MPs on the DCMS select committee are currently examining the economic impact that music streaming is having on artists, performers, record labels and the wider music industry.
Over £1 billion in revenue was generated from 114 billion music streams in the UK last year, with the inquiry noting, however, that “artists can be paid as little as 13% of the income generated”.
Despite the main focus of the inquiry being on streaming services, views are also sought as to whether the government should be proactive in protecting the industry following the EU’s recent steps and if the UK needs an equivalent of the Copyright Directive (following the announcement that the UK would not be implementing it).
This blog post will summarise the key takeaways from the three hearings and the written submissions most relevant for performers.
What You Missed So Far at the Committee Hearings
The DCMS inquiry, which held its first evidence session November 24, is seeking the perspectives of industry experts, artists and record labels as well as streaming platforms themselves. So far, we've been through three sessions.
The first round of evidence
...was from panels consisting of:
Tom Frederikse Partner, Clintons Solicitors
Tom Gray Founder, #BrokenRecord Campaign, and vocalist, guitarist and songwriter, Gomez
Colin Young Streaming auditor and accountant, CC Young & Co
Guy Garvey Singer and songwriter, Elbow, and BBC 6 Music presenter
Ed O'Brien Guitarist, Radiohead, songwriter, singer and musician
Nadine Shah Singer, songwriter and musician
Mercury Prize-nominated singer-songwriter Nadine Shah has said that she makes so little money from streaming that she is struggling to pay her rent; “The earnings from streaming are not significant enough to keep the wolf away from the door,” she told the digital, culture, media & sport select committee inquiry into the economics of streaming. “I have a substantial profile, a substantial fanbase, I’m critically acclaimed but I don’t make enough money from streaming and am struggling to pay my rent. I am a successful musician, but I am just not being paid fairly for the work that I make.”
The panel made it clear that the most likely route to success is to introduce equitable remuneration in the UK and expand the role of CMOs to manage and distribute it.
"This is happening while foreign companies are making the best profit margins ever" says Tom Gray. With equitable remuneration we will get money into the UK economy. Equitable Remuneration = equal pay for equal work. For the first time in history, money will go directly into the pocket from the first stream of the performer. Regardless of contracts. This produces and income from stream one to the entire music community.
Many artists are stuck in unfair record deals - even in the streaming era, some artists are being charged a standard 10% for broken physical records. With artists booking 100% of the cost immediately on the record label's ledger, the income coming from their royalties at an average 20% of total earnings, leaves them only a limited period to recoup.
Most of it the terms in these deals are hold overs from the old physical world. We are now seeking a rebalancing of the risk / reward trade-off - but what can artists really do? The most likely route to success will be to expand the role of PPL through introducing equitable remuneration.
The second round of evidence
...was from panels consisting of:
Maria Forte Managing Director at Maria Forte Music Services Ltd
Kwame Kwaten Manager, record producer and owner at Ferocious Talent
José Luis Sevillano Director General at Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE)
Fiona Bevan Singer and songwriter
Soweto Kinch Jazz alto-saxophonist and rapper
Nile Rodgers Songwriter, producer and artist
In the second meeting of the DCMS Select Committee inquiry into streaming, witnesses highlighted the outdated nature of the current contractual system and the need for remuneration reform for authors and performers. UK MPs looked to testimonial by José Luis Sevillano, Director-General of the Spanish collective management organisation (CMO), amongst others, to find a solution for current streaming services’ system failure.
Consensus was found around the virtual table that, despite the clear benefits online services have brought to the music industry, regulations and stakeholders have yet to adapt adequately. Music expert and consultant Maria Forte described it quite bluntly: “As time has gone by, the industry has shoehorned traditional agreements and methodology into how streaming is dealt with and that has not worked.” The result of this maladaptation being the increasing inequitable division of royalties. Sevillano highlighted that of the online services subscriptions paid by users “50% go to record labels, 30% go to the platforms, and less than 10% goes to performers!”
The 2019 EU Copyright Directive regulates that “remuneration should be appropriate and proportionate to the actual potential economic value of the music”, Sevillano pointed out. Although the UK is no longer held accountable under the purview of this Directive, witnesses and MPs all seemed to agree with its underlying objective. Already back in 2006, Spain had identified the issues that would arise with the expansion of streaming and put in place a remuneration right for performers. At the time, in Spain, as is the case in most countries today, performers “were the only part of the music and AV industries who don’t have direct link to users. Performers don’t have the ability to negotiate their own rights”.
UK MPs were very interested in this mechanism presented by Sevillano, also pointing to the potential of such a system in collecting royalties across borders as Sevillano confirmed that around £800,000 flows from Spain to UK performers every year. Committee member MP Kevin Barron commented: “If this right existed across the European Union or in other countries as well, potentially, given the UKs strength in the music industry, it could be a very significant earner for UK-based musicians.”
The third round of evidence
...was from panels consisting of:
Peter Leathem Chief Executive at Phonographic Performance Ltd
Andrea Martin Chief Executive at PRS for Music
Tony Harlow Chief Executive at Warner Music UK
Jason Iley Chairman and Chief Executive at Sony Music UK & Ireland
David Joseph Chairman and Chief Executive at Universal Music UK & Ireland
The heads of three major labels – Universal, Sony Music and Warner Music Group – gave evidence before the digital, culture, media and sport (DCMS) committee inquiry into the economics of music streaming, in often testy exchanges about whether the model was fair.
Universal Music UK’s chairman and chief executive, David Joseph, told the inquiry that artists were “very happy with the investment, very happy with advances” they currently received, before the SNP MP John Nicolson interrupted, saying: “I think you’re living in cloud cuckoo land here if you really believe that.” Joseph also refused to answer a question about whether the lower royalty fees his label agreed with Spotify as part of a multi-year deal in 2017 had affected artists.
Harlow said streaming was “an evolving situation” that was being well governed, adding that any change or disruption could “diminish UK competitiveness”. Before the session, the BPI, which represents the three major labels, released data it claimed showed that of the money labels received from Spotify subscriptions, the vast majority was put back into the industry via A&R. Nicolson questioned that argument and claimed that Warner Music had given out more to passive investors than had been spent on artist development.
Kevin Brennan MP asked the final questions, where he made the key point that recording advances aren’t *investments* - they’re a purchase of life of copyright, and finally put the label bosses to the test with this record deal simulator (try it yourself here: https://dealsim.createos.app). It also becomes clear that the labels are getting a rate per stream from streaming services than artists if they earn £5000 per 1 million streams.
The Written Submissions
Below you will find a summary of written submissions from BECS, MU and AIE.
1. British Equity Collecting Society Limited (BECS)
Read the full written submission here: https://committees.parliament.uk/writtenevidence/15252/pdf/
The Committee has asked – Does the UK need an equivalent of the Copyright Directive?
It is vital that efforts to develop independence and evolution of a copyright framework outside direct obligations linked to the European acquis in Intellectual Property, does not block proper assessment of benefits which derive from others making world leading developments linked to the digital world. Whether this links to WIPO initiatives or EU positions, the UK must continue to deliver the world leading developments for the effective protection and enforcement of copyright and related rights, for which it has been well recognised.
1. When music and films are delivered by streaming services, it is becoming all the more important that the legal distinction between exclusive rights of performers to authorise the “making available” of their work via streaming services does not, in practice, exclude performers from mechanisms to receive fair and proportionate remuneration for use within streams using collective management organisations.
2. Government dialogue with stakeholders should include assessments of the way in which provisions included in Chapter 3 of the 2019 Copyright Directive are being transposed into national laws within EU Member States. This will show how the aims for provision of fair and proportionate remuneration for the work of performers within digital services of the future are being established in practice. This is important for UK performers, but also the foreign performers whose works are included in programmes streamed into the UK where their local national laws provide for equitable remuneration payments under local national laws.
3. The UK should take a lead in ratifying the Beijing Treaty on Audiovisual Performances (2012)2 . It has long been an anomaly in the framework administered by the World Intellectual Property Organisation (WIPO) that performing artists do not receive the same level of international protection for their audio-visual work - a film or DVD, for example - as musicians do for sound performances.
Musicians have enjoyed stronger ‘equitable remuneration’ rights for the use of recorded music since 1996 and the 2012 Beijing Treaty - so-called from where the signing took place – aimed to correct the disparity, establishing equivalent minimum standards to produce a more level playing field internationally.
The UK and the EU were among the Treaty’s signatories, but it only came into force in April 2020 after being ratified by the required minimum number of 30 member states. To date 2 https://www.wipo.int/treaties/en/ip/beijing/ both the UK and EU have not completed the ratification process. It is only through the ratification process that the protection laid out in the Treaty can effectively operate as standards to apply around the world. The UK should be seen to take a lead here. In this context BECS welcomes the support received in the EDM promoting early ratification of the Treaty.
2. Musicians Union (MU)
Read the full written submission here: https://committees.parliament.uk/writtenevidence/18910/pdf/
A survey of members of the Musicians’ Union and The Ivors Academy on streaming income in November 2020 (with 320 respondents) returned the following results:
More than 80% of respondents had earned less than £200 from streaming in 2019.
63% of respondents had earned less than £50 from streaming in 2019.
82% of respondents had earned less than £50 from their most streamed track in 2019.
Over 90% of respondents said less than 5% of their earnings came from streaming.
Traditionally, the back end of royalties from PPL sustain session musicians and artists but these do not currently apply to streaming revenue and therefore this represents a 'value gap' of a different kind in the view of the MU. The #BrokenRecord YouGov survey showed that 81% of consumers support the idea of session (or backing) musicians receiving streaming royalties.
There is also a move to achieve this across Europe, with the implementation of the Copyright Directive in EU member states, and the recent C8 Associates survey showed that performers would want streaming royalties paid through a CMO (such as PPL in the UK) rather than direct from a record label.
The survey results (here https://www.payperformers.eu/performer-survey-results) showed that 90% of all performers indicate that the streaming market has given them no meaningful return in income.
There is certainly an argument that music streaming platforms should increase their pricing and that this increase in revenue should be passed on directly to performers via a CMO. There is growing evidence that licensed streaming platforms are leading people away from illegal sites and helping to reduce music piracy, which is of course good news. A YouGov poll conducted in 2018 showed that 10% of those surveyed downloaded music illegally compared to 18% five years before and that 63% of those who had stopped using illegal download sites were now using streaming services. This reduction in piracy will primarily benefit the record labels unless fair remuneration for creators and performers is achieved.
We would like to see the principles of the European Copyright Directive enshrined in primary legislation in the UK. We believe that the wording of the European Directive could actually be improved upon so it is more effective and practical to apply.
3. Artistas Intérpretes o Ejecutantes (AIE)
Read the full written submission here: https://committees.parliament.uk/writtenevidence/15300/pdf/
Under Spanish copyright law, artists have an unwaivable right to equitable remuneration from the music streaming service which is subject to mandatory collective licensing. This applies when the artist has transferred their rights to the record companies. It is in addition and independent to the contractual arrangements between the artist and the record company. The relevant article is Article 108 of the Spanish copyright law.
In practice, AIE negotiates the tariffs for equitable remuneration for music streaming services on behalf of artists. We collect the money from music streaming services together with usage data, and after deducting administration fees (which are about 10%) we distribute the money transparently to Spanish and international (including British) artists based on our comprehensive databases.
This approach can be easily adopted in the UK by extending the established UK system for broadcasting and public performance to also cover music streaming (legally referred to as “making available to the public”). Under UK copyright law artists have an unwaivable right to equitable remuneration for broadcast and public performance which is subject to mandatory collective licensing. Artists and record companies share this equitable remuneration in equal parts. It is successfully administered by PPL, the UK collecting society representing artists and record companies. The main difference between the Spanish and the British approach is the scope of equitable remuneration: Under Spanish law music streaming is within the scope of equitable remuneration whilst under UK law pure music streaming, where the user selects a specific piece of music he wants to listen to at a certain moment in time - “making available to the public” - is expressly excluded from the scope of equitable remuneration. The co-existence of remuneration rights with exclusive rights is already commonplace in the UK, for instance regarding the fund for session musicians which guarantees 20% of revenues from sales of their recordings or the rental right, i.e. the right to receive remuneration from loaning a CD or a DVD from a library.
Read more about the successful Spanish model on our blog right here: