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Government responds to Parliament’s economics of streaming report

By | Published on Wednesday 22 September 2021

UK Parliament

The UK government last night responded to the big ‘Economics Of Music Streaming’ report published by Parliament’s Digital, Culture, Media & Sport Select Committee in July.

Although calling the report a “key moment for the music industry”, ministers have accepted few of the committee’s recommendations outright. However, it will now convene a ‘contact group’ and two ‘working groups’ to further consider some of the legislative proposals, as well as the transparency and data issues that the committee raised. And it has also asked the Competition & Markets Authority to consider a study into the dominance of the music majors.

The select committee’s review of the music streaming market came on the back of campaigning by the likes of the Musicians’ Union, Ivors Academy and Tom Gray’s #brokenrecord initiative, which argued that – while the streaming boom has taken the record industry back into growth – many artists and songwriters are yet to see the benefit because of various issues with the way the streaming business and music industry are run. That became an even bigger issue as artists and songwriters saw other revenues falter amid the COVID pandemic.

After considering hundreds of written submissions from across the music industry – and testimonies at a series of oral hearings – the committee published a lengthy report calling for a “complete reset” of music streaming. It made numerous recommendations, but the two that got the most attention were that performer equitable remuneration should be applied to streams and that the CMA should investigate the dominance of the majors.

The latter recommendation had been called for by the Ivors Academy in particular and mainly relates to the ongoing debate over how streaming monies are split between the recording rights and the song rights. Some argue that so much more goes to the recording than the song because the majors are the dominant players on both sides of the music rights business. And, because – when it comes to sharing the revenue – record deals usually favour the label and publishing deals usually favour the writer, the majors have a vested interest in recordings getting more and songs getting less.

Although not really dealing with that allegation in its response, the government has nevertheless written to the CMA requesting that it consider the committee’s recommendation regarding a market study of the music rights sector and the majors’ role in it.

“As an independent competition authority, it is for the CMA to decide how best to use its resources to deliver its objectives in making markets work well for consumers and businesses”, the government’s response says. But, it then adds, “while remaining mindful of this, DCMS Minister Of State For Digital And Culture, Caroline Dinenage MP, and BEIS Minister For Science, Research And Innovation, Amanda Solloway MP, have written to Dr Andrea Coscelli, the Chief Executive of the CMA, to request that the CMA gives consideration to the committee’s recommendation”.

As for changing copyright law to help artists get a bigger cut of the digital pie, that requires more consideration, the government reckons. As well as the proposal that performer ER be applied to streams – so at least some streaming monies would pass to artists and musicians through the collective licensing system – the select committee also proposed a contract adjustment mechanism for artists to help them renegotiate out-dated old record deals, and a right to recapture copyrights that they assigned to record labels or music publishers decades ago.

“Many testimonies to the inquiry noted that [ER on streams] might not be in the interests of all performers and could result in lower revenues for some”, the government’s response says. “For example, some featured artists may receive better revenue under the current arrangement than they might under an equitable remuneration right. This suggests that changes could have significant impacts which are difficult to predict and must be investigated and better understood”.

Meanwhile, it goes on: “Evidence from the Netherlands on the contract adjustment mechanism suggests that it may have little impact in practice, partly because many creators and/or performers choose not to enforce the right against their contractual counterparts”.

With all that in mind, the government plans to convene a “music industry contact group” with senior representatives from across the music industry to discuss these legislative proposals further, as well as other proposals for changing the ways streaming monies are shared out, such as the artist growth model put forward by the Association Of Independent Music. Ministers will also commission research to understand the practicalities and potential impact of each proposed reform.

The government is actually already about to publish an in-depth piece of research on ‘Creators’ Earnings In The Digital Age’, which means this contact group and future research work will build on that as well as the committee’s report. Ministers say that they will also pursue further educational initiatives around music rights, building on the ‘Music Copyright Explained’ guide that the Intellectual Property Office published in partnership with CMU Insights earlier this year.

Alongside the contact group, two “technical stakeholder working groups” will also be formed, one focused on contract transparency and the other on music rights data. Both have been repeatedly raised as key issues in the digital music domain, the former affecting the ability of artists and songwriters to truly understand how the ever evolving streaming business actually works, the latter stopping music-makers – and especially songwriters – from getting paid.

On the data front, the government’s response also name-checks the ‘Credits Due’ project that was officially launched by Bjorn Ulvaeus at the Ivor Novello Awards yesterday, adding that the Department For Digital, Culture, Media & Sport and the IPO have a role to play in supporting industry initiatives around things like data.

“It is important that all parts of the industry work to ensure that the quality and timeliness of data is improved so that it is accurately recorded to allow for remuneration and attribution of creators”, it says.

“The government agrees it has a role in facilitating these industry discussions. To this end, the IPO and DCMS will work closely with partners on a music industry initiative ‘Credit’s Due’ to develop options for a minimum data standard. Work is already underway to convene a cross-industry technical working group. The group will be expected to report its progress after six months and our aim is for a minimum standard to be agreed after twelve months”.

Despite the commitments around data to help songwriters in particular get paid – and all the talk about the need for more transparency – the government actually rejects two specific recommendations in the committee’s report regarding issues on the songs side of the business.

For songwriters, arguably the biggest transparency issue in streaming relates to the super complex and super mysterious royalty chains down which money flows from the streaming services to the writers. Money gets deducted, delayed and sometimes stuck at each link in the chain, yet most writers have no idea what chains are being employed, and what other entities involved in the process are doing with their money.

To that end the committee recommended that “the government should require all publishers and collecting societies to publish royalty chain information to provide transparency to creators about how much money is flowing through the system and where problems are arising”.

However, “the government will not be taking forward” this recommendation, because “it questions whether this approach is feasible or practical: these parties are unlikely to have oversight of the entire chain, so will not be in a position to publish all of this information”.

This is a strange conclusion because, actually, of all the transparency issues, it’s relatively easy to resolve, it simply requires industry-wide consensus on the need for more transparency, rather than just a few independent publishers trying their hardest to pursue that agenda on their own.

And if the big music publishers – and especially the collecting societies – really don’t have “oversight of the entire chain”, that’s a spectacular failure of those organisations that suggests they are actually incapable of administering the rights with which they have been entrusted, and they should probably just shut down.

The government also rejected the committee’s main recommendations regarding tackling the streaming black box, ie the streaming monies on the songs side which have not been allocated to specific songs or copyright owners.

While it’s true that the black box problem is very much linked to the music rights data problem – so addressing the latter will help with the former – the committee also recommended research on why the streaming black box exists, and that – in the short term – ministers should put pressure on the industry so that unallocated digital monies mainly go to data and educational initiatives, rather than being paid out to the industry on a market share basis.

In its response, the government argues that the current regulation of collecting societies – stemming from European laws introduced pre-Brexit – already regulate black box distributions. “Under these regulations, collective management organisations are obliged to ensure that there are appropriate and effective mechanisms for members to participate in their decision-making processes, including in relation to policies on non-distributable revenue”, it writes.

That, however, ignores the fact that streaming money isn’t really proper “non-distributable revenue”. Which is to say, why public performance royalties, for example, may be “non-distributable” for logistical reasons, streaming money is “non-distributable” because of the fundamental failings of the industry.

And, the argument goes, while the big publishers and superstar songwriters continue to get the big old pay day that is the distribution of the streaming black box by market share, the big players in the industry don’t really have any interest in addressing those failings, whatever nifty data initiatives are launched.

Elsewhere in the government’s response it also talks about curation and algorithms and the pesky safe harbour, in the main suggesting further research is required, or that other government-led initiatives are already working in those domains.

Which is pretty much the theme of the entire statement – the committee’s report and the upcoming ‘Creators’ Earnings In The Digital Age’ report are both good starting points, but more work needs to be done before the government intervenes into the streaming music economy in any tangible way.

That is probably the right conclusion, although campaigners in the artist and songwriter community may fear that this is a way to kick everything into the long grass, even though some deadlines are set in the government’s statement.

Certainly some artists and songwriters reckon that some of the corporates in the digital and music sectors are likely hoping that – once the live industry is properly back up and running – music-makers will have less time to moan about the economics of streaming, and for many there will be less urgency in addressing the issues.

You can read the government’s full response here.

Read industry responses to the government statement here.

You can read all of CMU’s coverage of the economics of streaming inquiry here.

CMU’s Chris Cooke will host a session all about the streaming inquiry at the Brighton Music Conference this Friday at 11.30am – info about the wider conference here.