Image Credit: William Santos
The three major streaming companies showed a willingness to discuss new changes to benefit artists, when questioned at the UK government’s inquiry into the economics of music streaming.
The UK government’s DCMS inquiry into the economics of music streaming has been investigating whether musicians are fairly paid by streaming services. We’ve been following the sessions, hoping for an outcome that puts more money in the pockets of music artists.
In one of the last hearings before UK MPs write up their report on the streaming economy, it was finally the turn of representatives from Spotify, Apple Music and Amazon to face questioning.
The committee took turns trying to prise out of the execs what balance they strike between ensuring artists are paid fairly and staying profitable as companies. Elena Segal from Apple, Amazon’s Paul Firth and Horacio Gutierrez from Spotify, all showed a surprising willingness to engage with the committee considering the whole debate is centred on if their business models are unfair.
Before we dive in, get up to speed on our coverage of the previous sessions in the inquiry here, here, here and here.
Would users pay a little bit more if it meant that their favourite artists got a fairer deal?
Spotify haven’t raised their prices in a decade. Asked if the price of Spotify subscriptions should be raised in a bid to get more money to artists, Head of Global Affairs and Chief Legal Officer at Spotify Gutierrez advocated for caution. He noted the need to strike a balance lest users turn to piracy instead, sending the music industry back to the bad old days of the late noughties. Worth mentioning here is the fact that Spotify have just announced the planned launch of a presumably more expensive HiFi tier.
Netflix meanwhile has raised its prices, but music streaming is a different beast to video streaming. They have an exclusive catalogue, whilst the music streaming services all pretty much have the exact same catalogue. And as the music streaming execs pointed out, they are competing with free – YouTube.
Does everyone hate YouTube?
YouTube is often the focus of complaints, as revenue from free, ad-funded music streaming is less than subscription-based streaming services as the company is protected by safe harbour laws from claims of copyright infringement.
Choosing her words carefully, Segal, Global Senior Director of Music Publishing at Apple said: “It’s challenging to compete on an un-level playing field… [YouTube] don’t necessarily have licences for all of the music that they use, and they don’t need to.
And even if they do have licences, the amount they pay because of the way their business model is set up, and the way the tariffs work, is less.”
Do the streaming companies agree that artists are losing money?
Presented to the companies was Nadine Shah’s testimony, wherein the independent singer-songwriter claimed that she doesn’t make enough money from streaming to pay the rent. How do the companies feel about that, then?
Spotify’s Gutierrez responded as diplomatically as you would expect, but warily pointed the finger at labels being the issue. 75% of streams came from major labels, and Gutierrez claimed the problem comes from how the revenues “trickle down” through the intermediaries from the moment the song is streamed. Addressing Shah’s comments, Gutierrez said:
It’s unfortunate that [Nadine Shah] feels that way… I don’t know what agreements she has with labels and publishers. I don’t know what the economic terms are with the split of the revenue that she might have agreed to with her label… I know that close to 70% of every pound that we generate gets paid to those intermediaries that represent artists.Horacio Gutierrez, Head of Global Affairs and Chief Legal Officer at Spotify
Spotify appearing before the UK government coincidentally came just a day after the company’s Stream On event, a livestream of announcements with plenty of hyperbole about how Spotify has transformed their artist’s lives. Musicians don’t hate the streaming model, as Gutierrez stressed, for one thing because of the “ability of artists to find an audience on the service.” Payouts to artists continue to grow, he added.
What are the alternatives to the current system, then?
A common thread throughout the session was the fact that streaming is actually a relatively new beast, and a very different one to the old standard of CDs and radio plays. Isn’t it far past the time to rewrite the rules to readdress the balance?
The committee has been keen to investigate whether a stream counts as a sale or a rental. Deciding either way would change how royalties are divvied up. Or perhaps the answer is that streaming is neither – in which case it’s something new entirely and therefore needs a new categorisation and formula.
Campaigners meanwhile have been pushing for equitable renumeration – an equal split of recording royalities between labels and artists. This is especially applicable to the radio-esque features like autoplay that streaming services offer users.
All three companies argued that such radio features are more interactive than classic radio and it’s difficult to equate the two. Segal also claimed she didn’t know the “detail of the economics of broadcast radio”, despite the fact that Apple Music does have its own radio stations.
MP Kevin Brennan pointed out that by Spotify’s own admission, stated by their COO Dawn Ostroff, they seek to “suck listeners away from radio”. Shouldn’t the artists who would have been streamed on the radio but are now being streamed online be paid what they would have from the radio? Gutierrez admitted: “Yes, it’s not going to happen overnight, and there’s no guarantees it will happen completely.”
Are user-centric streaming payments the way forward?
The current system sees all revenue pooled before being allocated according to market share. In 2019 Deezer tested out the user-centric approach for payouts instead – giving money only to the artist whose song is being streamed by the user. SoundCloud are looking to implement a user-centric subscription model as soon as next month.
As long as the streaming companies still got their share, all three companies seemed to be up to at least discussing the concept in the future. Spotify were open-minded to the idea, although it would have to work globally. Whilst he claimed Deezer’s study didn’t show a “dramatic” shift, Gutierrez conceded that “if musicians and artists prefer the model, we would support moving on to that.”
Amazon’s Director of International Music, Paul Firth, said: “The time has come now for the UK industry to come together and openly model and analyse what other distribution models could look like… and Amazon would be willing and very keen to be part of that.”
Apple’s Elena Segal was more cautious, saying they’d be open to discussion and that everyone who supplies music to the services would need to agree on a method before it could be implemented, and all agreed that any changes would need to be modelled on data.
So, did we witness a turning point in the inquiry?
If a breakthrough were to come, this session would be the chance. The three biggest streaming companies faced the committee for the first time, in one of the last sessions of the inquiry.
It would have been easy for the notoriously tight-lipped mega-companies to dodge every question, not show up at all, or say nothing at all like Twitch. However there seemed to be encouraging signs that Spotify, Apple and Amazon would indeed be willing to sit down and discuss the eventual findings of the inquiry and make some changes.
We’ll have to wait and see what the government recommends in its report. Whether equitable renumeration or a user-centric model come into play, artists deserve a better deal when their art that they’ve given everything to create and promote is streamed by eager fans.
As a music distributor, RouteNote is following the UK’s streaming inquiry hoping the result will benefit artists. If you’re looking to get your music out onto the major streaming services, RouteNote will be with you every step of the way. Start selling your music today – for free.