“Performers, songwriters and composers receive only a small portion of revenue due to poor royalty rates and because of the valuation of song writing and composition, relative to the recording. Poor remuneration risks disincentivising successful, professional musicians and diminishing the UK’s ability to support new domestic talent.”
So said the House of Commons Select Committee in a highly critical report on the “Economics of Music Streaming” published 15th July 2021.
The Committee's work was the result of nine months of investigation into the economic impact of music streaming. Whilst they recognised that legitimate streaming had done much to save the industry from the effects of piracy, it had at the same time switched the balance in favour of the large music companies and historically successful artists with large back catalogues. The Committee argued that:
Whilst the UK music industry contributes £5 billion in gross value added (GVA) to our economy, the major music companies have experienced historic profit margins, and continue to consolidate their position as the largest asset owners of recording and song rights through mergers, acquisitions, and integration with all aspects of the digital music business. As Will Page pointed out to the inquiry “For labels, the music industry is thriving. Between 2015 and 2019, the streaming-led recovery boosted UK major label turnover by 21 percent and operating profit margin increased from 8.7 percent to 11.8 percent.”
The Government should do more to support the independent sector and take advice from the Competition and Markets Authority as to whether competition in the recorded music market is being distorted.
The Government should introduce a right to equitable digital music remuneration, a right to recapture the rights to works after a period of time and the right to contract adjustment if their works are successful beyond the remuneration they receive. As the report states “The pitiful returns from music streaming impact the entire creative ecosystem. Successful, critically acclaimed professional performers are seeing meagre returns from the dominant mode of music consumption. "
Whilst the British Phonographic Industry organisation argued that streaming offered many benefits, saying that “Streaming is enabling more artists than ever, from all genres, to earn a long-term income”, the overwhelming weight of evidence portrayed the opposite point of view. Instead it suggested that the volume of finance available and its distribution was neither sufficient nor distributed equitably.
It is a situation made worse, as the Committee pointed out, by the Covid epidemic which has curtailed the revenue artists gain from live performances and made them more reliant on the earnings from streaming. Streaming like playlists also panders to established artists. As an article in Music Business Worldwide stated, over 66% of all music listened to in the USA is now from back catalogue recordings rather than from new releases.
Underpinning the Committee's report were a number of wider issues:
It was suggested that many artists were too afraid to speak out in case major record labels discriminated against them. As BBC 6 Music presenter Guy Garvey stated,
“however leaky the boat has become, young musicians still don’t want to rock it, and if they don’t rock it they can’t make ends meet”.
The distribution of streaming revenues is biased in favour of the means of delivery rather than its creators and performers. As the report shows, via a chart from accountants CC Young and Co, The means of delivery, the streaming companies, take between 30-34% whilst those who create the music, songwriters and composers, get only just over 10% of revenues.
How funding is distributed is also tied into the legal status of steaming. If music is played via radio or television then the distribution of licence income is much more equitable than if its ‘made available’ via a streaming service. This is even more marked in the case of ad-based services such as YouTube. As the BBC reported “At present, Spotify is believed to pay between £0.002 and £0.0038 per stream, while Apple Music pays about £0.0059. YouTube pays the least - about £0.00052 (or 0.05 pence) per stream.”
YouTube not only pays less but has become increasingly dominant as the means by which consumers listen to music. As the Committee reported, “In 2017, for example, a consumer insight report by the IFPI found that YouTube was responsible for 46 percent of all on-demand music streaming time, which was more than Spotify, Apple, Tidal, Deezer and Napster combined."
Finally, there is considerable discussion within the report over the allocation of royalties beyond streaming, where artists are still paying a proportion of income for services which are no longer either required or which have been repaid in full. The report quotes Nile Rogers as saying
“The running joke…is that the music business is the only business where after you pay off the mortgage on the house they still own the house. It does not make any sense. There is no other business on earth that does that. We pay back all the royalties, and they still own our property. It is ridiculous.”
The overall concern that comes through from the work of the Select Committee is that the music industry is an important earner of revenue for the UK economy, yet if new talent is stifled because it cannot gain a fair return from its labours, that revenue will in effect decline. Streaming may have been the focus of the inquiry and it is clear there are problems with the way in which streaming works, particularly with regard to YouTube. Yet there is also a recognition that streaming is simply the end product of a 20th century model of music distribution that is no longer relevant or in place. Little wonder that the report concludes:
“The issues ostensibly created by streaming simply reflect more fundamental, structural problems within the recorded music industry. ”
We wait to see whether the Committee's concerns are to be shared by government in terms of legislation.
Swimming Against The Stream
For most people in the music industry the House of Commons Select Committee hearings are not their first-choice for internet browsing. Yet from October 2020, the Digital, Culture, Media and Sports, Select Committee embarked on an investigation into the economics of music streaming.