On 12 December 2023, the UK Parliament’s Culture, Media and Sport Committee held its second non-inquiry session into creator remuneration. The topic is familiar to the DCMS Committee, who examined it as part of an inquiry into the Economics of music streaming, which resulted in a Report calling for a ‘complete reset’ of streaming in order to move away from a ‘label centric’ model. The Government responded by accepting most of the Committee’s recommendations and described the Report as a ‘key moment for the music industry’. This December session dovetails the Committee’s exploration of remuneration issues in the Economics of music streaming inquiry, focusing on the specific issues faced by songwriters and composers.

Where are we since the Economics of Streaming Report?

It has been over two years since the Select Committee called for a ‘complete reset’ of the digital music business. The IPO responded by setting up three industry led work streams into metadata, transparency and remuneration.

Metadata

On metadata, we have seen the United Kingdom Industry Agreement on Music Streaming Metadata, a voluntary agreement to improve music streaming metadata demonstrates a step in the right direction (see our article here). In summary, the agreement represents a commitment by industry signatories to improve music streaming metadata in the UK over a two-year period, by gradually improving metadata in new recordings and ensuring consistent crediting on streaming services; ensuring a core data set is associated with all new recordings; promoting good practice; and establishing expert working groups on education and technical solutions.

Transparency

On transparency, a new UK Voluntary Code of Practice on Transparency in Music Streaming which seeks to create a ‘race to the top’ in terms of industry good practice, was published on January 312024. Paul Clements, representing the Music Publishers Association, stated that it has been a ‘revealing’ and interesting study to demonstrate to both DCMS and IPO what tools are already available in relation to business intelligence and distribution statements on the publishing side. The code aims to address the complexity of licensing models, usage data processing, and reporting royalties while maintaining legal constraints related to confidentiality, data privacy, and competition laws. Twelve trade associations, membership organisations and collecting societies have signed on behalf of their members. However, given that non-compliance would not constitute a breach of legislation or relevant contracts, the impact of the new Code is uncertain.

MP Kevin Brennan shared that prior to the session, there had been a confidential briefing during which representatives of the major labels had discussed how much money was being paid out to musicians as a result of the Committee’s recommendation about old contracts that had been recouped, and that streaming revenues from those should start being paid out to artists.  However, Brennan noted that the labels were not prepared to reveal publicly how much money artists are being paid as a result of this measure.

In February 2023, DCMS published research into the impact of streaming services’ algorithms on music consumption. The final report found that evidence proving or disproving whether these technologies embed, amplify, or introduce unfair biases is mixed, and at times inconclusive. The report made several suggestions for streaming services to improve transparency around algorithms for consumers and creators.

Remuneration

There has been slower progress on the remuneration side, which is seen by many creators as the most contentious and pressing issue. Whilst a working group dedicated to creator remuneration was announced earlier last year, it is yet to meet. This perhaps ties into a larger issue which was discussed; that the working groups are evolving slowly and sometimes with a lack of transparency about what conversations are taking place. Committee chair Dame Caroline Dinenage noted that this is an area in which the industry holds many of the strings that must be pulled to solve the problems, which in turn produces increased tension between stakeholders.

It is worth noting that there have been some voluntary measures taken by industry stakeholders, who either wiped out or disregarded unrecouped advances, thereby enabling some musicians to start seeing royalties from streaming. Internationally, some major labels have been making moves towards a new ‘artist-centric’ model, however this has faced its share of controversy, with critics suggesting it represents unilateral reform, rather than the industry wide collaboration envisaged in the Report.

What do songwriters and composers think?

Amongst the witnesses at the December session, was Grammy award winning guitarist and composer Nile Rodgers, who also co-founded publicly traded IP investment and song management company Hipgnosis Songs Fund with Merck Mercuriadis. The Committee asked Rodgers how streaming has disrupted the industry over his career. Rodgers suggested that while streaming technology itself is beneficial, the business practices and model surrounding it have not been helpful for musicians, as they have not felt the financial benefit that the lower production and distribution costs have bought.

Dr Hyojung Sun – a lecturer at the University of York who has conducted significant research into the area – agreed with Rodgers, pointing out that the predicted disruption from digital technologies did not occur as commentators had expected, primarily due to the power held by rights holders. Explaining how the streaming pay model is fundamentally different from the conventional pay per unit model, Dr Hyojung Sun noted that there is a continuing debate about the share received by the recording sector. In the past, labels took on significant risk related to physical products, but with the shift to digital, there is a moot question of whether the money saved has gone to the musicians. She noted that whilst the recording sector argues an increase in A&R investment explains why the recording sector still has to take that share, the “Music Creators’ Earnings in the Digital Era” found evidence that the reduced manufacturing cost was not offset by an increased amount of A&R.

During the discussion of what the split should be between recording artist/label, songwriter/publishing and streaming platforms, Rodgers mentioned how a lack of proper audits due to contracts being under NDAs puts songwriters in the dark as to how much they are being paid per stream.

The issue of pay per stream was at the centre of much discussion. Songwriter VV Brown, shared that she has found it incredibly difficult to have a sustainable career as a songwriter due to the current position with streaming culture. She noted how Snoop Dogg’s 2023 Spotify Wrapped suggested that a billion streams had generated just $45,000 in income. Similarly MP John Nicolson’s team spoke to Steve Byrne of Malinky, who was paid £300 for half a million streams last year.

Growing concerns around catalogue music:

Professor Hesmondhalgh, who specialises in Media, Music and Culture at the University of Leeds highlighted that 86% of music available on streaming services is more than a year old, which has a significant impact on the earnings of musicians making new music. Merck Mercuriadis suggested that the convenience of streaming, where consumers can choose what they want to hear, has led to this focus on catalogue music, and that many of these iconic songs have become part of the fabric of our lives and society.

In April 2023 BMG integrated its frontline and catalogue recording businesses, moving away from what it called ‘the outdated industry distinction’ between new and old releases. Financially, by reuniting the two, labels may be in a better position to utilise the profits from catalogue music, alleviating some of the pressures faced by A&R teams to break new artists into an increasingly challenging, oversaturated market.

The dominance of catalogue music in today’s listenership raises another issue; that many of those musicians signed contracts between the sixties and noughties, which have lower royalty rates (10% or less) and longer duration (the life of copyright), than contracts negotiated during the streaming era. These legacy contracts, which didn’t contemplate modern formats like compact discs or streaming, are then difficult to renegotiate.

Kieran Hebden (Four Tet) v Domino Records [2022] EWHC 74 (IPEC) is illustrative of the issues relating to legacy contracts in the digital age. A pre-streaming contract from 2001 was in place between the two, and Four Tet argued (successfully) that streaming and download income ought to be treated as licensing income (subject to a 50% royalty rate), rather than physical sales income (subject to a much lower 18% royalty rate). His settlement included all historical streaming and download income from the accounting period commencing 1 July 2017.

The issue of legacy contracts has been on the government’s radar for some time now, we wrote about it here in relation to the CMA’s investigation, and in February 2023 the IPO published its research into rights reversion and contract adjustment  proposals from the DCMS Report. The IPO concluded that reversion rights may help to address the concerns of creators who feel that their royalty rates are disproportionately low. However, it would only be possible to address the concerns of artists with legacy contracts if the legislation were introduced in a retroactive manner (and thus applicable to contacts that were signed before it was enacted). The research also evaluated a contract adjustment right, which would enable music creators to address disproportionate revenues resulting from contractual terms.

What next?

Professor Hesmondhalgh raised a new suggestion that the Committee might want to consider how the government could apply pressure on streaming platforms to change their systems, so that attention and income gets pushed further down the long tail. Paul Clements suggested that there needs to be an increase in pricing for subscription services, which now offer more music than ever, along with added services such as audiobooks. Last summer Spotify increased its prices for the first time in 14 years across 50+ markets, but their public statement did not explain whether any of the money would be going to recording artists and songwriters. Apple Music and YouTube Music have also increased their prices in recent years.

Dr Hyojung Sun reminded the Committee of the efficiency and speed of equitable remuneration as a potential solution to creator remuneration. Nile Rodgers, who came under some heat during the session for his position as a Producer In Residence at Apple, called for further reform to make things ‘equal and fair’, and greater transparency so that consumers can understand how much of their money is actually going to the artist.

Overall, the broad consensus from the witnesses, and those on the Committee, was that whilst the industry has come a long way since the release of the Report, there is still much progress to be made before a ‘complete reset’ is achieved.

Whilst the USA’s Music Modernization Act and EU’s Copyright Directive both demonstrate recent attempts to move towards fairer remuneration for creators, the UK has no equivalent reform regime. Notably, these are both yet to be fully tested and the extent of their efficacy remains to be seen.