Written evidence submitted by the Musicians’ Union
RESPONSE TO DCMS STREAMING INQUIRY
The MU represents over 32,000 professional musicians working across all sectors of the UK music industry. We are delighted to see the CMS Select Committee running this much needed inquiry, having highlighted the issues with the current streaming model in the oral evidence given to this committee by our General Secretary, Horace Trubridge, earlier this year as part of the COVID inquiry.
We would be very keen to give oral evidence to the committee on behalf of our members.
Summary of music streaming economics:
At present streaming revenue is divided roughly as follows:
Yes. Another YouGov survey of consumers, supported by the #BrokenRecord campaign, Musicians' Union and The Ivors Academy showed that listeners feel streamed playlists are very much like radio. The survey, which spoke to a nationally representative sample of over 2,000 British adults, showed that 60% of streaming consumers felt playlist streaming is more akin to radio than listening to a CD: (https://ivorsacademy.com/news/significant-public-for-streaming-reform-in-yougov-survey-for-the-brokenrecord-campaign/).
Playlists are also often controlled by the major labels and tracks are 'pushed' to listeners, which has an impact on listening and therefore royalties. The Musicians' Union is concerned that over time listening will move from traditional radio to playlists on streaming platforms and this could have a detrimental impact on our members' livelihoods. Streaming increasingly mimics radio with curated playlists; a good example is “The GetUp” breakfast show: https://newsroom.spotify.com/2020-10-22/say-hello-to-the-hosts-of-the-get-up-spotifys-new-daily-morning-show/. However, unlike with radio, royalties from streaming are not guaranteed to artists and performers through collective rights management.
Radio listening in the UK is in slight decline as evidenced by RAJAR: https://www.rajar.co.uk/docs/news/RAJAR_DataRelease_InfographicQ12020.pdf. PPL royalties from radio and other broadcasting plus public performance help to sustain the incomes and careers of session (non-featured) musicians who currently receive no streaming royalties whatsoever. We would like to see a portion of streaming royalties, perhaps 25%, passed on to a collective management organisation such as PPL to distribute to labels, featured artists and session musicians by the same ratios as for PPL's radio licensing revenue. The ratios are: 50% to the label and 50% to performers (divided 65% to the featured artist and 35% to the non-featured). Incidentally, the percentage of PPL revenue that comes from broadcast licensing (such as radio) is in a steady decline of 3% annually (2017: 37%, 2018: 34%, 2017: 31%) and this is also of concern.
Streaming royalties paid via PPL would be of benefit both to non-featured (or session) musicians and also featured artists who are under exclusive contracts with labels and remain unrecouped. Record labels treat any money they spend on an artist, which includes any advance paid to them as well as all costs of manufacture, distribution and marketing of their music, as recoupable and therefore it is essentially a debt the artist must repay before they receive any royalties. Many artists (particularly those who signed record contracts in a pre-digital era) remain unrecouped for decades and never start receiving royalties. Unlike in a profit share arrangement, the artist is fully responsible for repaying all costs rather than sharing the costs and any resultant profits with the label. We believe this is unfair and that unrecouped balances should be wiped after a reasonable period, for example 15 years.
We are also concerned about the significant influence of the major labels and publishers over streaming playlists and algorithms. This is a barrier to independent artists and smaller labels accessing the marketplace and generating revenue from their music. Spotify have very recently launched a new feature for artists which allows them to boost the visibility on algorithmic playlists by accepting a lower royalty rate: https://newsroom.spotify.com/2020-11-02/amplifying-artist-input-in-your-personalized-recommendations/. They have offered this on the basis that labels and publishers already do similar deals. These sorts of practices will clearly have an impact on access to the marketplace and on the income of creators and performers. Major labels and publishers have far greater ability to negotiate or pay for tracks to be promoted by algorithms.
Streaming is a phenomenal success and labels are reporting record profits from it. The IFPI's Global Music Report 2019 showed that the recorded music market grew by 9.7% worldwide in 2018, the fourth consecutive year of growth. Streaming revenue grew by 34% and accounted for almost half (47%) of global revenue, driven by a 32.9% increase in paid subscription streaming. There were 255 million users of paid streaming services at the end of 2018 accounting for 37% of total recorded music revenue. Growth in streaming more than offset a 10.1% decline in physical revenue and a 21.2% decline in download revenue. However, it is our perception that this growth is not reflected in musicians' earnings. The average musician earns around £20k from music and during the Covid-19 crisis, during which the live sector has effectively shut it doors, tens of thousands have suffered financial hardship. Even without the impact of Covid-19, session musicians' upfront fees, for example, have stagnated over the past decade. The Musicians' Union negotiates minimum fees with the BPI and these negotiations have proved incredibly difficult. The minimum rate for a 3-hour session, to record up to 20 minutes of music, was £120 from 2011 to 2016. It increased to £130 in 2016 and there it remains. Traditionally, the back end of royalties from PPL sustains 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.
Streaming offers music lovers the opportunity to access an enormous catalogue of music either for free (supported by advertising) or at a relatively low monthly subscription fee. While Netflix, Amazon and Disney have successfully increased the pricing of their audio-visual streaming services, music streaming has remained at the same price point for a decade. 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 artists.
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.
Yes, we would like to see the principles of the EU Copyright Directive enshrined in primary legislation in the UK. We believe that the wording of the EU Directive could actually be improved upon so it is more effective and practical to apply. The broad principles of the Directive which we would want to see addressed in UK law are as follows:
Transparency obligations for record labels, music publishers, streaming platforms and other licensing entities so that creators can effectively make use of their right to audit music companies they are signed to or who administer royalties to them. At present, it is very costly for artists to audit labels and it is ineffective because they are not able to gain access to details of licensing deals with platforms because of non-disclosure agreements.
Liability of online platforms: ensuring that platforms including those that host user generated content will (barring exceptions such as parody) be liable for hosting unauthorised content, unless they have:
obtained a license
not displayed any copyrighted content which has been registered with the platform by rightsholders
Acted expeditiously to take down any copyrighted content on receipt of valid notice from the rightsholder
Made best efforts to prevent the reupload of taken-down content
Appropriate and proportionate remuneration for creators and performers from streaming. For example, the song currently receives around 15% of streaming revenue (divided between songwriter and publisher) whereas the recording receives around 55%. Session musicians currently receive no streaming royalties. If UK law enshrined the principle of appropriate and proportionate remuneration, this would provide a lever for representatives of creators and performers to negotiate fairer terms and royalties.
Contract readjustment: if the remuneration originally agreed under a license or transfer of rights turns out to be disproportionately low compared to revenues generated, rightsholders should be allowed to renegotiate contracts. Again, if this principle were enshrined in law then it would facilitate renegotiation of contracts which offer insufficient royalty rates to artists on streaming, for example. There are examples of music businesses improving their practices and adjusting existing contract terms but this is far from widespread. BMG, for example, recently eliminated controlled composition contracts from its US record deals: https://www.musicbusinessworldwide.com/bmg-exterminates-poisonous-controlled-composition-clauses-from-its-us-record-contracts/.
Rights revocation: music creators ought to be able to revoke a license, i.e. sign their works with a different music company, if after a reasonable timeframe the music company tasked contractually with exploiting their work is not succeeding.
We would like to see unrecouped balances for artists who signed contracts in a pre-digital era (heritage artists) wiped clean after a reasonable period of time (we would suggest 15 years but Martin Mills of Beggars Banquet suggests 20 would be reasonable: https://www.musicbusinessworldwide.com/martin-mills-majors-must-pay-artists-fairly-if-were-to-beat-youtube/). Record labels should also be obliged to account and pay royalties to all heritage artists and held to the same standards of due diligence in finding those to pay as CMOs are (under the CRM directive: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32014L0026&from=EN)
We would also like to see significant efforts from labels in particular to improve performer data on tracks so that royalty payments are paid out more accurately. CMOs and rightsholders can only be truly accurate and effective in distributing payments if their data is good quality. For example, record labels do not always provide PPL with the list of non-featured performers on a track when they register it. This leads to musicians not being paid. The IPO backed research project Music 2025 highlighted the music industry’s data problem but many in the industry failed to take the recommendations forward. Renewed efforts are crucial. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/809492/Music-2025.pdf. Minimum data standards are required as is the facilitation of meaningful industry dialogue on this issue.
We have also attached a supplementary paper detailing the issues with aggregator contracts. An aggregator is a digital content distributor. Aggregators register recordings with the streaming services, on behalf of artists, and collect any resulting royalty income. The streaming services won't deal with individual artists, so an aggregator is always required, unless the artist is signed to a label. An aggregator usually charges the artist an upfront fee and/or a percentage of royalty income from the streaming of their music.
Covid-19 has hit songwriters, featured artists, session musicians and composers hard. Gigs and commissions have been cancelled, festivals and performances postponed, and recording studios have had their capacity significantly reduced. This crisis has brought into sharp relief the fact that creators and performers are sustained primarily by income generated by the live side of the music business and that streaming royalties are woefully insufficient. MU members have reported over £21m of lost income since the Covid-19 lockdown came into force. It would take an estimated 62 million Spotify streams to break even on a £25,000 loss, which was the anticipated loss by Ivors Academy members at the outbreak of Covid-19 over a period of 6 months. This figure is unattainable for most music creators. There has never been a more urgent time to fix streaming so that it becomes a real source of income for musicians and composers.