Image Credit: Ming Jun Tan

Major labels have taken a beating in the report from an inquiry into the economics of music streaming in the UK. Will artists now get a fairer deal from streaming?

Big changes could be on the way for the future of music streaming in the UK.

For months, the UK Government’s Digital, Culture, Media and Sport Select Committee (DCMS) has been gathering evidence about the state of the modern music industry with regards to royalty payments from streaming services to artists.

Now it’s published a report of recommendations for the government to act on going forward. And the big major labels do not come off well.

What is the economics of music streaming inquiry?

Since October 2020 the DCMS has gathered 300 pieces of evidence about fairness in the music industry, from artists, streaming services, major and independent labels, MPs, and academics. Musicians including Nile Rogers spoke passionately at the sessions to give their views on how the economics of streaming impact their everyday lives. At RouteNote we’ve been keeping an eye on the hearings, hoping to see an outcome that benefits independent artists.

There was one factor that united all those involved – the agreement that music streaming is a force for good. Streaming pulled the music industry back from the brink of ruin back in the worst days of music piracy and offers opportunities for artists to get their music heard around the world like never before.

The artists highlighted the fact that musicians and producers, even those with successful careers, aren’t making enough money from streaming to live off. This has been especially noticeable over the last year with pandemic shutting down live music. Songwriters meanwhile suffer even more, with unfair revenue splits.

Streaming services warned of the danger of going back to piracy days if ad-free subscription fees were increased in a bid to pay artists more. Record labels meanwhile insisted that changes would make negotiating with streaming services harder and damage artists in the long run.

The committee has now pulled together all the evidence produced throughout the inquiry. The next stage hands the reins to the UK Government, who decide whether to go ahead with the recommendations put forward by the committee.

So, what’s been decided?

The committee’s recommendations call for a complete reset of how the streaming model works, to modernise the music industry and bring it in line with the new age of music streaming. In particular, the report gives big record labels a proper telling-off, but doesn’t take aim so much at streaming platforms themselves.

The committee clearly took on board the arguments of the #BrokenRecord campaign, headed by Tom Gray of Gomez, that the streaming economy currently doesn’t work for artists and is biased towards major labels and big tech corporations. It calls for modernisation of a model that it says is based off pre-streaming days, and now needs to catch up.

The committee revealed their top five recommendations for what they think needs to happen to fix streaming:

Introduce equitable remuneration

Equitable remuneration means that performers, including backing singers, can share in recording revenues of a song. It’s the same as radio plays – a 50/50 split of broadcast music recording royalties between labels and artists, overseen by collecting society PPL.

The current system for streaming means that performers are paid according to their record deal – often 20% or for artists with older deals as little as 2%. As equitable remuneration already exists in UK law for radio plays, the committee argue it is a simple yet effective solution.

The committee suggested separating streams into those actively chosen by listeners and those selected by playlist algorithms. As recommendation playlist algorithms are more like radio, it would make sense for equitable remuneration to be applied there.

Look into the dominance of major labels

The committee recommends a competition inquiry into the market share of the music industry dominated by the three major labels, Warner Music Group, Sony Music and Universal Music . Big labels and rightsholders have an unfair advantage when it comes to streaming services with regards to what songs and artists get the best exposure.

The committee wants the big labels to be referred to the competition watchdog to investigate. This could mean huge shifts in the way the Big Three record labels dominate streaming services and the wider music industry.

Songwriters and composers should get a bigger share of streaming royalties

The government should work with the independent music publishing sector, songwriters, and composers, to help ensure songwriters can forge sustainable careers instead of earning tiny royalties for their work after everyone else has taken their share.

Make algorithms and playlisting fairer

The committee recommends tackling playlist payola by implementing a code of practice to ensure ethical decisions with regards to who makes it onto curated playlists on streaming services. The Advertising Standards Authority already advises social media influencers in this way.

Investigate safe harbour licensing arrangements

Artists earn less revenue from ad-funded services than paid services. YouTube’s free service for example accounts for 51% of music streams a year, but contributes 7% of revenue.

Free music streaming sites like YouTube and SoundCloud have a competitive advantage over streaming services due to safe harbour laws – whereas streaming services have to ensure music is licensed before they can host it, on YouTube users upload videos and the Content ID system then flags up infringing content.  

There’s much, much more to the report – if you have an empty schedule, you can read it here.

What happens next?

Everything now depends on how the government responds to the recommendations. Will they want to place restrictions on major labels, despite the fact they bring in huge amounts of money for the economy? Do they even have the power to change the way a song is split into different royalties, to give individuals like songwriters a bigger share?

This all feels like the first step on the road to shaking up the world of streaming. The government has two months to respond to the findings.