Supplementary written evidence submitted by the BPI

 

 

 

Thank you for the opportunity to provide evidence to the Committee at the session held on 10 February. I hope you found our contribution to the Inquiry helpful.

I fully appreciate that it is not possible, given time constraints, to cover every important issue at every session, and so I would like to set out some brief observations on equitable remuneration and unlicensed platforms, two subjects that were not addressed in detail during the BPI’s panel on 10th February. I also provide further information below in relation to BPI’s engagement of consultancy support and one of our former employees, the two areas where I undertook to write to the Committee.

Equitable Remuneration

Artist representatives appearing before the Committee called for the introduction of a so-called Equitable Remuneration (ER) system on music streaming.

As I outlined during the oral evidence session on 10 February, we believe that the only truly effective means to significantly increase royalty payments to all artists would be to generate more value from the streaming economy – to proverbially ‘grow the pie’. We are concerned that the proposals for ER would have the opposite effect, with serious adverse consequences for the whole UK recorded music sector. You will be aware that we have submitted a briefing paper setting out our concerns with ER, and I re-submit this as an annex below for ease of reference. 

In summary, we do not believe ER would have the intended effect of raising artist incomes – particularly for those who are already earning less. In addition, ER runs the serious risk of harming future artists by suppressing investment into new talent. Where ER models have been adopted around the world, they deliver very low shares of revenue back to music stakeholders, since they remove the power of rightsholders to walk away in a negotiation. This is illustrated by the fact that TV and radio broadcasting, which is licensed under ER in the UK, generates only 1/7th of the royalties generated by streaming. That much smaller pot is then distributed according to usage, meaning that the large majority of the (lower) royalties go to the most successful artists; and the amounts paid out would be further reduced since they would also be shared with non-featured performers (who have already been paid through their session fees). Both successful and less successful artists would lose out; and the UK would become much less competitive globally as a result of reduced risk taking and investment. As our longer note sets out, ER would also represent a significant intervention into thousands of private contractual arrangements and be complex and costly to administer.

Unlicensed Platforms - Twitch

[Redacted].

Written follow-up on Questions from Committee Members

Engagement of Consultancy Support

I undertook to provide more information about the engagement of a communications consultancy. The BPI is a small member-based organization with a modest in-house communications and public affairs team - just three staff covering both areas. We take this inquiry seriously and want to engage in the most constructive way possible. It is therefore not unusual for us to retain external agency support (and this is commonplace for other organizations, as the exchange with the MU about their engagement of Lodestone made clear). We engaged Fleetwood Strategy in an advisory capacity – primarily focused on communications and media support, and preparation for our evidence session. To respond to a specific question raised in the session, they have not been engaged to, or undertaken, any communication with politicians, including any members of the Committee. Communication with MPs and ministers is undertaken by BPI staff, and largely by our in-house public affairs resource (Sophie Jones, our full time Director of Public Affairs and Hudson Roe, a part time member of staff working as Senior Adviser, Public Policy) or by me.   

David Wood

[Redacted].

 

As you approach the completion of the oral evidence sessions, we would welcome the opportunity to have a follow up private meeting to reflect on some of the issues raised in the Inquiry.

If you have any further questions in the meantime please don’t hesitate to get in touch.

Yours sincerely,

Geoff Taylor

Chief Executive, BPI, BRIT Awards & Mercury Prize

 

 

Annex 1: Previously submitted briefing on Equitable Remuneration

FOLLOW UP BRIEFING NOTE 5: ALTERNATIVE MODELS: EQUITABLE REMUNERATION

APPLYING EQUITABLE REMUNERATION (ER) TO STREAMING WOULD SIGNIFICANTLY REDUCE THE VALUE OF THE UK MUSIC BUSINESS, UNDERMINE INVESTMENT, CREATE INEFFICIENCY AND REDUCE UK COMPETITIVENESS


DCMS SELECT COMMITTEE INQUIRY ON THE ECONOMICS OF MUSIC STREAMING - BPI FOLLOW UP BRIEFING NOTES

THE REALITY OF MUSIC STREAMING: ADDITIONAL CONTEXT AND DATA TO CLARIFY MISCONCEPTIONS AND INACCURACIES IN THE DEBATE SO FAR

 

The DCMS inquiry discussion so far has centred on the claims of specific individual artists and creators rather than considering the overall economics of music streaming and its impact on the whole sector. Accordingly, BPI is providing these supplemental briefing notes to build on and reinforce our original submission and to provide additional information on some of the key themes that have arisen so far. As such, these notes should be read in conjunction with the main submission).

 

In providing more data and challenging a number of assertions made, our intention is to aid the Inquiry’s evidence-based and objective analysis of the music sector. Streaming continues to evolve, but overall, BPI and its members believe the evidence shows that it benefits artists, consumers and the UK economy. New analysis conducted by the BPI as the Inquiry has unfolded shows that more artists are active in the market, and more are achieving volumes of sales and generating earnings from streaming than in the CD era; that success is spread across more artists, with major artists less dominant than before; that artists are achieving very significant global success; moreover, record labels are sharing the growth that has returned to the sector with increased investment in A&R and marketing and in growing royalty payments. Additional data is provided below on these points, and in addition to those contained within the BPI’’s primary Inquiry submission.

 

Policy intervention is unwarranted at this time and risks destabilising the music economy at a time at which it is innovating and growing; there is a significant risk of undermining future investment and reducing UK competitiveness, with a consequent negative impact for new talent and consumers.

 

As articulated in our original submission, there are, however, a number of specific opportunities for growth, which would benefit the whole of music in the UK, supported by positive policy intervention (see original response for more detail). These opportunities have yet to be addressed by the Committee and include:

 

      Artist Incomes in the Streaming Era

      Democratisation of Music in Streaming

      The Evolving Role of Record Labels

      How Streaming Works

      Alternative Models: Equitable Remuneration

 


 

FOLLOW UP BRIEFING NOTE 1: ARTIST INCOMES IN THE STREAMING ERA

Data shows that overall more artists are achieving significant consumption milestones than before – with artists benefiting from a greater share of revenues as the market has started to return to growth.

 

MORE ARTISTS ARE NOW ACHIEVING MILESTONE STREAMING VOLUMES THAN BEFORE

STREAMING IS A GLOBAL BUSINESS – WITH REACH TO FANS ALL OVER THE WORLD

 

ARTISTS’ GENERATE INCOME FROM MORE THAN STREAMING ALONE

 

ROYALITIES HAVE BEEN RISING: ARTISTS AND SONGWRITERS NOW COMMAND A HIGHER SHARE OF REVENUES

 

 

 

 

 

 

 

 

 

 


1 12 million streams equates to £15k earnings (based on 20% royalty rate)

 


 

MAJOR LABEL REVENUES AND ARTIST REMUNERATION (2016-19)

 

 


 

 

 

 

STREAMING EARNINGS ACCRUE OVER A MUCH LONGER PERIOD OF TIME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


2 The 15% is nearly double the share in the CD era, at 8% of PPD

 


 

FOLLOW UP BRIEFING NOTE 2: DEMOCRATISATION OF MUSIC IN STREAMING

Streaming has ‘democratised’ music – for artists and fans for like; providing unprecedented choice and value for money.

MORE ARTISTS ARE ABLE TO RELEASE MUSIC IN THE STREAMING ERA – AND SUCCESS IS SPREAD MORE BROADLY:

ARTISTS HAVE MORE CHOICE…

…AND EVERY ARTIST DEAL IS INDIVIDUALLY NEGOTIATED WITH FULL LEGAL REPRESENTATION

COMMERCIAL SUCCESS IS DRIVEN BY THE MOST DEMOCRATIC OF ALL MEASURES – POPULARITY

 


3 The no. of artists with 1m streams in 2020 is more than twice the number that achieved the equivalent level of CD sales in 2007 (1000 units): 7800 vs 3533. And the number of artists with 100,000 streams is more than six times greater than the number of artists that sold 100 units in 2007 (over 300,000 versus 47,166).

 


 

 

FOLLOW UP BRIEFING NOTE 3: THE EVOLVING ROLE OF RECORD LABELS

 

LABELS ARE INVESTING MORE IN THEIR CORE ACTIVITIES OF A&R AND MARKETING AND PROMOTION IN THE STREAMING ERA

 

 

LABELS HAVE ADAPTED TO STREAMING: REINVENTING THE BUSINESS MODEL TO BE DIGITAL-FIRST AND SUPPORTING ARTISTS TO SUCCEED IN THE COMPETITIVE, GLOBAL STREAMING MODEL

 

 

TRADITIONAL “FULL SERVICE” RECORD DEALS REMAIN POPULAR WITH ARTISTS - BUT ARTISTS ARE FREE TO CHOOSE OTHER DEAL TYPES OR TO WORK WITHOUT A LABEL.


4 The Committee heard specific reference to Warner Music Group’s investment: as itemized in public documents, investment has remained broadly constant between 2017-2019.

 


 

recoupment can take longer; through to the other end of the spectrum where the artist might carry more risk of losses, receive no payment up-front in the form of an advance, but generate royalty payments more quickly.

 

AFTER 15 YEARS OF DECLINE, LABELS ARE ONCE AGAIN MAKING PROFITS, WHICH PERMITS GREATER INVESTMENT, EMPLOYMENT AND TAX CONTRIBUTIONS TO THE ECONOMY.

 

 

RECORD COMPANIES AND PUBLISHERS ARE RUN AS INDEPENDENT PROFIT-MAXIMISING BUSINESSES, EVEN WHERE THEY ARE PART OF THE SAME CORPORATE GROUP – KEEP/ROLE OF RECORD LABEL

LABEL DEALS WITH DSPS ARE COMPETITIVELY SENSITIVE, PRIVATE CONTRACTUAL TERMS THAT RIGHTLY CONTAIN CONFIDENTIALITY PROVISIONS. HOWEVER, ARTISTs HAVE ACCESS TO NECESSARY INFORMATION TO ENSURE ROYALTIES ARE FAIRLY CALCULATED

 


 

 

FOLLOW UP BRIEFING NOTE 4: HOW STREAMING WORKS

COMMERCIAL SUCCESS IN STREAMING REQUIRES AT LEAST TENS OF MILLIONS OF UK STREAMS PER YEAR – HOW STREAMING WORKS

 

THE FOCUS ON A ‘PER STREAM’ RATE IS MISLEADING AND OVER-SIMPLISTIC: THERE IS NO SINGLE ‘PER STREAM’ RATE BECAUSE IT IS VARIABLE.

 

STREAMING GIVES THE CONSUMER CONTROL OVER WHAT TO LISTEN TO

 

 


5 As explained in BPI’s first submission, premium streams and ad-supported streams (whether user-selected or algorithmic) do however pay out at different rates.