@digitalmusicnws: @Portisheadinfo Says SoundCloud’s ‘Fan-Powered’ Royalty System Has Boosted Their Payments by 500%

Back in March, SoundCloud introduced “fan-powered royalties,” or direct-to-artist payments based upon actual user engagement. Now, a track that Bristol’s Portishead released exclusively on SoundCloud in July has reportedly generated over six times the royalties that it would have made on streaming services with a pro-rata model in place.

Read the post on Digital Music News

Not You, ARPU: Another Way to Value Streams on Spotify

[This post first appeared on MusicTechPolicy.]

By Chris Castle

I recently co-wrote with the noted international economist Professor Claudio Feijoo a paper for the World Intellectual Property Organization on a new “streaming remuneration” royalty to be paid to all musicians and vocalists by streaming services. Part of our justification for the new royalty is that these creators, especially “non-featured” musicians and vocalists are not paid at all for streaming which is rapidly replacing radio (for which they are paid through SoundExchange). The value that the streaming remuneration would try to capture is not just revenue based (which is how all streaming royalties are derived currently) but also derived from the market valuation conferred on companies like Spotify. Spotify remember is more like YouTube would be than say Google because it is essentially a “pure play” music stock, kind of like Pandora was.

Claudio has done considerable work on trying to capture and express this value, so for today let’s do some rough justice using one of the approaches from the paper. There are more bells and whistles to the calculation than I’m going to give you here, but you’ll get the idea that a stream is assigned a much, much lower value when calculated on the revenue side of loss-making organizations than when calculated on the extraordinary wealth-making side of the public markets valuation of Spotify. And if you want to make a causal connection between low royalties and high market value, who am I to stop you?

The formula is simple: Divide Spotify’s market capitalization by the number of royalty bearing streams in a month and you have a rough idea of how much value each stream confers on the monopoly streamer.

Spotify’s recent market capitalization is $41,056,000,000 give or take an Arsenal in the rounding. A recent number of monthly plays as reported by the MLC is 24,815,407,149.

Divide market capitalization by number of streams. The result is $1.65 per stream in market valuation. According to the last Trichordist streaming price bible, Spotify’s per-stream rate was $0.00348 and for songwriters, even less.

$1.65 versus $0.00348. Where oh where might that delta go? It goes somewhere and it’s not to the people who made them rich. Not a perfect metric, but you get the idea.

You might say how do they sleep at night? The answer? Sleeping very well on much nicer sheets than you, thank you, and for one reason–they do not give a flying hoot about your problems because Daniel Ek doesn’t think you’re working hard enough to make him and all his employees richer.

#FrozenMechanicals Crisis: Comments to CRB by Twelve International Songwriter Groups Opposing Frozen Mechanicals Part 1

[We’re going to break this excellent CRB comment into two parts, so check back tomorrow for Part 2. You can find the whole post on MusicTechPolicy]

[Editor Charlie sez: This post demonstrates that no single songwriter group–including NSAI–speaks for every songwriter in the world and that songwriters around the world do not want their incomes smashed. So that’s a bit of a pickle.]

COPYRIGHT ROYALTY BOARD (CRB)

In re DOCKET NO. 21-CRB-0001-PR-(2023-2027)

Making and Distributing Phonorecords (Phonorecords IV)

Notice of Proposed Rulemaking re: 37 C.F.R. Part 385 Subpart B

Comments Submitted by the Songwriters Guild of America, Inc.,  the Society of Composers & Lyricists, Music Creators North America, and the individual music creators Rick Carnes and Ashley Irwin

These Comments Are Endorsed by the Following Music Creator Organizations:

Alliance for Women Film Composers (AWFC). https://theawfc.com

Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org

Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news

European Composers and Songwriters Alliance (ECSA), https://composeralliance.org

The Ivors Academy (IVORS), https://ivorsacademy.com 

Music Answers (M.A.), https://www.musicanswers.org

Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

Screen Composers Guild of Canada (SCGC), https://screencomposers.ca

Songwriters Association of Canada (SAC), http://www.songwriters.ca

I. Introduction

The following Comments are respectfully submitted by the signatory organizations Songwriters Guild of America, Inc. (“SGA”),[1] Society of Composers & Lyricists (“SCL”),[2] and Music Creators North America (“MCNA”),[3] and by the individuals Rick Carnes[4] and Ashley Irwin[5] (the parties sometimes collectively referred to herein as the “Independent Music Creators”).  These Comments have also been endorsed by the national and international music creator groups additionally listed above.  Together, these commenters and endorsers advocate for and represent the interests of hundreds of thousands of independent songwriters, composers and lyricists in the United States (US) and throughout the world.  

The Independent Music Creators speak today (i) in strong opposition to any rulemaking that would result in the adoption by the CRB of a proposed, continuing freeze on mechanical royalty rates for physical phonorecords, permanent downloads, ringtones, and music bundles, and (ii) against other, non-transparent elements that may be presented to the CRB by the National Music Publishers Association (“NMPA”), the Nashville Songwriters Association International (“NSAI”), and the major record labels Universal Music Group Recordings (“UMG”), Sony Music Entertainment (“SME”), and Warner Music Group Corp (“WMG”).   

II.  Statements of Interest

SGA is the longest established and largest music creator advocacy and copyright administrative organization in the United States run solely by and for songwriters, composers, and their heirs.  Its positions are reasoned and formulated independently and solely in the interests of music creators, without financial influence or other undue interference from parties whose interests vary from or are in conflict with those of songwriters, composers, and other authors of creative works.  Established in 1931, SGA has for 90 years successfully operated with a two-word mission statement: “Protect Songwriters,” and continues to do so throughout the United States and the world.  SGA’s organizational membership stands at approximately 4500 members.  SGA is represented by signatory Rick Carnes, who is signing as an individual music creator and copyright owner, and as an organizational officer.

SCL is the premier US organization for music creators working in all forms of visual media (including film, television, video games, and musical theatre).  It has a membership of over 2000 professional composers and lyricists, and is a founding co-member –along with SGA and other independent music creator groups– of MCNA.  SCL is represented by signatory Ashley Irwin, who is signing as an individual music creator and copyright owner, and as an organizational officer.

MCNA is an alliance of independent songwriter and composer organizations that advocates and educates on behalf of North America’s music creator community. As the only internationally recognized voice of American and Canadian songwriters and composers, MCNA, through its affiliation with the International Council of Music Creators (CIAM), is part of a coalition that represents the professional interests and aspirations of more than half a million creators across Africa, Asia, Austral- Oceania, North and South America, and Europe.  MCNA is represented by signatories Rick Carnes and Ashley Irwin, who are signing as organizational officers.

Of particular relevance to these comments, SGA, SCL and MCNA are also founding members of the international organization Fair Trade Music,[6] which is the leading US and international advocacy group for the principles of transparency, equitable treatment, and financial sustainability for all songwriters and composers.

III.  History of US Statutory Mechanical Royalty Rate-Setting 

As the CRB is well aware, the establishment of a compulsory mechanical rights licensing system, and the setting of a statutory mechanical royalty rate for the manufacture and distribution of sound carriers reproducing musical compositions, has its roots in the US Copyright Act of 1909.  Section 1 (e) of that law provided that once a musical composition had been distributed for the first time on a sound carrier in the US, any other party (i.e., a record company) was free to make and distribute its own recorded version of such composition so long as such party abided by the formalities set forth in the law, and paid a total of 2 cents for each unit of each composition distributed.  Thus began one of the most notorious miscarriages of economic justice in the history of the international music industry. 

By 1978, the tiny US record industry of the early twentieth century had grown into a multi-billion dollar, multi-national corporate entertainment empire that dominated the international music marketplace.  A good deal of the credit for such growth, it is widely acknowledged, is attributable to the fact that the intervening years were marked by one of the greatest periods of creative songwriting and composing that the world had ever seen, centered principally in the United States.  Those 20th century (and later 21st century) songs, composers and lyricists created the foundation on which the American record industry’s domination of global music sales was constructed, and on which it still rests.[7] 

Surreal as it may still seem, however, for that entire seventy-year period of phenomenal record industry growth between 1909 and 1978, the US mechanical royalty rate remained static at 2 cents per composition. According to US Consumer Price Index (CPI) statistics during those seven decades, the buying power of 2 cents in 1909 required the approximate equivalent of 14 to 15 cents in 1978.[8]  A songwriter or composer would have needed to earn about 750% of the original 2 cent royalty rate to have maintained his or her cost-of-living standard.  And yet no increase whatsoever had taken place.

Congress, despite enduring the intense lobbying of the recording industry not to take action, did finally raise the US statutory mechanical rate in 1978 under the “new” US Copyright Act of 1976.  It did so, however, by raising the rate by just 37.5%, to 2.75 cents.  Immediately thereafter, the entire record industry (claiming coincidence rather than collusion) immediately introduced and expanded the concept of the “controlled composition clause” into nearly every American recording contract.[9]  The practical effect of that essentially non-negotiable provision was to contractually freeze and then de-value the new US statutory mechanical royalty rate to 75% of its new level — driving it back down to two cents.

The outcry from the US and global music creator community over the ensuing years was substantial enough to result in gradual rises in the statutory mechanical royalty rate phased in every five years under the statutory rate-setting provisions of the 1976 Copyright Act (with some increases based upon negotiated cost of living increases tagged to various measurements under the CPI).  That process continued until its current 9.1 cent royalty rate zenith was reached in 2006.[10]  And there it has stayed, applicable not only to musical compositions manufactured and distributed in physical phonorecord form, but to permanent downloads in the realm of digital phonorecord deliveries and to certain other uses also specified in 37 C.F.R. Part 385 Subpart B (“Subpart B”). 

Subsequently, the Copyright Royalty Board opted in the rate-setting proceedings Phonorecords I (2006), Phonorecords II (2011) and Phonorecords III (2016) to adopt “roll forward” recommendations regarding the 9.1 cent royalty rate relative to Subpart B, principally without the formal objection of music creators.  In those years, members of the songwriter and composer community were forced to focus on pleading for substantial increases in the pitifully low digital streaming rates that were driving most music creators either into poverty or out of the music industry altogether.  That same drastic problem, unfortunately, remains for music creators.  Streaming royalty rates continue to be the subject of ongoing federal litigation brought by copyright users in the digital music distribution industry to negate rate increases mandated in Phonorecords III.  The case is currently on remand back to the CRB.  

Thus, economic circumstances for songwriters and composers –after fifteen years of a 9.1 cent rate applicable to Subpart B uses– are more dire than ever.  That is especially true in light of the hardships brought on by the recent pandemic.  The vast majority of songwriters and composers simply cannot abide a continuation of this financially strangling status quo any longer.  To do so would be to rubber stamp the extension of a second era of frozen mechanical royalty rates applicable to the sale of physical phonorecords and permanent downloads, for a period that would now stretch to over twenty years and counting (2006-2027). 

To put the effect of such result into numerical perspective, even a simple cost of living application to the subject statutory mechanical royalty rate since 2006 would have already yielded a 2021 royalty rate of 12 cents under CPI measurements.[11]  The 9.1 cent rate, in other words, has already been devalued by one third in real dollars since its implementation.  That leaves aside the historical legacy of the 2-cent rate from 1909, which would in 2021 dollars equal over 55 cents pursuant to those same CPI formulas.[12]  While no one is suggesting this latter extrapolation be considered dispositive on the issue of new rate-setting, it does starkly demonstrate the outrageous unfairness that has been imposed on the music creator community over a period of more than an entire century.[13]

Nevertheless, on March 2, 2021, the three major, multinational record conglomerates UMG, SME and WMG, the US music publisher trade group NMPA (whose largest members include the music publishing affiliates of those major record companies), and inexplicably, the Nashville Songwriters Association International (collectively, the “Settling Parties”), filed a Notice of Settlement in Principle (the “March 2 Notice”)[14] with the CRB, stating as follows:

Once they reach a definitive agreement concerning the Settlement, the Participants expect to propose to the CRJs [Copyright Royalty Judges] that the royalty rates and terms presently set forth in 37 C.F.R. Part 385 Subpart B, and the related definitions and late fees for Subpart B Configurations presently addressed in Subpart A, should be continued for the rate period at issue in the Proceeding [through 2027]. 

One participant in the Phonorecord IV proceedings, pro se music creator and music publisher George Johnson, filed his objections to the adoption with the CRB on April 19, 2021.  He noted specifically the unfairness of the proposed roll forward of the frozen Subpart B royalty rate proposals,[15] among his other objections that also included a substantial lack of transparency by the Settling Parties.   

The remainder of the music creator community, none of whose members seem in any way to have been consulted concerning the anticipated settlement noted in the March 2 Notice by the Settling Parties, were similarly taken aback by the Settling Parties’ actions.   Not only were they blindsided by the pending decision to recommend a continued freeze of the royalty rates and other terms contained in Subpart B, they were also agitated by the lack of more detailed disclosure by the Settling Parties concerning the following statement contained in the March 2 Notice:

NMPA, UMG, WMG and SME have also reached an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.

With a pending deadline of May 18, 2021 set by the CRB for the filing by the Settling Parties of a final proposed settlement, the signatories to these Independent Music Creator Comments –in reliance on, among other provisions, §801 (b) (7) of the US Copyright Act– sent a letter to the CRB dated May 17, 2021[16] stating as follows:

In the interests of justice and fairness, we respectfully implore the CRB to adopt and publicize a period and opportunity for public comment on the record in these and other proceedings, especially in regard to so-called proposed “industry settlements” in which creators and other interested parties have had no opportunity to meaningfully participate prior to their presentation to the CRB for consideration, modification or rejection. In the present case, hundreds of millions of dollars of our future royalties remain at stake, even in a diminished market for traditional, mechanical uses of music. To preclude our ability to comment on proposals that ultimately impact our incomes, our careers, and our families, simply isn’t fair.

Thereafter, the Settling Parties informed the CRB on May 18, 2021 that they had reached an agreement that mirrored the terms set forth in their prior March 2 Notice, but did not file a motion asking the CRB to adopt their settlement.  This procedural anomaly raised alarms among the members of the independent music creator community, who once again had not been consulted in any way by the Settling Parties regarding their settlement discussions, or concerning the subsequent filings announcing agreement on the royalty rate freeze. 

In a second letter to the CRB dated May 24, 2021,[17] the Independent Music Creator signatories to these Comments once again conveyed their concerns:

We believe that this procedural omission (whether permissible or not) may well be calculated to delay and/or compromise the ability of the independent music creator and music publishing communities to file comments in a timely manner, and could result in irreparable harm to our ability to present our views and pose our questions, for example, if one or more of the settling parties subsequently withdraws from the proceeding.  Simply put, we believe the settling parties are seeking to stifle timely discussion and dissent through delay, a strategy which should be rejected as antithetical to due process.

On the next day, the Settling Parties acted to file their “Motion to Adopt Settlement of Statutory Royalty Rates and Terms For Subpart B Configurations” (“the May 25 Motion to Adopt”).[18]  That motion contained the following statement by the Settling Parties:

In all material respects, the Parties propose that the current regulatory provisions applicable to Subpart B Configurations, and Late Fees solely as they concern Subpart B Configurations, remain in effect. They propose a few minor editorial changes to the applicable regulatory language, which are shown below with additions in bold and underlined text and deletions in bold with a strikethrough. To the extent that the provisions set forth below are also applicable to configurations other than Subpart B Configurations, such matters are outside the scope of the Settlement.

The May 25 Motion to Adopt contained no further elaboration concerning the statement originally made in the Settling Parties’ March 2 Notice that “NMPA, UMG, WMG and SME have also reached an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.”

One month later, on June 25, 2021, the CRB published in the Federal Register its Notice of Proposed Rulemaking[19]addressing the May 25 Motion to Adopt filed by the Settling Parties, stating in pertinent part as follows:

The Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants not party to the agreement if any participant objects and the Judges conclude that the agreement does not provide a reasonable basis for setting statutory terms or rates. See §801(b)(7)(A).[20] (Emphasis and Footnote added). If the Judges adopt rates and terms reached pursuant to a negotiated settlement, those rates and terms are binding on all copyright owners of musical works and those using the musical works in the activities described in the proposed regulations….

The Judges solicit comments on whether they should adopt the proposed regulations as statutory rates and terms relating to the making and distribution of physical or digital phonorecords of nondramatic musical works. Comments and objections regarding the rates and terms and the minor revisions must be submitted no later than July 26, 2021.

By submitting these Comments today, the Independent Music Creator community seeks to respectfully explain the myriad reasons why adoption by the CRB of the Settling Parties’ May 25 Motion to Adopt (including the proposed royalty freeze) would not only be inconsistent with the provisions of the US Copyright Act, but will cause great harm to the US and global songwriter and composer communities.  We likewise urge circumspection by the CRB concerning the possibility of any potential “insider” or “self-dealing” settlement arrangement among related companies and trade associations that may have been carried out at the expense of those music creators whom Congress intended (pursuant to Article I §8 of the US Constitution) to be the beneficiaries –not the victims– of the statutory mechanical royalty rate-setting process.

Continued in Part 2

Frozen Mechanicals Crisis: @NorthMusicGroup Comment to Copyright Royalty Board

July 26, 2021

Via Electronic Delivery

Copyright Royalty Board 37 CFR Part 385

[Docket No. 21–CRB–0001–PR (2023–2027)]

Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)

Copyright Royalty Judge David R. Strickler
Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge Steven Ruwe
US Copyright Royalty Board
101 Independence Ave SE
Washington, DC 20024

To Your Honors:

My name is Abby North. I am a music publishing administrator based in Los Angeles. My views expressed in this letter are solely my own.

With my husband, I am a copyright owner of the classic song “Unchained Melody,” among other copyrights.  I also administer musical works on behalf of songwriters, their families and heirs. My clients depend on royalties to pay for life’s essentials.

It is imperative that the Judges understand that despite what some parties may argue, Subpart B royalties absolutely are meaningful to songwriters.

There is no dispute over the fact that streaming is the most prominent form of music distribution, as reported in the popular press.  But mounting evidence shows a significant and consistent growth in vinyl production.  CDs remain popular among some listeners. Other listeners prefer to have permanently available digital copies, i.e., downloads.

Vinyl, once written off for dead, has enjoyed almost 15 years of consecutive growth, with more than 19 million vinyl records sold in the US so far this year.  Per Digital Music News, this is an increase of 108% over the previous year. The Judges need only look to this year’s Record Store Day on July 17 for confirmation of the vinyl resurgence.  

Amazon Music now offers a “Vinyl of the Month” club, curated by “the experts at Amazon Music.”

Vinyl pressing plants are overwhelmed by the volume of orders they are fulfilling, and it is commonly understood in the industry that vinyl sales would be far higher if production could keep up with demand.

Vinyl is now treated as a merchandise item by many labels and artists, and as such it is a significant contributor to the overall earnings of many artists, from the smallest independent to Taylor Swift.

An artist/songwriter of Taylor Swift’s stature may not rely on earnings from vinyl, but other songwriters most certainly do. This is particularly true of artist/songwriters who have seen their high margin vinyl sales cannibalized by streaming (as was noted in the recent report by the UK Parliament’s Digital Culture Media & Sport Committee on the Economics of Music Streaming).  And ALL songwriters rely on any source of revenue available for exploitation of their songs.

As a rightsholder and administrator of legacy and current copyrights, I can testify that mechanicals from physical and download media are a substantial share of overall royalties.

In reviewing my clients’ 2Q21 statements, one legacy songwriter received 57% of his period royalties from physical mechanicals and 9% from download mechanicals. Another writer had uniquely high grand rights and sync royalties for the period, but still saw 17% of overall royalties from physical and download mechanicals. If we remove the grand rights and sync amounts, the overall total from physical and download mechanicals is 35%.

It is clear that streaming rates, even at 15.1%, are not sustainable for most songwriters. It is obvious that without a more equitable streaming revenue distribution model, we will continue to see songwriters leave the business entirely, or at least be forced to pick up side gigs to increase their income.

These facts provide the undeniable case against freezing the Subpart B rate at $.091 per unit.  Arguments I have heard from insiders defending their decision to freeze the rates are that downloads will decline if Apple stops supporting iTunes, and that physical sales are so negligible that they just do not matter. Walk into any record store or follow fans to the merch stands at a concert and you will see and hear the real story. Also, Apple is not the only distributor of digital downloads.

It appears that significant and impactful decisions are allowed to be made by a tiny group of participants that is in the room primarily because this group has tens of millions of dollars to fund legal expenses. This very small group with undeniably substantial resources and very deep pockets decided that it is in support of a rate freeze.

This very small group is now asking the Judges to apply its private deal to each and every songwriter in the world.  And yet, almost none of these songwriters were included in that decision to freeze the rate.

The ability for just two trade organizations to have such an oppressive global impact is staggering. What about the rest of the songwriters and independent publishers and their due process rights?

Respectfully, I implore the Judges to keep in mind that the NMPA does not represent all music publishers, and the NMPA itself owns no copyrights.   At best, the NMPA Board of Directors could speak solely for the music publishers that employ them.

NSAI is one of many United States songwriter organizations, and like the NMPA, owns no copyrights. It most certainly does not represent all songwriters from all US songwriter organizations, and it certainly does not represent songwriters around the world who are not affiliated with songwriter organizations. 

As an illustration of global songwriter opposition, both the UK’s Ivors Academy and the European Composer and Songwriter Alliance have each come out against frozen mechanicals.

I ask the Judges to recognize that NSAI and the NMPA do not have such broad authority to reasonably put forth decisions that affect all the world’s songwriters and publishers.

In the recent Web V decision, the Judges acknowledged the need for an inflation-indexed increase in the statutory rate for sound recordings.  Due to the inevitable decline in buying power created by inflation, the physical and download mechanical rate must correspondingly increase.

I have no objection to a settlement related to mechanicals. I do have an objection to a freeze proposed without authority that does not both increase the old $.091 rate and also include an adjustment for inflation at a bare minimum.

To freeze the rate for 20 years ignores the debilitating impact of inflation, ignores the needs of songwriters and truly independent music publishers like me who are not represented before the CRB, and frankly, displays a willingness to undervalue music.

It is imperative that in the future, publishers and songwriters at large, domestically, and globally be given a mechanism to participate in the rate-setting process, whether or not they have millions of dollars to spend on lawyers.

Music is crucial to human well-being. The American Songbook and its many creators are a treasured element of United States, and in fact, world culture.

How can something so important, so meaningful and so rare not be deserving of a rate increase that at least mitigates the effect of inflation?

Sincerely,

Abby North

North Music Group LLC

Press Release: House of Commons, Digital Culture Media and Sport Committee: New Report: Economics of music streaming

MPs call for a ‘complete reset’ of music streaming to fairly reward performers and creators 

Successful artists see ‘pitiful returns’ from streaming while some performers are frozen out of payments altogether 

Artists must be given a legal right to a fairer share of revenues from streaming, the DCMS Committee concludes, following a wide-ranging inquiry that calls for a complete reset of the market. 

The Report into the Economics of music streaming finds that comprehensive reform of legislation and further regulation is needed, not only to redress the balance for songwriters, performers and composers, but to tackle fundamental problems within the recorded music industry. 

Services that host user-generated content gain significant advantage on copyright say MPs, with YouTube emerging as a dominant player. The Report warns of ‘deep concerns’ about the unassailable position of the major music companies with a call for the Competition and Markets Authority to examine whether competition in the recorded music market is being distorted. 

Though consumers enjoy music that is historically cheap, more personalised and more readily available than ever before, streaming’s short-term pricing structure puts music at risk in the long-term, say MPs. 

Chair of the DCMS Committee Julian Knight MP said: 

“While streaming has brought significant profits to the recorded music industry, the talent behind it – performers, songwriters and composers – are losing out. 

“Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do. 

“However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself. 

“We have real concerns about the way the market is operating, with platforms like YouTube able to gain an unfair advantage over competitors and the independent music sector struggling to compete against the dominance of the major labels. 

“We’ve heard of witnesses being afraid to speak out in case they lose favour with record labels or streaming services. It’s time for the Government to order an investigation by the Competition and Markets Authority on the distortions and disparities we’ve uncovered.” 

ENDS 

Key findings and recommendations: 

Government to legislate so that performers enjoy the right to equitable remuneration for streaming income 

Government to refer case to the Competition and Markets Authority to undertake full market study into the economic impact of the major music groups’ dominance 

Government should introduce robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming ‘value gap’ 

A full list of conclusions and recommendations can be found in the attached report 

‘Pitiful returns’ from streaming 

Performers, songwriters and composers receive only a small portion of streaming revenue due to poor royalty rates and because of the lower valuation of song-writing and composition, compared to the value of a song’s recording. Evidence from artists and songwriters who enjoy critical success described earnings from streaming as insufficient to ‘keep the wolf from the door’ or to live off, a position magnified by the loss of income from live performances. Such ‘pitiful returns’ from music streaming are found to impact the entire creative ecosystem with session musicians frozen out altogether. 

The Report notes that several performers who gave evidence claimed that they and many of their peers were afraid of speaking out against the status quo for fear of losing favour with major record labels and streaming services. 

Equitable remuneration 

MPs call on the Government to introduce a right to equitable digital music remuneration. Though performers have a right to equitable remuneration where a commercially published sound recording is rented (broadcast via the radio, or played in public), streaming exploits the ‘making available’ right for recordings under UK copyright law. The Report says the right to equitable remuneration should be applied to the ‘making available’ right, drawing on the precedent of how the right to equitable remuneration applies to rental, as a simple yet effective solution to the problems caused by poor remuneration as it is a right already established within UK law, and applied to streaming elsewhere in the world. It also argues that this would address the inconsistency whereby equitable remuneration already applies to songwriters and composers. The Government should also consider how to increase the value of a song to give parity with a recording to support songwriters and composers. 

Case for CMA to examine Universal, Sony and Warner market dominance’ 

The Report finds a case for a full study by the CMA into the economic impact of the dominance by major music companies Universal, Sony and Warner of the UK’s music recording industry, and to a lesser extent in publishing. Further, the Government must make sure that UK law is not enabling market dominance. It should support independent labels to challenge the majors’ dominance, with creators empowered to offset the disparity in negotiating power when signing with music companies. 

Further evidence to support a referral to the CMA comes from ongoing concerns about the majors’ position in direct licensing negotiations with streaming services which allows them to benefit at the expense of independent labels and self-releasing artists, particularly regarding playlisting. 

MPs question whether with the major record labels’ market dominance on song rights, a song would be fairly valued and urge consideration by the CMA of the majors’ dominance in recording and publishing on this point. 

‘Safe harbour’ 

‘Safe harbour’ gives services that host user-generated content (UGC) such as YouTube a competitive advantage over other services, exempting them from legal liability for copyright infringement unless and until they obtain “actual knowledge” of infringing activity, in which case they must remove or to disable access to it. The Report finds these exemptions, now transposed into UK law, have had a profound impact on the market, with UCG-hosting services gaining broad limitations of liability that undermine the music industry’s leverage in licensing negotiations. It recommends the CMA examine YouTube’s dominance of the music streaming market and take steps to encourage competition. To prevent market distortion, the Government should introduce obligations enforceable in law that would ‘normalise’ licensing arrangements for UCG-hosting services. 

Legacy contracts and recoupment 

To address a wider imbalance, the Report recommends a right to recapture the rights to works after a period of time from record labels, and a right to contract adjustment if an artist’s work was successful beyond the remuneration they received. 

Performers, signed to a record deal, are paid according to the terms of their contract with their record label from streaming revenue after production costs are recouped. Many labels do not write off debts meaning that deals signed decades ago can still recoup against initial production and distribution costs. Following an appearance before the Committee, Sony announced it would “pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music” for deals before 2000. MPs call for Universal and Warner to look again at the issue of unrecouped balances with a view to enabling more of their legacy artists to receive payments when their music is streamed. 

User-centric model 

MPs heard evidence of different models to distribute streaming revenues, either the predominant pro-rata payment model or alternatives such as user-centric. They welcome the consideration by new services of ways to address fairness and transparency in remuneration. However, are concerned that current contractual agreements between the major music companies and streaming services could stifle further innovation if misused and recommend consideration by the CMA. 

The Report also make recommendations on licensing and royalty chains to increase transparency to creators. 

Further information: 

The inquiry into the Economics of music streaming was launched in October 2020. It received more than 300 pieces of written evidence. Among artists and performers who gave evidence, songwriter and producer Nile Rodgers, Radiohead’s Ed O’Brien, Elbow’s Guy Garvey and soloist Nadine Shah. It took evidence from the UK’s independent music sector, as well as major record labels Sony Music, Warner Music and Universal Music. Spotify, Amazon, Apple and YouTube also gave evidence. 

Committee membership: 

Julian Knight MP (Chair) (Conservative, Solihull); Kevin Brennan MP (Labour, Cardiff West); Steve Brine MP (Conservative, Winchester); Alex Davies-Jones MP (Labour, Pontypridd); Clive Efford MP (Labour, Eltham); Julie Elliott MP (Labour, Sunderland Central); Rt Hon Damian Green MP (Conservative, Ashford); Rt Hon Damian Hinds MP (Conservative, East Hampshire); John Nicolson MP (Scottish National Party, Ochil and South Perthshire); Giles Watling MP (Conservative, Clacton); Heather Wheeler (Conservative, South Derbyshire). 

Media queries to Anne Peacock peacocka@parliament.uk / 07753 101 017; Gina Degtyareva degtyarevae@parliament.uk / 07548 146 012. 

Visit the DCMS Committee website 

Committee Twitter: @CommonsDCMS 

Specific Committee Information: cmscom@parliament.uk / 020 7219 6188 

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