even when listening to playlists people can “chose what genre, what theme, they can skip forward, go back, they can listen again: it’s very, very different from broadcast.”

The major labels don’t see themselves as market dominant

When the parliamentary committee announced this session, it described the MPs plans to “focus on the benefit to market-dominant labels from the production and

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licensing of streamed music”. Unsurprisingly, the three label bosses pushed back at the ‘market-dominant’ part of that during their session.

“This is an incredibly competitive environment, there are so many more choices and so many more labels for people,” said Joseph.

“There are very limited barriers to entry in music nowadays,” added Harlow later, noting that major labels account for “a very small amount” of the 40k-50k new tracks uploaded to streaming services every day – a metric of volume rather than share of streams or revenue, though.

“There is more competition in the music industry now than in 30 years of doing this job. The independent sector is a brilliant sector and signing some of the best acts. There’s more opportunity for artists to either sign to a major label, sign to an independent label or distribute their own records,” said Iley. “There are more avenues today than ever, than I’ve ever seen in my time doing this job.”

“He later returned to the point. “If an artist does not want to sign to Sony, they have a choice, and if they wish to earn more of that revenue, they can sign to a distribution company,” he said, citing Jorja Smith, AJ Tracey and Skepta as three examples in the UK.

[Jorja Smith and Skepta have worked through The Orchard, which is a Sony Music subsidiary.]

“They have chosen to sign to a distribution company. They want a bigger share of the revenue, and that’s their choice,” he said. “I clearly would have preferred them to sign to Sony Music, but that’s the opportunity of choice.”

They want to clear up that sensitive ‘breakages’ issue

In the heyday of physical music, ‘breakages’ were deducted from artist royalties when actual records broke while being distributed to retailers.

One of the questions raised in the wider debate about artists and streaming is why ‘breakages’ still appear in artist contracts in the streaming age, and whether this is an example of labels screwing musicians.

The pushback from the three major labels today was emphatic. “Breakages is categorically not true. I’ve heard this session where it was alleged we charged breakages on physical distribution and digital distribution. From Sony Music’s perspective that is not true. That does not happen,” said Iley.

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“In terms of digital royalties, they are 100% clean,” said Joseph, boldly. “I did hear that in the inquiry and it’s not an industry that I recognise or a company practice that I recognise,” he said.

However, Harlow and Joseph offered an explanation of ‘digital breakage’, which Joseph defined.

“The DSPs sometimes guarantee labels a minimum amount fo revenue from plays of their catalogue over a certain period. If the actual revenues paid to the label fall short of the minimum guarantees, then the DSP pays the label the balance, which is called digital breakage,” he said.

“Universal accounts a share of all of this breakage to artists according to he number of plays of their tracks across the minimum guarantee period, in the same way as other revenue received from the platforms.”

Harlow agreed, describing digital breakage as a situation of labels “having done a smarter deal than the platform realised”, and adding that WMG also allocates it to artists based on their performance on the streaming service.

“When we talk about digital breakage, that works in favour of the artists. When we talk about physical breakage, that’s a deduction,” he said.

Is UMG set to back user-centric licensing?

Phrased as a question, because one executive’s view is not necessarily company policy. But after a question prompted by artist Nadine Shah’s testimony earlier in the inquiry about struggling to pay the bills with her streaming revenue, Joseph seemed to back the user-centric model as something that could help.

“There are some artists who’ve been particularly badly hit by the pause in the live industry. They have a small fanbase but a particularly passionate fanbase who they play to very often... their economy has been incredibly badly hit, because the major source of income that they had, playing live, has not been available to them,” he said.

“It’s not possible or logical that that would be instantly replaced by the money they would make from their recordings. That was never how their earnings were shaped.”

But here it comes: “With the platforms, perhaps look at how at the moment, all of the streams are coming to us and other artists based on popularity, and there are other ways we could look at that,” said Joseph.

“There are models that if you just listened to Nadine Shah that month, there would be models the services can do just to pay that artist rather than be diluted.”

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That’s user-centric licensing, yet Deezer has been trying to get a trial off the ground for more than a year without success – because it cannot persuade all the labels to sign up. UMG swinging its weight behind the model would be significant.

“Streaming is at the start. It’s not perfect yet... I’ve got tons of ideas for how to improve streaming for the artists,” said Joseph. Sony Music’s Iley, however, preferred not to take a side in the user-centric debate.

“That’s a very difficult conversation because I look after artists across many different genres, and I have many artists who favour the current model,” he said. “I’d be favouring one subset of artists over another. That’s the difficult part of the position in this debate.” Although arguably not a reason not to support a trial of the model to understand it more.

David Joseph isn’t a fan of music streaming algorithms

Joseph also made waves – although he could have made more if only the committee had followed up on it – with his views on the recommendation algorithms of streaming services. Or more accurately, the importance these algorithms play in what does well on the services.

He even described his views as “very anti algorithms” at one point. “I’m happy to share thoughts on how I think our UK artists could benefit from different types of models for them in terms of curation and albums rather than just lists,” he said, later adding “I would love to have a service that isn’t based on the algorithm: I think it favours certain types of music”.

“Perhaps we could get to a pure service, a 6Music [style] service where things are just being curated for people rather than by data and algorithms.”

There’s a really important discussion to be teased out here, especially if the UK’s biggest label boss wants to drive it. Hopefully it will be part of a future session involving the streaming services, with proper nuance.

(In other words, not just ‘Algorithms are bad aren’t they? JUST ANSWER THE QUESTION MR EK’ but a proper dive into the winners and losers from lean-back streaming.)

What’s in a label deal?

Another facet of the labels’ arguments to the inquiry is pushing back against the idea of ‘the major label deal’ as a single thing.

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“There are all different types of deals. A lot of deals at the moment in a competitive market are just distribution. A lot of them can be 80/20, some can be 50/50,” said Joseph, talking about the split between label and artist.

“If you’re talking about an advance deal, 90% of deals, average between 20 to 25 per cent artist royalty,” he continued. Around 40-50% of Universal UK’s A&R spend goes to new / first-album artists, and of those on advance deals, the majority fall into that 20-25% royalty rates bucket.

The conversation about deals offered some useful unity of figures from the three majors in terms of how much artists are likely to be making from streaming.

“If you look at an artist having 10 million streams, that’s roughly £50,000 revenue, and then taking the royalty of 20% for the sake of easiest maths, that would be £10,000,” said Iley.

“We would say a million streams is worth four to five thousand pounds in revenue, and that would deliver on that same 20% metric a thousand pounds to the artist,” agreed Harlow. Joseph, too, later said that “for us about a million streams is about £5,000” [for the artist].

These are useful figures to have out in the open: it means the average per stream rate for an artist signed to a major label in the UK is around £0.005 ($0.0068).

But the labels came back to the idea of competition sparking a wide range of deals.

“The idea that three major record companies are putting down on the table three exact similar deals of a ‘take it or leave it’ for an artist feels like something from over 50 years ago,” said Iley.

“The modern deals are all different. I do licensed deals, I do distribution deals, I do life-of-copyright deals. There are different things that are important to different artists... The idea that it’s literally ‘sign here, take it or leave it’ simply isn’t the case.”

Iley also gave some interesting specifics as an illustration of labels’ investment in artists at the higher end of the scale.

“One of my rap artists, we gave her an advance of £300,000, recording costs of over £400,000 and we’ve subsequently spent over a million pounds on marketing that artist to be successful,” he said. “Fortunately that artist is successful!”

He added that Sony Music signs on average around 50 artists a year in the UK, and that it is “very rare that I see an album artist deal advance for less than £200,000” – with singles deals, especially for tracks blowing up on social media – going even higher.

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“I might get a call from one of my labels in the morning it’s £50,000 for an advance, and by the end of the day it’s £300,000 for an advance,” he said.

Jason Iley is not a fan of ad-funded music streaming

Later, during a discussion about ‘freemium’ music streaming, Iley offered some surprisingly spicy views, albeit couched in pragmatism about the established nature of the model.

“Services such as Spotify are ad-funded, and my personal view is we would much rather that the ad funded model was not there: but actually that people literally went to subscription right away,” he said, noting that 95% of Sony Music’s streaming revenue comes from subscriptions.

“Spotify argue very very strongly that that ad-funded model is the funnel into subscription,” he continued, but after being pressed by an MP about why labels allow it, he suggested that this was something the committee should ask Spotify.

“I’m not disagreeing with you. I don’t disagree. Quite frankly if he ad funded model went tomorrow i’d be delighted. But Spotify’s business model says it works for them. And again, I think that’s a conversation you should have with them. I sympathise with your point. I’m not disagreeing with you.”

Harlow offered a slightly different view of freemium’s value to the industry. “It’s all about the maximum number of people encountering music, falling in love with music... and enjoying music and then gradually saying music has value,” he said.

“We’re always fighting for the value of music. This is an evolving situation, It’s been well governed by a market that is nimble.” This, an argument against the government adding more regulation of streaming.

Should Spotify keep a smaller share of its revenues, and pay out a bigger share to music rightsholders? Here, too, the label bosses argued that the market is working fine on its own.

“Every single streaming platform and our relationship with them is subject to an individual negotiation... It’s a two-way negotiation. We have rights and music, they have their interests, and we get the negotiation that is not hidden in any way, and governed by the market, to the best place for our artists,” said Harlow.

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The labels defended taking stakes in streaming services

The committee seem interested in the fact that the major labels had stakes in Spotify – UMG still owns its equity in the service, Sony Music has sold most of its, and Warner Music divested its entirely – and whether this is has potential for anticompetitive practices.

Harlow defended it. “I think that’s more about our efforts to encourage the pool to grow by licensing as many different parties as we can. On occasion when we’re licensing startups and platforms we will take a small stake to cover the risk we’re taking on behalf of ourselves and our artists,” he said.

“We’re trying to grow as many platforms as possible, as widely as possible. I don’t think there is any implication at all of market power.”

Iley, meanwhile, offered an anecdote about the earliest days of Spotify’s dealmaking.

“None of us in 2006 had any idea that Spotify would be as big as it is today. None of us. I remember sitting in a boardroom and we were discussing the concept of streaming. One person, the head of digital, said in that boardroom that streaming was the future, and all of us executives at that time didn’t believe it would happen. We all totally believed in ownership [of music],” he said.

“We didn’t believe it [streaming] was going to happen. It has, and that is great for the industry, and it is great for artists. and going back to the point on our shareholding [in Spotify]. Yes we still have a shareholding: we divested half of our shareholding a couple of years ago, and we put over $250m of that shareholding directly into the pockets of our artists.”

The ‘value gap’ debate rears its head again

Right now, it’s often the big tech companies who come in for the sternest grillings at these kinds of inquiries. So you would think that the arguments made by labels about YouTube and the ‘value gap’ would be falling on friendly ears.

Harlow called for the safe harbours of YouTube and similar ‘UGC’ platforms to be restricted, noting that while YouTube is “the way a lot of people like to consume music, and it’s the way a lot of our artists like to share music... it would be healthier if YouTube and other platforms like that were not as able to use the safe harbour provisions, where they can say that UGC content... is protected on their services.”

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“If the [streaming royalties] pool grew on less ability to hide behind the safe harbour, that’s probably the most effective thing you could do to improve artists’ position.”

Joseph later came back to this point: the idea that “it’s hard against this backdrop of YouTube: 70% of the music of our artists being consumed, and giving us only 5% of our revenues.”

In the earlier collecting societies session, both PPL’s Peter Leathem and PRS for Music’s Andrea Martin also exhorted MPs to crack down on safe harbour.

“When we look at the hosting defence in the EU or the safe harbour in the US, it dates back to 2001. The iPod didn’t even exist then... yes, there has been evolution, but the market is going really quickly, and it has to be modernised,” said Martin, who pointed to the EU’s recent copyright directive.

“The UK government has a huge opportunity now to take what the EU has done and improve it so much better to make sure that the money that is due to our members, that more money goes back into the pockets of the creators.”

What about the collecting societies?

Good question. There were less headlines coming out of Leathem and Martin’s session today, but still some points of interest.

For example, Leathem said that PPL is exploring options with labels to start collecting royalties – under equitable remuneration – from Apple Music Radio, the linear radio part of Apple Music. He added that when an agreement comes, it is expected to be backdated.

Martin was asked about a section of PRS for Music’s written submission to the inquiry that apparently (it’s not been made public yet) suggests that the music market is characterised by a lack of meaningful competition, although her answer focused on the “many platforms that offer free music that are not licensed” instead.

Leathem suggested that there is plenty of competition in the streaming market, but that the overall pool of royalties is still considerably lower than at the market’s peak in 2001.

“You’ve got a smaller pie that everybody is fighting over, and this is why the music industry has come back and said we do need support in terms of the value gap,” he said.

“When you look at the 2019 market, 50% of the streams from YouTube were 7% of the value... even though we’re not now going to implement that copyright directive

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from Europe, we would like support from government... to make sure better deals can be done that then support the overall music industry.”

“These unlicensed platforms that I talk about have to be stopped, because then there’s a concept with consumers that music is free, and that does not help,” said Martin.

She also criticised YouTube’s Content ID system for identifying copyrighted music and enabling rightsholders to take down, monetise or leave videos up.

“In this case it’s not just better data in, it’s all data in, and better data out. The content recognition, it depends how it’s deployed, how it’s applied,” she said. “We need to be confident that the content recognition tools are being applied on all content uploaded on the services. And we know that our members’ works are not always identified by these recognition tools.”

Bonus Harry Potter content

If you’ve made it this far, you deserve a light-relief ending. Joseph supplied it when offering his final defence of labels.

“We’ve been told so many times by tech companies, by live companies, that there’ll be this platform disintermediation... that ‘artists don’t need you, we’ll go directly to the platforms’,” he said.

“When people for 15 years in an industry that you love, that you want to support artists, say you’re going out of date, you’re behind, you’re not listening, it makes you lean into technology more, it makes you fight more,” he continued.

“There’s often this depiction of Slytherin rather than a company of Gryffindors...”

But before he could finish the point, the committee’s chair seized his opportunity to close proceedings with some banter. “I think the performance today has been a bit more Hufflepuff...”

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Hindsight note: A journalist’s nightmare: a massive data dump to sort through, with the juicy bits not always apparent on a quick skim-read!

If you had the metaphorical (or, indeed, literal) popcorn out on Tuesday for the latest sessions in the UK parliamentary inquiry into the economics of music streaming... well, perhaps grab a few more bags now and settle in for the day.

The committee behind the inquiry has just published all the written evidence submitted by musicians, industry bodies and other interested parties. You can browse through it here.

We’re going to be rooting through the submissions and drawing out the most interesting arguments made, and will be updating this post with our findings.

Label body the BPI‘s submission argues that “the return to revenue growth [of the recorded music industry] is directly benefiting artists” in terms of investment in A&R and marketing, as well as royalty payments that have “increased significantly”. It directs the committee’s attention towards piracy sites, and also argues that “compared to premium subscription, advertising-funded and user upload platforms seriously undervalue the music content on their platforms.”

Global label body the IFPI‘s submission treads over similar ground, arguing that “Creating artificial barriers or red tape that would make the UK music industry less competitive, would hurt the entire UK music sector” while claiming that “digital growth has benefited all participants in the value chain”. It, too, presses for the government to focus its attention on tackling piracy and safe harbours for UGC platforms.

The official submission from the Broken Record campaign, written by founder Tom Gray, sets out its key demand for equitable remuneration where streams are being delivered more like radio – “so that artists can earn from On Demand streaming in the same way they have long earned from radio and TV transmissions”. It suggests that this right be administered by collecting society PPL. “We have an opportunity, in

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strengthening the rights of our creators, to rebalance the industry, invest in our talent and keep income inside the UK.”

PRS for Music‘s submission also focuses on these platforms as a “dominant force” in the market, building huge audiences by offering free content – a model that’s possible “because they often pay little or nothing to the creators and producers of that content”. But it also goes in on all the big music services. “The inequalities in the music streaming market are harming competition and innovation, ultimately to the detriment of users. The market is dominated by a few massive entities that have significant control of a once dynamic marketplace. Many major music services, both user upload and subscription, are owned by large technology companies that have less incentive in optimising the value of music, for themselves or the industry, as music services are a secondary function intended to keep their consumers within the vertical business model.”

The Music Publishers Association‘s submission asks the government to do more to help tackle piracy: including cracking down on the major app stores if they are found to be distributing apps that enable it. The MPA also warns the government off interfering in “freely-negotiated contractual arrangements between songwriters/ composers and music publishers”.

Indie body AIM‘s submission offers a similar warning. “As a community of entrepreneurs, AIM’s Members express strong reticence to unnecessary and costly regulation of the music market other than where there is clear evidence of competition issues or other market failure,” it argues. “Policy that might intervene in the commercial negotiations risks destabilising a market which has become established after some decades of disruption and at a time when negotiating disparity between partners is decreasing and access to information for all participants is increasing.”

A joint submission from FAC, The Ivors Academy, MMF, MPG and the MU under the umbrella of the UK Council of Music Makers offers five “fundamental values” for the streaming market: that it should “value the songwriter and performer contributions to streaming more highly” and “recognise streaming is not a sale”; that it should “check the dominance of major music corporations on the streaming market across marketing, licensing and distribution of streaming royalties”; that there should be oversight of streaming services “to ensure algorithms are not biased, and there is equal access to the streaming market for all artists, songwriters and performers”; and that labels and publishers should be encouraged to “adopt progressive policies that write-off old contracts to pay streaming royalties and promote fairer deals between artists and labels”.

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DiMA, the representative body for the streaming services, has a submission too. It punts the royalties ball firmly back into the court of rightsholders: “Streaming services have no influence over the terms agreed between rightsholders and creators, including royalty rates. In fact, once streaming services have paid the rightsholders, they have very little ability to see who pays who, and do not know how much ultimately ends up in artists’ or songwriters’ hands.”

The submission from the BBC includes a spicy section on competition between radio and streaming. “It’s important to ensure that the powerful position of music streamers – especially those with an established platform advantage – is not used to reduce access to other forms of audio such as live radio, radio on-demand and podcasts, all of which audiences expect to be able to access easily and for free. In particular, we want to be sure that music streamers do not use their position to undermine the prominence of live radio.”

YouTube‘s submission, unsurprisingly, makes its case for UGC platforms as a power for good in the music industry, including an updated payouts figure. “Globally, we’ve paid out over USD$12B to the music industry from our advertising and subscription businesses as of January 2020... record labels agree it is possible we will become the music industry’s number one source of revenue by 2025.” There is also a long defence of Content ID: “not just an anti-piracy solution, but also a growing revenue-generation tool for creators”. YouTube also doesn’t want the British government to modify safe harbour legislation “until a full economic impact assessment can be made of the impact of Article 17 in the EU”, and wants the committee to prod the music industry to develop a “comprehensive musical works and sound recording ownership database”.

Hipgnosis’ main suggestion was underlined in its submission:“Hipgnosis believes the focus of this inquiry should be on how the 70% of revenue that is sent to “Rights Owners” and where the money goes once they are paid by the streaming services.” It also calculated that a label’s cut would drop from 38.5% to 17.5%. “Moving to a broadcast rate for passive listening would significantly increase the proportion of the royalties paid to songwriters (11.75 % to 29.75%), and incrementally increase those paid to artists (16.5% to 17.5%) with the difference taken out of the record label’s pocket.”

BMG’s submission addresses “the elephant in the room” –”A revenue split which awards the recording four times as much money as the song underlying the recording looks anachronistic now record labels no longer have the costs which initially justified their greater share.” BMG goes on to propose a new system, which it believes will

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“encounter significant push-back from the traditional music industry,“ due to the “wholesale changes to working practices, improvements in efficiency and a more robust approach to overhead” required: “The only realistic way for artists to increase their income from streaming is for them to receive a higher share of the revenue generated by their recordings. “The only realistic way for songwriters to increase their income from streaming is for them to receive a greater share of the total pot of money paid by streaming services for the music they use.”

The Ivors Academy‘s submission also focuses on the songwriter splits (understandably, since those are its members). “Creators face a lack of transparency, lack of trust, royalty distortions and inefficiency,” it argues, before making four recommendations for the government. It should regulate “major music intermediaries” like it regulates collecting societies; it should implement copyright reform “based on the principles of liability of online platforms and provisions around greater transparency, improved contract terms and fairer pay for writers and performers”; it should “set a timeframe for implementation of the reform of Collective Rights Management systems and the implementation of a Minimum Viable Data Standard for music recordings”; and it should commission research into creators’ earnings.

Beggars Group‘s submission has some interesting thoughts on streaming algorithms. “The algorithm is now in charge, it has largely taken the place of charts, chart shows and even reviews,” it argues. “Spotify in particular is very focused on utilising algorithms to deliver what they think the user will listen to. Spotify resists attempts for rights owners to promote their own recordings via third-party owned playlists on the platform. The whole ecosystem is very much Spotify’s USP and they resist any non-Spotify offering. There is a clear policy to overlook albums and concentrate on individual tracks – for example on the new release page on Spotify there is no distinction between Eps, singles and albums.” It also worries that Spotify’s move to offer promotional plays in return for discounted rates may mean that. “the service increasingly chooses to push music according to how much it costs them”.

The Music Managers Forum and Featured Artists Coalition were more specific in their accusations of an absence of transparency, saying that, “the streaming market has become less transparent as it has diversified... A particular problem is the lack of transparency around advances and lump sum payments from streaming platforms (such as Spotify or Apple) or social media services that use music (such as Facebook or TikTok).” They also offer specific solutions to the lack of transparency at deal-level, which should, they say, be codified into copyright law: “An artist’s accountant should,

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on request but subject to NDA, have sight of specific deal terms where that information is required to properly audit an artist’s royalties.”

Former Spotify director of economics Will Page made a submission that drills down into one of the key challenges of the streaming era. “There is more money available but also many more mouths to feed... In 1984 (the earliest available data), the UK music industry released just 5,000 singles and 6,000 albums in one calendar year. By 2015, this had increased to a total of 60,000 albums per year... Since 2009, PRSforMusic has seen membership grow from 65,000 songwriters to 140,000 (up 145%) and PPL, which represents artists and recorded rights holders, has seen membership grow from 47,000 performers to 115,000 (up 115%).”

Madness (yes, with the Baggy Trousers) submitted a call for equitable remuneration to be applied to streaming. “It is our collective view that we are strong advocates of the application of Equitable Remuneration for the Recording Artist. We are aware of the active / “lean in” vs passive / “lean back” model. We would like to request that these two elements be officially investigated by the committee.”

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Hindsight note: As the inquiry went on, the ‘should songs receive a bigger share of streaming royalties and recordings a smaller share?’ question became more prominent, and particularly the angle of whether the major publishing companies were able to lobby for such a change, given their owners.

We reported yesterday on the publication of all the written evidence submitted to the UK's parliamentary inquiry into the economics of music streaming. Among the strong opinions offered was Hipgnosis Songs Fund's breakdown of what it sees as the key problem for streaming royalties.

"The conflict of interest created by the three major record companies (Universal Music, Warner Music and Sony) owning the three largest publishers (UMPG, Warner Chappell and Sony ATV respectively) is critically important to understand," claimed its submission.

"These three publishers are being prevented from advocating for songwriters’ interests as a result of being controlled by their parent companies who wish to push economic improvement towards recorded music where they make an 80% gross margin and a 40% net margin."

"As a guide to how the revenue from music is split, the typical income earned by a master holder is c. 80%. The typical income earned by a publisher is c. 15%. Given the major record labels own the publishers, it is in the record labels’ interest to push for the income received on the master / sale side to be greater than on the writers / publishing side."

The three major labels would, of course, have their own views on this matter, which is why it's a shame that none of their UK bosses was asked about it during their stint in front of the inquiry committee earlier this week. It is possible, though, that a future session will focus on publishers and the masters/songs split.

In the meantime, Hipgnosis's bullish acquisition strategy continues. This week it picked up the production rights for famed producer Bob Rock, who's worked with artists from Metallica to Michael Bublé. The company is also planning to issue up to

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1.5bn more shares over the next year in order to raise up to $2bn in new funds to spend on catalogues.

It spurs a question. If the splits between labels and publishers were changed, and if a larger portion of streaming royalties flowed towards the songwriting side of the business, that would be a good thing for the revenues of song catalogue owners like Hipgnosis. But what would it mean for the valuations of those catalogues when they were being bought and sold, and the need / desire of songwriters to sell? A theoretical question at this point, but one worth thinking about.

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Hindsight note: A fortuitously-timed study into the potential impact of user-centric payouts. Well, we say ‘fortuitous’ – it came out as user-centric started to fade out a little in the inquiry’s priorities, with equitable remuneration the new battleground.

One of the things that's been clear in the debate about user-centric models for paying out streaming royalties – primer here if you need it – is that we need more studies based on recent data from big streaming services.

So, news this week of a new study commissioned by the National Music Centre (CNM) in France from Deloitte – using data from Spotify and Deezer – is encouraging, even if the findings aren't the slam dunk that user-centric evangelists might hope for.

You can find the CNM's page about the study here, with its topline findings and links to the full (French-language) report. Among the key findings: switching to a user-centric system would reduce the royalties paid out to rightsholders of the top 10 artists by 17.2% – they'd get 7.7% of the overall payouts rather than 9.3%. The result would be small percentage gains further down the pyramid: an average 1.3% increase for artists ranked 11-100; 2.2% for those ranked 101-1,000; 0.5% for those between 1,001 and 10,000; and 5.2% for those outside the top 10,000.

Woo-hoo! But wait: "If the percentages of change seem not insignificant, the amounts in value remain in reality limited," warned the CNM in its summary of the findings. That 5.2% average increase for artists outside the top 10,000 would be "at most a few euros per year on average" for those musicians. It's not THE solution for low streaming payouts in the long tail, in other words – something earlier studies of user-centric have also suggested.

There is plenty more to parse from this new study, such as the likely increases for genres like classical music, jazz, metal and blues (and corresponding drops for streaming's biggest genres: rap and hip-hop). Meanwhile, catalogue music is a beneficiary, which – again, as indicated in previous studies – is one reason why

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user-centric might not be the redistribution of revenues from major labels to independents that might have been expected.

President Jean-Philippe Thiellay drew the conclusion that "the fight of authors, composers and performers, who demand better remuneration for their work, is not here today" – in other words, that user-centric is not a single solution for their complaints. However, the CNM says that this study is "a first step" towards more research, while noting that several streaming services "from the start of the study, indicated that they did not wish to participate in it".

That's disappointing, but it is a reminder of the other big problem with user-centric, which is that to even make a limited impact, it needs participation across the board. If DSPs (not to mention labels, publishers and PROs) can't even back research together, the prospects for a commercial introduction look bleak.

Here's something more encouraging though. We already know Deezer is a strong backer of user-centric payouts, but Spotify is now making positive noises too. "Spotify believes that artists and songwriters should have a voice in how the streaming economy operates," a spokesperson told Music Ally, following the CNM study.

"While initial research around a user-centric payment model is limited and doesn’t show the dramatic shift many thought it might, if artists and songwriters prefer this model, we support conducting additional research and will keep an open mind. Of course, any change in payment model is a decision that would need broad industry alignment to make happen."

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Hindsight note: Here’s an early example of ‘ER might not be the silver bullet you’re looking for’ analysis.

There are still several sessions to go in the UK's parliamentary inquiry into music streaming's economics, with Aim, Beggars Group and Jazz Re:freshed next in the hotseat on 4 February, and streaming services still to come too. But we can already see strong pointers towards a recommendation by the committee of MPs that at least a portion of streaming payouts in the UK be divided through 'equitable remuneration' – the UK system that splits broadcast royalties 50/50 between labels and artists.

It's been the obvious candidate so far for the 'One Thing We Can Do For Your Industry' measure that politicians love to seek out in these kinds of inquiries. But is it the one thing that will answer the debates around streaming royalties? Midia Research suggests not in its 'Equitable remuneration, artist income and unintended consequences' blog post.

Under ER: "There is an implied misconception with ER that ‘equitable’ implies some sort of quasi-socialist redistribution of wealth. It does not. Instead, it allocates income with the same distribution skews that make streaming the superstar economy that it is," it notes. "Just as with user centric, ER is not a silver bullet that is going to fix all of the ails of streaming for creators, mainly because there is no silver bullet."

Midia stresses that this is not an argument against ER, but rather to manage expectations for artists. And in truth, the Broken Record campaigners who sparked this inquiry in the first place have never made the silver bullet argument either: their view has always been that 'fixing' the industry is about multiple measures and a wider approach.

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Hindsight note: The inquiry’s final report would call for a “complete reset” of music streaming. We can’t help but wonder if it was this column by Tim Burgess that seeded the word ‘reset’ in the politicians’ minds...

Charlatans frontman Tim Burgess has a higher profile than ever thanks to his Tim's Twitter Listening Party album tweetalongs during the Covid-19 pandemic. He's also using that profile to become one of the key advocates for artists in the debate about streaming economics. For example, this guest column for the Guardian newspaper yesterday calling for the music industry to "use this moment to hit reset" on its models.

"I’m not averse to the idea of a musical reset: using the pandemic as an opportunity to look again at how things are working in the industry. To take this moment and this strange landscape we find ourselves in, and just switch things off and back on again," he wrote.

"They say, 'If it’s not broken, don’t fix it.' Have they also considered, 'If you’re busy and you don’t look too closely, it might seem to be working fine, but actually it’s not'? Not as catchy, admittedly, but bear with me..." Well worth a read in full for anyone thinkin' things over around these issues.

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Hindsight note: The independents panel certainly didn’t get as rough a going-over as the major labels, even though on ER, they were much closer to the views of their bigger competitors.

Having recently grilled the bosses of the three major labels’ UK subsidiaries, yesterday it was time for the MPs on the UK’s inquiry into the economics of music streaming to hear from the independent sector.

Jazz Re:freshed co-CEO and executive director Yvette Griffith; Aim CEO Paul Pacifico; and Beggars Group general counsel Rupert Skellett were the people offering their views on how the music industry should (and should not) change in the streaming era.

In short: they’d like tax breaks of the kind granted to other creative industries like games and animation; they don’t want ‘equitable remuneration’ to be applied to streaming; and they think user-centric payouts are a fairer way of dividing the pie, but don’t see them as a panacea for artists’ streaming complaints.

Here’s a full writeup of the session with more detail on all of that. Meanwhile, if you’re a fan of deckchairs, popcorn, fireworks and/or exploding cans of worms, put a note in your calendar to watch the inquiry’s sessions on Wednesday 10 February. Music Publishers Association chair Roberto Neri and BPI boss Geoff Taylor are one of them; Ivors Academy chief Graham Davies and Musicians Union general secretary Horace Trubridge are another; and then there’s a DSPs session with Twitch, SoundCloud and YouTube. But now: the indies...

The early focus was on how indie labels’ deals compare to those of the majors, with Pacifico negotiating a sticky moment with the committee chair (“you’re not being particularly direct”) to explain that there IS no standard deal: the indie sector runs the gamut from 50/50 net-profit-share partnerships to traditional royalty-and-advance deals.

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Griffith outlined how Jazz Re:freshed has tried to avoid the pitfalls around recoupment by making it very clear what costs artists are not expected to foot – music videos, photography, artwork and so on.

Skellett, meanwhile, defended the role of those traditional label deals, particularly for new artists with no track record. But he also stressed that “to a large extent nowadays, if the artist does have any success, they can choose not to do that kind of deal: they can forego the big, upfront payments and have a net receipts deal or a distribution deal. If they’ve had some success, they can pretty much choose any deal they like.”

One of the juicier questions asked by the committee – about whether the major labels’ deals with streaming services included guarantees of playlisting and other promotion at the expense of independents – elicited carefully un-juicy answers.

“We don’t know. The deals between the majors and the platforms are top secret,” said Skellett.

“We absolutely hope not. I think consumers subscribe to streaming platforms, and they want those recommendations to be based on their listening habits, and what the platform genuinely thinks they will be interested in, rather than potentially some other deal with a commercial interest,” added Pacifico.

“We don’t know. We hope not. We’d like to think that these platforms are working in a way that responds to the users’ listening patterns, as opposed to investment going in from the majors,” said Griffith.

You can expect the committee to dig deeper into this question when it holds a session with the streaming services – and judging by how the hearing with the major labels went, if the DSPs plead confidentiality of agreements, they can expect a tongue-lashing from the MPs. Skellett talked about how he sees independents as different from majors. “We’re not commercially driven. That’s not our main focus,” he said. “We’re in this business because we love music. We’re not in this business because we love making money.”

He was also asked about Beggars’ policies around streaming royalties. “After a certain period of time, we wipe unrecouped balances for artists, and we have a minimum digital royalty rate for artists. We’ve done that across the board now with all our artists,” he said. The period of time is 15 years, and the minimum rate is 25%.

“My chairman and owner Martin Mills has tried to persuade the majors over the years to adopt a minimum [digital] royalty rate,” he added. “It’s unconscionable that some artists from legacy contracts are getting less than a 10% royalty rate from digital. It’s just a nonsense.”

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Pressed on what impact it would have if majors adopted Beggars’ policy, he added: “In some cases it would double their royalties on streaming. Some older artists on legacy contracts would have a direct benefit from the streaming money.”

The panel were asked about whether user-centric payouts (explanation here) would make a significant difference to the industry, and to artists’ and songwriters’ royalties. Griffith made it clear that she does not back the idea.

“I would say no. I don’t think user-centric is going to work, certainly for the indie sector,” she said, adding that “the type of people who are going to listen to a lot of the indie music are people who are wanting to discover new things. They’re going to be streaming quite broad amounts... which means that that £9.99 [subscription] would be spread very thinly across quite a broad expanse of artists and streams.”

Skellett was more positive. “We’re not sure that user-centric is a panacea, but it certainly philosophically feels fairer to us. If a fan just listens to a certain artist, all their money goes to that artist,” he said. “Obviously there are issues with it: cost of implementation, and it’s very difficult to audit. You basically have to look at each listener’s monthly streams. I think that’s probably impossible!”

Pacifico agreed with both. “It does feel fair... however, I think it does bring us to a place where music discovery and interest and curiosity becomes devalued in the streaming economy,” he said, suggesting that older artists would benefit most. “I think the winners would probably be bands like the Eagles, rather than the Eagles of Death Metal!”

Pacifico also suggested that there would be complexities in explaining to artists the likely variance in their monthly royalties under a user-centric system: “why in one month they got a million streams and it was worth five grand [£5,000] and in another they got a million streams and it was only worth £500”. Skellett spoke up in the model’s favour again, however. “I think philosophically it does feel fairer. I think the reports that have been done into user-centric [show] it doesn’t necessarily move the needle massively,” he said. “I think it shaves a bit off the top. I think what’s good about it is it reconnects the listener with the artists they listen to, and I think that’s a good thing.”

He also fielded a sharp question about competition. Why, if some major label deals are as exploitative and unfair as campaigners have claimed, do artists continue to sign with those companies rather than independents?

“The majors have deeper pockets than we do, sadly. They dominate the singles market, and you’ve got to bear in mind that streaming services are centred around the individual track,” said Skellett.

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“The big winners of the new streaming economy are essentially those in the singles market – which we’re not, really, our focus is the albums market – and those entities who have big catalogues. And the majors tick both boxes.”

“We’ve found, where we have had artists that are successful in the singles market, like grime artists, that when they come to the end of their deal, the majors swoop in, offer them silly money, and that’s it. And fair play to them.”

What would help independents to scale up and defend themselves in these situations? Pacifico referred back to Aim’s submission to the inquiry, and its focus on three key problems: access to capital, access to skills, and access to scale.

Aim wants British music companies to get the same kind of creative industries tax incentives as TV, film, games and animation. “That would really help independents make investments,” he said.

It also has an idea for a sliding scale of streaming payments: “Your first million streams become the most valuable streams, and by the time you get up to the 100 millionth stream, it might be worth a little less,” he said, suggesting that this could help newer and niche artists whose streams are in the tens of millions to make the model work.

(You can read Aim’s proposal for an ‘artist growth’ model here.) “Ultimately, it fundamentally boils down to capital. The majors have so much

more money to do what they do,” was Griffith’s view, although she qualified that with the observation that there are certainly independents “punching above their weight” to succeed in the market too.

The MPs moved on to the thorny question of whether streaming should be treated as a ‘sale’ or a ‘rental’ by rightsholders – a distinction that would have a significant impact on the percentage of royalties due to the musician. On this point, the three panelists agreed with their major label counterparts from the earlier session.

“It’s a sale,” said Griffith. “It’s a sale. The same way you would go into a shop and buy a CD or a vinyl, you’re buying permission to listen to that track. When you’re streaming, you’re buying permission to listen to that track for the period of your subscription, for your own personal use.”

Pacifico suggested that the debate around sale or rental would be easier “if people cleaned up their legacy contracts and did the sort of thing Rupert’s talked about Beggars doing” – i.e. wiping unrecouped balances and setting a minimum digital royalty for artists.

After comparing a streaming subscription to buying a mobile phone contract (“you buy a certain number of minutes, you use them and you buy them again”)

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Pacifico took another angle on the question, suggesting that a broadcast-style model for streaming would be harmful for labels.

“Broadcast operates under a blanket licence. Any radio station can play any song they like... and that represents a loss of rights to the rightsholder,” he said, comparing this unfavourably to “a commercial negotiation for the best price... we would like to see revenue maximised for the industry, but to make absolutely sure and clear that revenue is shared fairly and properly [with artists].”

The committee moved on to some questions about copyright termination: musicians’ ability in the US to regain ownership of their copyrights after 35 years. The implication: the MPs are wondering whether similar legislation should be introduced in the UK.

Skellett noted that “legally there are a lot of arguments you can throw at this issue” especially when a label has an English-law jurisdiction contract for sound recordings. However, he made it clear that when Beggars receives a termination notice from an artist, it never gets into litigation with them: instead, it tries to persuade them to stay with improvements on their existing deal.

He warned the committee against introducing copyright termination rights in the UK. “We’re in the business of recordings on a long-term basis,” he said. “We’re partners for the life of copyright of the recordings. If we were suddenly to lose that right in the UK, that would be pretty disastrous for us.”

Griffith agreed. “As commercial businesses, there is an element of: there has to be that income coming into the organisation from historical deals etc. As long as the artist is absolutely clear of what they are signing up to, then I think as long as there’s a constant dialogue and there’s all the transparency around that, I’m in support of that,” she said.

However, she added that Jazz Re:freshed has taken a different path, recently deciding to become purely a licensing label. “We don’t own the copyright: we license the copyright for a period of time. At the end of that period, we can negotiate with the artist... or they may fly and take it elsewhere. It’s a risk and a gamble, but it’s a choice we’ve made – and an example of the diversity of different examples of deals that exist within the independent landscape.”

Skellett chimed back in, claiming that introducing copyright termination rights in the UK would “severely inhibit our ability to invest in new artists: generally speaking, new artists is quite often a loss-making proposal, and our business model relies on the fantastic catalogue that we’ve been lucky to acquire over the last 40 years. If that was terminable, that would have a massive impact on our business, and would

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definitely dry up our ability to invest in new artists.” One question got to the heart of what the inquiry is about: why are so many artists feeling so miserable about streaming’s impact on their careers and earnings? Skellett said that while many artists have benefited from the shift to streaming – “principally catalogue artists and singles artists” – there are others who have not fared so well.

“Some of our releases do brilliantly with streaming and some of them don’t, and with those we need to look at other revenue streams. Live, sync, original commissions, physical records,” he said, noting that the Covid-fuelled live music shutdown is one of the reasons this latter group of artists are hurting so much at the moment.

“Streaming is a very long game, so I would say to those artists: don’t give up. If you grow your catalogue, if you keep playing live – when you can – there is a chance you will build an audience, and over time you will build the streams higher and higher, and you will get to a point, hopefully, where your physical records receipts will be exceeded by what you get in streaming. But it’s very hard: artists obviously have bills to pay right now. I have absolute sympathy for them.”

He added that Beggars Group currently has 41 artists who are doing more than 50m streams a year. “So there is a big category of artists who are happy,” he said, before referring back to comments made by the major label executives in their inquiry session. “The major label bosses weren’t completely wrong.” He later noted that within Beggars’ roster, some catalogue artists have seen their royalty earnings double in the last four years, as a result of streaming’s growth.

Pacifico took up this theme. “There’s never been a better time to be in the music industry, and there’s never been a harder time to be in the music industry... We have 90% of the revenue from streaming going to 1% of the people in the market. This is about money in, money out, and greater efficiency in the middle of those two things.”

The panel were asked what they would like the committee to recommend in its report, and Pacifico returned to the “capital, skills, scale” argument. “We need a tax break to help us attract investment, we need to make sure we upskill and level the playing field, and we need to help artists and labels get to scale so that streaming can become a meaningful part of their revenue mix.”

Griffith agreed, and added a fourth request: “There needs to be some kind of modernisation to how we process a lot of this,” she said, also highlighting the fact that the basic price of a streaming subscription has been stuck at £9.99 a month for more than a decade now.

“Unless you are in that higher echelon of billions of streams, that is never going to generate your rent for you. There is something that needs to be done in terms of the

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modern landscape that we’re in, and changing it so it’s fairer for all. Some people need to sit round a table!”

But Pacifico offered another warning. “We have got to be careful that the cure isn’t worse than the disease,” he said. “We must not allow ourselves to lose our rights in favour of mandated compensation through an outdated mechanism like equitable remuneration.”

Before the session ended, there was time for some probing of the tax breaks idea, and how any such incentives could be focused on British businesses and artists, amid discussion of the fact that the three major labels are global companies headquartered outside the UK.

There was also a question about the division of streaming royalties between publishing and recordings, with the MPs clearly having caught on to accusations made in some submissions to the inquiry that major labels want to keep the balance tilted firmly towards recordings, for which they take a greater share of the revenue than for publishing.

However, the indies declined to put the boot in on this point. “It might be true. The majors might be looking at where their margins are highest. But we have a publishing company, and we’ve certainly seen a drop in physical mechanicals income, halving over the last five years or so,” said Skellett. “But the digital revenue has shot up four and a half times.”

He went on to suggest that publishers have seen “a more than doubling of their take” from royalties in the transition from physical sales to streams, and suggested the current publishing share – around 15% of streaming royalties – is fair. “I think it’s at the right level, yes. I’m a record company man!”

Pacifico agreed, suggesting that changes should perhaps be directed towards speeding up payments for songwriters. “It’s a really hard nut to crack to stop songwriters having to wait up to two or three years to earn money when it is earned in streaming,” he said. But on the division of the spoils: “I think at 15% of the retail price that feels about right.”

The session finished with a question about independents scaling up – even to the point where a British independent music company is big enough to challenge the three majors.

“I would absolutely love to see that happen,” said Pacifico. “Is it possible? Yes, why not?”

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“I think it’s possible too,” said Griffith. “We’ve got some real strong big independents already... there’s absolutely no reason why something that already exists couldn’t be upscaled, or something new comes into the world...”

Skellett also agreed. “We have the talent, we have the infrastructure, we have the rights protection law, so yes, definitely.”

Pacifico had the last word, coming back to Aim’s key policy goal. “Something like a creative industries tax break could make this happen. That could move the needle and absolutely reboot the British music industry in a way that it could really benefit from.”

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Hindsight note: After the majors session, a lot of people were expecting BPI boss Geoff Taylor to have a terrible time in this follow-up hearing. But Taylor is a pro when it comes to dealing with politicians: swerving tough questions without arousing the committee’s wrath for evasiveness. That said, bar the ‘value gap’ issue, the inquiry’s report would not come down on the BPI’s side of many arguments.

The latest day of hearings for the UK’s parliamentary inquiry into the economics of music streaming was the busiest yet, with three sessions – including the first to involve streaming services.

As before, there was a mixture of tough questions, grandstanding and moments of farce. And plenty to think about as the digital, culture, media and sport (DCMS) committee works its way towards recommendations on how to improve the streaming market for musicians and the industry.

One of the running themes of the inquiry is whether a stream should be treated as a sale for the purposes of royalty payouts, and it was the first question for Geoff Taylor, head of labels body the BPI, in the opening session.

If a stream isn’t like a sale – if it’s more like a radio spin – musicians would get a 50% share of the payouts, just as they do for broadcast usage of their works. Unsurprisingly, labels think a stream *should* be treated as a sale.

As the boss of their representative body, Taylor took the same view, although he did note that “it’s not necessarily always helpful to take older concepts and to try to apply them to streaming... a stream is a stream”.

Questioned about why artists whose streams are in the millions have been complaining about the royalties, Taylor suggested that it’s a question of scale.

“A million streams sounds like a lot, but in the modern streaming business it actually isn’t. If you have a million streams, you’re about six or seven thousandth on the list of artists in the UK,” he said.

Taylor added that 1,800 British artists are now getting more than 10m streams a year. “More artists are benefiting, but because there are a lot more artists in the

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business, obviously there are some artists who are not generating enough streams for that to provide a living on its own.”

“Ultimately, the economics of streaming are what they are. If you look at 2019, there are about 100 billion streams, that generated about a billion pounds in retail revenue, and that was divided by popularity. Each stream is worth about a penny, and then that flows through the system.”

If anyone was expecting this session to see the committee of MPs giving Taylor as much of a (metaphorical) duffing up as they gave the three UK bosses of the major labels earlier this year, they’d have been disappointed.

He pushed back or deflected awkward questions without raising the hackles of the politicians, while smoothly steering the conversation onto the BPI’s key policy aims: for example YouTube and safe harbours.

“Not only does it take users away from the streaming services, but it also exerts price capping pressure on the other streaming services,” he claimed, while also pointing to piracy sites and apps. From those two rightsholder bugbears alone: “there’s almost half a billion pounds in revenues that could be coming into the streaming economy, but which is not.”

An inquiry that has focused a lot on the fairness of labels’ contracts with musicians was suddenly much more about the infamous ‘value gap’, with Taylor honing in on YouTube and the question of whether its safe harbour gives it unfair negotiating leverage with the music industry several times. “We think that the ratio of their risk and reward is out of kilter,” he said. “They are building this [huge] business... and yet they are paying such a tiny fraction. The differential between what YouTube pays and what Spotify and Amazon Music and other services pay is so huge.”

Taylor had company in front of the committee. Roberto Neri, chair of the Music Publishers Association, was also on hand. But again, expectations were confounded –

in this case, that he might call for labels to get a smaller share of streaming royalties so that publishers could get a larger one.

That much-debated (including in this inquiry) dynamic that sees publishers get around 15% of the streaming pie and labels upwards of 55%? “I think it’s fit for purpose as it currently is,” said Neri, who was quickly pressed on that question.

“If we go back to where we were 10 years ago when streaming first surfaced, we were at eight to 10 per cent, and we’ve moved up in the right direction. Equally, my understanding is that in more recent negotiations, the label share has actually come down slightly as we’re moving up,” he said.

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“We’re very convinced that we’re moving in the right direction... Could we do more, would we like more? Of course, yes. But we are moving in the right direction. We could question what maybe the streaming services are taking in what’s called ‘the new normal’ that we’re living in. But we are moving in the right direction.”

Neri declined to offer a target percentage where the MPA would like to end up – “it wouldn’t make sense for us to have any form of bar or ceiling: we want to push the rates on behalf of songwriters as far as we can get them” – but he did return to the question of whether publishers’ share should rise at the expense of the streaming services’ 30% cut, rather than the label share.

“I can understand why people discuss these things,” said Neri. “We would like to take the share from wherever we can take it. I would argue: why are the streaming services taking double what the underlying work, the composition, takes?”

Neri also backed Taylor’s claim that YouTube is exerting an unhealthy influence on the streaming market. “The 9.99 [standard streaming subscription cost per month] has been in play for 10 years now. It would be £13 plus with inflation alone, if we could allow them to combat and raise the prices. But they’re fighting against free.”

Neri’s comments on the streaming royalties split between recordings and publishings being “fit for purpose” will spark debate, especially as it diverges – as the committee noted during the session – from the written evidence submitted to the inquiry by another publishing body, the Independent Music Publishers Forum.

You can read that here. On publishing’s 15% share of streaming revenues, the IMPF wrote that: “Simply put songwriters, CMOs and publishers need to generate a larger share of digital revenue. The amount of revenue that streaming services make off the back of creators’ work and the gross disparity and inequality of what they pay out has become scandalous.”

That last word was quoted back at Neri during yesterday’s hearing, but he stood by his claim that “we’re moving in the right direction” in the face of questions about whether the major publishers are unwilling or unable to press for a greater share, because their owners – the major label groups – take a bigger cut of recordings revenues than they do of publishing royalties.

“The major publishing companies are helping to push their rates up in the other forums that I sit in, on different boards,” said Neri. “Music streaming is one element. I can only say in the forums I’m sitting with these major companies in, they’re absolutely helping songwriters collect better rates from other sources of income.”

There were some frustrating moments during the session. For example, the committee trying to put Taylor on the spot about the salaries of major label’s senior

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executives: a query as easily wiggled out of (“That’s their issue, not really anything to do with the BPI”) as questions about labels’ deals with individual DSPs like Spotify are.

Instead, Taylor successfully turned the conversation back to the policy measures that the BPI would like the British government to adopt: changing safe harbour rules, and bringing piracy and unlicensed content into the scope of the government’s upcoming ‘online harms’ legislation.

“I think the issue that has rightly been raised is there are artists who are critically acclaimed who are not able to earn enough money from streaming to support themselves. We want to see those artists earn more money from streaming,” he said. “But you can only do that by increasing the total amount that comes in to the streaming economy.”

Taylor was also asked about YouTube’s suggestion in its written evidence that “record labels agree it is possible we will become the music industry’s number one source of revenue by 2025” and – in comments that would later draw a rebuke from YouTube – disagreed with that prediction.

“I would be thrilled if YouTube overtook Spotify and others in terms of how much they pay the music industry. We’re not on a path to achieve that, let’s put it this way,” he said.

“I think last year, we received something like £35m in the UK for all the tens of billions of views of music videos, which is largely on YouTube. Which is about half what we earn from selling vinyl records. That can’t be right. And to me, I don’t really recognise the projections that YouTube has.”

Taylor did welcome YouTube’s efforts around paid music subscriptions, although there was a noticeable sting in the tail of his praise.

“If they can grow YouTube Premium, their subscription tier, then that could generate a lot more money and that would be a fantastic thing. The industry is waiting to see them do that successfully.” Taylor was asked to clarify that he was outright disagreeing with YouTube’s claim that it might be the music industry’s largest revenue source by 2025.

“The data so far doesn’t suggest it to me. They may have business plans and investment plans and brilliant ideas that will help them to achieve that. I’d love to see it happen. They should be contributing a huge amount more to the creators of the content that drives their business.”

Neri chimed in. “I wouldn’t call them a platform. They’re a music service. 450 of the top 500 most viewed videos are music related. It is not fair,” he said, returning to

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the idea that YouTube is the reason why the audio streaming services have felt unable to raise their basic subscription prices beyond £9.99 a month.

“We would like them to push their prices up, but they can’t when YouTube is such a mammoth offering, and almost the default for the consumer to go to,” said Neri. “We really want the government to look hard at this.”

Another frustrating moment came when Taylor was put on the spot about the BPI’s use of a lobbying company to prepare it for the inquiry, and to advise it on its public relations strategy around it.

One of the committee members described this as a “revelation” and pressed Taylor on the company’s name and cost (Fleetwood and £20k-£30k, if you’re wondering).

But it felt like a strangely meaningless ‘gotcha’ moment – skewered neatly later on by Musicians’ Union general secretary Horace Trubridge when he was asked the same question, and explained that the issues around this inquiry are so important for his membership, that bringing in external help (for around the same price) was worth doing.

The session ended with Taylor dancing neatly along the tightrope of a question about whether the streaming ecosystem (but by extension, the music industry itself) needs a full-blown competition investigation focused on the topics of fair value for musicians and songwriters.

That’s the kind of inquiry that might open all manner of worm-cans for rightsholders, and Taylor steered the conversation accordingly.

“The streaming market overall shows signs of healthy competition, generally. The safe harbour is a distortion of that competition, but if one eliminates the safe harbour... from where I sit, it’s a highly competitive sector, the music streaming sector. We just need to get rid of the distortions,” he said.

The session concluded, it was on to the next hearing, with Trubridge and Graham Davies, chief executive of the Ivors Academy.

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Hindsight note: Musicians’ representatives having their say, with the song-versus-recording issue to the fore, but also agreement with the major labels on the question of YouTube.

Yesterday’s second session at the UK’s parliamentary inquiry into the economics of music streaming was another double-header, featuring representatives of musicians. Graham Davies is chief executive of songwriters body the Ivors Academy, while Horace Trubridge is general secretary of the Musicians’ Union (and a founder member of 1970s band Darts).

The panel of MPs questioning them quickly zeroed in on the question of streaming royalty splits between publishing and recordings – “one of the central issues for us... because so little of that is actually making its way through to our members,” as Davies put it.

There was an important contrast to the day’s previous session, in which Music Publishers Association chair Roberto Neri seemed to be saying that he’d like publishing’s 15% share of streaming royalties to grow at the expense of the DSPs’ 30% cut, rather than the labels’ 55% slice of the pie.

Davies took the opposite view, defending the investments being made by the streaming services – “they have taken on a lot of the marketing and promotion activities that once were the domain of the record labels” – and parrying a question about their 30% cut.

“I think that for the Ivors Academy, a lot of the attention is put onto the [other] 70%, because the song value should be higher within the 70%,” he said. “The song value has been suppressed, and we would argue that is because of the industry mechanics: in that it is in the interests of the record labels to do so.”

This comes back to a recurring theme in the inquiry: the question of whether recordings getting a much bigger share of streaming royalties than the underlying songs/compositions is driven by the interests of the three major label groups – who keep a bigger share of royalties for recordings than they do for publishing.

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“Should the industry be pushing to get more out of the overall take from the subscriber and reduce down that 30% take of the DSPs? Well sure, of course. We’re representing songwriters and composers. Anything that gets more money into our members’ pockets, we would advocate for,” said Davies.

“But I’m trying to explain that for us, whatever money comes in to the industry, if it isn’t going to go into creators pockets, what would be the point of us advocating for more money if it’s all going to go into one place?”

He was backed up by Trubridge, who said he was unfazed by streaming services keeping 30% of their advertising and subscription revenues, and compared it to the share taken by physical music retailers back in the day. “I don’t think the streaming platform taking 30% should really be the focus of too much alarm. It’s far more about the money that goes to the labels... Is the performance so much more valuable than the song? I’m not quite sure that it is,” he said.

Trubridge gave short shrift to the labels’ view that streams should be treated like sales – “it’s not a sale, it never was a sale: it’s a communication to the public. It’s like modern radio basically” – before mirroring Davies’ view with his thoughts on YouTube and the ‘value gap’.

“We would like to see YouTube paying what the other platforms pay. We’re supporting the rights owners in that lobbying to get the safe harbour provisions changed, and the value gap closed, but it’s kind of difficult to give 100% support when we know that money, most of it, will be going to the rights owners and not to artists and writers,” he said.

“We would much prefer the record labels to turn round to us, and say ‘okay, support us in closing the value gap, and we will make sure that we give you a greater share of what we get’. That’s what we want to hear, and then we could give wholehearted support to what they’re doing. It just feels like we’re saying ‘yeah, they should have an extra ten quid, so that our lot can get an extra 10p'”

Trubridge came back to the radio point, and the MU’s desire “to reclassify streaming as ‘communication to the public’ – to see it like you do radio. That way the money is split 50/50 between the record labels and the artists.”

In the day’s earlier session, BPI boss Geoff Taylor had been grilled about the industry body’s employment of a lobbying company around this inquiry.

Trubridge was asked the same question, and revealed that the MU had also hired a lobbying company (“for somewhere about the same as what Geoff is paying his

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lobbying firm I think” – i.e. £20k-£30k). However, he also offered a no-nonsense explanation of why.

“This [inquiry/topic] is so important to musicians, that if I didn’t hire a lobbying firm, and we don’t get any progress with this problem, then in years to come people will say ‘Why didn’t you do that? Why didn’t you try absolutely everything?'” he said.

Trubridge also drew on his history as a musician when asked about how streaming affects artists on ‘legacy’ contracts, signed well before Spotify was a glint in Daniel Ek’s eye.

“People are streaming stuff that they haven’t heard for years and years, and the record labels that own that catalogue now, very few of them have got details of all the musicians they should be paying royalties to,” he said, adding that even when they do, many of those artists are getting very low royalties, or – if they still haven’t recouped their original advances – nothing at all.”

The committee of MPs kept returning to the question of whether the division of streaming royalties between labels and publishers should be rebalanced, though, to enthusiasm from Davies and Trubridge, and more suggestions that the major publishers lack the clout within their parent organisations to drive change.

“It’s not hard to see why it’s unfair,” said Trubridge. “The publisher will pay out up to 80% of what they receive to the songwriter, whereas the record label will pay... maybe if you’re really lucky about 20%. Bearing in mind that the companies [major labels and publishers] are intertwined, there is a real interest in the shareholder side to keep the publishing payment down and the recording payment up.” The session did touch on other topics. Trubridge expressed his fears that the dwindling provision of musical instrument training in schools is a big problem, because it’s disadvantaging children whose parents can’t afford to pay for it instead.

“And when you get to the point where you’ve got to struggle for a couple of years as a musician... you’re relying on Bank of Mum and Dad to get that foothold. So I think you’re getting a very narrow class of musicians coming in. That worries me an awful lot... there’s a lot less opportunity for people from deprived backgrounds.”

Both Davies and Trubridge acknowledged that YouTube and other streaming services are putting some money and effort into grassroots music programmes, but Davies warned that this activity “should be what people do as the right thing to do because they believe in the industry: not as an alternative for paying proper royalties – and that would go for all parties in the music industry”.

There was time for a bit of talk about the infamous ‘black boxes’ of unclaimed royalties within the streaming ecosystem: for example, money that hasn’t been paid

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out to publishers because recordings were uploaded to the DSPs without the necessary metadata.

Davies wants streaming services to crack down by refusing to make any tracks available that don’t have the publishing credits attached, and he suggested that there is “more than £100m of black box unattributable streaming royalties in the collecting society network” by the Ivors Academy’s estimation. “No one’s disproved that yet.”

This was the second session of three yesterday. The third would be the first to feature streaming services: YouTube, SoundCloud and Twitch.

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Hindsight note: We’ve still never got to the bottom of why Twitch’s representative seemed to be present at the start of the hearing, but was never asked a single question. But really, this session felt like it was always going to be about grilling YouTube, and so it proved. Also, with the greatest respect to President Biden, we still don’t give two hoots what his music taste is.

A lot has been said about the strengths and failings of music streaming services during the UK parliamentary inquiry into the economics of this market. Yesterday, three DSPs got the chance to have their say. Well, two of them, as things turned out.

In one of the most curious episodes in the inquiry so far, Twitch’s general counsel Steve Bené was seemingly present at the session – he could be heard thanking the chair for welcoming the three speakers at the start – but he wasn’t asked a single question during the session, and thus remained a silent participant.

Given the music industry’s recent ructions with Twitch, that probably counts as a win for Amazon’s livestreaming subsidiary. And while it’s possible that some kind of technical issues kept Bené out of the session rather than the committee of MPs simply forgetting that he was there – or perhaps he couldn’t turn his cat filter off – it was bizarre.

It also meant those MPs had much more time to grill Katherine Oyama, director of government affairs and public policy at YouTube, and – to a less aggressive extent – Raoul Chatterjee, VP for content partnerships at SoundCloud. (Where are Spotify, Apple Music, Amazon and co? You can expect some or all of them to be called for a future hearing in the inquiry. Their absence yesterday does not mean they have wiggled out of it.)

Pressed on safe harbours and the ‘value gap’ from the get-go, Oyama outlined YouTube’s familiar arguments in favour of the former and pushing back on the latter notion.

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“Safe harbours have really powered the user generated content movement that we’re seeing,” she said, getting in early with YouTube’s latest official figure: $12bn of payouts to music industry rightsholders by January this year.

“Many of them are receiving more than half of their [YouTube] revenue every year from the user-generated side. So not only has that system created a really vibrant place where artists and fans are able to be more interactive... but there has been a big shift where this sector is really driving real revenue, and powering this five to six-year positive growth we’re seeing now in the global recorded music industry.”

Having spent the rest of the day hearing from people claiming that YouTube has actually ‘suppressed’ the potential value of streaming – arguments that its safe harbours give it a negotiating advantage over non-UGC rivals, while its scale bars those rivals from raising their prices – it was no surprise to see the DCMS committee spend much of the session pressing Oyama on these matters.

Oh, and also asking her whether YouTube is lobbying for safe harbours to be included in any post-Brexit trade deal, which was one of the sharper questions posed during the session, albeit one parried calmly by Oyama.

“I think we generally support the safe harbour foundation, both for the importance it has had for the digital economy and for the music sector,” she said, while stressing that she has “not been any part of the debate in the US-UK discussions... I think if we were asked, we would be happy to share what we just shared earlier: we do think it [safe harbour] is a strong foundation”.

The questioning switched tack to the recent report that SoundCloud is exploring ways for fans to pay artists more directly, including possibly adopting a user-centric payouts system – one of the recurring topics in this inquiry thus far. However, he was distinctly cautious in his response.

“It’s definitely an interesting area, and as an artist-first platform we’re always looking for ways to make payouts to artists fairer,” he said. “But the whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. It’s one potential path we’re exploring... and it would require industry-wide conversations and support to be impactful.”

(And requiring industry-wide support is exactly the reason why getting user-centric off the ground – even as Deezer wants to do it, as a single-country recordings-only trial – is such a remote prospect right now, for all its potential.) After this brief respite, it was back to Oyama with questions about the ‘value gap’ between music consumption on YouTube and its payouts to rightsholders. And, indeed, the

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perceived gap between YouTube’s per-stream royalties and those of its audio-only / non-UGC rivals.

Parry one: Oyama pointed to the YouTube Music Premium subscription service, with its 30 million subscribers, and said “all the analysis I’ve seen on payouts and breakdowns is that we are on a par with those other services”.

Parry two: UGC videos are not the same as regular music tracks. “There’s a lot of content on YouTube that has these more minor uses: a video of a skateboarder or a tourist video... not all streams are equivalent to this one model that we might have,” she said.

Parry three: YouTube’s Content ID system gives rightsholders the option to block or monetise UGC videos featuring their music – “and in 95% of the cases, and it’s completely, of course, their decision, rather than block they’re choosing to have it up and they’re choosing to get the monetisation.”

To anyone who’s been following the ‘value gap’ debate for years there was little new here: although Oyama did say that the Content ID system has sent about $5.5bn out to music rightsholders so far. That’s just under 46% of the total payouts, and might be a new stat.

The two tech executives ran through their copyright protection technologies – broadly similar in the fact that they identify rightsholders’ music when it’s uploaded by users, although Chatterjee stressed that SoundCloud operates a ‘notice and stay down’ policy to ensure rightsholders don’t have to send repeated takedown notices for the same material.

They were also asked how they thought the streaming ecosystem needs to be improved for artists and songwriters. Oyama pointed the MPs’ attention in the direction of dodgy or missing metadata.

“The lack of a comprehensive database about ownership adds a lot of complexity,” she said. “For a 90-second song, we are often having to divide that across maybe 14 different entities and rightsholders.” And the data telling YouTube who those entities are may be incomplete.

She also offered a careful nod to the debate around how rightsholders pay through the royalties they receive from YouTube and other DSPs.

“I have heard throughout this inquiry a real call for more transparency as to what happens to the dollar as it works through the system and a number of different entities,” she said, before segueing into YouTube’s desire to help artists make money in more ways from its platform: with livestreams, merchandise sales and channel memberships.

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(Including another new number, sort of. Oyama talked about K-Pop stars Blackpink’s recent ticketed livestream concert on YouTube. “They sold out about 20 times the capacity of the O2 Arena for one concert,” she said. The O2’s capacity is 20,000, so you can do the maths.)

The conversation turned to whether streams should be accounted for like sales. “Streaming should be defined as streaming: I don’t think we should be looking to apply old business models to what is now the dominant format,” said Chatterjee. “I think we should be considering more equitable ways to distribute the revenue to the artists.”

He was mildly grilled on whether SoundCloud will ever be profitable – “I’d like to think we’ll be breaking even pretty soon” – before the MPs’ attention switched back to Oyama, and the question of whether YouTube is the reason audio streaming subscriptions are still £9.99 a month more than a decade after Spotify’s launch.

(We’re diplomatically leaving out the interlude where one of the DCMS committee chose to use up some of the limited time available to ask Oyama whether her former employer, Joe Biden, had good music taste. It was a proper throw-your-shoe-at-the-screen moment.)

“I would give them credit that they have smart people looking at the overall economics,” said Oyama. “There might be an assumption that if you increase the subscription price, the output would only be a growth. But not every user can pay a subscription. Not every user today is ready to pay a subscription, or willing.” Earlier in the day, BPI boss Geoff Taylor had questioned YouTube’s claim that it could potentially be the music industry’s biggest source of royalties by 2025. “We’re not on a path to achieve that, let’s put it this way,” he had said. “The data so far doesn’t suggest it to me.”

Oyama was unimpressed. “I honestly was surprised and a bit disappointed by the testimony that I heard. Frankly it does not reflect at all the individual relationships that we have with the individual members of the BPI,” she said.

“The numbers that I’ve seen: in 2019 we sent three billion to the music industry. We don’t yet have our 2020 numbers done, but it’s been growing every year. We’ve no reason to think it has not grown quite significantly last year.”

“Spotify, the last press release I saw for them, for Q4 of last year, is that they’re sending one billion per quarter to all rightsholders. So music I’m sure is a significant portion, but also podcasts and others. If you just look at that data, we are close, and we absolutely wanna get there.”

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The stickiest moment for Oyama came near the end of the session, with a sustained burst of questions about how YouTube’s payouts translate into per-stream figures, which she declined to give.

In one sense, that was understandable: there is no single per-stream figure, as it depends on whether ads are running around a video; what kind of ads if so; current advertising rates in the country of the viewer and so on.

But at least offering some kind of range / ballpark figure might have ensured Oyama avoided the wrath of the committee’s chairman, Julian Knight MP, who was as cross with her as he had been with UMG UK boss David Joseph in an earlier session, over a question (and similar unwillingness to answer) about a Spotify deal.

“I’d have thought when you came before this committee you’d actually know how much you pay artists when you use your content on your platform, when it’s uploaded by users. It seems to me astounding that you don’t actually know,” said Knight.

“Or can we read into this that you do not want to say, because frankly it would expose the fact that you are making an absolute fortune from other people’s work?”

Oyama tried to answer. “Because we’re sharing revenue, if we make any money, the majority of the revenue is going out to the music industry. So respectfully I do think that it is partnership,” she said. Although when, soon after, she described per-stream payouts as “not a metric we rely on”, Knight let rip.

“Not a metric you rely on. That’s because it’s fairly inconvenient in that respect,” he said. “You’re an enormous company. You are literally almost a state unto yourself in many respects. You are absolutely enormous. And isn’t this another example of where you are just so big, and that where you are making such huge profits, that effectively you are dampening down an entire industry?”

“You are becoming effectively the sort of, almost like a... I don’t know how to put it: not gangmaster, but you are a huge entity, and you are taking huge sums of money out of the creative sectors. And yet they are effectively having to have a hand-to-mouth existence with yourselves. It’s true for journalism, and it’s true for music streaming, is it not?”

This felt like an important moment. In fact, many of the important moments in these kinds of inquiries are less about what the people giving evidence say, and more about what the questioners say – and what that shows about how they may be leaning with the reports and recommendations to come.

You don’t need a degree in political science to spot that “you are dampening down an entire industry” and “you are taking huge sums of money out of the creative

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sectors” and especially “gangmasters” (even with the ‘not’ prefix) are signs that an inquiry isn’t tilting your way.

Davies’ mini-speech suggests that the safe harbour and ‘value gap’ arguments from the music industry are winning favour. Equally, the tetchy nature of the hearing with the major label bosses suggested that their arguments were falling on deaf ears compared to the much more warmly received testimony of musicians and their representative bodies. Heaven knows what the committee think about Twitch.

That said, the result of this inquiry will be a report and recommendations, but turning that into legislation is another challenge entirely – and one affected by other external factors, for example that US-UK trade deal.

As things stand, it would not be surprising to see the committee recommend that ‘equitable remuneration’ be deployed at least for some streams – the more radio-like lean-back variety – as well as offering some recommendations on safe harbour that YouTube won’t like at all. Tax relief for music companies akin to that for TV, games and animation firms would be welcome too.

It’s more of a stretch to see it seeking to get the government involved in industry matters like musicians’ deals with rightsholders; the split between publishing and recording royalties; or banging everyone’s heads together until they commit to a user-centric trial.

Still, the inquiry continues, and we’ve yet to hear from the biggest audio streaming services – a session with Spotify, Apple Music and Amazon, perhaps with an add-on hearing for Deezer to detail the roadblocks to its user-centric trial – may yet add some more twists to this tale.

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Hindsight note: ‘Black box’ royalties – those that can’t be matched to particular works or musicians, and so have not been paid out – cropped up a few times in the UK streaming inquiry. But across the Atlantic, they were making bigger headlines, not least because there was finally an official figure for how big the pot of unpaid cash was.

Last November, a filing from the newly-created Digital Licensee Coordinator (DLC) in the US – the body that interfaces with the Mechanical Licensing Collective (MLC) on behalf of streaming services – revealed that there were "several hundred million dollars" of black-box streaming royalties ready to be transferred to the MLC for paying out to songwriters and publishers. That's royalties that had not been paid before because they had not been matched with recordings.

Now we've got an even more specific figure: $424,384,787. That's the amount of 'historical unmatched royalties' that 20 DSPs have now transferred to the MLC, as part of an agreement that will see them protected from liability for past infringements of copyright on this front.

The MLC has broken down the total by DSP too: Apple Music sent the most money ($163.3m) followed by Spotify ($152.2m), Amazon ($42.7m) and Google ($32.9m).

That's a lot of money, but now the hard (and, indeed, somewhat controversial) work begins for "reviewing and analysing the data in order to find and pay the proper copyright owners". That data being "more than 1,800 data files, which contain in excess of 1.3 terabytes and nine billion lines of data".

Publishing body the NMPA hailed the news as "a massive win for music creators and the streaming services themselves" but the Artist Rights Alliance offered a warning.

"In the months ahead we look forward to engaging further with the [Copyright] Office about efforts by publishers who have already been paid for historical usages via settlement agreements to seek double payment out of these new funds," it claimed.

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"As we have told the Office in our prior filings, the major publishers that already settled with digital services and received payment from them should not be allowed to claim a further share of the monies transferred to The MLC today."

The Trichordist, meanwhile, had some bracing words for the DSPs. "Apple tries to position itself as a friend to artists and songwriters and is the worst offender. Spotify has literally no excuse as they have been sued multiple times and as we now see for good reason. Amazon and Google are two of the biggest technology companies in commercial history, but they can’t find songwriters," it said, later adding "if our lobbyists are going to celebrate anything, they need to celebrate when every penny is accounted for and paid to the right person".

The MLC has an unenviable task in sorting through the masses of data to match works to streams, and dealing with the sensitive 'double payment' issue fairly and transparently. Make no mistake, getting $424.4m out of the black boxes is a very important moment. But there is plenty more work (and, clearly, quite a few arguments) to come around its distribution.

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Hindsight note: Before the inquiry began, we’d have put money on this session being the one with major fireworks. But this was positively benign: the three DSPs weren’t made to squirm, and Spotify and Apple’s reps resisted any temptation to kick lumps out of one another.

Reporting on a two-and-a-half hour parliamentary inquiry session the day after liveblogging a two-hour Spotify event plus associated interviews? That’s living alright! It’s a busy week for anyone involved with the music streaming world.

Today’s hearing in the UK’s streaming economics inquiry was the long-awaited appearance of Spotify, Apple Music and Amazon Music to field questions from the Digital, Culture, Media and Sport (DCMS) Committee.

The results were... well, there weren’t many fireworks, and neither Spotify’s Horacio Gutierrez, Apple’s Elena Segal nor Amazon’s Paul Firth roused the ire of the MPs like Universal Music’s David Joseph or YouTube’s Katherine Oyama had in previous hearings.

There were some strong signals about where the committee is heading in terms of its likely recommendations though, and some interesting signs of willingness on the part of the DSPs to engage with them.

Plus some useful back-and-forth on whether streams are sales or rentals; some blunt comments on YouTube; and a great big red herring about Harry and Meghan’s podcast fees. Read on.

The ‘sale or rental?’ question is clearly front of mind for the committee, as it mulls whether to tinker with the way streaming royalties are divided between rightsholders and musicians – well, specifically between labels and artists.

What is streaming? “It is different than an ownership model. I’m not sure that it is quite the same as a rental per se,” was Gutierrez’s initial response.

“It is hard to find analogues in the physical world of what streaming is. It is an ephemeral right to enjoy a stream, and you have full access to the catalogue that is

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made available. Renting has certain economic and legal connotations that I think are not 100% applicable to our scenario.”

It will be interesting to see where the committee goes with this question in its report. Whether a stream is a sale or a rental affects how the royalties are split, but if the correct answer is that it’s neither, it’s something new, perhaps that’s a challenge for the policymakers to come up with a new formula too. The topic came up again later in the hearing, when Apple’s Segal was asked the same question.

“I see it as a licence. We have a right, we have licences that entitle us to sub-license to consumers... and that’s always been true with music,” she said, noting that the model applied to downloads in the iTunes era, but even to CDs.

“It was a piece of plastic and you were purchasing a licence to use the music on that piece of plastic in certain ways... It was the sale of a licence, I would say. This [streaming] is a subscription to a licence. I would say it’s more akin to a rental. I’m not going to comment on legal connotations of that.”

As for Firth, on the sale or rental question: “It’s very clear to me that it’s neither of those things. Streaming is something different, and trying to qualify it as something from the old world... it’s a classic square peg, round hole moment,” he said. “I think it is something different from either of those concepts.

A recurring theme of the session today were questions to Gutierrez about how the economic model for streaming was drawn up in its early days, when Spotify was negotiating its first deals. But it wasn’t a satisfying line of questioning, because he joined the company a decade later in 2016, so could only say variations on “I wasn’t there”.

He had more to say when asked about Spotify’s willingness to try user-centric payouts though.

“We would definitely be open to look for alternative models and considering them. In the case of the user-centric model, it is one that we are open to,” said Gutierrez, citing Spotify’s participation in a recent study of user-centric in France.

“It doesn’t really show a dramatic shift, the way that many thought that it might. But on the other hand, if musicians and artists in general prefer the model, we would support doing the additional research,” he continued, before adding a crucial caveat.

“It would require not only a decision on the part of Spotify. Every licence agreement that we sign with every rightsholder all over the world would have to be transitioned into that model, so it would not be a trivial decision.”

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This was another topic that the session circled back to later. Firth said that Amazon would be “willing, and would actually be very keen” to explore new payout models. Not just user-centric, but the ‘artist growth’ system proposed by indie body Aim in its submission to the inquiry.

“We should take a look at a number of these approaches. They should be modelled,” said Firth. Segal also indicated willingness on Apple’s part to examine alternatives to the current pro-rata system.

“I think it’s certainly very interesting, and the key thing for us is there needs to be consensus among all licensors. It’s not a model you can apply to some licensors and not to others. Obviously the only way to reach consensus like that is to get together as an industry,” she said.

“Absolutely we would be open minded and willing to explore it and to work with others on it,” added Gutierrez. “It has to be a model that works at scale.” He also suggested that any such model would have to be able to work globally, rather than expect streaming services to operate different payout systems in different countries.

Spotify, Apple and Amazon saying they’re willing to explore user-centric is a step forward, and don’t forget that Universal’s Joseph also spoke positively of the model during the major labels hearing.

However, the inquiry hasn’t yet got to the bottom of why efforts to pilot user-centric – notably Deezer’s in France – have failed. Asking Deezer might have been fruitful. As things stand, by indicating their willingness to consider the model, the bigger DSPs are punting the ball back into the labels’ court.

For the artists’ rights campaigners whose campaign triggered (and adeptly steered) the focus of this inquiry, user-centric isn’t a primary goal. Radio-style equitable remuneration (ER) – where recording royalties are split 50/50 between labels and artists – is what they’re pushing for most, even if it just applies to the radio-like features of streaming services. When asked, it was curious to see Segal saying “I don’t know the detail of the economics of broadcast radio” given that Apple Music has its own radio stations – and that in a previous hearing, PPL boss Peter Leathem had said that his society was talking to labels about collecting royalties under ER from Apple Music Radio, although he did make it clear that Apple wasn’t directly involved in those discussions. She did say that if Apple Music was asked to separate out streams chosen by users and streams served to them by playlists or algorithms – a necessary step if ER were to be used for the latter – it would be possible.

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“Theoretically yes. It’s not something that we’ve examined in detail, and I would imagine there would be operational complexities, but certainly we can identify where it [a stream] comes from, so yes,” she said.

Gutierrez offered a caveat, which was that the lines between user-chosen music and served-to-them music are blurring. “Increasingly there isn’t going to be just a single radio-style linear presentation of music,” he said. If a playlist is being personalised based on someone’s listening habits, for example, it’s arguably a less ‘passive’ (in terms of their input) experience.

Later, Firth came back to this point. “It’s much more interactive [than radio]. We will use data from what you’ve listened to before to select what to play you there.

You’re able to skip, you’re able to pause, you’re able to rewind. You’re able to ask what the name of the artist is and go and explore their catalogue. So there are many ways it’s much more interactive than radio... but I do understand the point that’s being made here, some element of similarities that you’re highlighting.”

(Again, this comes back to the difficulties of trying to put streaming into an existing box: radio or sales in this case. It’s streaming, a different beast. That means a new box, and arguments about who constructs that box...)

Towards the end of the session, the three execs were asked again about their likely responses if the committee “recommended a legal framework that enabled the activities of your companies to benefit artists more equitably” – in other words, ER.

“I think we are supportive of any efforts that improve the equitable distribution of revenues in the industry, so we would be well disposed to engage in a discussion to that effect,” said Gutierrez.

“Equitable is a very complex term. Reasonable people can disagree on what equitable means. Yes, we’re absolutely happy for the discussion from our standpoint. Artists should be paid for their work. Creators should be paid for their work,” said Segal. “We’re absolutely happy to have any discussion on what is and is not equitable. Because it’s not a straightforward question.”

Firth agreed, and stressed that any solution should make the industry “sustainable for the long term” for artists, songwriters, labels, publishers and streaming services alike.

The DSPs were asked why the basic price of a streaming subscription has been stuck at £9.99 a month since the dawn of the model, although Gutierrez was able to point to Spotify’s experiments in raising its price in some markets, as well as its plans for a more expensive Spotify HiFi tier later this year.

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“Over time, the menu of options that are available to users is going to be more robust. There will be higher price tiers or offerings, and on the whole prices will rise. But we have to do that also being sensitive from the perspective of users,” he warned, while pointing to the competition with free music, by which he was referring to piracy.

“It is true as Horacio said that we are competing with free,” agreed Segal. “We have been competing with free... since the beginning of iTunes in 2003, or 2004 in the UK. And competing with free is always very difficult, because consumers have a choice to move to free.”

Netflix had been cited as a digital service that has raised its prices, but Segal pointed out that streaming music and streaming video are different beasts in market terms. Unlike Netflix, Disney+ and the video pack, music services all basically have the same catalogue. They all have all the music.

“Those things do make it hard to put prices up in a vacuum by yourself. People can just opt to go to free, or to other services,” she said. A question about whether Apple and Amazon force owners of their smart speakers into their own music services was swiftly dispatched by Segal and Firth – HomePods and Echos both now allow other services to be set as the default – while Gutierrez fended off a question about Spotify’s profitability with relative ease too.

“We are still in expansion mode. We are launching in new markets, we are finding new users, we are developing new advertising revenue generating mechanisms, and we are working very hard to convert more of those users in the ad-funded tier into the subscription tier,” he said.

He did describe podcasts as having “a very different cost structure that we believe has the potential to put us on a more solid path” towards profitability, adding: “It is clear that the cost structure of the music streaming side of the business is very challenging. Over two thirds of every pound that we generate goes straight to rightsholders, and ultimately to the artists and songwriters.”

Surprise! The DSPs chose not to put the boot in – explicitly anyway – to their key partners, the labels. If you looked for it, there were a few nods in the direction of how royalties flow through to musicians once they’ve been paid out.

Segal’s claim that Apple has “gone further than anyone else in trying to ensure money flow” was one of those moments.

“There have been numerous ways in which there were complications moving to a legitimate digital world. You had lots of players who just were not ready for it in terms of receiving money and dealing with the money,” she said.

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“We’ve worked really hard to push people to work with us on processes that enable money flows as best as possible from us on the composition side. For example from us to collecting societies to songwriters. We’ve done that because we don’t want to hold on to the money. We want the money to get to the people it’s supposed to get to.”

(This being a UK inquiry, unfortunately nobody chimed in at this point to ask all three DSPs about the “historical unmatched royalties” they had recently paid to the MLC in the US: $163.3m from Apple, $152.2m from Spotify and $42.7m from Amazon.)

Talking of putting the boot in, though: YouTube and the ‘value gap’ has been a recurring theme throughout the inquiry, with nearly every speaker (bar YouTube’s

Oyama, obviously!) describing its safe harbour as unfair. Segal fielded a question about it today.

“As I said earlier, it’s challenging to compete with free. It’s always been challenging, whether it’s legitimate or illegitimate. And it’s challenging to compete on an un-level playing field,” she said.

What is un-level about it? “The fact that they don’t necessarily have licences for all of the music that they use, and they don’t need to. And even if they do have licences, the amount they pay because of the way their business model is set up, and the way the tariffs work, is less.”

Oof. The three execs were later asked whether their service would still have a free tier if YouTube didn’t exist. Gutierrez and Firth said they would. Apple Music has no free tier, but Segal was asked how a world without YouTube would look for her service.

“I think more people would probably be using Apple Music. It wouldn’t change our service,” she said. “We don’t think that an ad-supported service can generate enough revenue to support a healthy overall ecosystem. And it would also really go against our fundamental values on privacy.”

As the session progressed, Gutierrez offered a new (we think) figure from Spotify: €550m of royalties paid in the UK alone in 2020. Tactfully sensing the political climate in the UK, he even apologised for the figure being in euros.

He also provided another read-between-the-lines moment when asked about the reduction in music distribution costs between the physical era and the streaming era. The question was seemingly getting at the idea that since the costs have shrunk,

Spotify’s 30% cut is too much: that it doesn’t need to be taking a similar share to retailers in the past.

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Gutierrez pointed out that a lot of the past costs of getting music to people – printing records, packaging and shipping them, and marketing them in stores – were handled by the labels.

“As the internet allowed for frictionless distribution... for the most part that has gone straight to the bottom line of labels,” he said, while noting that they have faced new costs and challenges too.

However: “The reality is that was not a cost saving that we realised. It was a cost saving that labels realised.” Not explicitly an argument that it’s labels whose share of streaming revenues should come down, but... Well, it will be interesting to see if the committee picks up on it.

One of the big early moments in this inquiry came when musician Nadine Shah talked about her financial struggles during the Covid-19 pandemic, despite the critical acclaim and awards nominations that her music has attracted.

Gutierrez was asked how he felt about that testimony: about as dangerous a question as a streaming exec can be asked. Push back, and they might seem like a heartless, artist-disrespecting monsters. Agree, and, well, they’d basically be saying streaming services are heartless, artist-disrespecting monsters. Pitfalls abound.

“It’s unfortunate that she feels that way. A couple of things that need to be clarified: I don’t know what agreements she has with labels and publishers. I don’t know what the economic terms are with the split of the revenue that she might have agreed to with her label,” he said.

“I know what we pay, and I know that close to 70% of every pound that we generate gets paid to those intermediaries that represent artists,” he continued, citing the figures announced at last night’s Stream On event – that more than 800 artists earned more than $1m last year in Spotify royalties, and more than 7,500 earned more than $100k.

Read between the lines again! “Streaming is having a positive economic impact on artists, but you have to recognise that when you look at the economics of streaming, you have to look at the different actors in the value chain, and how the money trickles down from what comes out of streaming, and ultimately makes it to artists.”

There’ll surely be some follow-on from these comments, from Nadine Shah herself and/or from her label or publisher. Saying we need to look at how money flows after it’s been paid out is uncontroversial in general, but riskier as part of a response to a specific artist’s complaints.

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Gutierrez was at his most animated during this part of the hearing, when defending Spotify’s impact, though.

“We’ve paid over €20bn [in royalties] since the foundation of the company. We paid €5bn in 2020 alone. The payouts continue to grow. The streaming payouts are what’s bringing total music revenue up,” he said. “The streaming music paradigm is actually paying off, is contributing to bringing the music industry back into health.”

Cue the strange ‘Harry and Meghan’ tangent, with Gutierrez asked whether Spotify is paying the Sussexes for their new podcast on the service. Spoiler! “They’re not doing it for free.”

The angle of questioning was clearly whether Spotify paying big sums to celebrity podcasters is another way that it’s screwing artists – possibly with one eye on the UK tabloid newspapers’ eagerness for negative headlines about the Sussexes specifically.

They may struggle to turn this into a headline though. “There is a market for certain talent because they command a certain amount of consumption,” he said. “The podcast market is different from the music market. We don’t get to negotiate directly with artists in the music space the way we negotiate directly with podcasters... so the structure of that market is different.”

Gutierrez also put forward a familiar Spotify argument: that podcasts – and by extension, the big fees paid to big podcast stars – are good for music too, because they keep listeners engaged with Spotify, and thus makes them more likely to pay for the service, which boosts music royalties.

Harry and Meghan save the music industry, as the MP asking the questions drily put it. “That seems a little bit premature,” responded Gutierrez. “They’re not the only act that we’ve signed...”

Before the session ended, there was time for a question about the dynamics within major label groups between their recordings divisions and their publishing divisions – and specifically whether the latter have no power to agitate for a higher share of streaming royalties than their current 15%.

Do the label arms get the biggest, first slice of the pie, leaving publishing to take whatever’s left?

“It’s certainly not the way we’ve ever set things up. We’ve never gone ‘hey labels, how much do you want?’ and whatever’s left goes to the publishers,” said Segal. “From our point, publishing is just as important. We negotiate them separately... We’re generally negotiating with completely different people.”

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Gutierrez was also asked the question that led to David Joseph’s sticky moment with the MPs: about whether a deal between Spotify and Universal Music lowering royalties if the streaming service hit certain milestones was damaging for artists.

He was in full general counsel mode when answering – saying “in general” several times to walk the line between not talking about a specific deal, and not getting shouted at for evasion by the committee’s chairman.

To paraphrase: his argument was basically that Spotify surpassed all its targets, so it paid more money to UMG (sorry, in general to labels) and thus artists made more money, even with any lower rate.

“If we do better, they will do better, and the artists they have signed will do better,” he said, before fending off some questions about whether Spotify’s new

‘Discovery Mode’ – where labels choose tracks to promote in the service’s autoplay and radio features in return for a lower royalty rate – is harmful for artists.

“Labels have had their streams grow by 30% when they use this, which means they obviously receive higher royalties when they participate in the program,” said Gutierrez, who also managed to squeeze in the point about Discovery Mode not requiring payment upfront like other advertising features. “In that sense, it could be a great equaliser for independent labels...”

The final question was about major label stakes in Spotify, and whether that gave them undue influence over its strategy.

Again, it was parried without much fuss: Gutierrez made the (correct) point that it’s not equity stakes that give labels influence over a streaming service: it’s the fact that they own huge catalogues of music, which they could remove from the service if agreement can’t be reached on a licensing deal.

And that was a wrap. No alarms and not many surprises, when all’s said and done. But some interesting nuance, and a growing picture of what the committee might recommend in its ultimate report from this inquiry.

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Hindsight note: A late play to encourage the committee to recommend user-centric payouts rather than equitable remuneration? If that was the case, it didn’t work.

Spotify, Apple Music and Amazon Music had their say at the UK's streaming economics inquiry yesterday. But yesterday the parliamentary committee holding the inquiry also published the latest written evidence from the three major labels, in response to some specific questions from the politicians after the earlier hearing involving the UK bosses of UMG, Sony and WMG.

It's important, because this included questions zeroing in on user-centric payouts and equitable remuneration (ER), two of the measures that the committee seems to be looking on favourably as potential changes to the streaming ecosystem. So what did the three majors think?

On user-centric payouts, Universal's filing claims to "welcome any proposal that maximizes fairness and transparency and supports market growth", adding that the label is carefully reading the recent French study into the model. "In all likelihood, it would be difficult to change systems in the midst of an in-force contract but as we indicated at the hearing we are open to various reforms at the streaming services."

Sony's filing said "We are agnostic as to whether a user centric model is employed as it is not meant to change the pool of money available to the labels/artists. We feel that whether a user centric model is used is ultimately a matter for the DSPs (who will have to invest significant sums in changing royalty reporting systems) and the artist community (as some artists will win from a changing model and some will lose)."

WMG's filing is more critical, suggesting that "a user-centric model would not change the overall royalty pool and our analysis suggests that any changes in the allocation of payments to artists would not be significant", and describing it as "far more complex and administratively burdensome for digital services to implement as it would require a tremendous amount of data – it is likely that digital services would want to pass off some of the associated costs to rightsholders and therefore to artists".

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On equitable remuneration – where royalties from radio-like streams would be split 50/50 between artists and labels, as they are for broadcast usage – Sony Music's filing offered this rebuttal: "If streaming was treated as broadcast and artists received direct a material share of the fees payable, the balance payable to the label would not be sufficient to maintain investment in new signing, A&R and marketing and so would materially reduce the opportunity to mitigate its risk on the majority of signings which do not succeed and in respect of which we are unable to break even."

It went on to reiterate one of the arguments from the hearing: that because a collecting society like PPL (which would likely oversee ER) cannot "walk away" from negotiations "it is generally accepted that the rates that would be payable under a collective licensing regime would be significantly less than those that would be negotiated by the labels direct, where we can choose to license or not license our catalogue, or specific recordings, if necessary".

WMG's filing follows this line too: "Because rightsholders can refuse to license their content, licences are agreed at market rates as determined by the parties and the rates tend to be higher than for collectively managed remuneration rights such as in broadcasting." Essentially it's a claim that under ER, artists might be receiving a bigger slice of a smaller pie: a theory that definitely needs to be independently modelled to understand whether it's true, and what the impact might be.

There is plenty more to parse in the filings: Universal Music, Sony Music, and Warner Music. Some royalty calculations, for example, with Sony estimating that an artist on a 25% royalties deal would need around 1,000 streams on Spotify Premium to earn £1, but 5,479 streams on YouTube. The corresponding section in WMG's filing is, alas, replete with XXXX redactions, while UMG's filing does not include that question.

It's a useful extension of the information and views that the inquiry has already yielded, anyway. As is Broken Record founder Tom Gray's new op-ed for MBW, in which he sets out at length "what I think might be achievable and practical through compromise, but also place our industry on more sustainable and ethical ground".

Again, this takes the debate on a step, because like the major labels, Gray is responding to questions about or criticism of his original view – for example about whether the views of artists who do well from streaming have been represented in the inquiry; and whether the sharp growth in the number of musicians scrapping for the streaming pie is a factor in low earnings.

He also expands on how he thinks equitable remuneration could work as a "half-way house" – "some believe streaming is communication and/or rental, some

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insist it is sales. Okay, let's split it in two" – including some thoughts on tackling the "negotiating issues of a blanket license". Read his piece and the three major label filings and you'll get a good sense of where this inquiry might be leading, and the arguments, hurdles and (whisper it quietly) potential compromise and common ground that lie ahead.

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Hindsight note: SoundCloud had been privately mulling the idea of introducing a user-centric system for some time. This announcement was timely.

Rumours that SoundCloud would become the first big music streaming service to adopt user-centric payouts were correct. The company has just announced plans for what it's calling 'fan-powered royalties'.

The system won't apply to the entire catalogue of music that is available on SoundCloud, but just to the tracks uploaded by independent artists directly to the platform: specifically the nearly 100,000 who use the company's SoundCloud Premier, Repost by SoundCloud or Repost Select features.

The switch will happen on 1 April 2021, and SoundCloud has launched a website explaining how the new system will work, and encouraging artists to "tell your fans" about it to drive listening (and thus royalties) once it's up and running.

The site includes some examples modelling out how the new system will work. One independent artist called Vincent, with 124,000 followers on SoundCloud, is cited as earning $120 a month under the existing 'pro-rata' model of streaming royalties, but the company says this could increase to $600 a month under the new system.

Another artist, Chevy, with 12,700 followers, stands to earn 217% more per month according to SoundCloud, although dollar amounts are not provided in this case.

The site also explains some of the all-important details of how fan-powered royalties will be calculated. The royalties will depend on how much a fan listens to an artist "relative to all of their listening time in a given month", but also "how many advertisements the fan has consumed" and whether they are paying for a SoundCloud Go+ subscription – the service's premium tier.

There are some interesting unanswered (for now) questions about the new model: for example, whether it's being used for recordings only, or both recordings and publishing royalties. Also about how it intersects with SoundCloud's licensing

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deals with labels, since a SoundCloud Go+ subscriber may be listening to a mixture of independent and label-signed artists.

The significance of today's news should not be overhyped. In 2019, the most recent year for which it has published financial results, SoundCloud generated €99.5m from its 'listener business' – ads shown to and subscriptions paid for by consumers, as opposed to its 'creator business' selling subscriptions to musicians and other audio creators. The service has grown since then, but it's important to keep the size of its royalties pool in mind before getting overexcited about that pool being divided in a new way.

Still, it's a very interesting move from SoundCloud, which can unilaterally launch a user-centric system in a way that Deezer, Spotify and other major streaming services cannot, because it has that community of artists uploading and making money directly from its service.

If you want to dive deeper into the user-centric topic, we've got plenty to read in our archives. Here's our primer on what the model is and how it works, for example, and here's our report on the latest study of user-centric's potential impact, which was conducted in France.

User-centric payouts have also been a key topic in the UK parliamentary inquiry into the economics of music streaming. SoundCloud's Raoul Chatterjee offered a cautious – curiously so, given that it was only a couple of weeks before the launch of fan-powered royalties – assessment of the model.

“It’s definitely an interesting area, and as an artist-first platform we’re always looking for ways to make payouts to artists fairer,” he said. “But the whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. It’s one potential path we’re exploring… and it would require industry-wide conversations and support to be impactful.”

The three major labels offered mixed views on user-centric's potential in their most recent submissions to the inquiry, but in a session featuring representatives from Spotify, Apple Music and Amazon Music, all three DSPs indicated a willingness to explore the model – but also stressed the need for wider industry backing.

Meanwhile, a recent episode of our Music Ally TV Show asked Deezer why it has struggled to get a user-centric pilot off the ground in France, and heard from the company about why it still thinks the model could be beneficial.

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Hindsight note: The inquiry ensured that attention was growing for the streaming economics debate in the mainstream media – aided by the fact that some of the industry’s most storied musicians were speaking out about it.

UK broadcaster Radio 4 turned its attention to the debate around songwriters' streaming royalties yesterday. You can listen to the segment in full here if you're in the UK. Among the moments being talked about: songwriter Fiona Bevan predicting that she'll receive "about £100" for a million streams of 'Unstoppable', a track off Kylie Minogue's latest album that she co-wrote.

"I know songwriters that are now driving Ubers or Amazon trucks," added Bevan. "During Covid, songwriters should have been able to turn to their streaming income, especially when the general public are stuck at home streaming songs more than ever before, for solace during these terrible times. But actually, what it really revealed was, when you take away all the live income, songwriters can't live off streaming royalties."

The segment also saw Sir Paul McCartney throw his weight behind calls for artists to get a bigger share of streaming revenues. "It's such a small percentage. And what they'll tell you is: 'Yeah, but if you have millions of that small percentage, you're alright!' After a while, if you're lucky, you get some success and it can be your art, rather than just having to pay the bills," he said. "The artists are the ones who make the music."

Abba co-founder (and Cisac president) Björn Ulvaeus was also interviewed for the broadcast, and reiterated his desire for user-centric payouts. "I want my subscriptions to go to the people I play. I think that's very natural," he said. "With user-centric, and it is technically possible, I'm actually certain of that, with that, you could be a niche artist with two thousand, three thousand loyal followers. And if they play you, you get all that subscription, which means that you actually could live off that."

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Hindsight note: More label backing for user-centric payouts, even if Deezer was still seemingly struggling to get its pilot up and running.

Cooking Vinyl boss Martin Goldschmidt is the latest industry figure to come out in support of user-centric payouts. In a guest column for Music Ally, he explained why. "The bottom line, for me, is that user-centric is obviously a big win for the consumer. Long term, this will be a big win for artists, labels, distributors and DSPs. And we will all make more money," wrote Goldschmidt, explaining how a presentation from Deezer won over his initial scepticism.

"If the pie remains the same, then how can that be? It would stop fake-stream scammers for a start. Even with a warehouse of devices streaming your own tracks – the so-called ‘Bulgarian scam’ – under user-centric you would only get 70% back from the money you were spending on subscriptions, killing your business. Which, let’s face it, is a great result in its own right. Whatever share of the pie that was going to those fake streams under the current pro-rata model would now go to legitimate artists and labels, growing the pie."

Talking of Deezer, that company welcomed SoundCloud's 'fan-powered royalties' launch yesterday. "It's great to see SoundCloud moving towards a user-centric model for artists who monetize directly on their platform. We think it's a step in the right direction and we're happy to welcome SoundCloud as a supporter of user-centric payment, a model that we've been spearheading since the beginning," said chief content and strategy officer Alexander Holland, possibly through gritted teeth.

"The pilot is a great first step, but only captures independent and self uploaded artists. Deezer stands ready to launch a full UCPS pilot and we look forward to having SoundCloud on our side in convincing the labels to do it."

COOKING VINYL BOSS BACKS INTRODUCTION OF USER-CENTRIC

PAYOUTS

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Hindsight note: Another Music Ally TV Show report: a counterpart to the one with Tom Gray in 2020, and perhaps the fullest explanation of the label body’s arguments as the inquiry evolved.

Throughout the current UK parliamentary inquiry into the economics of music streaming, and indeed, throughout the history of streaming itself, Music Ally has worked hard to cover the full range of views in the debates about how streaming pays off for musicians.

That’s why we’ve reported at length on the key sessions at the inquiry, taking in artists, major labels, independent labels, industry bodies and streaming services. It’s also why, back in May 2020, we invited Tom Gray, a key figure in the Broken Record campaign that would ultimately lead to the inquiry, onto our Music Ally TV Show to set out his views.

It’s also the reason why we have now extended a similar invitation to Geoff Taylor, chief executive of the BPI, Brit Awards and Mercury Prize. Like Gray, he gave evidence during the inquiry, speaking on behalf of the BPI’s major and independent label membership.

You can watch the full episode, but in keeping with our past coverage, we’ve also turned it into a written report, which follows. The interview kicked off with Taylor expressing broad support for the inquiry’s impact – “a positive opportunity for some of these much-debated issues to get aired, and to hear viewpoints from right across the industry” – but also expressing his fear that the recommendations of the Digital, Culture, Media and Sport (DCMS) committee which is holding it may include “policy interventions that won’t work, or could be counterintuitive or do more harm than good”.

Prime among those is equitable remuneration (ER), which has been one of the main policy aims of the Broken Record campaign. To recap: ER is the system already used in the UK for recorded music royalties from radio and TV usage, administered by collecting society PPL, which splits them 50/50 between artists and labels.

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Broken Record is not calling for ER to be applied to streaming in its entirety, but rather to its most radio-like, lean-back elements: for example when what’s playing is being decided by a recommendation algorithm rather than by the listener. Labels aren’t keen at all on this.

“The suggestion that equitable remuneration might be the solution really doesn’t work for us,” said Taylor. “We think it’s not going to work as a solution even for those artists who think it might, but that it also would have substantial, negative effects on the long-term competitiveness of the UK business. We are quite concerned about that.”

Taylor’s argument against ER partly reiterates some of the talking points from the inquiry. For example, whether even lean-back streams are as radio-like as has been suggested.

“When you’re on a streaming service, it’s not like listening to the radio, because you the consumer choose exactly what song you want to listen to, and when you want to listen to it, in the same way as you chose what CD you wanted to buy,” he said.

“Whereas on the radio, someone else is choosing those songs for you. I know people will often say well, there are parts of the service like Spotify Radio that should be considered as radio. That doesn’t really look at the whole service, because the difference – the fundamental difference – between Spotify Radio and traditional radio is that on Spotify Radio, at any point, you are in control.”

“You still have 60 million tracks you can choose from. You can skip at any time, you can rewind, you can pause. You can see the next tracks that are coming. You are in total control – interactive control – of that experience. You might choose to lean back, but you’re paying a subscription that gives you the option at any point to consume fully on demand.”

Will the committee agree? Music Ally’s sense is that the MPs are looking more favourably on the Broken Record campaign’s arguments for ER rather than on labels’ arguments against it. The risk for labels is that their opposition to the model is seen as pure self-interest, because it would reduce their share of streaming royalties. ‘Exclusive rights give you the power in a negotiation to say no’

That’s why Taylor wanted to talk about the wider potential impact of introducing ER for streaming royalties.

“We think it would have really serious adverse consequences for the whole music ecosystem, that would be very significant and very negative. Really what it would deliver is a win – a massive win, and a windfall – to the platforms, at the cost of everyone in the music community,” he said.

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“What you look at when you see equitable remuneration systems anywhere in the world, what they’re characterised by is it’s a different kind of right. You’ve got exclusive rights over here, and you’ve got equitable remuneration rights over there. And exclusive rights give you the power in a negotiation to say ‘No, I’m walking away from this deal and you can’t have my music’.”

“Once you’re in the world of an equitable remuneration right, you’ve lost that power. And the user – the platform – can use your music and you can’t say no, and all you can do is argue about the price. And that makes a fundamental difference to the deals that get done... Typically they deliver only a few percent of revenues as the royalty.”

Taylor pointed to the £85m of broadcast revenues paid to artists and labels collectively in the UK, compared to more than £700m a year generated by streaming.

“Why would we want to swap the direct licensing model that delivers [more than] seven times as much, why would we want to change that to an equitable remuneration model that everywhere we see it in the world delivers very small amounts of revenue?” he said.

“What it [ER] would do is massively reduce the pool of money available to the music industry. Yes, that would then be split through the collecting society 50/50, but we’re absolutely convinced that our artists would be worse off. And not only that. Labels would be left with a tiny fraction of the current amount that they have to invest into talent.”

This is a key argument for labels, which they clearly hope will hit home with the DCMS committee, but also with the British government – which after all will have a key role in implementing (or not) the committee’s recommendations.

Exports are a big part of the government as it scrabbles to make the UK’s exit from the European Union – Brexit – a success. The UK’s music industry already punches well above its weight globally, so it is no surprise to see that being brought in to the debate about ER.

“You’d have only a much smaller amount to sign new artists, a much smaller amount to market those artists. It would make the UK extremely uncompetitive if this [ER] were done in the UK and not elsewhere. So talent wouldn’t want to sign here,” claimed Taylor.

“It truly would be the death knell of the success of the British music industry, and we can’t afford to do that with a streaming model which every year is delivering growth for artists and for labels.” ‘The current system is delivering a lot of benefits’

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Clearly the pro-ER campaigners would not agree with the ‘death knell’ aspect. We put to Taylor the recent suggestion by Tom Gray in a guest column for MBW that ER could be applied as a “halfway house” system following the model used for music publishing, where royalties are split between performance and mechanical rights.

Gray suggested that such a hybrid system would ensure label revenues (and thus investment) do not take a drastic hit, while also addressing fears about losing negotiating leverage with DSPs. Couldn’t that kind of solution work for everyone?

“Trying to take something, an old concept and conceptual framework from the publishing world, of mechanical rights and performing rights and splitting them, to me it doesn’t make any sense trying to apply it to the streaming world on the side of artists and labels,” said Taylor.

“The current system is delivering a lot of benefits. We’re seeing that income is rising every year, substantially. We’ve seen seven, eight, ten percent growth over the last few years... Every year more artists benefiting. There are more artists earning a good income from streaming than has been the case for any format before it.”

The BPI is marshalling data in support of this argument, revealing that around 1,800 British artists are currently generating more than 10m streams a year each, compared to around 1,000 who were selling 10,000 records a year back in 2007.

“I don’t see that bringing in the equitable remuneration model, even in part, is part of the solution. We have a model which is not only ensuring that more and more artists are succeeding, but is generating record levels of investment into A&R. £250m a year being invested into new music by labels. £150m a year being invested into marketing,” he said.

“And the UK is doing really well globally. One in 10 streams around the world is coming from a British artist, so we’re seeing success, and we’re seeing that success growing at a macro level. But that doesn’t mean we don’t understand the concerns of some artists who feel they’re not benefiting from that success, because in relative terms, they may not be being streamed a large amount.”

‘There are 300 British artists getting over 100m streams a year’ The DCMS committee has heard from an impressive range of people during its

inquiry, but if there’s one criticism, it’s that its sessions only heard from artists who are unhappy with streaming, and not from those who feel more positively about it.

Positive testimonies wouldn’t (and shouldn’t) have cancelled out the criticism, but they would have shed more light on what kinds of artists are doing well, and why – which may be helpful for understanding how the model might be improved for artists who are struggling.

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One of those artists is Nadine Shah, whose testimony in the inquiry’s first day of sessions was referenced throughout the subsequent hearings. It cut to the heart of the debate: a critically acclaimed, awards-nominated artist who’s worried about surviving in the streaming era, let alone thriving.

It was brave and important testimony, and it lodged firmly in the minds of committee members. It also presents a quandary for labels and industry bodies like the BPI, who want to argue that Shah’s situation does not represent that of all artists, without seeming to attack her personally, or ignore her concerns.

Taylor stressed that he is a fan of Shah’s music, and was “cheering her on” when she was nominated for the Mercury Prize in 2018. Here’s how he responded to her testimony, and its impact on the inquiry, when we asked about it.

“There are lots of artists who have different profiles. Some artists have a really strong streaming fanbase, others will have a great live following and sell some physical but not be as popular on streaming. That is just the reality of the market,” he said.

“Streaming has also brought a lot more artists into play. If you look at the number of artists who get 100,000 streams a year, that’s about 300,000 artists now in the UK. If you compare that to the number of artists who used to sell 100 CDs a year, it was about one sixth as many. So we’ve seen a sixfold increase in the number of artists that are in the market.”

“So you do see some artists for whom streaming is only part of their music career. I guess Nadine, potentially, is one of those artists, with critical acclaim, a good live following, but actually I think her streaming numbers are something like one to two million, that kind of range, and the artists who are achieving lots of success are getting tens or hundreds of millions,” continued Taylor.

“There are 300 British artists getting over 100m streams a year. For an artist who is streaming 1-2m streams a year on streaming services, that’s like selling 1,500 CDs. At no stage of our industry would that really have earned you enough money on its own to be a living.” ‘There is loads of positive news out there about streaming’

Note the ‘on its own’ there. The BPI’s argument is that artists like Shah will sustain their careers through a combination of income streams: concerts and festivals as they return; merchandise; physical sales; TV and radio income; brand partnerships AND streaming, with the latter driving some of those other opportunities.

This is another key point of contention where the DCMS committee will have to decide which way to lean, since the Broken Record campaign has argued that the

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financial struggles of Nadine Shah and artists like her cannot simply be put down to Covid-19 and the live music shutdown.

Taylor reiterated the BPI’s viewpoint. “I think we feel that perhaps the inquiry got off to a start from a perspective which wasn’t really representative of the market as it now is, with hundreds or thousands of artists getting tens or hundreds of millions of streams, there is loads of positive news out there about streaming,” he said.

“But of course, there will be some artists for whom streaming is a much smaller component of what they do, and who may feel that it’s not working for them. That’s always been the case: that there are artists who aren’t necessarily at the top of the market.”

“If you’re streaming one to two million streams a year, you’re about six thousandth on the list of most-streamed artists in the UK. I think it’s perhaps unrealistic to expect that streaming on its own is going to deliver a living at that level of popularity.”

That does still leave a question about how we ensure that talented artists don’t fall by the wayside simply because their streaming numbers aren’t in the tens or hundreds of millions.

The BPI has set out its desired policy measures in its evidence to the inquiry, from reforming the safe harbour system that it believes gives YouTube an unfair advantage over non-UGC streaming services; cracking down even harder on piracy sites; investing in music exports; and prioritising the safe reopening of venues, and a reinsurance scheme to help promoters go ahead with concerts and festivals this year.

‘Our view would be: we should look at it [user-centric] in more detail’ User-centric payouts, where the royalties from each streaming subscriber are

divided solely between the music they listen to, are not on that list, although they have been mooted as a positive step forward by campaigners. In the final DSPs session, representatives from Spotify, Apple Music and Amazon Music also indicated a willingness to explore the idea.

During this interview, Taylor indicated that the BPI is similarly open to user-centric.

“It’s very interesting. Certainly to some people intuitively it just feels fairer. I’ve got some questions about it. We don’t really understand properly yet what its effects would be,” he said. For example, he noted that it might have a positive effect for genres like classical and folk, but a less positive one for genres like grime and hip-hop.

“That’s not necessarily a good thing: we’d have to weigh all those different impacts, which I don’t think we properly understand,” he said.

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“Also if you’re a record label, you don’t even know between the different artists on your roster who it’s going to help, who it’s going to hurt, and you don’t know how much it’s going to help those who may benefit: whether it’s going to be just a few pounds a year or something significant.”

Taylor also raised the potential administration costs of user-centric, but added that this should not stop exploration of the model.

“Our view would be: we should look at it in more detail. I think BPI would be absolutely open to getting involved in doing that,” he said. “It would have some kind of redistributive effects. If that can be positive, then great. I think we probably just don’t quite understand it enough. What we haven’t been able to understand is the costs of putting it in place versus the benefits.”

“I think there is some complexity to putting in place either the systems to do it, or frankly a detailed study. You’d have to have quite a lot of partners willing to join in. But I think we’d absolutely be open minded to it. I think a study would be the right next move, so that we can understand it better.” ‘It’s never been more competitive than it is right now’

Before the interview closed, we raised another recurring theme of the inquiry: label deals. The contracts signed between artists and labels, both in the past and now.

It’s actually two themes really. The inquiry has seen campaigners criticise deals signed in the pre-streaming era that, because those artists have not recouped their advances – and recoupment is an infamously wiggly can of worms in the music industry – mean they are not earning from streaming now.

Meanwhile, labels and the BPI have focused on the positive aspects of the modern dealmaking environment: that artists have more options to get their music out (major label, independent label or distributor) AND more options when going the label route (standard deals, rev-shares, label services agreements etc).

Taylor reiterated those arguments. “It’s never been more competitive than it is right now, which is good news for artists and managers. You have the full choice. If you want a big advance and lots of investment, you can do a traditional-style deal with those elements to it, and maybe get a royalty rate that’s twentysomething percent,” he said.

“Or you can do a JV or profit-share deal, 50/50... or you can do a label services deal and maybe keep 70% of the money, or you can do a distribution deal and keep 80% of the money, or you can be your own record label, self-release, and keep 100% of the money. And managers are aware of that, and they shop round different record labels and look at the different options.”

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“I don’t really think anyone should complain, really, about the operation of the current streaming market [in terms of competitiveness] because artists have every choice. If they want to distribute themselves and keep 100% of the money, and employ a team to market themselves and pay for their own recordings etc, that option’s there.

AJ Tracey’s done it, other artists are doing it. I think that competition is a good thing for the business.”

When it comes to bad legacy deals, the BPI’s argument is that sorting them out should be a matter for individual labels rather than for politicians

“My view on that is they are, and should be, individually renegotiated. Managers generally are pretty adept at renegotiating whenever they can. That probably is the right way of dealing with these things, because every deal is different,” he said.

In the indies session at the inquiry, Beggars Group general counsel Rupert Skellett explained that the company wipes unrecouped balances for artists after 15 years, and operates a minimum digital royalty rate of 25%. He said that when founder Martin Mills had tried to persuade major labels to follow suit, they had declined.

“The main point is that if an artist is unrecouped, that essentially means that at that point in time, they haven’t sold or been consumed enough that they would have earned that amount of money under their contract had they not been paid in advance,” was Taylor’s response to that.

“If you take an approach to write off unrecouped balances at a certain arbitrary point, you are saying that there will be more cases in which a project will be lossmaking for the label. It will be harder for them to recoup their investment, because you’ll have written off the unrecouped balance, and at that point they’ll be sharing royalties with the artist, and it will take them longer to get back to breakeven.”

However, he added that he welcomes labels looking at this issue individually “and seeing what they can do”, noting that it could even be a competitive advantage if it leads to more artists wanting to sign with them as a result.

“Also, what I am hearing all the time from labels is that more and more artists are recouping, that they never thought would recoup, because of streaming. All these catalogues that were pretty dormant are suddenly enjoying some success from streaming, and artists are starting to recoup. So it’s also a problem that starts taking care of itself, in a sense.”

‘I regret that some of the debate has seemed to get so personalised’ The industry is now awaiting the committee’s report and its recommendations,

to see which way it will lean on these various arguments and policy demands.

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“I do hope that the committee will absorb the points we’ve been making about all the positive growth there is in the streaming business, and value that growth, and value the trajectory we’re on, and see that that trajectory will deliver for more and more artists over time, if we can keep it up,” said Taylor.

“Our hope is that they’re thoughtful – I’m sure they will be – in their policy recommendations, and not do things which will make the UK less competitive, or undermine investment by labels, which is really the engine of the UK music market’s success.”

“Labels partnering with artists is where it’s at, and we need to keep that environment dynamic, competitive in the UK. We shouldn’t over-regulate it or ossify it or make it too centralised and bureaucratic. What you want is lots and lots of competition between lots of different labels to sign the biggest talent, lots of competition between labels to sign the best deals with DSPs, and get one over on each other in those deals. Because more competition will ultimately lead to more investment, more choice for consumers, and more options for artists.”

Our final question was about the tone of the debate about streaming economics, particularly when it spills over into social media. We’ve seen some vicious spats on Twitter during the inquiry, although admittedly that’s a platform where vicious spats seem increasingly to be a feature rather than a bug.

As the dust settles from the inquiry, is there room for calmer, constructive conversations and even compromise? Sitting down together in a room may be difficult at the moment, but when that’s safer, is there scope for the various entities involved in the debate – from major labels and their representative body through to the artist rights campaigners – to come together and chart a positive path forward?

“I think some calm would be a very good thing. Personally I regret that some of the debate has seemed to get so personalised. I think there has been a lot of demonisation. I know a lot of people who work in record labels, and they are all people who are passionate in their love of music, and only want artists to succeed,” said Taylor.

“When you hear representatives of lobbying groups suggesting that the only people who make money from streaming are people at record companies, things like that. Firstly, it’s massively untrue. Secondly, it’s really unhelpful, because it’s really misleading.”

“As we’ve said during this interview, there are lots of artists who are doing well from streaming. That doesn’t mean they all are, and we recognise that, and we

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recognise that streaming is a challenging environment for lots of artists, and we all want it to generate more value.”

“But more constructive conversations, as you’re suggesting, in a calmer way, would be something that I would absolutely welcome. I think unfortunately certain individuals have seen this as an opportunity to really go to town, and to attack hard, and I think they believe that’s the best way to effect change,” he continued.

“I hope that if change comes, that it will be done in a way of partnership, and constructively, and by the industry together. And yeah, dialogue would be the first step towards that. Certainly the BPI is always open to such conversations.”

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Hindsight note: The streaming campaign was continuing in the US, but still with its focus on Spotify, rather than on rightsholders.

Last October, the US-based Union of Musicians and Allied Workers (UMAW) launched its 'Justice at Spotify' campaign with a series of demands for the streaming service. They included royalties of at least one cent per stream; a switch to user-centric payouts; and more transparency around its finances.

That campaign continues: yesterday UMAW organised demonstrations outside 10 of Spotify's offices in the US, as well as others across the world. "The company has tripled in value during the pandemic, while failing to increase its payment rates to artists by even a fraction of a penny," organiser Mary Regalado told Pitchfork.

"Musicians all over the world are unemployed right now while the tech giants dominating the industry take in billions. Music work is labour, and we are asking to be paid fairly for that labour."

UMAW TOOK ITS #JUSTICEATSPOTIFY PROTEST TO THE DSP'S OFFICES

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Hindsight note: Spotify may not have been on the defensive in the streaming inquiry at this point, but UMAW’s campaign and other coverage had made artist royalties a sensitive issue for the company again. Cue this move, which as ever when Spotify publishes data relating to artist earnings, could be read between the lines as redirecting some of the scrutiny towards rightsholders.

Did you know that the top 500 artists on Spotify last year generated around $1.85bn in royalties from the streaming service - 37% of its overall payouts?

Or did you know that the 286,000 DIY artists releasing through distributors generated $1.17bn of Spotify royalties last year – around 23.5% of the total?

You do now. These are just a couple of the calculations that people (alright, digital music nerds like us) are going to be doing today, following the launch of Spotify's new website Loud & Clear.

The company isn't explicitly describing it as a defence of music streaming, but given the recent upsurge in debate about musicians and streaming royalties – not to mention the UK's parliamentary inquiry focusing on the streaming economy – the timing is no accident.

"We absolutely think that artists deserve to have more clarity on how the music streaming economy is working," is how Charlie Hellman, VP and head of marketplace at Spotify, explained it to Music Ally in an interview ahead of the site's launch today.

"Payouts and artist earnings and how its economy works is literally an every-day discussion inside the building, but in many ways I think we've been too quiet on the topic externally," he continued.

"It is complicated stuff, and that has created an environment where there are lots of conversations happening... This is another big step for us in increasing transparency."

The numbers at the top of this article were crunched by looking at one of the new website's sections, where it offers some data for artists in various categories:

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established, DIY, market movers, chart toppers, specialist, heritage, breakthrough, and songwriters and producers.

That's where it says that the 500 top artists on Spotify last year (the 'chart toppers') generated average royalties of $3.7m each. Cross reference those stats with the company's $5bn total payouts in 2020, and that's where the $1.85bn / 37% figures come from.

(It's important to note that those artists did not 'earn' an average of $3.7m from Spotify each. That figure represents payouts to recording AND publishing rightsholders, with musicians' share depending on their deals with those rightsholders.)

Besides the DIY artists data (286,000 with more than 1,000 listeners averaging $4,100 in royalties last year) there are figures for 6,900 'breakthrough artists' who had less than 1m streams before 2019, but are now in the top 50,000 Spotify artists by streams.

Those artists averaged $31k in payouts to rightsholders in 2020 – around $213.9m in total. Meanwhile, 2,600 'heritage' artists (those with more than 500,000 monthly listeners and 80% of their streams coming from tracks that are at least five years old) averaged $407k of royalties in 2020 – around $1.06bn, or 21.2% of Spotify's overall payouts.

The songwriters and producers category is slightly different: Spotify isn't sharing its own payouts data, but rather estimates of total global revenues for publishing rightsholders from ALL streaming services, calculated for an upcoming report by its former chief economist Will Page.

He estimates that publishing streaming revenues grew from $1.6bn in 2017 to $2.5bn in 2018 and then $3.3bn in 2019.

"Our feeling is let's put it out there. Let's get the information of the global streaming economy shared, break down the system as best we can, and use this as a foundation for more conversation on the topic," is how Hellman described Spotify's desire to publish this and other data on its new site.

"One of the big things we see is that clearly there are more artists than ever finding success in the music industry. The scale at which a number of artists are able to achieve significant success on the platform is really high, and it's growing rapidly."

Spotify announced some of these numbers during its recent 'Stream On' event, and the new website fleshes them out with more data that it hopes supports its case.

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According to the site, 870 artists' catalogues generated more than $1m in annual royalties last year, up from 450 in 2017. Meanwhile, the number of artists generating more than $500k in royalties has grown from 950 to 1,820 over that time.

The data goes down as far as $1k in annual royalties, a bar met by 184,500 artists in 2020, up from 89,700 in 2017. Again, these are royalties paid to rightsholders, not directly to artists.

"Probably the most exciting thing to me is the growth rate," said Hellman. The number of artists earning $1m, $100k, $10k... from 2017 to 2020 all of those numbers are growing by more than 80%. That paints a really encouraging picture of where the industry is headed."

The Loud & Clear site also has a tool for artists to enter their all-time stream count or their number of monthly listeners to see where they rank overall on Spotify. For example, an artist with a million monthly listeners "would be in the top 7,000 artists on Spotify globally".

There is also a Frequently Asked Questions section responding directly to some of the key talking points in the streaming economy debates, including Spotify's official line on whether it would consider switching to a 'user-centric' system of royalty calculations.

"The research we’ve seen to date suggests that a shift to user-centric payments would not benefit artists as much as many may have originally hoped," it says, citing the recent study by the National Music Centre in France.

However: "We are willing to make the switch to a user-centric model if that’s what artists, songwriters, and rights holders want to do. However, Spotify cannot make this decision on its own – it requires broad industry alignment to implement this change."

The longest answer in the FAQ section is to a question about why Spotify's per-stream rate is so much lower than that of many of its rivals. As far as we're aware, it's the first time the company has addressed this question head on and publicly.

Streaming services don't pay royalties out on a 'per-stream' basis – their royalties pools are divided up based on each track's share of total streams (as the new website reminds visitors).

However, artists and labels can calculate an average per-stream rate by looking at their royalty statements and dividing their payouts by their number of streams, and artist rights site The Trichordist publishes an annual, widely-shared table comparing the different streaming services, using the data of an anonymous mid-sized independent label.

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Its 2019-2020 'streaming price bible' revealed that the label's average per-stream rate from Spotify was $0.00348, compared to $0.00675 for Apple Music and $0.01123 from Amazon Music Unlimited, so questions are understandable.

Spotify's answer claims that "the average subscriber to Spotify listens to more music per month than on other services" which drives down the average payout per stream, while stressing that this also means "more listeners discovering more artists, more opportunities to deepen engagement with listeners, and more chances to convert them into fans who buy tickets and merch".

"Spotify has invested more than any other services and been more successful than any other service in driving that engagement," said Hellman. "They're spending time with music! Driving that up is a good thing. Perversely, if we wanted to improve that ratio [the per-stream rate] the easiest thing we could do is try to get people to stream less."

That's not on the cards. However, Spotify's transparency only goes so far in this case: it has not published the data used to make its claim that its subscribers are more engaged than those on rival services.

Spotify's answer to the per-stream rate question also explains that its expansion into countries where subscription prices are lower, and its ad-supported tier, are also factors in its lower per-stream rate, while also arguing that both have other positive impacts.

Hellman put the launch of Loud & Clear into the wider industry perspective. "Spotify has paid $23bn in royalties to date, which is really an astounding turnaround from when I joined Spotify at the beginning of 2011," he said.

"When the industry was at its lowest point in 2014, we had a total industry of $14.3bn [for recorded music] and now flash forward to today: when we see the 2020 numbers come out, it's likely that streaming is going to be bigger than the entire industry was in 2014," he continued.

"We're seeing our part: we paid $5bn out to rightsholders in 2020 alone, but Spotify is just one piece of that puzzle. Its other key role is being a source of discovery to drive fanbases that propel all of the other different revenue streams for artists."

"We also totally embrace that we're nowhere near done. We have an unapologetically ambitious mission as a company. We're more committed than ever to continue growing the pie."

Hellman also addressed the issue of artists who are struggling to survive on their streaming royalties by talking about the pros and cons of an ever-greater number of musicians competing for listeners' ears on streaming services.

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"Our total payouts have grown from $3.3bn a year to $5bn a year from 2017 to 2020. That's 50% growth in total payouts, but the number of artists achieving these different levels of earning thresholds [outlined on the new site] has grown by 80%. The number of artists participating in success is growing much faster than the total pie," he said.

"We're finding more and more shelf space for more types of artists to gain an audience. Think of the period that most people think of the heyday for the industry: at that time how many artists could get in the record store, how many artists were selling more than 1,000 copies [records], how many could get on terrestrial radio?"

"Now you see 13,400 artists generating more than $50k from Spotify alone... No doubt that it's at a bigger scale now than it was before. But if the great part of removing those barriers is so many more artists are able to succeed, that also means there is going to be exponential growth in the artists who don't get over the bump and achieve their goals," he continued.

"Millions of artists won't make it all the way to their goals as they compete with the entire history of recorded music and try to get attention. But our goal is to create more and more shelf space."

A postscript to all this: Spotify, as usual, is careful not to explicitly criticise music rightsholders in its new site. However, CEO Daniel Ek’s tweets announcing Loud & Clear this afternoon included… well, let’s just say it’s a pertinent question, rather than a criticism.

“Since its 2014 low, the music industry has grown by 44%, driven primarily by streaming revenues which increased 500% over this same period. In 2020 alone, Spotify paid $5B+ and makes up about 20% of global recorded music industry revenue, more than any other streaming service,” wrote Ek.

“That number is massive on its own, and it doesn’t include the other music streaming services, or other sources of music revenue. Still, artists ask me all the time why they’re not making more money. If the music industry is generating so much, then where the hell is it going?”

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Hindsight note: IFPI numbers again, and growth despite the Covid-19 pandemic. But also questions about how this growth was being shared with artists.

Global recorded music revenues grew by 7.4% to $21.6bn in 2020, according to industry body the IFPI, which has published its annual Global Music Report today.

That’s a deceleration compared to 2019, when the market grew by 8.2%, but with 2020 being the year of Covid-19, labels will see the latest figures as a success nonetheless. It’s the sixth consecutive year of growth, and the highest annual total since 2002, when global revenues were $22.1bn.

Streaming was the driver for last year’s growth. Streaming revenues for labels grew by 19.9% to $13.4bn, accounting for 62.1% of the total. That was enough to outweigh a 4.7% decline in physical sales, a 15.7% fall in download revenues and (“largely as a result” of Covid-19) a 10.1% dip in performance rights. Production delays in the TV, film and games industries also hit sync revenues, which were down 0.4% compared to a 4.4% rise in 2019.

The IFPI says that there were 443 million users of paid streaming subscriptions at the end of 2020. That’s up from 341 million at the end of 2019, which means 29.9% year-on-year growth. This continues a trend for the growth in the number of streaming subscribers (29.9%) to outstrip the growth in streaming revenues ($19.9%). However, the gap between the two in percentage points terms has narrowed: from 10.6 in 2019 to 10 in 2020.

In terms of the breakdown between subscription and ad-supported revenues, the summary version of the GMR report provided to journalists this morning included a graph showing that ad-supported streams – audio and video – accounted for 16.2% of total revenues, while subscription audio streams generated 46%.

That’s around $9.94bn of streaming subscription revenues and $3.5bn of ad-supported revenues by our calculations, compared to $8.5bn and $2.85bn respectively in 2019. That means ad-supported streaming revenues are actually

IFPI REPORT REVEALS 7.4% GROWTH IN GLOBAL RECORDED MUSIC REVENUES

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growing a little faster in percentage terms, even if subscriptions added more dollars in 2020.

Other points from the summary report included another tough year for the world’s second biggest music market, Japan, which saw its recorded music revenues fall by 2.1% in 2020, after a 0.9% decline in 2019.

While Latin America was the IFPI’s fastest growing region overall, with 15.9% growth, Asia would have topped this if it weren’t for Japan’s struggles. Factoring that market out, Asia saw 29.9% growth last year, including a whopping 44.8% spike in South Korea, riding high on K-Pop’s global spread. North America saw revenues grow by 7.4%, Europe by 3.5%, and Australasia by 3.3%. The IFPI says that revenues in Africa and the Middle East grew by 8.4%.

Elsewhere in the summary report it’s business as usual, with the IFPI setting out its stall for record labels as a force for good in the industry: investing in artists and helping them to build audiences across the world. New this year is a section on social justice and Black Lives Matter, focusing on interviews with the equity, diversity and inclusion execs at the three major labels.

Meanwhile, the section on ‘creating a fair environment for music’ is largely the same as in the 2019 report, outlining the IFPI’s four key lobbying goals. However, the third of them has been spruced up. In last year’s report it was this: “All parties should be free to agree the terms of their relationship. In a fair and functioning marketplace, parties should be free to agree the terms of their relationship. Unfair restrictions, whether over rights or contracts, distort and limit the development of music markets and result in recorded music being devalued.”

And now? “Respect freedom of contract. In a fair and functioning marketplace, parties should be free to agree the terms of their licensing arrangements. Interference, however well intentioned, will distort the market, disincentivise investment and undermine the growth of the entire sector. Binding the industry’s hands through static regulation – which can never evolve as fast as technology – limits the ability of record labels, artists, and platforms to find the most effective and innovative solutions to respond to an evolving marketplace.”

It’s hard not to see the rewrite as a response, at least in part, to the UK parliamentary inquiry into the economics of music streaming, including campaigners’ call for radio-style ‘equitable remuneration’ to be introduce for some aspects of streaming – and the arguments of labels and their representative body the BPI that this would undermine their negotiations with DSPs.

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Ahead of the report’s publication this afternoon, the IFPI held a Zoom call for key label executives and journalists, and the topic of artists’ rights campaigns was the first to be raised in the Q&A section.

IFPI boss Frances Moore offered a defence that has also been made during the UK inquiry. “Artists have more choice than they’ve ever had. They have enormous choice: whether to be with a label, whether to be a do-it-yourself artist. And the competition regarding artists is enormous as these companies [labels and distributors] vie for artists,” she said.

Intriguingly, Moore cited an IFPI study which she said showed that “in actual fact, artists’ revenues are higher than the revenues coming back to the industry after costs etc”. Music Ally followed up after the event to ask if this research is public, but the IFPI told us that it is not.

“There is a misconception that artists are not doing well,” added Moore during the event, before pointing to the more than seven million artists on Spotify, and more than 60,000 new tracks every day. “There is a very big competition for attention, and some of those artists will do very well, and other of those artists will perhaps have an opportunity that they wouldn’t otherwise have had in other environments.”

Earlier, Moore had stressed the positive elements to the 2020 figures. “You will sense the optimism throughout the report. Despite the challenging circumstances that record companies have faced [with Covid-19] they have continued to drive new and exciting experiences for fans, whether it’s gaming, exercising or beyond.”

One theme of the panel was this idea of acceleration. “Many of the trends that you’re highlighting were trends that were occurring pre-pandemic. The pandemic and the situation that consumers found themselves in just accelerated some of those trends,” said Dennis Kooker, president, global digital business and US sales at Sony Music Entertainment. He talked up the area of ‘immersive entertainment’ – “a convergence of audio, video and gaming” that for Sony has so far encompassed Travis Scott’s Fortnite performances, Lil Nas X’s Roblox concert and Madison Beer’s avatar gig on TikTok among other experiences.

Jess Keeley-Carter, senior vice president of global marketing at Warner Music Group, talked about the neeed for labels to be “totally immersed” in new technology trends: “not just looking at data and reading about trends, but living and breathing in those platforms”.

She added: “Covid has supercharged adoption and also supercharged the speeds at which trends are spiking and then decaying. The time in which we have to jump on those trends is shortening, so we have to be fully embedded in those platforms… we’re

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not just chasing shiny headlines, chasing the new spangly thing, but we’re thinking how we’re tying up the right artists with the right opportunities”.

“The way that trends spike and then decay [faster], that’s because when you’re locked in, things get boring quickly, and that goes across everything,” she added. Later in the Q&A, Music Ally asked Keeley-Carter to expand on this. “It’s important to be properly, authentically connected into those platforms. it’s not enough to just sit and look at the data and look at the reports. We need to have people in our marketing teams who are living and breathing it. People who are gamers who spend all their spare time playing Fortnite, for example,” she said.

“It’s the way you identify things [opportunities for artists] before you have to wait 24 hours, or however long it is, for the data to start feeding through the systems.”

Meanwhile, the panel event also saw Sipho Diamini, CEO of Universal Music South Africa and Sub-Saharan Africa, talk of the potential Africa has for future streaming growth.

“While the African market is today proportionally small, we believe it has significant potential, especially given recent developments in the technology and the commercial environments,” he said. Smartphones and cheaper mobile data packages are key to this, as are Africa’s youthful populations.

Asia was also a focus for the briefing, with Shridhar Subramaniam, president, strategy and market development, Asia and the Middle East at Sony Music breaking the territory into three groups of countries.

First: China and South Korea, the most evolved and fastest growing markets. Second, India and some of the South East Asian countries that are growing well. And third, the countries “yet to fundamentally come online” that are nevertheless seen as ripe with potential as, like Africa, smartphones and mobile data proliferate.

“BTS is this shining beacon of what the possibilities from this region could be. What K-Pop has done over the last decade is purely just an indicator of what can possibly happen over time [for other parts of Asia],” he said.

Simon Robson, president, international, recorded music at Warner Music Group agreed. “Asia is home to almost 60% of the world’s population… so the potential in the streaming world is massive,” he said. “Ally that with long-term economic growth, and that means Asia is becoming increasingly influential for the music industry.”

Robson also suggested that Asia is driving various areas of innovation for the music business. “Livestreaming, verch [virtual merchandise], virtual gifting and tipping have been long established in Asia, and the China streaming services have

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great social media functionality, which just hasn’t been possible with the global DSPs to date,” he said.

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Hindsight note: Broken Record seemed to have won over key members of the DCMS committee, but ministers might be a different story. However, their comments in this hearing were mainly cautious and non-committal, with the odd burst of word soup.

Yesterday saw the final hearing in the UK’s parliamentary inquiry into the economics of music streaming, but rather than music industry or tech executives being questioned, it was ministers and civil servants.

Caroline Dinenage MP, minister for digital and culture at the Department for Digital, Culture, Media and Sport (DCMS) and Amanda Solloway MP, minister for science, research and innovation at the Department for Business, Energy and Industrial Strategy (BEIS) were the ministers, and they were accompanied by Robert Specterman-Green, director of media and creative industries at the DCMS, and Tim Moss, chief executive of the Intellectual Property Office (IPO).

Here’s Music Ally’s topline takeaway from the session, and the inquiry more widely. The committee of MPs conducting the inquiry seem to be leaning towards the Broken Record campaign’s view of streaming: that most artists are struggling; that major labels are market-dominating villains; and that ‘equitable remuneration’ (and perhaps user-centric payouts) could be a good thing. Oh, and that YouTube is a wrong ‘un, and safe harbour needs to be reformed.

That’s our sense, anyway, with the obligatory caveat that this is a committee of MPs drawn from different parties who don’t necessarily all share the same views.

How about the ministers based on yesterday’s hearing? It’s not the same story. If anything, they seemed much closer to the views evinced by the major labels

and their representative body the BPI during the inquiry: that the market is competitive with more options for artists than ever before; that the biggest problem for artists is Covid-19’s live music shutdown rather than the streaming economy; and that current copyright definitions (the ‘sale or rental’ question that’s come up lots during the inquiry) are fit for purpose.

MINISTERS GIVE THEIR VIEWS AT THE UK’S MUSIC STREAMING INQUIRY

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However, on the one thing Broken Record and major labels agree on – the YouTube / safe harbour issue – the ministers seemed distinctly lukewarm, as they wait to see how EU members implement its new copyright directive before deciding whether to work on similar legislation for the newly-Brexited UK.

In the early exchanges, Dinenage and Solloway’s views chimed exactly with those of the BPI: that streaming has helped reverse the recorded music industry’s decline, and that Covid-19 has highlighted “more than anything how much modern artists rely upon live performances now” for their income – in Dinenage’s words. “It would occur to me that the loss we’re seeing in the music industry is from the live performances,” added Solloway, who later responded to a question about whether streaming provides an income for artists by saying “Well, I actually think it provides an opportunity of having an income”.

On competition, the ministers also batted back suggestions that the three global majors play an unhealthily dominant role in the industry, and thus the streaming ecosystem – again, matching the views of those labels and the BPI.

“There are many, many more routes to market for performers, for artists, than there ever used to be,” said Dinenage. “We know some really successful artists that are effectively their own record company.” She cited AJ Tracey, who was also mentioned by BPI boss Geoff Taylor in his recent Music Ally interview.

Whenever the idea of unfair competition or market domination came up, the ministers’ instinct was to reference the UK’s competition regulator the Competition and Markets Authority (CMA), with Dinenage stressing several times that the CMA is “operationally independent” – i.e. it’s up to that body whether it investigates major labels or streaming services, not up to politicians.

They were also keen not to pre-empt the inquiry’s own report on some of the potential changes to be made. For example, here’s Solloway’s response to a direct question about whether ‘equitable remuneration’ would be a good idea.

“I think it’s absolutely worthwhile looking at in this inquiry, and that’s why I welcome it so much. I think when you think about the way broadcasting works, and I understand that premise... so there’s something to be said about that, but I think there is also a discussion to be had, which is absolutely the discussion that you’re talking about, in terms of remuneration and are there other ways of looking at this?”

Strong Yes, Minister energy at this point. The committee probed on the question of streaming as a sale or a rental, with

Solloway expressing the view that “if we’re talking purely on Spotify, it is not buying: if I were buying a record I would retain it, so that is where the buying part is”.

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However, IPO boss Moss expressed the same view as the labels and the BPI: that the “making available” right that applies to streaming remains fit for purpose, suggesting that “it was actually introduced to deal with things exactly like streaming... it’s an exclusive right for the rightsholder, and it is designed for the streaming environment”.

(A minor controversy here, since the relevant right was created a few years before music streaming emerged, so was actually designed for music downloads. Moss was later challenged on this, and accepted the point.)

This is all part of the debate about whether some streams – the most radio-like ones served up by playlists and algorithms – should be licensed more like radio with ER. Interestingly, Dinenage’s views were closer to the Broken Record campaign’s on that point.

“If you’re listening to playlists that are being suggested to you by algorithms, then there isn’t a great deal of difference from it being broadcast on a radio,” she said. That will be seized upon by pro-ER campaigners, although Specterman-Green quickly brought the conversation back to the ‘making available’ right, and his view that it remains fit for purpose in streaming. There were more ministerial parries to follow. On whether labels’ share of the streaming pie is too large at the expense of publishers, Dinenage said “I don’t really think I’m qualified to be able to make that judgement... the music industry themselves are very divided on this question” and suggested that this was a matter for “the music industry sector to work more collaboratively together to come to a conclusion that suits everybody a little bit better”.

However, she was tempted into a further thought on ER, in response to a question about session musicians getting royalties from broadcasts but not from streams. “I wouldn’t want to comment myself on what is and isn’t fair,” she said, before commenting: “But it does seem there is a disparity, as you commented, between what happens on the radio and what happens on streaming”.

This session’s ‘chair aggro’ moment (see also: UMGs David Joseph trying not to talk about Spotify deal terms; YouTube’s Katherine Oyama trying to explain why there isn’t a single ‘per-stream’ rate) came when committee member Kevin Brennan MP grilled Moss about the IPO’s in-progress survey of musicians about their earnings.

There was bags of subtext here. Brennan asked whether the various music industry entities are contributing “hard data” to the study as they were expected to do. In other words: are labels and streaming services cooperating or not?

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Moss didn’t want to answer. “The research is ongoing. We look forward to the results coming out in the summer,” he said. When pressed on whether the labels and DSPs have contributed data: “I do not have the detail around that because I’m not directly involved in that piece of research. It’s independent research, of which we are party to it, and I wouldn’t look at the details on that until the research is concluded.”

After more back and forth, we got the chair aggro moment, as the committee’s leader Julian Knight MP let rip.

“You’ve come in front of a parliamentary subcommittee to do with music streaming. What did you think we were going to ask you about? Did you think it was going to be watersports? This is something which is absolutely germane to your role, and you’ve come in front of us, frankly, and offered absolutely no details.” Oof. And while Moss joined Joseph and Oyama in Knight’s hall of infamy, this exchange has brought the question out into the open of the IPO study, which labels and DSPs are cooperating with it, and (if not) why that is the case.

What else? There was more manna for the Broken Record campaign in Dinenage’s assertion that while the government doesn’t want to stick its nose into private deals between labels and DSPs: “We 100% recognise that artists and creators need to be fairly remunerated for the work that they do, and that’s never been more important than now, given the just extraordinary times that we’re living through.”

That doesn’t address the thorny question of what IS fair remuneration for musicians of course. But in the lobbying to come once the DCMS committee publishes its report and recommendations, the statement above by Dinenage will surely be key to the Broken Record arguments.

Onto safe harbour, though, which is where yesterday’s session made uneasy viewing for the artist campaigners and music rightsholders alike. It’s now clear that the UK government is going to watch how the EU states implement the new European Copyright Directive before embarking on any of its own copyright reform.

“We’ve got the opportunity to observe and monitor how that is done before we take any decisions about the future of our own copyright regime,” said Specterman-Green.

“There were mixed views on the copyright directive, because it was supported by some sections of the music industry, but in actual fact it was opposed by others,” said Dinenage. That remark won’t go down well within the industry at all: the lobbying for the directive was actually a notable point of unity for its various factions.

Solloway agreed with Dinenage, noting that the government will “have a look at what is happening in the EU and see where we find our situation, rather than making

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a decision at haste: we believe this will strengthen what we’re able to do”. Moss, meanwhile, claimed that “the directive was a real compromise around a number of issues, and there is a real opportunity now to look at what is really appropriate for the UK”.

Back to square one for the British music industry’s campaign to reform safe harbour and give (as rightsholders see it) YouTube far less leverage at the negotiating table? Perhaps. Later, Solloway and Dinenage both said they didn’t have enough data to draw conclusions on whether YouTube’s safe harbour harms the music industry.

However, Dinenage did know that “YouTube have invested very heavily” in copyright-detecting technology, and when asked about whether safe harbour gives YouTube an unfair advantage in licensing negotiations replied: “I don’t know. You’d have to ask YouTube what their attitude to this is.”

She did point out that the CMA is establishing a new digital markets unit to look at competition issues within the tech world, reminding the committee again that the regulator is “independently operational from government... whether they would have the opportunity to look at YouTube would obviously be a matter for them”.

(In another possibly significant moment, Dinenage was asked whether the CMA could investigate the major labels on competition issues. “I’m very happy for the CMA to have a look at this,” she said. Although in truth this was less an encouragement, and more just another way of expressing a hands-off attitude to the regulator’s decisions about what it does or does not investigate.)

On the core question of the inquiry: whether artists are sufficiently remunerated through streaming royalties, Dinenage was closer to the labels’ view: that Covid-19 and the live shutdown has had a big impact; that streaming successfully defeated piracy; and that the explosion in the amount of artists and music has inevitable winners and losers.

“Streaming has enabled more artists to become successful, but at the same time more unsuccessful,” she said. “We know that so many more unknown artists are able to get their music out there than they were under radio, for example, where they were relying on geniuses like John Peel to break into the music industry,” she said.

“Spotify say that they get 60,000 new tracks a day uploaded, so if you’re a new artist trying to break into the market, there are some real opportunities there. But equally, there are some established artists for whom actually their genre does not particularly lend itself to streaming as a way of digesting their music. It’s not so successful, and also the more artists that there are, they’re sharing a smaller piece of cake each.”

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She came back to that point, suggesting that while genres like R&B, rap and bedroom pop work well on streaming, the likes of “folk, more indie music, the type of music on 6Music, obviously classical music” do not “and therefore it’s much, much harder for those artists”.

So, where does this final session of the inquiry leave us? It’s vital to understand the process from now on. The committee will now write its report and make its recommendations, and we would not be surprised to see it back the idea of equitable remuneration applying to some streams; to call for the kind of safe harbour reform that YouTube wouldn’t like; to back user-centric payouts or at least encourage a UK-focused study; and to throw its weight behind boosted funding for British music exports and perhaps even tax breaks for music companies.

But recommendations are not legislation, so whatever the committee suggests, we’ll then move into a whole new period of intense lobbying of ministers like Dinenage and Solloway, and their departments.

While a glib assessment might be that they’re currently closer to the BPI and major labels’ views on everything bar safe harbour, where they’re closer to YouTube’s, the Broken Record campaigners will surely be energised by the inquiry thus far, and ready to make a new push to win ministers round to their way of thinking.

In other words, it’s all still up in the air. But whatever is recommended and how (or whether) that ultimately becomes legislation isn’t the full story of this inquiry.

The sessions and written evidence have aired some very important dirty laundry; cleared up a few myths and – yes, this is trademark Music Ally tiptoing-along-the-fence optimism – opened some paths towards compromise, collaboration and meaningful improvements to the way streaming works for everyone.

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Hindsight note: On ER, the major and independent labels were united in their opposition, although the final report would come down on Broken Record’s side of that debate. The warning shots for Spotify here felt important too, though.

Impala, which represents independent music companies in Europe, is the latest organisation to step in to the debate about the music streaming economy and how to reform it. "Our aim is to make streaming fairer and provide a dynamic, compelling and responsible future for creators and for fans," was how Impala introduced its 10-point plan.

The plan starts on a familiar beat, calling for legislators to "revoke the safe harbour privileges" of platforms like YouTube "and to make sure no new loopholes are created". But the manifesto quickly gets on to questions around the division of streaming royalties that have been prominent in the UK's parliamentary inquiry into this sector's economics.

Impala represents labels, so it isn't a big surprise to see it coming out against 'equitable remuneration' as a solution to streaming complaints. "Let’s be clear. It is not a new right – it is a compensation mechanism for rights when they are stripped away," is its argument.

"The model on which it’s based illustrates the loss of value it brings, with radio paying rates per listener that are up to 200 times lower than streaming... It may also allow monopoly market participants to end the industry’s freedom to negotiate commercial rates for streaming; and it would not result in greater pay-outs to artists."

Elsewhere in the plan, Impala says it is "ready to explore" user-centric payouts but warns that "on its own it won’t create the optimal market for artists, just a different set of artists who gain and lose, without growing the market or embracing other dynamics which we feel are needed to achieve change".

The point that will be most welcomed by artists' rights campaigners is Impala's call for labels to "commit to revising all pre-digital royalty rates, and all artists should receive a fair contemporary digital rate".

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The manifesto also comes out strongly against "any proposals by services that reduce royalties for plays, or privileged treatment, in algorithms or other features. This is payola, and has no legitimate place in improving viability and opportunity for creators".

That puts Impala on a collision course with Spotify, which has been testing its 'Discovery Mode' since November last year, enabling labels and artists to choose tracks for promotion in its radio and autoplay features in exchange for a lower royalty rate on those streams.

While Spotify has argued that participants earn more money by participating in the scheme – because the increase in streams outweighs the impact of the lower royalty rates – this has raised important questions about whether artists and labels who *don't* take part are losing both streams and revenues as a result.

That seems to be the aspect that Impala is gunning for, and given its history of challenging the biggest companies in the music industry – usually over consolidation – Spotify should prepare itself for some battles ahead if it presses on with the strategy, and especially if it expands it to other parts of its service.

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Hindsight note: The enduring ‘Artist X earns Y from Z streams’ genre of news story, with Beggars Group moving swiftly to clarify it, offering some useful figures to compare with those of its major rivals in the process.

Recently, artist Gary Numan gave an interview to Sky News during which he talked about streaming royalties, and specifically about a small cheque he’d received. “I had a statement a while back and one of my songs had had over a million plays, million streams, and it was £37. I got £37 from a million streams,” said Numan. The story has since been widely picked up by other outlets.

The label Numan is most associated with is Beggars Banquet, but this week Beggars Group founder Martin Mills got in touch with Music Ally with a joint statement from the label group and Gary Numan, clarifying that it was not the label involved. 

You can read the full statement here on our website, and it includes some useful data from an independent perspective on what he's really earning from streams of his Beggars catalogue. "On average Gary receives over £2,000 per million streams on recent royalty statements from Beggars," explains the statement.

"The figure that I mentioned in that interview was not from a Beggars Banquet statement and it certainly doesn’t reflect my recent earnings from them. Although I believe that many record labels could do far better when it comes to the share of streaming income they pass on to their artists, Beggars Banquet would seem to be doing better than most and I continue to enjoy a very positive relationship with them," added Numan.

More details on that from the statement: "Beggars signed Gary in 1978 on what now seems a very lowly royalty, which was normal at the time. With the success of ‘Replicas’, and the support of Warners, that was renegotiated upwards in 1979. In 2009 Beggars unilaterally increased the royalty for all catalogue artists to a minimum of 18%," it explains.

BEGGARS GROUP AND GARY NUMAN CLARIFY STREAMING PAYOUTS

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"With the advent of streaming Beggars adopted a policy of paying a higher rate for that format and in 2016 that settled at 25%. In 2017 Gary’s contract rates were improved again and the accounting basis was adjusted to a net receipts-type structure. Since that revision, and on a like for like basis, Gary’s streaming income has increased by 76%."

The £2,000 per million streams figure is useful, though, not least to compare with figures discussed and released by major labels as part of the UK's parliamentary streaming inquiry. For example, in a written submission, Sony Music said that a typical artist on a 25% royalty rate would need 800 streams on a subscription tier to earn £1 as their share of the royalties – so around £1,250 per million streams.

Meanwhile, during the session featuring the major labels' UK bosses, WMG's Tony Harlow and UMG's David Joseph talked about artists on a 20% royalty rate (note, not 25% as in the Numan and Sony examples) earning around £1,000 per million streams after the label's cut.

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Hindsight note: Ulvaeus had already emerged as a key spokesperson on streaming economy issues, and as the DCMS committee worked on its report, here he was reminding them of the debate about the value of a song versus a recording, with a tie-in report to boot.

'Today's pop industry cheats songwriters' is quite the headline for a Guardian guest column by one of the biggest songwriters of all. Björn Ulvaeus was writing as he co-launched a report with Midia Research exploring the modern songwriting economy. "Songwriters are more important than ever – but, if you are a songwriter, the system is dysfunctional," he wrote in the piece, zeroing in on the division of streaming royalties.

"For a million subscriber streams, an independent label artist could earn more than $3,000 (£2,175), whereas the songwriter could expect to earn between $1,200 (£870) and $1,400 (£1,015) and, even then, only if they are the sole songwriter on the track. If you co-wrote the song, that money is split between you and your fellow writers. On average, songwriters therefore earn between a third and a half of what artists do. If we live in a 'song economy', that’s unfair: the distribution of royalties needs to change to reflect that."

User-centric payouts (described as 'fan-centric' in the report); higher royalties for 'lean-forward' songs chosen by listeners rather than served up by algorithms or playlists; and a 'songwriter in residence' model at labels are among Ulvaeus's ideas. The report is well worth a read.

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Hindsight note: Ahead of the report, the Broken Record campaign was shifting its attention towards the next stage of lobbying: the government.

The UK parliament’s Digital, Culture, Media and Sport Committee is working on its report (and recommendations) from its inquiry into the economics of music streaming. One of the big talking points during the inquiry’s evidence sessions was equitable remuneration (ER): specifically extending it from radio and TV to some streams.

The Broken Record campaign has made ER one of its key requests of the committee; labels have argued firmly against it; and (in our view, at least) the committee seems to be leaning more towards the former camp. But the committee isn’t the British government, so if ER is to be extended, ministers will need to be convinced too.

That campaign is already starting. A letter sent to Prime Minister Boris Johnson – and shown to Music Ally this morning – sees a who’s who of British musicians backing such an extension. Sir Paul McCartney, Annie Lennox, Chris Martin, Jimmy Page, Robert Plant, Kate Bush, Roger Daltrey, Damon Albarn, Noel Gallagher, Laura Marling, Sir Tim Rice... and many more.

“Only two words need to change in the 1988 Copyright, Designs and Patents Act. This will modernise the law so that today’s performers receive a share of revenues, just like they enjoy in radio,” argues the letter. But it also calls for a competition inquiry (or at least a government referral to watchdog the Competition and Markets Authority); for songwriters to get a bigger share of streaming royalties; and the establishment of a dedicated regulator “to ensure the lawful and fair treatment of music makers”.

Later today, we’ll publish our quarterly Music Ally report, including our analysis of the key talking points of the inquiry, and what might happen next. One of our suggestions was that while the DCMS committee seemed sympathetic to the Broken

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Record campaign’s arguments, the government ministers seemed to be leaning more towards labels’ view of the world.

The letter shows that the former group are going to work hard to change that, and in wheeling out the musical big guns, the intensity of the lobbying has stepped up several notches – even before the DCMS committee’s report has come out. Labels and their representative body the BPI must now decide how best to respond.

Here is the full text of the letter, and its signatories:

———-

Dear Prime Minister,

We write to you on behalf of today’s generation of artists, musicians and songwriters here in the UK.

For too long, streaming platforms, record labels and other internet giants have exploited performers and creators without rewarding them fairly. We must put

the value of music back where it belongs – in the hands of music makers. Streaming is quickly replacing radio as our main means of music

communication. However, the law has not kept up with the pace of technological change and, as a result, performers and songwriters do not enjoy the same protections as they do in radio.

Today’s musicians receive very little income from their performances – most featured artists receive tiny fractions of a US cent per stream and session musicians receive nothing at all.

To remedy this, only two words need to change in the 1988 Copyright, Designs and Patents Act. This will modernise the law so that today’s performers receive a share of revenues, just like they enjoy in radio. It won’t cost the taxpayer a penny but will put more money in the pockets of UK taxpayers and raise revenues for public services like the NHS.

There is evidence of multinational corporations wielding extraordinary power and songwriters struggling as a result. An immediate government referral to the Competition and Markets Authority is the first step to address this. Songwriters earn 50% of radio revenues, but only 15% in streaming. We believe that in a truly free market the song will achieve greater value.

Ultimately though, we need a regulator to ensure the lawful and fair treatment of music makers. The UK has a proud history of protecting its producers, entrepreneurs

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and inventors. We believe British creators deserve the same protections as other industries whose work is devalued when exploited as a loss-leader.

By addressing these problems, we will make the UK the best place in the world to be a musician or a songwriter, allow recording studios and the UK session scene to thrive once again, strengthen our world leading cultural sector, allow the market for recorded music to flourish for listeners and creators, and unearth a new generation of talent.

We urge you to take these forward and ensure the music industry is part of your levelling-up agenda as we kickstart the post-Covid economic recovery.”

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Hindsight note: Some more Goldman Sachs predictions, once again providing helpful figures for music companies raising funding or going public to wave at investors, but also fuel for the artist rights campaigners who want changes in the way these revenues are shared out.

Financial giant Goldman Sachs’ bullish music industry forecasts have sparked questions in the past about potential conflicts of interest in its work for and/or ownership of shares in companies including Vivendi and Spotify.

It’s useful to bear in mind whenever reading breathless headlines about its latest predictions. At the same time, these figures and the reports that they come from are influential in investment circles, including fuelling the ongoing wave of finance for acquisitions of music catalogues and companies alike.

With that in mind: stonks! Goldman Sachs’ latest report ups some of its already famously-big numbers. It values Universal Music Group at €44bn (around $53bn), for example, compared to €30bn in its previous report last year. The increase will certainly be welcome to UMG as it prepares to go public later this year.

The report also predicts that global recorded music trade revenues will grow from $21.6bn in 2020 to $23.5bn in 2021, with streaming accounting for $21.1bn of that. Meanwhile, it predicts that publishing revenues will grow from $6bn in 2020 to $6.2bn in 2021.

While Covid-19-hit performance royalties are part of the reason for the relatively small growth, we suspect that the figures will also be seized on by campaigners who think publishers (and songwriters) should get a bigger share of streaming royalties.

There is some bad news in the new Goldman Sachs report too. It predicts that the global live music industry will be worth $12.7bn this year, which is a considerable revision down from the $18.3bn it predicted in its report last year. Why? Because it’s taking longer than was expected then to get the live industry up and running again in many parts of the world.

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Hindsight note: More ideas from Europe on rebalancing the royalties for songs and recordings.

Covid-19 has been very bad news for songwriters and composers: this we know already from the figures (and warnings about future figures) published by collecting societies in various parts of the world. Now the European Composer and Songwriter Alliance (ECSA) has used the latest study – reporting a 35% fall in royalties collected by PROs – as the hook for a manifesto of sorts on "why we should fix streaming now".

It's the latest salvo in the ongoing debate about how streaming pays off for musicians, sitting alongside campaigns like Broken Record in the UK and Justice at Spotify in the US, although in this case it zeroes in specifically on what ECSA thinks would improve the lot of songwriters and composers.

"Adequate implementation" of the European Copyright Directive, including its elements limiting safe harbours for user-generated content platforms, is one of the measures called for. ECSA also wants to "restore the value of authors' rights" in the streaming economy, and it wants politicians and competition regulators to "carefully look at the impact of the majors on the music streaming market".

This relates to one of the talking points of the UK's recent music streaming inquiry: whether the reason songs take such a low share of streaming royalties compared to recordings is because the major label groups keep it that way ("they make more revenues out of recordings, where only a small share is usually paid to the performers, compared to publishing rights, where the publisher usually receives a minority share of income," is ECSA's reminder of that argument).

The body also backs the introduction of user-centric payouts for streaming; wants to change the 30-second threshold for a stream to generate royalties (which it thinks is leading to "a white washing of current chart music" as songwriters are forced to work to the format); for DSPs to "build different values and subscription tiers" for lean-forward and lean-back listening; and to look at the 'artist growth' model recently mooted by UK indie body Aim, where "the first number of streams could be valued

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more and after a certain number the revenue would fall into a lower tier or rate system".

More transparency is also on ECSA's agenda. "None of those issues can be looked at in isolation: policy makers and music stakeholders must adopt a holistic approach in this key debate about nothing else than the future of music," it suggested.

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Hindsight note: Spotify wasn’t the only streaming service publishing data to show how marvellous it was for musicians and the industry. Amid the ongoing ‘value gap’ arguments, here was YouTube’s latest salvo.

YouTube has paid out more than $4bn to the music industry in the last 12 months, according to its head of music Lyor Cohen.

The new figure was the focus for a blog post published by Cohen this afternoon, in which he also said that YouTube's premium subscription services have "added more paid members in Q1 ’21 than in any other quarter since launch."

Cohen did not include an updated figure for those paid memberships, which stood at 30 million globally in October 2020, plus another five million people on free trials of YouTube Music Premium and YouTube Premium.

According to Cohen, more than 30% of those $4bn payouts to rightsholders and musicians came from user-generated content: videos uploaded by YouTube users, and claimed / monetised by rightsholders using its Content ID system.

This is a surprising figure. As recently as January this year (in its submission to the UK's music streaming economics inquiry) YouTube said that "over half of the revenue we send to the music industry comes from Content ID claims".

Now it's merely 'over 30%' which points to the impact of YouTube's premium subscriptions on the breakdown of its payouts to the music business, as well as other kinds of revenue being generated on the service. More of which later.

"I’ve seen this industry evolve from an audio business, to an audio-visual business, and now – as my friend Chuck D puts it – to a visual-audio business," wrote Cohen.

"As a visual-audio platform, our goal is to become the leading revenue generator for the music industry and to help artists around the world build a career making music."

That goal sparked a row at the streaming inquiry earlier this year, when Geoff Taylor, boss of industry body the BPI, expressed scepticism ("I don’t really recognise

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the projections that YouTube has") over whether YouTube was on track to become the music industry's biggest single source of revenue.

A few hours later in her own testimony before the inquiry, YouTube's director of government affairs and public policy Katherine Oyama said she was "surprised and a bit disappointed" by Taylor's claim.

Do the figures published by Lyor Cohen today shed any light on YouTube's progress? Its music payouts are certainly growing: in the calendar year 2019, it paid out more than $3bn to the music industry, according to CEO Susan Wojcicki, writing in February 2020.

To become the music industry's leading revenue generator, however, YouTube will have to overtake Spotify. That company's last three annual reports reveal that its lifetime royalty payouts grew from €10bn at the end of 2018 to €15bn at the end of 2019, and €21bn at the end of 2020.

One might think that means Spotify's year-on-year growth in royalty payouts is 40% – from €15bn to €21bn, so €6bn – but its latest annual report added that "in 2020, our expenses for rights holders grew by 17% compared to the prior year".

Meanwhile, Spotify's recently-launched Loud & Clear website claims that "last year in 2020, we paid out over $5 billion to rights holders" which is less than the dollar equivalent of €6bn.

Let's set that confusion aside. Spotify's royalty payouts grew by 17% between 2019 and 2020 to more than $5bn. YouTube's grew by around 33.3% between calendar-year 2019 (the Wojcicki figure) and 'the last 12 months' now (Cohen's announcement) to more than $4bn.

Who'll win the race? Pick your horse! Or don't: in a sense, it doesn't really matter which of Spotify and YouTube ultimately gets to claim to be the music industry's biggest revenue source.

What matters is that payouts from both are growing, along with other global DSPs (Amazon Music, Apple Music etc), regional DSPs (Tencent Music and NetEase Cloud Music in China; Gaana, JioSaavn and Wynk Music in India, etc); royalties from social apps like Instagram, Snapchat and TikTok; and as licensing deals are signed, from games and fitness startups and livestreaming services and...

A bigger picture of growth, including YouTube. Cohen also flagged up its work with ticketing, merchandise, channel memberships and paid livestreams in his blog post, noting that K-Pop stars Blackpink sold nearly 280k channel memberships with their 'The Show' livestream.

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(The memberships cost $29.99 for the standard tier or $39.99 for the plus tier, which suggests gross revenues from the concert of at least $8.4m – and that's only if every fan bought the standard package.)

These features seem set, like subscriptions, to become a bigger part of YouTube's payouts to the music industry over time, and are already an unknown percentage of the $4bn payouts for the last year.

But we can't cover all this without also referring to the debate about how all this impacts on artists and songwriters, and the familiar questions: firstly about whether these companies should be paying even more (and what that might entail) and secondly about how their payouts are shared out between rightsholders and musicians.

YouTube, like other DSPs, is making its case both to rightsholders and musicians about the positive role it can play in the industry. The stats involved will fuel our understanding of how the industry is evolving, even if they also fuel the (important) arguments around it.

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Hindsight note: Another ominous moment for Spotify and its feature offering promotional boosts in return for lower royalties.

There may be trouble ahead for Spotify and its ‘Discovery Mode’ feature. That’s the program where artists and labels can select tracks to be promoted in the recommendation algorithms for Spotify’s radio and autoplay features, in return for a lower royalty rate.

It was announced in November 2020 with a test for artists and labels in the US. Now it’s attracting attention from the US Congress, and not of the positive kind for Spotify. Representatives Jerry Nadler and Hank Johnson Jr have written to CEO Daniel Ek with some pointed questions on the feature, and its planned use in the future.

They express concern that Discovery Mode could “set in motion a ‘race to the bottom’ in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment”.

Discovery Mode has already faced criticism, with some artists labelling it the streaming equivalent of radio payola, and the European Composer and Songwriter Alliance (Ecsa) attacking it as “profound disrespect” to musicians. For its part, Spotify has presented the program in a positive light, saying in its recent ‘Stream On’ event that it has seen participating labels “grow streams by 30%, resulting in higher royalty payments for artists opted into the test”.

Nadler and Johnson’s letter gets to the heart of concerns about where this might lead if everyone signs up. “Depending on how the program is implemented, there is a further concern that accepting lower rates for this boost in Spotify’s algorithm may not even guarantee more airplay if virtually all commercial artists are also doing the same,” they suggested.

Spotify has until 16 June to answer five questions posed in the letter. They are: whether it plans to make the pilot permanent, and if so when; what safeguards it has

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in place to ensure that “a large volume of boosts… do not end up cancelling each other out or otherwise resulting in a race to the bottom”; how it is calculating the reduced royalty rate and whether it is the same for all artists and labels; how those artists and labels will be able to measure the impact of Discovery Mode on their streams; and whether they’ll be compensated if they *don’t* get more streams from taking part in it.

Spotify’s answers should make for interesting reading. Remember, Discovery Mode is a test, and one that the company could end at any time. That’s a similar setup to the direct artist uploads tool that it launched in September 2018, then shut down in July 2019 in what it’s fair to call a diplomatic move for its relations with major labels.

If Discovery Mode creates similar headaches with politicians and regulators, it wouldn’t be a shock to see it meeting the same fate. But let’s wait for Spotify’s answers to this week’s letter: they’ll give us a sense of how committed the company is to its program, as well as what its defence is for the crucial ‘if everyone does this, isn’t the stream-boost aspect cancelled out?’ concern.

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Hindsight note: Broken Record stepped up the pressure here, with a roll-call of artists of the kind that many ministers would go starry-eyed at. Note also the request for a referral of the major labels to the UK’s competition regulator, presaging the recommendation for this in the inquiry report.

The Broken Record campaign is stepping up its lobbying efforts for the British government to introduce equitable remuneration for music streaming.

A letter sent to Prime Minister Boris Johnson in April was signed by the likes of Sir Paul McCartney, Kate Bush and Chris Martin. Now a second letter has been sent, with new signatories including the Rolling Stones, Barry Gibb, Sir Tom Jones, Chrissie Hynde, Yoko Ono, Van Morrison, Alison Moyet and the Pet Shop Boys.

As before, one of the key requests is this: "Only two words need to change in the 1988 Copyright, Designs and Patents Act. This will modernise the law so that today’s performers receive a share of revenues, just like they enjoy in radio. It won’t cost the taxpayer a penny but will put more money in the pockets of UK taxpayers and raise revenues for public services like the NHS."

Meanwhile, the letter also asks the government to make a referral to competition regulator the CMA to address "multinational corporations wielding extraordinary power and songwriters struggling as a result". It also calls for the creation of a separate "regulator to ensure the lawful and fair treatment of music makers".

Clearly there's a spicy situation brewing, where some of the marquee artists for the major labels (the Stones / UMG for example) are backing a change that those labels have argued firmly against.

The Broken Record campaign adeptly steered equitable remuneration to the top of the UK's recent parliamentary inquiry into streaming economics, and with that inquiry's report pending, it's already hard at work trying to outflank the labels' arguments at government level.

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Although storied stars, these are not the biggest artists of the streaming era: the Stones are the 149th most popular artist on Spotify, for example. However, they are certainly the names most likely to impress government ministers.

(If this is to be a letter-writing campaign, Dua Lipa and Ed Sheeran will surely be top of Broken Record's wishlist of artists still to enlist, given their positions as the two highest-ranked – 3rd and 14th respectively – artists on Spotify.)

Label arguments against ER have focused on its potential impact on the competitiveness of the music industry: both in terms of its ability to strike licensing deals from a position of strength, and its ability to invest in artists for global success.

Exports are currently a big priority for the British government, as it tries to make a success of Brexit. But some of the biggest stars of the nation's most famous musical exports success of all - the 'British Invasion' of the US in the 1960s – are calling for change. Which way will the ministers lean?

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Hindsight note:A positive move from one of the major labels, and one that may in time put pressure on Sony Music’s rivals to follow suit in some way. Even with the caveats – the unrecouped balances are not being wiped out – this was hailed as a welcome move, including by campaigners who distrust the majors intensely.

One of the talking points at the recent UK inquiry into music streaming economics was whether more labels should write off unrecouped balances from the pre-streaming era, and thus ensure more artists start to receive royalties for streams of their work.

Beggars Group has a policy of doing this, but the company has said its efforts to persuade major labels to follow suit have been rebuffed. Until now.

Sony Music is launching a new initiative called ‘Artists Forward’ which it says is “prioritising transparency with creators in all aspects of their development”. And one element of that initiative is a ‘Legacy Unrecouped Balance Program’.

Here’s how Sony Music explained it in a letter sent to artists, which has been doing the rounds here in the UK, and has been passed to Music Ally.

“As part of our continuing focus on developing new financial opportunities for creators, we will no longer apply existing unrecouped balances to artist and participant earnings generated on or after January 1, 2021 for eligible artists and participants globally who signed to SME prior to the year 2000 and have not received an advance from the year 2000 forward,” said the letter.

“Through this program, we are not modifying existing contracts, but choosing to pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music.”

(That’s an aspect that is important to understand. Sony is not cancelling or wiping the unrecouped balances: it is choosing to pay through the royalties.)

Sony Music said that it will be contacting artists who qualify for the program “in the weeks ahead”, and that they will also be able to use the label’s existing ‘Real Time

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Advances’ tool to receive advances on their projected future earnings. That tool is currently available in the US and UK, with plans to expand elsewhere this year.

At this time the initiative does not include a standard minimum digital royalty rate for those artists. Beggars Group’s is 25%, according to the company’s general counsel Rupert Skellett, talking at the recent UK inquiry.

Even so, this is a welcome move for artists who qualify: many from the pre-streaming era who were not earning any recordings royalties from streaming at all – because they had not recouped their advances – will now start seeing a flow of income from this sector.

When Music Ally interviewed Geoff Taylor, chief of British industry body the BPI, in March, we asked him about the idea of wiping unrecouped balances.

“If you take an approach to write off unrecouped balances at a certain arbitrary point, you are saying that there will be more cases in which a project will be lossmaking for the label. It will be harder for them to recoup their investment, because you’ll have written off the unrecouped balance, and at that point they’ll be sharing royalties with the artist, and it will take them longer to get back to breakeven,” said Taylor.

However, he also welcomed the idea of labels looking at this issue individually “and seeing what they can do”. Sony Music has clearly done that, but it remains to be seen whether this will create pressure for rivals Universal Music Group and Warner Music Group to devise similar policies.

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Hindsight note: The clearest indication that the inquiry’s report was imminent, and that some of its main protagonists were already focusing on the next stage: actual legislation to implement its recommendations.

We are still awaiting the report of the UK parliament’s inquiry into the economics of music streaming, but yesterday we had some news of potential follow-on legislation. Kevin Brennan MP, one of the members of the Digital, Culture, Media and Sport committee that has been holding the inquiry, presented a bill to the House of Commons yesterday that will receive its second reading on 3 December.

Details on what the bill contains are not public yet: we know from the parliament’s Hansard record that it’s called the ‘Copyright (Rights and Remuneration of Musicians, Etc’ bill, and that it will “make provision about the rights and remuneration of musicians and other rights holders; and for connected purposes”.

Presenting it is the first step in the process towards getting a bill debated in the UK’s two houses of parliament, but we’ll have to wait for the committee’s report to get a sense of what the bill might contain. That said, the word 'remuneration' in the bill's title may send a shiver down the spines of labels, given their opposition to the idea of equitable remuneration being applied to streaming...

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Hindsight note: And more detail on that planned bill. Throughout the inquiry, Brennan asked the most penetrating, well-briefed questions, and it’s already clear he’s going to be a key figure well beyond the committee’s investigation.

We wrote last week about British politician Kevin Brennan’s presentation of a private member’s bill in the houses of parliament that will focus on music streaming and artists. We noted that because of the way the British legislation system works, the actual bill will not be published until later this year. Now Brennan has written a guest article for the Independent offering a few more details.

“The law on copyright states that if you performed on a record that is played on the radio you are entitled to a payment. That same right does not apply in the UK if your recording is listened to on a streaming service like Spotify,” wrote Brennan. “My bill would bring the law up to date by creating a new right for musicians to an additional share of the revenue from streaming. This is particularly timely because the stated aim of streaming companies, like Spotify, is to replace radio as the way that people mostly listen to music.”

The British music industry will now be preparing for a big lobbying battle around applying equitable remuneration (ER) to streaming, although this is not a big surprise given the issue’s prominence in the hearings of the UK’s music streaming economics inquiry. Brennan is one of the MPs on the committee holding that inquiry, which is now preparing its report with recommendations.

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Hindsight note: Under scrutiny on both sides of the Atlantic for its Discovery Mode, Spotify was getting its defences aligned.

Spotify has been coming under pressure over its ‘Discovery Mode’ test, which lets artists choose tracks to get a promotional boost in its autoplay and radio features, in return for a discounted royalty rate. Yesterday, the streaming service hailed some supporters from the distributors world: Believe and its TuneCore subsidiary, as well as DistroKid.

Spotify’s webpage for Discovery Mode is highlighting endorsements from Believe CEO Denis Ladegaillerie (“highly innovative and beneficial for independent artists”); DistroKid CEO Philip Kaplan (“a groundbreaking music marketing tool because it doesn’t require any upfront budget”); and TuneCore co-head and chief revenue officer Andreea Gleeson (“maximises the reach of the music, based on the merit of the music – not because a gatekeeper said so”).

There is also a case study of how Believe used the tool for 33 tracks by Argentinian artist Natalie Perez over three months. “14 performed exceedingly well and helped Natalie grow her daily listening base in the U.S. and Mexico by 57% across Spotify,” claimed the company.

As always, it’s very important to look at the wider context here. Last month two members of the US Congress wrote to Spotify CEO Daniel Ek with some pointed questions about Discovery Mode, questioning whether it might “set in motion a ‘race to the bottom’ in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment”. 

Spotify was given until 16 June to respond, although as far as we can tell, that response has not yet been made public. Pending that, yesterday’s flurry of endorsements is clearly part of Spotify’s campaign to pitch Discovery Mode as a boon to the independent music sector.

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However, here too there has also been opposition, with US indies body A2IM coming out strongly against the tool recently. “Discovery Mode allows money to be a deciding factor as to which music is surfaced to listeners. Discovery Mode tilts what had been a level playing field for artists. Discovery Mode misleads listeners who believe they are being presented with music based exclusively on their established preferences,” it claimed.

The fact that Spotify is marshalling support and amplifying the views of Believe, TuneCore and DistroKid suggests that it sees Discovery Mode as here to stay, rather than as a test that can be quietly retired in the face of criticism from bodies like A2IM and interest from politicians. Case studies of artists doing well out of it will understandably be at the centre of that strategy.

What those case studies don’t yet answer is the all-important 'race to the bottom' question: about what the impact would be if Discovery Mode takes off to the extent that near enough every artist opts in. Spotify's response to the congressmen may shed more light on its answer to that though. It’s vital with any big tech platform to look ahead for both intended and unintended consequences of new features and policies – Spotify and its Discovery Mode included. 

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Hindsight note: If everyone signs up for Discovery Mode, doesn’t that mean everyone takes a lower rate for the streams covered by it, while the promotional boost is weaker? That’s the key question, although Spotify seemed to swerve it in its response to the US congressmen.

When we reported yesterday on Spotify’s defence of its Discovery Mode tool, we noted that its response to a recent letter from two US congressmen with questions about the feature would shed more light on its strategy. That response has leaked, via Billboard, including the claim that “fears that Discovery Mode may lead to a ‘race to the bottom’ largely rest on a misunderstanding of the way in which Discovery Mode works”.

That’s in response to the question – discussed here in the past – about whether if everyone opts in to Discovery Mode, that will mean that they all receive a lower royalty rate, while diluting the promotional benefits. That isn’t addressed head-on in Spotify’s response, but instead the company focused on the idea of competition between smaller and larger artists.

“The alternative, after all, would be to deprive smaller artists of the tools they need to invest in their careers – reserving the most effective promotional channels only for those with the deepest pockets…” The response also notes that Spotify considers the pilot to have been a success. “Based on these early results and great initial feedback, we hope to move beyond our limited pilot stage, opening up the product to more artists and labels, later in 2021.”

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Hindsight note: This was a defence of accuracy rather than a defence of Spotify. Mainly because of misreporting suggesting that these were comments from Spotify’s ‘inventor’ (as opposed to someone whose past job at Spotify had ‘inventor’ in their title, and joined the company five years after it was founded). But the story caught on, perhaps because it plays into many people’s suspicions about Spotify.

The latest rumpus around Spotify and artist royalties is starting to do the rounds of news sites. However, inaccuracies in some of the re-reporting may lead people to believe the story is about a current Spotify executive (or even its ‘inventor’) discussing artist payments at a conference this month. It’s not.

Jim Anderson was talking at the Sync Summit NY in June 2019, where he was billed as ‘solutions architect / inventor, Spotify’. Musician Ashley Jana asked him about artist royalties, and last year published an audio recording of his responses on YouTube (since removed) which Digital Music News published a transcription of last week.

It’s no surprise that Jana (and artists reading the news stories) are cross about Anderson’s comments, with his talk of “entitlement” and his claim that “Spotify was created to solve a problem. The problem was this: piracy and music distribution. The problem was to get artists’ music out there. The problem was not to pay people money… The problem, the problem was to distribute music. Not to give you money, okay?”

This would be incendiary if Anderson worked at Spotify now, but he worked there from 2011 (three years after its commercial launch) until 2014. There are plenty of interviews, earnings calls and launch speeches out there from Spotify’s senior management for artists critical of Spotify to draw on, so Anderson’s comments are less a smoking gun, and more a damp squib on the controvermeter.

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Hindsight note: Another way Björn Ulvaeus’s voice figured in the streaming debate, albeit much more indirectly!

The guiding principle of user-centric royalties is that the winners don't take it all; that the money, money, money is shared out more fairly; that the name of the game is to pay more to artists as a thank you for the music that their keenest fans have stre...

Okay, enough Abba puns. But Portishead have released a cover of 'SOS' to test out SoundCloud's user-centric 'fan-powered royalties', so we couldn't help ourselves. The track was recorded for the soundtrack of a film in 2015, but this is the first time it's been made available to stream anywhere.

Royalties for the track will be paid out using SoundCloud's new user-centric system, which launched earlier this year. The system calculates royalties by how much fans listen to artists "relative to all of their listening time in a given month" as well as how many ads they consume, and whether they have a paid subscription.

SoundCloud takes a 45% cut, but as the company explained in March, it pays mechanical and performance publishing royalties out of that, as well as other costs. Portishead are one of the biggest artists to test out the system so far, which may in itself provide some useful data on what happens within a user-centric system if a big name drops a track exclusively on a streaming service.

Talking of the data: SoundCloud has yet to publish any details about the impact that fan-powered royalties are having, which isn't surprising so early in its rollout. But rival streaming services, artists and their managers, labels and everyone else in the industry will be hoping that the company is as open as possible a few months down the line, amid continuing debate over whether user-centric should be seen as a gimme, gimme, gimme (sorry, so sorry!) for DSPs in the wider search for as fair a streaming royalties system as possible. 

PORTISHEAD TEST SOUNDCLOUD 'FAN-POWERED ROYALTIES' WITH ABBA

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Hindsight note: Well, there isn’t much hindsight at this point, given that this paragraph is being written mere days after the report came out. Hopefully this piece reflects Music Ally’s wider coverage of the inquiry and the debate about artists and streaming: trying to present the facts clearly, with balanced analysis of what they mean. Plus the odd joke about badgers.

Music Ally has reported extensively on the hearings at the British parliament’s inquiry into the economics of music streaming. Now the Digital, Culture, Media and Sport (DCMS) committee behind that inquiry has published its report.

It’s fair to say major labels will be wincing the most as they read its recommendations. There’s a paragraph about 25 pages in that neatly summarises the report’s guiding principle:

“Streaming has undoubtedly helped save the music industry following two decades of digital piracy but it is clear that what has been saved does not work for everyone. The issues ostensibly created by streaming simply reflect more fundamental, structural problems within the recorded music industry. Streaming needs a complete reset.”

Rather than give the streaming services a kicking over the royalties they generate for musicians, the committee has trained its fire on rightsholders and how that money flows through their systems – with particular attention to the three major labels.

Its recommendations include:

• Introducing broadcast-style equitable remuneration (ER) for streaming income

• An investigation by the UK’s competition watchdog the CMA into major labels’ market power and business practices

• Legislation giving artists a “right to recapture” their works after 20 years

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• Calling for songs (and thus songwriters and publishers) to get a bigger share of streaming royalties

However, not every recommendation is a blow for the labels. The report comes down squarely on their side in the ongoing ‘value gap’ debate, calling for the CMA to also “examine YouTube’s dominance of the music streaming market” and “normalise” the music licensing structure it operates under.

The report was published at 12.01am this morning UK-time, but Music Ally (along with other media outlets and interested parties) was sent an advance copy under embargo. We spent the afternoon reading it, picking out the key recommendations, and thinking about what it means for the music industry – and what happens next. Read on for the details. The report should be available here by the time you read this, too.

Equitable remuneration

As a quick reminder, in this context equitable remuneration (ER) refers to the system used for broadcast music recording royalties (radio and TV) in the UK, where they are split 50/50 between labels and artists in a system overseen by collecting society PPL.

Applying ER to streaming was the key demand of the Broken Record campaign, led by musician Tom Gray, which sparked the inquiry in the first place. Labels argued against it, but the report comes down firmly in favour of the pro-ER arguments.

It calls for the British government to be “exploring ways to provide performers with a right to equitable remuneration when music is consumed by digital means”, while setting out a few of the options suggested during its hearings.

One of those would involve separating out “actively selected and passively consumed” streams: in other words those specifically chosen by the listener, and those served up to them by playlists or recommendation algorithms. Nothing would change in how the royalties were handled for the former, but ER would be applied to the latter.

The committee also pushed back against some of the labels’ arguments against applying ER to streaming, including their view that it would erode their negotiating position when licensing music to streaming services – a view outlined by BPI boss Geoff Taylor in a Music Ally interview earlier this year.

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The committee’s report points to other examples of ER and these ‘exclusive rights’ co-existing in the UK: for example with CD and DVD library rentals, and funds for non-featured performers. It also notes that ER is applied to streaming in countries including Spain.

“The right to equitable remuneration is a simple yet effective solution to the problems caused by poor remuneration from music streaming. It is a right that is already established within UK law and has been applied to streaming elsewhere in the world,” concludes the report.

“A clear solution would therefore be to apply the right to equitable remuneration to the making available right in a similar way to the rental right. As such, an additive ‘digital music remuneration’ payment would be made to performers through their collecting societies when their music is streamed or downloaded.”

Watch out for the watchdog!

While some of the report’s recommendations are for the government to introduce, there are also a number that would fall into the domain of the UK’s competition watchdog, the Competition and Markets Authority (CMA). This, more so than even ER, is what will be setting alarm bells ringing within the major labels.

“There is no doubt that the major music groups currently dominate the music industry, both in terms of overall market share in recording and (to a lesser extent) in publishing, but also through vertical integration, their acquisition of competing services and the system of cross-ownership,” is the report’s verdict.

“We recommend that the Government refer a case to the Competition and Markets Authority (CMA), to undertake a full market study into the economic impact of the majors’ dominance.”

Later in the report, it calls for this study to include an examination of the majors’ licensing agreements with streaming services, suggesting that “there are ongoing concerns about the majors’ position in negotiation, which allows them to benefit at the expense of independent labels and self-releasing artists, particularly regarding playlisting”.

A competition inquiry might sound like a terrifying prospect for the major labels, but it’s important to understand the steps in the process where it could be kicked into the long grass.

The committee is recommending that the government refer a case to the CMA – but it can’t force it to. It wants the government to ‘urge’ the CMA to examine

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particular issues – but the government can’t make the regulator do that. And if the CMA does investigate these issues, it may decide that there is no case to answer.

One way to look at this: a CMA referral could be a handy way for the government to pass some of these hot potatoes on to the regulator. Another view might be that the threat of a competition investigation may be enough in itself to drive through some of the other recommendations in the report. Still, the report puts the ball (or potato) in the government’s court to decide whether to refer.

Songs, recordings and royalty splits

Another issue the DCMS committee would like to see the CMA get involved with is the way streaming royalties are divided between songs and recordings – and thus between labels and publishers. This emerged as one of the contentious topics during the hearings.

Questions about whether the rough split of 55% to labels and 15% to publishers is fair (with the remaining 30% going to the streaming services) developed into accusations that the major publishers cannot campaign for a bigger share because their parent companies keep a bigger share of recording royalties than of publishing royalties.

Publishing body the MPA won’t enjoy the report’s conclusion that “it is conspicuous that the MPA refused to give a definitive perspective on the debate, particularly given that the publishing arms of the three major music groups are counted amongst their members”.

The committee takes this theme on in a recommendation that bodies like the Ivors Academy and Musicians’ Union will cheer loudly. “As long as the major record labels also dominate the market for song rights through their publishing operations, it is hard to see whether the song will be valued fairly as a result.”

“Whilst the major music groups dominate music publishing, there is little incentive for their music publishing interests to redress the devaluation of the song relative to the recording.”

However, when it comes to changing this state of affairs, it’s a case of calling for the government to ‘urge’ the CMA to investigate it. “In its reference to the CMA, the Government should urge the CMA to consider how the majors’ position in both recording and publishing has influenced the relative value of song and recording rights,” is the recommendation.

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Recapturing works and royalties transparency

Another recommendation that labels won’t like: the committee’s desire for the government to create a “right to recapture works” for musicians, as well as a “right to contract adjustment” if their royalties are “disproportionately low compared to the success of their music”.

The latter zeroes in on the issue of artists signed to labels on a long-term basis, who have yet to ‘recoup’ their advances, and who thus may not be seeing any royalties from streaming.

During the hearing, we heard that several independent labels have policies of wiping these unrecouped balances after a certain number of years, so that the artists can begin to earn royalties again. Shortly after the hearings concluded, Sony Music announced that it will be paying royalties through to artists with unrecouped balances, if not wiping the actual balances themselves.

In the wake of that, the DCMS commitee would like Universal Music and Warner Music to “look again at the issue of unrecouped balances”, although again this is a matter of ‘urging’ rather than forcing them to do it, indicating the limits of government’s power to get involved in these companies’ contractual matters.

The right to recapture works, however, could be something the government legislates on, as has happened elsewhere in the world (notably the US).

“We suggest that the right to recapture should occur after a period of twenty years, which is longer than the periods where many labels write off bad debt but short enough to occur within an artist’s career,” recommends the report. “This would create a more dynamic market for rights and allow successful artists to go to the market to negotiate better terms for their rights.”

20 years is considerably shorter than the 35 year period used in the US for rights recapture. For musicians, this would be a big deal: bringing forward the date at which they could regain their rights to earlier in their working lives. Labels will have big concerns on what this means for their businesses, including their ability to invest in new artists. Expect to hear much on this particular recommendation in the coming days.

There are also some brickbats lobbed at the labels – and the streaming services – over their non-disclosure agreements, and the problems that causes for artists trying to audit them.

“Artists and their representatives face a systemic lack of transparency from both music companies and the streaming services that license their works. This exacerbates

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the inequities of creator remuneration by creating information asymmetries and preventing them from undertaking their right to audit,” is how the report puts it.

Here, too, the committee thinks that legislation could be the answer: “a right for performers (or their representatives) to have sight of the terms of deals where their works are licensed, on request and subject to non-disclosure” as well as requirements to provide “clear information and guidance to creators about the terms and structures of every deal where creators’ works are licensed, sold or otherwise made available, and the means and methods by which monies that are being distributed to them are calculated, reported and transferred”.

The return of the global repertoire database!

Here’s a sentence that will make industry veterans of a certain age run around screaming for an hour or two (which, given the report was published just after midnight, is a bit of a shame for their families and neighbours):

“The Government should explore the practicalities of creating or commissioning a comprehensive musical works database and task the IPO with co-ordinating industry work on a registration portal so that rightsholders can provide accurate copyright data to necessary stakeholders easily.”

Yes, it’s the return of the GRD, or Global Repertoire Database concept, which has been tried before in Europe, falling apart before it could launch (but after millions of pounds had been spent trying) amid a flurry of recriminations.

Call us unpatriotic sceptics, but expecting a government which spent £22bn on a Covid-19 test and trace programme that missed many of its targets to find a solution to the music industry’s metadata mess is... optimistic.

That said, from the creation of the MLC in the US to the work being done by data-focused startups like Blokur, there are reasons for hope that this isn’t an unsolvable problem if the government puts its mind to it – and doesn’t subcontract the work to its mates down the pub who set up their metadata consultancy last Tuesday.

The report contains other recommendations focusing on data, and while they may get lost amid the spicier parts, they could be good steps forward.

The committee wants the government to oblige labels to provide metadata for the underlying songs when licensing recordings to DSPs – thus ensuring that they know exactly who wrote songs and what publishers represent those rights – and it wants the music industry to “establish a minimum viable data standard within the

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next two years to ensure that services provide data in a way that is usable and comparable across all services”.

(Again, with our sceptical hat on, this is less a technology problem than it is a people and companies problem, and specifically a getting those people and companies to work together constructively problem. But here too there are already efforts and initiatives that can be built on, so it’s not a lost cause by any means.)

Collecting societies, meanwhile, may be nervously eyeing the recommendation to “end the practice of distributing black boxes pro rata”, including an audit of those black boxes “to achieve greater clarity as to what is genuinely impossible to allocate and what is mis- or un-allocated due to a lack of will”.

Safe harbour and the ‘value gap’

One area where the DCMS committee agrees firmly with labels is on YouTube, and the wider issue of user-generated content platforms and music licensing. The report runs through the competing ‘value gap’ arguments, including YouTube’s figures on its value to the music industry, and claims by rightsholders of a mismatch between its share of royalties and its share of consumption.

The report’s conclusion mirrors the lobbying position of the labels. “Safe harbour gives services that host user-generated content (UGC) a competitive advantage over other services and undermine the music industry’s leverage in licensing negotiations by providing UGC-hosting services with broad limitations of liability,” it concludes.

“This has suppressed the value of the digital music market both in real and absolute terms even as these services generate multi-billion-dollar advertising revenues.”

What’s the answer to this? Another competition referral, although in this case, the CMA is already scrutinising various aspects of the big technology companies’ businesses and market impacts.

The report recommends that the CMA “consider exploring designating YouTube’s streaming services as having strategic market status to encourage competition with its products”. You can read more about ‘strategic market status’ here: it’s part of a new regime introduced in the UK in November 2020 that sets specific expectations for “platforms that have considerable market power”.

The report also addresses the European Copyright Directive (ECD), which the UK is not transposing into law, following its exit from the European Union. The committee wants the government to come up with UK legislation that “provide

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protections for rightsholders that are at least as robust as those provided in other jurisdictions” (i.e. the ECD) as an alternative.

It wants those to include “robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming ‘value gap’” while not hurting startups trying to get into the market.

YouTube won’t like this, of course, but as we saw with the European Copyright Directive, there will be a long period of intense lobbying ahead as the two sides in the ‘value gap’ debate try to sell politicians on their vision of what this legislation should look like.

And more... user-centric, algorithms, exports and tax breaks

It’s a long report, and there are other recommendations worth thinking about. One topic that is significantly lower-profile than might have been expected before the inquiry is user-centric payout systems. The report merely describes the debate around these and other mooted new models as “compelling” but stops short of urging the industry to adopt them.

It does, however, express concern that “current contractual agreements between the major music companies and streaming services have the potential to stifle further innovation if they are misused” in this regard. The committee would like the CMA to look into whether those deals “have the potential to (or indeed have already) prevented experimentation and innovation by streaming services”.

There are various rumours about which label(s) have so far prevented Deezer from getting its user-centric pilot off the ground in France, so the prospect of a CMA investigation hanging out the dirty laundry is intriguing – or troubling, if you’re one of those labels.

It may seem that streaming services come off lightly in the report’s recommendations, but some will give them pause for thought. Like where the committee calls for the government to “commission research into the impact of streaming services’ algorithms on music consumption, including where creators are forgoing royalty payments in exchange for algorithmic promotion”.

That’s clearly putting Spotify on notice, with its ‘Discovery Mode’ already having drawn attention from politicians in the US, and criticism from some industry campaign groups including claims that it’s a modern version of payola.

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Talking of payola, the report also calls for the UK’s advertising watchdog, the ASA, to create a code of practice for streaming playlist curators that is similar to its code for social media influencers, with requirements for full disclosure if they’ve been paid or received other benefits in return for playlisting any tracks.

Finally, two more bright spots for labels. The BPI’s desire for a boost in funding for its Music Export Growth Scheme (MEGS) has been answered by the committee, which recommends that the government expand support for the scheme that funds independent music companies and artists in their efforts to grow audiences overseas.

The report positions this as an effort to “allow British music companies to compete with the multinational majors”, and recommends “clauses in grant funding awards that a company or artists’ rights cannot be acquired by the major music companies for a certain period of time”.

The committee also backed the music industry’s call for “a focused fiscal incentive for the independent music sector, similar to that which exists in TV, animation, film, theatre and gaming” – a tax break – which will go down well.

So... what now?

With the report published, what happens next? There’ll be plenty of public comment from industry bodies, companies and campaigners over the next day or two, although some (DSPs in particular, we sense) will be keeping quiet and breathing a sigh of relief about being out of the direct firing line. For a bit.

However, the real activity will be behind the scenes: the next phase in the lobbying battles around streaming, artist payouts and the workings of the music industry.

Whether the British government makes a referral to the CMA will be one hotspot for this activity. As for legislation, the government could take the report’s recommendations forward as a parliamentary bill, or it could leave that to the private member’s bill already tabled by Kevin Brennan MP – a member of the DCMS committee – which will receive its second reading in the House of Commons later this year.

The government could order its MPs to vote against that bill, albeit at the risk of being seen as anti-musician. It could back the bill wholeheartedly. And even if it backs (or at least doesn’t block) the bill initially, once it reaches the ‘committee’ stage where MPs go through it line by line and make amendments, what the bill contains could change a great deal.

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(For non-UK readers, or indeed anyone who isn’t well-versed in the workings of Westminster, here’s some information on the process for legislation in the UK.)

In other words, there is still a very long way to go before we find out which, if any, of the DCMS committee’s recommendations become regulation or legislation. Any suggestion that the report is a knockout blow for labels or a stunning victory for Broken Record is thus extremely premature.

Labels will hope that their views carry more weight with ministers and politicians beyond the DCMS committee; the Broken Record / Fix Streaming campaigners will be energised by their success so far; YouTube will be preparing its troops for any UK equivalent of the ECD’s Article 17; and so on. It’s all to play for.

In another sense, the debate around streaming economics is already driving change. Sony Music is paying royalties to unrecouped artists, and it seems likely that its main rivals will follow suit in some form. The inquiry hearings and its report have shed light on a range of issues that are already influencing music industry dealmaking – particularly musicians’ contracts.

At Music Ally, we sometimes talk about streaming ‘driving’ the music industry, which is true on a formats level. But the heart of the industry are its musicians, and ensuring streaming works for them as well as it does for the rightsholders, digital services and other companies who provide essential support for those musicians is... well, it’s a challenge that if tackled properly, could make the next decade the most exciting ever for the industry and its creators.

The streaming economy has never been set in stone: it’s constantly evolving, and the music industry evolves with it. And while the industry’s ability to infight like a sack of furious badgers remains unparalleled, the inquiry has provided much of the information it needs to plot a constructive path forward.

Or at least to get out of the bag, stop clawing at one another’s throats, take a deep breath, and look for that path together.

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Hindsight note: A good place to finish this book, as industry bodies and campaigners scrambled to release their statements about the inquiry’s findings. Running through them all is a clear understanding that we’re entering a new phase of the streaming economics debate. The DCMS committee came down on the Broken Record side for many issues, and on the side of the music industry (including that campaign) on the ‘value gap’. But now the battle shifts to win over ministers and influence whatever legislation ensues.

The UK parliament’s Digital, Culture, Media and Sport (DCMS) committee published its report on the economics of music streaming early this morning. You can read our analysis of its key recommendations and what they mean for the music industry here. Or, if you prefer to listen, we’ve discussed it all in the latest episode of our Music Ally Focus podcast.

The industry has also been responding to the report. Well, parts of the industry: representative bodies are shouldering the work of publicly commenting on it, rather than individual rightsholders. Meanwhile, the streaming services themselves are staying out of the public fray for now, perhaps relieved that they were not the main target for criticism in the report. So who’s saying what?

The DCMS Committee

We’ll start with the committee itself. “While streaming has brought significant profits to the recorded music industry, the talent behind it – performers, songwriters and composers – are losing out. Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do,” said its chair Julian Knight MP.

“However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself.”

“We have real concerns about the way the market is operating, with platforms like YouTube able to gain an unfair advantage over competitors and the independent

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music sector struggling to compete against the dominance of the major labels,” he continued.

“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.”

One of the committee members, Kevin Brennan MP, has been tweetstorming about the reports’ findings too.

The BPI

Labels body the BPI published its own statement this morning from chief executive Geoff Taylor. “The UK’s global success in music is driven by label investment in new artists, creating music that is loved around the world and contributing more than £1.5 billion a year to the UK economy,” he said.

“Streaming is enabling more artists than ever, from all genres, to earn a long-term income: more than 2,000 artists will achieve 10 million streams this year in the UK alone, double the number who sold the equivalent number of CDs and downloads in 2007.”

“When considering this report, the Government also needs to consider the vital role that labels play as the leading investors into artists’ careers, with investment in artists by record labels growing year-on-year. Artists also now have more choice in how to manage their careers, with independent and self-releasing artists growing their share of the market,” he continued.

“Labels are committed to ensuring that artists share fairly in the growth from streaming. We will carefully examine the findings of this report, but it is essential that any policy proposals avoid unintended consequences for investment into new talent, and do not imperil this country’s extraordinary global success in music.”

Broken Record

Musician Tom Gray founded the Broken Record campaign that sparked the inquiry, and he has also been sharing his response on Twitter this morning.

Gray also issued a longer statement to journalists. “The report brilliant and coherently cuts to the chase: the music industry has a serious problem. Profits are soaring, margins are better than ever, the value of the once piracy-blighted industry is

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forecast to eclipse anything seen in our lifetimes within a decade, but performers and songwriters are being left well behind,” he said.

“As we’ve repeated, rather like a broken record, it’s a failing market where corporations have little incentive to share their extraordinary profits with the architects of their success, musicians.”

“This goes to show that when artists come together and speak honestly about our experiences and those of our peers, our politicians can easily surmise the reality – the public too. This is not about getting more money for wealthy musicians, that mythology ought to be long dead. This is about preserving a national treasure into the future: our extraordinary, diverse British musical talent.”

The Competition and Markets Authority

The report made several recommendations involving a referral to the UK’s competition watchdog, the CMA. It has commented this morning, albeit fairly carefully.

“The CMA strongly supports competitive digital markets. We will consider carefully the recommendations in the report that relate to the CMA, and we will work with DCMS to respond to these in due course,” its spokesperson said.

AIM

Independent labels body AIM has put out a statement from its CEO Paul Pacifico. “The Select Committee has impressively zeroed-in on some of the key issues in music and many of the report’s findings endorse and vindicate the ethical practices of the independent music community,” he said.

“The independent community is founded on fair dealing and we believe the MPs have tried to make recommendations that benefit creators in good faith. However, our view is that equitable remuneration will not deliver the outcome they are hoping for.”

“It is a 20th century solution not fit for the 21st century digital market and will leave the next generation of artists worse off. We look forward to examining the findings in detail and continuing to work with all our partners in music and beyond to deliver successful, strong, inclusive and diverse outcomes for music.”

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FAC / MMF

The Featured Artists Coalition and MMF have put out a joint statement, having also teamed up to submit evidence to the inquiry earlier this year.

“We welcome today’s landmark report from Parliament’s Digital, Culture, Media & Sport Committee calling for artists, composers and musicians to benefit more equally from the boom in online streaming,” they said.

“This is a serious and comprehensive piece of work. It contains a wide range of recommendations, many of which, if implemented, could fundamentally reset and improve the current economic model for recorded music. It demands quite clearly that those companies and corporations regarded historically as ‘rights holders’ must urgently modernise their business practices, and go further and faster in their pace of reform.”

The statement continues: “Beneath the headlines, we are especially pleased the Committee has recommended tackling many long-running market dysfunctions – for instance, that legacy recording deals are overhauled, that artists can recapture their rights, and that inefficiencies and inequalities around songwriter “royalty chains” and “black box” allocations are challenged. These issues should be low-hanging fruit. Addressing them now would have a transformative and material impact on the livelihoods of all artists, songwriters, performers and producers.”

And it concludes: “More broadly, we welcome the idea of a market-wide investigation by the Competition & Markets Authority and, going forward, we urge the Government to ensure there is a robust, transparent and evidence-led response to this report that involves all voices in our industry – including young and emerging artists who have grown up in a streaming environment.”

“This is a once in a lifetime moment to reset our business along fairer and more equitable lines, it is not an opportunity to be wasted.”

Musicians’ Union and the Ivors Academy

The Musicians’ Union and the Ivors Academy have also been working together throughout the inquiry, and their heads offered statements this morning.

“As we all emerge from the horrors of the pandemic, the Government’s levelling up agenda is more important than ever. Our industry has been on its knees and if we want to preserve our cultural heritage, bring opportunity to all four corners of the UK and keep musical talent in Britain, we’ve got to fix streaming and stop exporting

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millions of pounds to huge record labels and their owners overseas,” said MU general secretary Horace Trubridge.

“This cross-party report is revolutionary. It grasps the issue, identifies the problems and recommends achievable and practical solutions, which won’t cost the taxpayer a penny.”

“It’s time to make the most of this rare, cross-party consensus, bring British copyright law up to date, show Global Britain leading the fight to protect the intellectual property of artists and creators, and make the UK the best place to be a musician.”

Ivors Academy chair Crispin Hunt also welcomed the report. “Today is a great day for musicians and music creators. This cross-party report

gives the Government the firepower and political mandate it needs to secure the commercial, professional and artistic futures of many thousands of British music creators, and to keep their value here in Britain,” said Hunt.

“For too long, foreign owned major record labels have recklessly gambled with the UK music economy and the future of British music. The true innovators and creators are our musicians and composers, and by acting on the Committee’s thoughtful recommendations, the Government will do so much good for so many – musicians and listeners alike.”

Impala

European independent labels body Impala isn’t so keen on some of the report’s findings, but welcomes others, as its executive chair Helen Smith explained.

“The DCMS report touches upon very important questions surrounding the music market as a whole, and it is crucial to look at different options. There are many opportunities to make streaming fairer for all, and we see music services and streaming platforms as our key partners for doing so,” she said.

“They are a vital part of today’s music market and we look forward to working with them and the whole ecosystem to improve the situation for musicians, labels, and of course, fans.”

“We support reform of streaming and we recently set out concrete ways of doing that in our 10-point plan to make streaming fairer. IMPALA cannot support equitable remuneration on streaming as we believe it is not in fact equitable. Our assessment is that it would be damaging for diversity and emerging artists,” continued Smith.

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“We look forward to seeing the options proposed by IMPALA and others in the independent community assessed as part of any next steps and we urge decision makers to look carefully at how risk works in the ecosystem and the evolution of remuneration in each section of the music community.”

Hipgnosis

Hipgnosis Songs Fund is one of the first music companies (as opposed to industry bodies) to put out a response statement.

“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,” said founder Merck Mercuriadis.

“We are particularly focused on their recommendations that there be a full reset of streaming in law that gives songwriters and artists a fair share of the earnings, and that further to this the Government refer the case to the Competition and Markets Authority to undertake a full market study into the economic impact of the major music groups’ dominance.”

“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 recognises that without the song we have no music industry.”

He concluded: Ultimately if we are to make streaming truly fair for songwriters and artists it is critical that they are given a direct seat at the negotiating table, have exclusive rights, not merely a right to remuneration, and are paid in line with the share taken by record labels.”

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