Business News Digital Labels & Publishers Legal

IPO publishes economics of streaming research on reversion and contract adjustment rights for music-makers

By | Published on Tuesday 7 February 2023

The UK’s Intellectual Property Office has published a new report scrutinising the possible practicalities and potential impact of introducing reversion and contract adjustment rights into British copyright law. Both those copyright reforms were proposed by Parliament’s culture select committee at the end of its inquiry into the economics of music streaming.

They were proposed by MPs as possible solutions to some of the problems raised during that inquiry, in particular around how artists and songwriters get paid when their music is streamed.

Another proposal was that the performer equitable remuneration system already in place on broadcast income be applied to streaming, so that artists get at least some of their digital income directly through the collective licensing system.

With a reversion right – sometimes called a termination right – an artist or songwriter that does a long-term record or publishing deal, where the label or publisher controls the rights in the music-maker’s recordings or songs for a long time, would be able to basically cancel that deal and reclaim the rights after a set number of years.

Rights of this kind that already exist in some copyright systems often take the form of a use-it-or-lose-it clause. When that is the case, if a creator assigns rights to a business partner, but the partner fails to exploit the work, the creator can get the rights back.

However, in the US in particular there is a more impactful termination right that allows copyright assignments to be fully terminated, albeit only within the US, after 35 years. The IPO report discusses that US right in some detail.

A contract adjustment right is somewhat less dramatic, in that the artist or writer can’t cancel their old deals, but can force the terms of those deals to be renegotiated in some way.

Rights of this kind already exist in some European countries and a contract adjustment mechanism was also included in the 2019 European Copyright Directive which is now in force, although not in the post-Brexit UK obviously.

Quite how this right works and who it benefits from it varies from country to country. It has traditionally been more to benefit creators who take a modest one-off upfront fee from a business partner for involvement in a recording or movie that then becomes a massive hit.

It allows them to negotiate additional payments in hindsight because of the often unexpected commercial success of the work they were involved in.

However, music-makers would also like it to benefit artists who are in theory cut into the success of a project – by receiving an ongoing royalty – but where that royalty seems unfair in hindsight. For example because some kind of innovation, like streaming, makes it much easier for a business partner to exploit the work.

Artist and songwriter groups generally support both reversion and contract adjustment rights. In the context of streaming, it would most help artists stuck in old pre-digital record deals which provide a much lower royalty rate than more modern deals. A reversion right would cancel that deal. An adjustment right would allow the artist to seek a better royalty rate.

The IPO report was commissioned to review how reversion rights and contract adjustment rights work in those countries where they already exist in copyright law; and also what impact such rights might have – on the UK copyright system and the British music industry – if introduced here.

It also reviews the opinions of each stakeholder group in the music community regarding the select committee’s proposals that a reversion right and an adjustment right be added to UK copyright law.

The writers of the report were not asked to express their own opinions on the merits of the committee’s proposals – instead their work is to inform the wider debate.

Unsurprisingly, while artists and songwriters support both proposed copyright reforms, record labels and music publishers are generally opposed to both of them, variously arguing that they aren’t needed and/or that they would negatively impact on the ability of music companies to invest in artists and writers.

Labels and publishers often argue that record and publishing deals are more favourable to artists and writers today than in the past, which is definitely true. Though that doesn’t help music-makers stuck in old deals. However, the labels and publishers also insist, they routinely voluntarily renegotiate those old deals.

That is also true to an extent, though the music-maker community argues that the effectiveness of that approach depends on each artist and writer’s negotiating power. And while superstar artists can always renegotiate old deals, mid-tier heritage artists who would benefit most from receiving modern royalty rates on their streaming income often aren’t in a position to fight for better terms.

Some labels have, of course, voluntarily applied better terms – and especially better royalty rates – across their entire catalogue, and where that’s the case a contract adjustment right possibly isn’t so important. The IPO report summarises some of those voluntary initiatives, although for now they are far from industry-wide, which makes getting new rights in law very attractive for artists and writers.

Of the three reforms, a reversion right – especially if applied retrospectively and potentially cancelling decades worth of deals – would be most fiercely opposed by labels and publishers. Performer ER on streams is not popular with labels either. Both labels and publishers could probably live with a contract adjustment right, although that would depend on the specifics of how it works.

However, the record industry and music publishing sector at large would almost certainly prefer some kind of voluntary industry solution instead of copyright reform – perhaps embracing some of the voluntary initiatives some labels have already instigated – if attempts to defend the status quo do ultimately fail.

Such a voluntary solution has not yet been formally part of the IPO-led discussions that have been taking place ever since the culture select committee published its streaming report.

When the committee held an update session on music streaming late last year, music-maker reps expressed frustration that, while there have been plenty of discussions on data and transparency issues, the conversation around remuneration and addressing bad artist royalty rates had not really begun. MPs on the committee then confirmed that they shared that frustration.

The delay on starting a remuneration conversation was partly because the IPO had commissioned its research on the three copyright reforms, meaning all discussion was basically on hold until that research had been published. With two thirds of said research now available – and the report on performer ER to follow – music-makers will no doubt again be calling for a formal remuneration conversation to begin.

You can access the new IPO report here.