Yesterday, at the second meeting of the DCMS Select Committee inquiry into streaming, witnesses highlighted the outdated nature of the current contractual system and the need for remuneration reform for authors and performers.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.
An outdated contractual system for streaming
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!”
In addition to the discrepancy between current remuneration mechanisms and the modernized music industry, witness Kwame Kwaten pointed to what music expert Chris Cooke coined as the “leaky pipe” – the loss of revenue incurred by the succession of multiple intermediaries between revenue collectors and content creators. In agreement, Sevillano confirmed that more than “$2,5 billion was lost to black boxes last year”, otherwise known as the “Black Box Royalties''. These unpaid funds usually accrue when a Digital Service Provider like Spotify or Apple Music can not trace the writer or publisher of a song.
A solution to be found in the Spanish system - a collectively managed remuneration right
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”.
To curb this issue, Spain put in place a remuneration right. Since 2006, under Spanish copyright law, artists have had 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 to and independent of the contractual arrangements between the artist and the record company. 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”).
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.”
A plea for music sector reform
Lastly, committee member and MP John Nicholson presented a plea from a performer watching the hearing, saying: “I hope this committee can bring an end to the scandal that is streaming or there won’t be any musicians left.” With that perspective, he asked Sevillano: “What is the one thing we can learn from the Spanish model?” The answer was clear - adopt a mechanism similar to the one in Spain to provide performers with a voice: “In Spain, the performers have their own voice and can negotiate their own rights. The remuneration right has successfully been implemented in the Spanish Law since 2006 which means performers now receive fair compensation from streaming”.