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Artist remuneration remains a key sticking point as MPs return to the economics of streaming debate

By | Published on Wednesday 16 November 2022

UK Parliament

MPs on the UK Parliament’s Digital, Culture, Media & Sport Select Committee yesterday heard from music industry experts and representatives about the work that has been ongoing within the music community since the committee published its report last year on the economics of music streaming. There were definite developments around transparency and data to be updated on, although it was clear from yesterday’s session that artist remuneration remains a key sticking point.

The select committee called for a “complete reset” of the streaming music ecosystem in its July 2021 report, which was based on a series of oral sessions in Parliament last year and a plethora of written submissions from across the music community.

MPs basically concluded that artists and songwriters were not benefiting enough from the music streaming boom that took a recorded music business that had been in decline for fifteen years back into growth in the mid-2010s. With that in mind the committee made a number of recommendations, including a number of proposed copyright law reforms which were then also included in a private members bill presented in Parliament by committee member Kevin Brennan MP late last year.

In response to the report, the UK government said that MPs had raised some important issues, but that its preference would be for the wider music community to come up with industry-led solutions to said issues, rather than having copyright law re-written – albeit with the option of copyright law reform still on the table if no solutions could be found.

Keen to facilitate those industry-led solutions, the government’s Intellectual Property Office instigated a number of projects overseen by what it calls the music industry contact group, a committee mainly made up of representatives from the various music industry trade associations, so the organisations that represent artists, musicians, songwriters, managers, record labels, music publishers and the streaming services in the UK.

There are some independent experts on that committee too, including myself, there to give other viewpoints. Through all of CMU’s editorial, educational and consulting work, we are in a position to provide the big picture view, ie how all the cogs of the digital music business fit together. Which is a good viewpoint to have, I reckon, given many of the issues with streaming occur between the cogs.

Having been involved in some of that IPO-led work – as well as continuing to collaborate with the Music Managers Forum on its long-running ‘Dissecting The Digital Dollar’ project – I was among those questioned by MPs yesterday. Appearing alongside music economist Will Page and intellectual property expert Hayleigh Bosher, we were questioned about general trends and developments in the streaming music sector and, in my case, about the progress made by the IPO-led projects.

In the second hour of the session Naomi Pohl from the Musicians’ Union, Tom Gray from the Ivors Academy and Geoff Taylor from the BPI then outlined their respective positions on the issues, solutions and progress made in the last year. It was during that section that the current sticking points became very apparent.

But first, what has happened in the last year behind the scenes? The IPO organised its work into three strands. That was a sensible move, because the economics of music streaming debate is actually a number of separate debates, and it gets confusing quickly if the distinction between the different debates isn’t made. The three strands were respectively focused on data, transparency and creator remuneration.

For data and transparency, working groups were convened made up experts from across the industry, most nominated by the aforementioned trade associations. They were tasked with considering, debating and scrutinising the data and transparency issues that had been raised in the select committee’s report and the proposed solutions to those issues.

The members of the working groups are there to offer expertise rather than negotiate, although alongside each working group there have been discussions between the trade associations in a bid to agree some plans.

A plan for better communicating to artists and songwriters how their music is exploited and monetised by the streaming services. And a plan to better manage the music rights data that is key for ensuring artists and especially songwriters are properly credited and paid when their music is streamed.

That work is very much ongoing and – perhaps unsurprisingly, given how many stakeholders need to be consulted – it is taking slightly longer to be completed than originally hoped. However, depending on how the final negotiations go, the plans of action on both data and transparency could be in place in early 2023.

I am actively involved in the transparency working group and therefore discussed that work at yesterday’s select committee hearing.

Earlier this year, I worked with the various creator organisations – including the Featured Artists Coalition, Musicians’ Union, Ivors Academy and Music Managers Forum – to put together a transparency wishlist, including all the data and information that artists, writers and their managers would like to have access to so that they can fully understand their own individual digital music businesses.

That wishlist has then informed a document that sets out a number of aims and commitments for labels, publishers, collecting societies and streaming services in terms of what data and information they will seek to make available moving forward.

That will be done both reactively – ie answering questions asked by artists, writers and managers – but also proactively, making some data and information available through each company’s portals and other communication channels day-to-day, so that the wider music community understands how different services work and how they get paid.

For their part, the creator organisations – who come together via the Council Of Music Makers and are pretty much in agreement on all of this – have been pushing for a wider range of data and information to be made available, and for more of that data and information to be provided via proactive communications, rather than on a reactive basis.

So, lots of progress, but still plenty of work to be done and things to be negotiated and agreed before those data and transparency plans are ready to go.

And, at that stage, it will be important for the wider music community to embrace the proposed changes around data and transparency, as success will need the involvement of many stakeholders, and many of the teams working within labels, publishers, societies and streaming services, not just those with specific data or communication remits.

Education and communication has been part of the planning process within the working groups already, and the importance of that outreach was stressed during yesterday’s hearing.

But what about creator remuneration? Actually, that in itself is at least three separate debates.

Firstly, there is the debate about how streaming money is allocated each month to each track in a streaming service’s catalogue. Second, there is the debate about how streaming money is split between the separate recording rights and song rights, and the streaming services themselves. And third, there is the debate about how the money that flows through the recorded music side is shared between the labels and the artists.

The IPO-instigated work on creator remuneration has generally focused on the latter. That’s because the copyright reforms proposed by the select committee are mainly focused on the latter too, based on the argument that artists – or at least some artists – should be getting a bigger cut of the streaming money generated by their tracks than they currently receive.

What cut each artist gets depends entirely on the deal they did with their record label or music distributor, and could be anything from a few percent to 100%. The select committee – and Kevin Brennan’s subsequent private members bill – proposed a contract adjustment right that would allow artists to renegotiate old deals that they feel are no longer fair and a reversion right that would actually allow them to terminate those old deals.

Then there was the proposal that performer equitable remuneration be applied to streaming, which would mean that artists would get at least some of their cut of streaming money directly via the collective licensing system – so via PPL – at industry standard rates as currently happens with radio. Session musicians, who currently get nothing from streaming income, would also likely benefit from an ER system of that kind.

Labels – both major and indie – have raised a number of concerns about all three of those proposals, including the impact they would have on any one label’s ability to invest in new talent, and the fact that the increasing number of artists who release music via their own labels – in partnership with a distributor or another label – could actually be worse off if those copyright reforms went ahead.

However, those concerns haven’t really been officially raised or scrutinised within the IPO-led work to date because a different approach was taken on creator remuneration. Rather than going straight to a working group, research was commissioned to consider the potential impact of the three proposed copyright reforms, ie the contract adjustment right, the reversion right and the ER right. That research is nearing completion, after which discussions will begin.

As I noted yesterday – while I believe that the work on data and transparency is incredibly important – the creator remuneration debate is a crucial part of the wider conversation. And, for the artist, writer and management communities, creator remuneration is the single most important of the various streaming debates. Which means there is now a sense of urgency within those communities to progress that strand of the IPO’s economics of music streaming work.

A possible alternative to the three proposed copyright law reforms is an industry agreement regarding artist remuneration, possibly similar to that recently agreed within the French music industry. That would likely include some kind of minimum artist royalty and a system for making payments out of streaming income to session musicians.

There is some support in the label community for that approach and, indeed, some indies already basically operate a minimum artist royalty rate system, applying a minimum rate across their catalogues. However, so far that’s not a consensus position among all labels.

Many labels argue that artist royalties are slowly increasing on new record deals anyway, mainly due to competition in the market place to sign talent, which is true. And therefore many labels are already offering royalty rates higher than any likely minimum on their new deals – and an artist working on a distribution basis with a label is likely getting much more than that possible minimum rate.

However, artists and managers point out that a minimum rate would enhance that existing trend, and also – crucially – benefit the many artists stuck in old record deals where artist royalties are lower and where labels are still applying those old royalty rates. As a general rule, the older the deal the lower the rate, so some heritage artists will be on single figure percent rates.

The increasingly urgent need for the IPO-instigated work to open up an active discussion on artist remuneration – and for that conversation to include consideration of a minimum royalty rate – was a key theme of the second section of yesterday’s hearing, when the reps of the Musicians’ Union, Ivors Academy and BPI spoke.

The MU’s Naomi Pohl confirmed that her major frustration with the IPO-led process so far is that the “big issue” and “elephant in the room” – ie artist remuneration – has not had any formal discussion.

While the in progress research is to be welcomed, “what we need is to sit around a table and have a negotiation and it’s not happened. There might have been some conversations out of the room, but conversations haven’t been happening in the room. And I just feel that that is an absolutely urgent priority”.

Addressing the issues around artist remuneration may well involve a package of solutions, she added. “Equitable remuneration is one option and it might be the best option – I’m quite supportive of ER as a solution”.

“But”, she went on, “it could also be a minimum digital royalty, for example. And, for session musicians, it could be more of an upfront payment for session musicians with something on the back end as well, which might not be equitable remuneration, but could be a pot of money set aside and processed by PPL”.

“There’s lots of different ways that you could solve the problem”, she added, “but at the moment, the committee clearly identified that there is a problem in terms of artist remuneration and we’re not anywhere close to getting a solution on that”.

Asked for his take on the artist remuneration debate, the BPI’s Geoff Taylor stressed again that on new deals artist royalties have been increasing and that – whereas in the past a label would often control an artist’s recordings for life of copyright – with modern deals the rights often revert to the artist after a period of time.

Meanwhile, on older deals signed before 2000, all three majors are now paying through royalties to artists who never recouped the advances they received in the past or paid back any other upfront costs that were recoupable in their deals.

“The three major companies all announced that they will write off unrecouped balances on pre-2000 deals”, he stated, “which is a very substantial announcement, which means that thousands of artists will now be receiving streaming royalties on top of their advances that they previously received”.

Meanwhile, with session musicians, he added, “we’ve been doing work on the industry side with the Musicians’ Union, where we’ve put a proposal to the MU for a significant increase in session rates for the session musicians to ensure that they are not left behind”.

Unlike featured artists, who have royalties in their label deals, session musicians are generally paid one-off fees. Therefore, Taylor conceded, they haven’t really benefited from the streaming-led revival of recorded music. “And so we think they have been somewhat left behind”, he went on, “and so we have put forward a proposal to address that”.

But Tom Gray – who is involved in this conversation both as Chair of the Ivors Academy but also as founder of the #BrokenRecord campaign – backed up Pohl in saying that further discussion is urgently needed about artist remuneration, including a possible minimum royalty rate.

While it’s great that the majors are paying through royalties to unrecouped artists, he said, that commitment will sometimes relate to old record deals “where the rate is 2%, or 5%, or 6%, on a stream that’s worth a third of a penny. So, you know, if you don’t lift those artists up to a minimum royalty of 15% or 20%, then that’s not going to cost the labels an awful lot of money”.

“There is no reason not to introduce minimum royalty rates into the market, it should be on the table”, he insisted. “I don’t know why it’s not on the table”.

While artist remuneration clearly remains a big sticking point in the wider music community – as does the split of streaming monies between the song rights and the recording rights – there is also quite a lot that unites all strands of the music rights industry, including the obligations of user-upload platforms that use music and concerns over proposed new copyright exceptions in the AI domain.

In the first part of yesterday’s session, Hayleigh Bosher also noted that the baseline cost of streaming to the consumer has not really increased since Spotify went live in the late 2000s, with the 9.99 price point getting less lucrative every year because of inflation. Given that streaming is a revenue share business for the music industry, that means there is less revenue to share.

Of course, as Bosher also noted, Apple has now increased the baseline subscription price for its music service to 10.99. And it seems likely that Spotify – which has previously only really instigated price increases to its bundles like the family plan – will probably now follow suit. And “growing the digital pie” in this way is supported by pretty much the whole music community.

Although, Will Page made a very interesting observation. He talked about herbivore and carnivore markets, suggesting music streaming has been the former to date, but will become the latter.

Basically, most players in music streaming have been mainly targeting consumers yet to sign up to a paid-for music service and in many cases they are targeting different kinds of consumers. Therefore all services have been steadily growing their subscriber bases over the last decade. But, he added, when you get to market saturation, services start to go after their rival’s subscribers and it becomes a carnivore market.

When that happens, you have to wonder whether any of the players in the market will want to compete on price point. Optimists have mused that, once the 9.99 price point is broken, music services will probably start instigating semi-regular price increases like the video services to keep up with inflation. But if the carnivore market kicks in just as we get to that point – maybe not.

One last point raised during yesterday’s session related to those aforementioned working groups and, in particular, which music industry people have been appointed to them. That isn’t currently public knowledge which, it was noted, means – somewhat ironically – there is a lack of transparency about the transparency working group.

Now, members of those working groups are there as experts not negotiators, donating their time and expertise to the process. But still, it was a valid observation. Fingers crossed we can get some transparency on that particular point pretty quickly, even if it takes a few more months for the data and transparency projects to generate some outcomes. As for whether any resolution on the artist remuneration debate can be achieved in the short term – well, let’s see shall we!

You can watch yesterday’s select committee hearing here.

This story is discussed on this edition of our Setlist podcast.

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