Economics of music streaming Contents

---

Summary

Music streaming intersects two sectors of considerable political, economic and cultural significance to the UK: our world-renowned music industry, which contributes over £5 billion in gross value added (GVA) to our economy, and our dynamic, innovative tech sector, which in 2018 was growing by nearly 8 percent per year and currently creates hundreds of thousands of jobs. Following over a decade of digital piracy, music streaming has returned the recorded music sector to growth and is now the dominant mode of music consumption for consumers in the UK and globally. Real-terms revenues from recorded music, however, are far below the levels seen in previous decades. For consumers, recorded music is now cheaper, more personalised and more readily available than ever before. While in the short term, the pricing structure of the industry, and free availability of such product, may be seen as a good deal for music-lovers, the danger is that without greater levels of revenue, some of the music they love may not be being made in ten years’ time.

Despite the streaming boom that has provided a partial economic recovery for the music industry, not all stakeholders have received proportionate benefit. In many instances, companies have leveraged structural advantages to achieve seemingly unassailable positions in their relative markets. Streaming services that host user-generated content (UGC) have significant advantages over other services due to copyright ‘safe harbours’, which has led to the dominance of services like YouTube. We have been told that the major music companies have experienced historic profit margins, and continue to consolidate their position as the largest asset owners of recording and song rights through mergers, acquisitions, and integration with all aspects of the digital music business.

Meanwhile, performers, songwriters and composers receive only a small portion of revenue due to poor royalty rates and because of the valuation of song writing and composition, relative to the recording. Whilst these issues predate the Covid-19 pandemic, this has been compounded and thrown into sharp relief by the loss of live music, which continues to impact them and the ecosystem that supports them. Poor remuneration risks disincentivising successful, professional musicians and diminishing the UK’s ability to support new domestic talent.

We recommend a broad yet comprehensive range of legislative reforms and regulatory interventions to deal with these issues. In order to address artist remuneration and the disparity in power between creators and companies, we recommend that the Government introduce a right to equitable digital music remuneration, a right to recapture the rights to works after a period of time and the right to contract adjustment if their works are successful beyond the remuneration they receive. We have deep concerns about the position of the major music companies and call on the Government to support the independent sector and take advice from the Competition and Markets Authority as to whether competition in the recorded music market is being distorted. We also advise the Government to proactively normalise the requirements on streaming services both within the streaming market and with other modes of music consumption, by placing greater licensing obligations on UGC-hosting services, future-proofing the public service broadcasting prominence regime and addressing ‘payola’ concerns about algorithms and playlist curators.