42.Creator remuneration was the fundamental issue raised by our inquiry and this chapter will consider how revenues flow from streaming platforms to the music industry. Will Page, visiting fellow at the London School of Economics and former chief economist at Spotify, argues that whilst streaming has returned the recorded music industry to profit, music creators—that is, performers, songwriters and composers—have not proportionately shared this benefit. Mr Page observes that:
For labels, the music industry is thriving. Between 2015 and 2019, the streaming-led recovery boosted UK major label turnover by 21 percent and operating profit margin increased from 8.7 percent to 11.8 percent. The recorded music business not only got bigger, but also much more profitable for record labels. Artists, however, have not received proportional benefit.
Whilst commercial music creation is intensely competitive, it is reasonable to expect that at least professional musicians, who otherwise are able to support their livelihood with live music income, are similarly participating in this recovery. Instead, income from recorded music is meagre. One illustrative member survey by the Ivors Academy and Musicians’ Union, for example, found that in 2019, 82 percent of professional musicians made less than £200 from streaming, whilst only seven percent made more than £1,000. Furthermore, 91 percent of respondents stated that they earned less than £200 from their most played track across all platforms in 2019. In the context of the Covid-19 pandemic, where other income streams have necessarily dried up, this situation has become untenable.
#PayPerformers Campaign survey results regarding remuneration from streaming from UK performers, 2020
43.First, this Chapter will consider the impact of the terms under which rightsholders are remunerated that were set out in Chapter 2: that is, how streaming revenue is allocated between the rights in the song and recording, and similarly how these revenues are divided between the creative and corporate partners. On the song side, issues with income are caused by the way in which industry revenues are initially divided; this has repercussions for songwriters and composers, as well as music publishers. On the recording side, creator remuneration is due to the terms under which performers are paid; this Chapter will consider the impact of this on creators and their dependent creative ecosystems, as well as some solutions. Finally, this Chapter will examine technical barriers to creator remuneration: specifically, issues with the metadata and songwriting royalty chains, which compound with issues of rightsholders’ remuneration.
44.Because streaming is exploited by the ‘making available’ right under UK copyright law, performers who are signed to a record deal are paid according to the terms of their contract with their record label from streaming revenue. This differs from other forms of music consumption, such as a rental, license, or broadcast. A typical record contract will make several stipulations, such as the minimum number of recordings per period (usually one album), the number of options to extend the agreement (usually three or four) and the length of time a performer assigns the rights to the music they create, which is typically the ‘life of copyright’ (which in the UK is 70 years). Importantly, the contract will also set the performer’s royalty rate. Performers signed with independent record labels are sometimes signed to ‘advance and profit share’ deals, where the performer and label share the profits from a recording according to an agreed proportion (usually 50:50). However, for an emerging performer on an ‘advance and royalty’ deal (commonly known as the ‘standard record deal’), which is the predominant type of deal for a performer signed to a major record label (who, as will be discussed in Chapter 4, dominate the market for recording rights), this is likely to be between 20 to 24 percent of recording revenues (minus fees for the record producer), with the rest accruing to the label. For more established performers who are out-of-contract or renegotiating, this might rise to 25 to 30 percent, depending on their career success. Historically, royalty rates for performers with pre-digital ‘legacy contracts’ have been even worse: in the early 1960s, established bands were only receiving royalties of between two and four percent, whilst musician, songwriter and Rock and Roll Hall of Famer Ed O’Brien told us that Radiohead’s deal, signed in 1991, put the band on a 12 percent royalty.
45.Moreover, a contract will also establish which costs of production are to be covered by the record label (such as manufacturing, packaging, distribution, marketing and touring) and which costs are recoupable against future revenues. Under an ‘advance and profit share’ deal, recoupable costs are earned out from total revenues (which effectively means that they are recouped from both the performer and label’s share of the revenues until the recording becomes profitable). Under an ‘advance and royalty’ deal, however, the performer’s advance and any negotiated recoupable costs are earned out from the performer’s royalties only. Colin Young described the challenges facing performers to recoup on their deals:
The challenge is to recoup that within the cycle, because you have a two-year period, in essence, you have to recoup it by, before the next advance is given and the next recording costs. The costs are immediate on to the ledger; the income is delayed. The domestic income will appear there in the period January to June, July to December, but the overseas will be delayed by six months. That is the challenge: 20 percent of the income, 100 percent of the costs and you only have a limited window to recoup it in. That is difficult.
These types of deal also pose the obvious and highly questionable dilemma whereby, because the costs are recouped against a minority of the income, a recording’s total revenue might have in actuality exceeded the total costs of production and the performer’s advance well before the label has theoretically recouped under the terms of the contract and begins paying royalties to the performer. For example, taking a simple model to illustrate and assuming recoupable costs of £10,000 and a royalty rate of 25 percent, total revenue would have to exceed £40,000 (of which £30,000 would accrue to the label in profit, minus any non-recoupable costs) before the performer would receive any royalty payments. As Nile Rodgers mused:
The running joke in the music business, ever since I have been in it, all my life—I am 68 years old—is that the music business is the only business where after you pay off the mortgage on the house they still own the house. It does not make any sense. There is no other business on earth that does that. We pay back all the royalties, and they still own our property. It is ridiculous.
46.However, a minority of independent labels do forgive debts after a certain period of time. 19 percent of record labels that are AIM members have a policy of writing off debt, of which the average is ten years; Beggars Banquet, one of the UK’s largest independent labels, writes off debt after 15 years. However, many labels do not, meaning that many deals that were signed decades ago are still recouping against initial production and distribution costs. Horace Trubridge, General Secretary of the Musicians’ Union, argued in oral evidence that “every other area of business writes off bad debt after six years, but not record labels; if you owed them some money from the 1970s, you still owe them that money, and they will not pay you any royalties”. However, in a positive move, Sony (who answered questions on this subject in evidence to the Committee) recently announced that 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 made before 2000 (though at the time of writing Universal and Warner have not similarly followed suit). We urge 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.
47.Moreover, there is evidence that this has been inconsistently applied. A written submission from Hipgnosis notes that singer-songwriters Seal and Enrique Iglesias have been paid at a 50 percent licence rate for streaming revenue by their record labels; in the latter case, Iglesias’s share was subsequently reduced to his royalty rate after two years, which resulted in a lawsuit and settlement out of court subject to a non-disclosure agreement.
48.The issue of unfair contracts is exacerbated when considered against the relatively meagre returns from streaming, even as streaming itself is displacing other forms of music consumption and has emerged as the dominant modality. According to the Office of National Statistics, professional musicians earned an average of £23,059 in 2018 , well below the national average of £29,832, despite themselves contributing £1.1 billion to the UK’s export revenue alone in the same year. Despite this, 92 percent of performers claim that less than five percent of their earnings comes from streaming. Nadine Shah, a critically acclaimed, Mercury-nominated musician and songwriter, told us about the dual impact of poor remuneration from streaming and the devastation of live music caused by the pandemic:
As an artist with a substantial profile, a substantial fan base, critically acclaimed, I don’t make enough money from streaming. I am in a position now where I am struggling to pay my rent and I am embarrassed to talk about these issues publicly. I am embarrassed to talk about them for many reasons, because money to an extent is an indication of success. Here that is not really the case because I am a successful musician but I am not being paid fairly for the work that I make. As I first said in this session, often artists are encouraged not to ask these questions.
49.As such, musicians have become over-reliant on touring and live music income: 70 percent is estimated to be due to live music. As Ed O’Brien told us in oral evidence, “for so long live income has been like band-aids”. This has led many performers to treat streaming services as a promotional tool rather than a sustainable form of income. Several musicians noted that a presence on streaming services is necessary to be discovered and ‘heard’, meaning that withdrawing works from these services is not practical and could stymie future success. One performer, meanwhile, noted that venues and promoters have come to expect a Spotify presence and use this to evaluate whether to book an act. Consequently, musicians’ income streams have become much less diversified than the decades prior to digital piracy. Furthermore, several performers argued that recording music and performing live have become inexorably linked, as recording music would be unviable without touring but touring typically is prompted to promote the release of new records.
50.Despite this, performers are set to face further pressures to live income due to the ongoing issue with EU travel arrangements for creatives. Historically, touring in Europe has been an important source of revenue for British musicians, as Colin Young argued on 24 November 2020:
A musician, his revenue, 70 percent will be from live performances and the cream is to be had in the summer festival season. It is pure profit and Europe has totally transformed that. Any obstacle is bad for live touring in Europe, so whether it is going to be visas, whatever it is, it is going to be bad.
Negotiations between the UK and EU, which led to the Trade and Cooperation Agreement (TCA) that came into force on 1 January 2021, did not result in provisions for short-term travel for creatives or associated technical and support staff. This has created barriers affecting both the movement of musicians and their supporting ecosystem (in the form of visas and work permits) and the movement of goods such as equipment and merchandise. As Tom Gray noted, this could add a considerable financial and bureaucratic burden on performers:
I performed across Europe for 20 years and to go into Switzerland you had to fill in a thing called a Carnet. It cost several hundred pounds and you had to itemise every single piece of equipment and merchandise that you were carrying with you.
The financial burden imposed by these costs therefore impact performers’ most important source of income and exacerbate existing issues with remuneration from streaming.
51.There are also concerns that the economics of streaming entrench historically successful artists and create barriers for new performers. Of the four UK acts who featured in Billboard’s top 10 worldwide music tours of 2019 only Ed Sheeran released a debut single in the last 50 years (with the other three being Elton John, the Rolling Stones and Sir Paul McCartney). Meanwhile, it has become an industry norm that costs of producing music, such as for space and equipment, are falling to creators. Whilst externalising costs of production is beneficial to corporate margins, it raises barriers of entry for musicians who cannot access the means to cover these costs. Evidence we received cited Maria Schneider, a jazz musician and composer, who has previously observed that “many, if not the vast majority of record companies, are no longer advancing money for a lot of music on their labels, whilst creators are sinking tens of thousands of dollars into making their own records”. Written evidence to this inquiry supported that observation and 43 percent of professional musicians told YouGov that insufficient income from streaming has caused them to look for jobs outside of music. Several musicians via written evidence argued that they or their peers have been forced to subsidise making music with other employment, which subsequently further reduces the resources and time available to devote to making music. Other performers have noted that it has been more sustainable to carve a niche in creating music for television, film and advertising, or in creating ‘muzak’ or background music optimised for mood playlists.
52.Musicians releasing music to streaming services, including those on record deals, do so as the ‘featured artist’. Featured artists are performers whose names are credited within the title of a record release. In contrast to featured artists, non-featured artists are performers whose names are not prominently featured on the release of a recording. Non-featured artists are typically session musicians (professional artists such as backup vocalists, orchestral players or specialist musicians who are hired to perform on a recording or tour on a ‘work-for-hire’ basis) who have transferred their performers’ rights to the producer of the recording in exchange for a one-off payment. The minimum rate for this payment is negotiated through periodic collective bargaining agreements between the BPI, representing record labels, and the Musicians’ Union, representing session musicians. The current agreement, negotiated in 2019, is set at £130 for a standard three hour session or £43.33 per hour, which increases to £48.60 per hour (and with a minimum session length of two hours). Other aspects of the agreement include: a five minute break every hour in a standard session; limits whereby a record label can only use 20 minutes of recorded performance per session; and additional payments for overtime, overdubbing and bank holiday employment.
53.Because non-featured artists transfer their rights in exchange for a one-off session fee rather than a royalty, they are effectively ‘bought out’ of their rights to future revenues, including from streaming. This means that, when a track that includes contributions from one or more non-featured artists is streamed, downloaded or purchased physically, those artists are not paid. Instead, session musicians are only entitled to an equal share of 20 percent of gross revenues from physical and online sales, which is referred to as the non-featured performers fund or session fund, after 50 years since the publication of the recording. The exception to this is where UK law provides performers with a right to equitable remuneration, such as when recorded music is played in public or broadcast via radio. Because this right legally cannot be transferred or waived, in these instances non-featured artists receive a payment alongside (albeit at a lesser rate than) featured artists from the performers’ overall share. Where a recording is incorporated in a music video or is used as a backing track for performers to mime or sing live within a broadcast, session musicians have also been entitled to subsequent annual payments since 2012. However, these payments have amounted to only approximately £2,708,000 in total for all session musicians between 2012 and 2020.
54.Session musicians fulfil several important roles in the creation and performance of recorded and live music, both through their creativity, skill and expertise in their own right but also as a pipeline for new talent to emerge. However, their reliance on session fees to earn a living has been particularly impacted by the Covid-19 pandemic. Written evidence from several session musicians (or those who started their careers as session musicians) argued that the terms of the BPI/Musicians’ Union agreement are unfair because they “[deprive] session musicians of fair and legal remuneration for the exploitation of their performances” and that the agreement itself is worded so that it will apply unilaterally to any “hereafter created” format. The Musicians’ Union itself criticised the status quo, arguing that as streaming displaces radio, it reduces opportunities for session musicians to participate in equitable remuneration for their recordings. Many prominent featured artists, such as Nile Rodgers, Tom Gray, and Bloc Party’s Matthew Tong, also cited the lack of remuneration for session musicians from streaming as a salient issue. Ed O’Brien noted that, as a solo artist, his band rely on income from touring but have also, during the pandemic, been excluded as freelancers from Government support packages; Mr O’Brien told us that his bass player, for instance, has said that “’I am going to have to take a year out and this is a chance to do an MA or something’”. Though the Minister for Digital and Culture, Caroline Dinenage MP, refused to state whether she thought the lack of remuneration for session musicians from streaming was fair due to the “wildly differing views” between stakeholders, she did emphasise the contributions of all musiciansincluding that of session musicians—to recorded music production and sympathised with their position, noting that “it seems that there is a disparity […] between what happens on the radio and on streaming and yet the contribution of all the talented artists on the piece of music is no different”.
55.Submissions from both the BPI and AIM, however, asserted that session musicians are remunerated fairly on the basis that they are paid up-front regardless of the success of the recording and thus are not exposed to the risk of a release not being commercially successful. Moreover, the BPI emphasised that, “where the recordings are successful, they enjoy certain further payments” from specific formats. By contrast, AIM warned that any attempt to redress the disparity for session musicians could result in session fees being reduced to compensate for the margin reduction to “investors” (i.e. the record labels), fewer session musicians being used and that any alternative, success-based model would “favour the few session musicians who play on the small percentage of very successful tracks”. Similar to its perspective on featured artists, the BPI argued that “the most important element in securing future earnings […] to increase the overall size of the recorded music sector, so that labels can invest in more recordings and hence, more recording sessions”. However, AIM’s submission did recognise that “minimum rates for sessions negotiated between the BPI and Musicians’ Union have not increased dramatically”, despite session musicians not participating in booming revenues from streaming. Moreover, neither submission considered why session fees might automatically decrease given that these fees are subject to collective bargaining by the Musicians’ Union and the BPI, nor why there would necessarily be a reduction in the number of session musicians if greater performer remuneration instead underpinned greater financial incentives for more and more wide-ranging music to be created.
56.Whilst creators perform the most fundamental and important part of the music industry—production of the ‘raw material’ on which the industry is based—they also often provide the foundation for a front-line business that aims to maximise the revenue that accrues from their creative output and enable further production. Although creators may operate these ‘artist businesses’ themselves, they are often supported by an ecosystem of employees and business and corporate partnerships that focus on and aim to develop one particular aspect of a creator’s career. Managers, for example, may run the day-to-day operations of the company; lawyers and accountants provide important legal and financial support and advice; and agents and promoters arrange the live music shows and tours that make up the primary revenue stream for most performers.
57.Diminishing returns for creators, both in the context of streaming but also in terms of live music and other modes of recorded music consumption, has had knock-on effects on this ecosystem. AIM’s submission acknowledges that managers, who have traditionally worked on a 20 percent commission model on artists’ net revenues, are “having to invest more and for longer when working with a developing artist” with no long-term security that they will see returns on this investment, unlike record labels. Agents, similarly, work on commission for income that has since disappeared. Road crews, made up of professional technicians and engineers required to facilitate live music events, face intense working conditions and increasingly precarious employment conditions despite their expertise. The pandemic has subsequently forced many to seek alternative employment in lieu of lost revenue from live music and an absence of Government support. Ed O’Brien in particular argued that “my crew people are not ‘roadies’; they are proper technicians and engineers and I know that most of them have become delivery drivers—Amazon drivers”.
58.The pitiful returns from music streaming impact the entire creative ecosystem. Successful, critically acclaimed professional performers are seeing meagre returns from the dominant mode of music consumption. Non-featured performers are frozen out altogether, impacting what should be a viable career in its own right, as well as a critical pipeline for new talent. Those that provide specialist support for creators, either based on commission or working as salaried staff as part of an artist’s business or technical expertise, are also affected, meaning that fewer jobs will be sustained by an otherwise growing sector.
59.Given that the benefits from streaming have disproportionately accrued to the record labels, it is unsurprising that many contributors to our inquiry have called for a right to equitable remuneration to be applied to streaming. The right to equitable remuneration (as explained in paragraphs 28–9 in Chapter 2) is a non-waivable, non-transferrable statutory right to payment when certain copyright controls are exploited. This is paid according to industry standard rates (which have no statutory basis), which currently stands at 50:50 between the label and performers. Equitable remuneration is a proposed solution to many of the aforementioned issues facing performers. First, equitable remuneration is not subject to recoupment, meaning that performers would be paid when their tracks are streamed regardless of whether their recordings have earned out on the initial investment and expenditure. As Horace Trubridge, General Secretary of the Musicians’ Union, explained, “when equitable remuneration came in for radio play, it was a lifeline” as “it meant that you had a source of income that the record companies could not get their hands on”. Second, equitable remuneration could help redress the some of the disparity faced by legacy performers who are paid according to the terms of pre-digital contracts at much lower royalty rates, despite the fact that these artists often generate significant revenues for the industry. Finally, it is non-waivable and non-transferrable. This means that performers cannot transfer away their right to equitable remuneration, even in instances where they may be negotiating with much more powerful parties (or otherwise feel pressured or intimidated into doing so).
60.Solutions for poor creator remuneration are popular with music consumers. A recent survey of streaming service customers, undertaken by YouGov on behalf of the #BrokenRecord Campaign, Musicians’ Union and Ivors Academy, found that there is widespread public support for better remuneration for creators. 77 percent of respondents felt that performers were not paid enough, and 76 percent felt that songwriters and composers were underpaid. 81 percent of respondents also wished to see session musicians receive some share of streaming revenue. These sentiments perhaps underpin the success of tech companies like Patreon and Bandcamp, which allow artists to create fan communities and monetise this fanbase independently of corporate partners by offering exclusive or early access to creative content, merchandise, and other benefits. Spotify similarly at the start of the pandemic launched a function for artists to raise donations for fans that became known as the Spotify ‘tip jar’. However, Nadine Shah was critical of the ‘tip jar’, arguing that it was an admission that the economics of streaming were not benefitting creators:
Initially I thought, “This is interesting. This is another way of making money.” I found it insanely condescending. It was an admission of sorts by that platform that says, “We know that you are not making enough.” As I said earlier, when I have to talk about transparency and my earnings and what I make among my peers and my fans, I don’t want to come across like I am cap in hand. I believe that I am worth and deserve to be treated better, but I believe that that was an admission that the system is not working for us and I found it very, very condescending.
Furthermore, Ms Shah observed that emerging artists that had yet to build a dedicated fanbase would therefore not be able to rely on the additional support of superfans to make a burgeoning professional music career viable.
61.Whilst calls for better creator remuneration from streaming have been prompted by the iniquitous distribution of the benefits of streaming, arguments to apply an equitable remuneration right specifically have emerged due to the inconsistency of and contestation about the classification of music streaming within UK law. It is clear from those who have given evidence to us that music streaming poses a definitional challenge. There is no consensus as to how streaming should be defined and classified under UK law. Broadly speaking, performers argue that streaming has characteristics that justify a classification that would engage equitable remuneration. This position has been endorsed by most creator unions, campaign groups and trade associations, several (non-domestic) collecting societies and several academics. Conversely (and as expected), record labels and their trade associations have generally argued for the status quo. For the most part, the Music Publishers’ Association (MPA), domestic music collecting societies and the streaming services themselves generally declined to take a stance on the debate.
62.During our inquiry, companies ranging from the major multinational record labels Universal, Sony and Warner to independents like Jazz Re:freshed, as well as trade bodies the BPI and AIM, argued that streaming should be classified as ‘making available’. The major labels’ case for this classification cited technical specifications for this: namely, the on-demand functionality of streaming platforms. As Tony Harlow, Chief Executive of Warner Music UK, explained in oral evidence:
You can play what you want when you want it and skip when you don’t want. That is the basis of the argument that streams are equivalent to sales: you have a choice. You can either choose a song directly or you could make your own playlist, or as you say you could listen to something like Sunday morning jazz; but when I am listening to it as you are listening to it, it will then feed me artists based on the choices I have made before. I can decide how long I want to listen to it. That is not like broadcast. I can decide when I want to listen to that. I can skip, and most subscription platforms nowadays will offer you the chance to case your recordings, or bring them down to use offline. So in all those ways it is like a sale and, as I say, it is covered by that making available right, which is kind of what the internet has set out as the basis of equivalent to sale.
Universal Music, Warner Music and Sony Music expanded on this in subsequent correspondence, arguing that streaming services allow users to skip, pause, rewind or skip forward, download, repeat, cancel, download, like, retrieve artwork and credits and/or create their own playlists at their leisure. Warner Music also argued that listener behaviour also informs algorithmic curation, further emphasising the user interactivity. Finally, Universal Music wrote that in instances where streaming services restricted the interactivity and functionality on certain devices for ad-funded users, they typically allowed those same users to listen with unrestricted functionality on other devices.
63.When asked to characterise streaming in contrast to other legal classifications, record labels emphasised that streaming appropriately could be described as a sale, thereby justifying both performer remuneration according to royalty arrangements and the relative revenue disparities between the recording and song rightsholders (see paragraphs 78–88 for the implications of this). Universal’s submission argued that “the reason for introducing the exclusive making available right at the international level in the first place was to ensure that rights holders can authorise online uses that have the same commercial effect as the distribution of copies in the off-line world”. Warner Music’s correspondence expressed this comparison in economic terms, noting that “commercially, streaming is substitutable for, and has largely replaced, physical goods and downloads”. When asked whether streaming was analogous to a sale or a rental, BPI Chief Executive Geoff Taylor argued that:
When the framers of the internet treaties granted rights for the future, they granted an exclusive ‘making available’ right, which is what applies to streaming, and they did that in the knowledge that an exclusive right was needed because these interactive digital transmissions were going to take over from the sales model. So we would say that, if you are going to compare to either, it is really a ‘making available’, but the better comparison is to a sale.
This analogy was supported by the independent sector. Paul Pacifico, Chief Executive of AIM, likened a music streaming subscription to a phone contract, arguing that a phone customer buy a specific number of (or otherwise infinite) minutes, whereas a customer would have to give back a rented car or home video after a certain amount of time. On broadcast, Sony emphasised the lack of user control, arguing that broadcast mediums “do not afford any interactivity to the end user because the user cannot influence the transmission of the music which can be listened to at a given time; he or she can only choose to turn off the station if the piece broadcast is not to his or her liking”. Warner similarly noted the lack of individual consumption, stating that “every listener hears the same track at the same time with no possibility for individual selection of or interaction with the content”.
64.However, the balance of evidence that we have heard suggests that the classification of streaming is not as straightforward as posited by the record labels. First, the consumption of streaming does also share characteristics with rental, insofar as consumers may receive unlimited access music from streaming services but only for as long as they pay for time-limited access (i.e. subscribed to the service). This occurs even when a track has been downloaded from a streaming service for offline play, which is distinct from what occurs when music is bought and downloaded from a digital MP3 store (which is also classified as making available). Nile Rodgers illustratively argued that:
In the old days we would buy a CD and that was a sale. That was something we owned and there is a big difference. Like those bicycles that are on the street that you can put your credit card in and ride on the bicycle, but you have to return it, it is not your bicycle to keep forever.
65.José Luis Sevillano, Director-General of the Spanish collecting society Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE), concurred, asserting that “who can say that Netflix is more similar to an old Blockbuster or to a shop where you can buy a film? It is a rental right.” Streaming services themselves also pushed back on the idea that streaming was straightforwardly similar to physical sales or downloads relative to other modes of consumption. Whilst they did not comment on the legal ramifications, Apple and Spotify did, in oral evidence, concede that streaming was “more akin to a rental” and “different to an ownership model”.
66.Similarly, streaming also shares similarities with more passive listening experiences such as broadcast. Autoplay, which applies where a user stops actively selecting music and the service’s recommendation systems subsequently select tracks for them, is an example where music is curated for, rather than by, the user (albeit in a more personalised way). Streaming services themselves can delineate whether a user has selected a track themselves or listened passively via autoplay or algorithmic or editorially-curated playlists, meaning this differentiation is technically feasible to monitor. Though major record labels have argued that streaming is substitutable for, and is replacing, sales and downloads, it is equally applicable that streaming is substitutable for, and is replacing, radio. In oral evidence, Spotify confirmed that it intends to leverage its more personalised listening experience to radio listeners and would expect to reduce radio listens over time. Dawn Ostroff, Spotify’s Chief Content Officer and Advertising Business Officer at Spotify, has previously said that “our job is sucking listeners away from radio” and suggested the $30 billion of radio industry advertising revenue presents a business opportunity for ad-funded streaming services in particular. Finally, the BBC has warned explicitly that music streaming is a critical challenge to the prominence of radio consumption of public service broadcasting, particularly due to the displacement of traditional radio by ecosystem providers such as smart speakers and in-car hardware (discussed further in paragraph 160).
67.Many submissions also observed an inconsistency in how streaming is classified between the recording and publishing sides. Unlike the recording, which is classified simply as ‘making available’, the song is classified as both a ‘mechanical’ (reproduction) and a ‘performance’. This means that performing rights royalties are paid to the song. Therefore, streaming is already paying a performing right within making available without changing the law. Though Roberto Neri, Chair of the MPA, declined to comment explicitly on the difference in classification between the recording and the song, he explained that publishers apply this model because “there is a performance element, because it has been performed” and “there is a mechanical element behind that, to actually get on the service” and “you can download the tracks on to your devices”. Mr Neri also asserted that he was satisfied with the classification of streaming under publishing, stating that the model “is fit for purpose as it is”. As such, performers have questioned why they are excluded from equitable remuneration (their performance royalty) when a performance royalty is paid to songwriters and composers of the same track. The lack of remuneration right for performers partially underpinned a Musicians’ Union and Ivors Academy campaign, which prompted over thirty creators and organisations to submit evidence both confidentially and publicly to our inquiry arguing for equitable remuneration to apply to recording as well as publishing.
68.However, perhaps the most compelling argument is not technical, but economic. The right to equitable remuneration currently applies to modes of consumption whereby the manufacturing, storage, distribution and physical breakage costs for record companies, after the song has been created and the performance recorded, are marginal relative to other modes such as physical sales or otherwise externalised to retailers or broadcasters. In renting, for instance, the costs of manufacturing and distributing each unit to the label occur once (when rental copies are delivered to the rental copy owner), whilst the subsequent act of renting incurs little to no additional costs to the label. Similarly, once music has been licensed for public performance or broadcast, there are no marginal costs to the label for each additional use. The same technologically enabled reduction and externalisation of costs occurs for the modes of consumption that exploit the making available right. For both digital downloads and music streaming, the storage, distribution and breakage costs associated with simply transferring a digital copy of the recording to the download store or streaming service are negligible or non-existent relative to storage, distribution and breakage for the purpose of physical sales. Despite the reduction in marginal costs with digital consumption, these cost savings have not been shared with the performers.
69.The major music companies and independent record labels have consistently asserted that music streaming is straightforwardly ‘making available’, and therefore performers should be remunerated as though it was a sale. However, this classification does not consider the complexities of streaming that sets it apart from other modes of consumption. For example, it also has the characteristics of a rental and a broadcast, which are consumed by exploiting copyright controls that provide performers with a statutory right to equitable remuneration. Furthermore, this classification creates inconsistencies in comparison to the song rights. Finally, precluding the making available right from equitable remuneration does not capture the realities of costs associated with the distribution of digital music. We recommend that the Government addresses these inconsistencies and incongruities by exploring ways to provide performers with a right to equitable remuneration when music is consumed by digital means.
70.There are several ways that equitable remuneration could be applied to streaming that we have considered, with different potential outcomes. One method would be for a legislative intervention to provide a specific classification for streaming. Many submissions from artists, academics and organisations (including several independent record labels and an Irish collecting society) called for streaming to be reclassified as communication to the public. In oral evidence, the Ivors Academy and Musicians’ Union both advocated for this approach, both on the basis of streaming’s substantial functional distinction from downloading and similarity to radio and for greater consistency between the song and recording sides. This had strong support amongst written evidence we gathered, often citing similarities with traditional radio or on the basis of consistency. Conversely, evidence from Colin Young and Nile Rodgers proposed applying a more nuanced reclassification based on distinguishing between actively selected and passively consumed content, similar to the classification of streaming for the publishing side, to reflect changes in both the methods of user payment and consumption. They propose that, if the distinction between active and passive listening is recognised, payment would be administered according to two distinct royalty streams. Where a user actively participates in selecting music, revenues are allocated between rightsholders as though they have purchased a CD (i.e. where the recording and publishing sides according to the 55 percent to 15 percent split, and where appropriate the creative and corporate partners are then paid according to royalty arrangements). Where a user passively streams music, revenues are allocated as though they have listened to a broadcast (i.e. where both the recording and publishing sides and the creator and corporate partners on each side are remunerated equitably).
71.These methods could be accomplished by adding an exception to the definition of broadcast in the Copyright, Designs and Patents Act 1988, which currently excludes internet transmission but for certain specific exceptions such as radio broadcasts that are simultaneously transmitted via the internet. However, the Government would need to ensure that streaming is defined precisely. A definition that was too broad would potentially encapsulate other modes of music consumption, thereby negating the purpose of creating a specific exception for streaming only. Similarly, a definition that was too technologically specific would risk not applying to certain forms of music streaming or becoming quickly outdated as streaming itself evolves. Finally, this approach may mean that the law might need revisiting if and when new modes of music consumption appear in the future. This would necessitate Government to be prepared to proactively intervene if this is the case. Indeed, Tim Moss, Chief Executive of the IPO, asserted that this is often necessary of Government, having previously been undertaken by Parliament and the Government led by Prime Minister Margaret Thatcher in the 1980s:
As things change, we need to make sure the copyright regime is fit for the purpose. The UK has a great copyright regime and we need to understand how things change over time and make sure that it is fit for purpose.
However, when questioned, Mr Moss and Department for DCMS officials also repeatedly affirmed that they felt that the current copyright framework was “fit for purpose” given that the making available right was “designed for the streaming environment” and “was linked to changes in the internet and the way that music was being done, of which streaming would be one”.
72.A likely consequence of this approach would be the introduction of compulsory or collective licensing for recording rights for streaming. Tom Frederikse, a former music producer and dual-qualified UK solicitor and New York attorney, explained that:
I think the easy answer to “What is [equitable remuneration]?” is that it is collective licensing. It does create a restriction on the exclusive rights of the rights holder to negotiate for themselves. But as you have heard many times this morning, the artist-label negotiation rarely takes place on a level playing field, so this goes some way towards helping that problem. Also, as we can see in the US and elsewhere, collective licensing for all forms of streaming and broadcasts is certainly possible.
Both the major and independent record labels definitively favoured direct licensing due to the greater power afforded to them by being able to walk away from negotiations. Despite some concerns about the implications for self-releasing artists (see paragraphs 128–9 in Chapter 4), the negotiating power afforded by direct licensing does likely increase the total streaming revenue for the music industry.
73.Another method of practically applying equitable remuneration to streaming exists in Spain. Under the Spanish system, the performer is presumed to have transferred the exclusive right under the terms of their contract, which the producer (i.e. the record label) retains, whilst the non-waivable and non-transferrable remuneration right allows performers to be paid when music is streamed. In Spain, equitable remuneration is paid by the user of the sound recording (in this instance, the streaming services) to the rightsholders via the Spanish collecting society AIE subject to an administrative fee of approximately 10 percent. In total, around £800,000 per year is paid to UK performers by AIE from the equitable remuneration right. The Spanish system has been in place since 2006, when Spanish law that transposed the 2001 EU Information Society Directive came into force. This solution was posited in written evidence by the #PayPerformers campaign, Musicians’ Union and songwriter Robin Firman, and has been explored in Holland, Switzerland, Hungary and elsewhere.
74.The main proposal by the #BrokenRecord campaign calls for amending UK law so that the right to equitable remuneration would extend to making available. This suggestion has also been endorsed by the Musicians’ Union. A recent letter to the Prime Minister calling for this amendment was signed by over 230 artists from a variety of genres, including Lily Allen, Massive Attack, Gary Barlow, Kate Bush, Celeste, Paloma Faith, Noel Gallagher, Kano, Chris Martin, Sir Paul McCartney, Kate Nash, Stevie Nicks, Jimmy Page, Mike Skinner and Sting. Unlike reclassifying streaming in legislation, this approach would not require the Government to proscriptively define a stream, thus future-proofing UK law to any technological deviation in streaming. It would, it should be noted, also apply to downloads. Another advantage would be that this would be relatively straightforward. Spain’s model provides some illustrative precedents for policymakers as to the practicality of applying equitable remuneration to the making available right. AEPO-ARTIS, a non-profit organisation representing 36 European performers’ collecting societies, argue that in practice, UK performers are forced to transfer their exclusive right to record companies, film studios and other producers for little to no remuneration anyway. This is due to the overwhelming contractual power held by record labels relative to performers they negotiate with, which was argued by several legal, academic and industry professionals. The Scottish Research Centre for Intellectual Property and Technology Law (SCRIPT), note that creators’ weak bargaining position at the time of signing initial contracts may be caused by a lack of experience and/or information and a desire to be produced or published at any cost, and exacerbated due to the relatively few controls on copyright contracts in the UK.
75.The co-existence of remuneration and exclusive rights already applies in several UK contexts, established in the Copyright, Designs and Patents Act 1988. This occurs in the case of rental, where performers have the right to equitable remuneration when a CD or DVD is rented from a library, and in the case of non-featured performers’ funds, where non-featured artists are entitled to an equal share of 20 percent of gross revenues from physical and online sales of the recording after the fiftieth year following its publication. This therefore addresses the critique levied against applying equitable remuneration to the making available right by one submission we received, which argued that if the “exclusive right is reduced to a simple right of remuneration, performers will no longer have any right to authorize or prohibit the use of their records”. This position was similarly argued by Tim Moss who argued that “the broadcaster can broadcast whatever it likes and the rightsholder cannot control what is broadcast”. However, practically speaking, rightsholders are only able to control whether streaming services have licensed the rights; they do not control what is played or when, particularly when algorithmic curation takes place. Mr Moss himself also noted when questioned that this was the case in Spain, where the making available right was then linked to a remuneration right, and confirmed that “we want to look at this in more detail” as to “ whether that works in practice and gives a better deal for those in the whole music industry”. A remuneration right for digital music consumption, therefore, could practically be introduced to apply to the making available right similar to the rental right where performers retain the right to equitable remuneration where their rental right has been transferred. As Tom Frederikse noted:
Regarding the application of equitable remuneration in streaming, clearly the on-demand nature of streaming is fundamentally different to that of broadcasting, but the music industry has a long tradition of crossbred music business models. […] There is certainly a lot of precedent for pulling models and principles from one type to another.
76.The right to equitable remuneration is a simple yet effective solution to the problems caused by poor remuneration from music streaming. It is a right that is already established within UK law and has been applied to streaming elsewhere in the world. A clear solution would therefore be to apply the right to equitable remuneration to the making available right in a similar way to the rental right. As such, an additive ‘digital music remuneration’ payment would be made to performers through their collecting societies when their music is streamed or downloaded. This digital music remuneration would address the issues of long-term sustainability for professional performers and the cannibalisation of other forms of music consumption where equitable remuneration applies, whilst also retaining the benefits of direct licensing.
77.We recommend that the Government legislate so that performers enjoy the right to equitable remuneration for streaming income. Amending the Copyright, Design and Patents Act 1988 so that the making available right does not preclude the right to equitable remuneration, using the precedent set by the co-existence of the rental right and right to equitable remuneration in UK law, would be an effective solution. This would be relatively simple to enact and would appropriately reflect the diminished (and increasingly externalised) marginal costs of production and distribution associated with digital consumption. Furthermore, were the Government to do this by echoing existing UK law, this remuneration right would apply to the rightsholders (i.e. the record labels) rather than the streaming services.
78.As discussed in Chapter 2 (see paragraph 26), streaming services keep approximately 30 to 35 percent of gross revenues and distribute the remaining 65 to 70 percent, known as the royalty pot, to the music industry. Whilst the majority accrues to master rightsholders, who receive approximately 78.5 to 80 percent of revenues distributed to the industry, song rightsholders receive approximately 20 to 21.5 percent. Despite this, many witnesses to our inquiry have emphasised the importance of the song to music streaming. Representatives of song rightsholders contrasted the poor rate of remuneration for songwriters and composers relative to other parties, despite the fact that the song and recording rights of any track are logically symbiotic insofar as both need to be licenced for recorded music to be consumed. Roberto Neri questioned why the streaming services’ share of the gross revenue pot was twice as much as that of song rightsholders, arguing that:
Our songwriters are half of what is brought to the table. Without the songs, there are no music services. […] Without a songwriter creating a song, there is no music industry.
Graham Davies, Chief Executive of the Ivors Academy of Music Creators, similarly emphasised the importance of the underlying song to the recording: “The songwriters, as we all know, invent the music. You do not have a recording, you do not have music, without the song”. Academic research has begun to explore this assertion further with statistical analysis, which has suggested that the quality of songwriting is as important as performing talent in determining the extent of music consumption.
79.The importance of quality songwriting and composing should also be contextualised by how streaming technology has influenced music consumption. Many written submissions have recognised that streaming has provoked a decline in album sales concurrent to an increased consumption of individual tracks, referred to as a ‘song economy’. The song economy of streaming services have been in part driven by changing demand-side consumption habits underpinned by functionality such as playlisting, alongside the weakening of supply-side incentives to create album-length music to capitalise on economies of scale for physical manufacturing and delivery costs. This shift in consumption behaviour is not unprecedented: ERA posit that the concept of ‘albums’ did not exist before the invention of vinyl LPs, and moreover were limited to around 40 minutes of play until the invention of CDs. Instead, creators are now incentivised by platforms to release tracks continuously to optimise streaming revenues. Daniel Ek, founder and CEO of Spotify, attracted criticism last year for saying in an interview with Music Ally that “you can’t record music once every three to four years and think that’s going to be enough”, which many musicians felt demonstrated a misunderstanding of the creative process of making music.
80.However, even as the industry moves towards a song economy, songwriters and composers face new social and technological influences when creating music. Most significantly, most on-demand streaming services only register a user’s stream if that user listens for thirty seconds. BMI Award-winning singer-songwriter Fiona Bevan and critically-acclaimed jazz saxophonist, MC and composer Soweto Kinch both noted that that they had observed similar trends as fellow creators are incentivised to write for a particular aesthetic based on quick beats and catchy hooks, leading to greater homogenisation around a “disposable sort of sound”. Guy Garvey, meanwhile, told us that whilst “Elbow is an album band”, the band has and would shorten the introduction to a track if it optimised the track for streaming and playlisting with the aim to then lead listeners to the album. The BPI has similarly asserted that number of tracks on albums and EPs have also increased, in order to maximise the number of tracks streamed (and therefore generate additional revenue) in case an artist’s music is left playing.
81.From the creator side, the current valuation of the song despite the importance of song writing and composing has resulted in financial hardship for all but a select few. In oral evidence, Fiona Bevan disclosed that one track that she co-wrote, of which her share was 48 percent, earned her approximately £100 on an album that was the fastest-selling solo artist album of the year at the time of release and reached No. 1 in the UK album charts. Successful songwriters and composers also provided written testimony, both publicly and confidentially, about low rates of remuneration for successful songs. One songwriter and composer, who co-wrote an NME and Rolling Stone award-winning song that was streamed 137 million times on Spotify, received a royalty of £3,013.47. Another prominent songwriter and producer received approximately €352 in Spotify payments over three years from a one-third writing share for a song that was streamed over 14 million times. Yet another composer and artist, who has created music for some of the biggest films in the world, wrote confidentially that they make more money from a track being played on TV than out of millions of record streams. Several witnesses asserted that, as a result, many hit songwriters and composers were also working in ‘gig economy’ jobs for Uber or Deliveroo in lieu of adequate remuneration from streaming.
82.Creators of music in genres such as classical, national and traditional music and types of popular music such as jazz are particularly disrupted by streaming, even accounting for the fact that their specialist or supposed ‘niche’ nature meant that it would already be difficult to achieve the numbers of streams that mainstream music would. Several witnesses, for example, argued that paying rightsholders after 30 seconds of streaming a track meant that a seven-minute classical piece or a nine-minute jazz symphony would pay the same as a 31-second album interlude. One classical composer noted in written evidence that Ariana Grande’s ‘thank u, next’ could be streamed three times for every stream of Pink Floyd’s nine-minute ‘Comfortably Numb’ from the band’s concept album The Wall, and seven times for every stream of Simon Rattle conducting the twenty-four minute first movement of Symphony No. 2 by Gustav Mahler. Effectively, this means that, particularly for services that use ‘pro-rata’ payment models, regular long-form, classical, jazz and traditional music listeners subsidise the consumption of consumers with popular or mainstream tastes, especially where mainstream music has optimised for streaming. Many witnesses also asserted that these issues were further compounded by algorithmic curation and playlisting that disadvantages these genres over mainstream pop and commercial music. The algorithmic and playlisting problem too is multifaceted: on the one hand, these types of music may be overlooked by recommendation systems entirely, but one submission we received also highlighted that niche music is being contextualised in problematic ways when it is playlisted, arguing that “if a highly trained soloist views getting included on a Spotify ‘Sleep’ playlist as a career booster, something is really wrong”. As a result, it is estimated that the value of music such as jazz has been suppressed by about three to six percent, reducing financial incentives to its continued investment and production.
83.Moreover, for songwriters and composers particularly, there are often likely to be several creators contributing to a song. This means that what revenues that are allocated to song rightsholders are often divided between more parties than on the recording side. Fiona Bevan noted that “if you look at the charts, the vast majority of music in the charts is written through collaborations and teams, songwriters and producers and artists together or producers and songwriters together”. It is not unusual for songwriters to share revenues for writing credits with at least three to four other songwriters, if not more; ‘Havana’ by Camila Cabello, ‘Uptown Funk’ by Mark Ronson featuring Bruno Mars and ‘Strip That Down’ by Liam Payne featuring Quavo credit ten, twelve and fifteen writers respectively. Soweto Kinch observed that “if you are independent, you would be looking to pay splits to a composer, a band arranger, songwriters, lyric writers and so on”. Sometimes the recording artist may also contribute to the writing of songs or otherwise negotiate a credit, writing fee or upstreaming bonus. Maria Forte explained why this trend may be increasing:
The easiest explanation is, first, sampling is quite prevalent. When you sample a song and you give up a share of the copyright, you immediately have the songwriters of that sampled song in your song. That can be a way in which suddenly you get 17 songwriters. Somebody can write a song and then the producer, who is a producer-writer, will get it and add bits to it. There can be a number of people in the room who will be given a percentage. Often, if it is a major artist, they will require a percentage of the song irrespective of whether or not they contributed to it.
Indeed, the latter practices, where song writing revenues have become fair game, have become an industry norm to the extent that they are summarised by the maxim ‘add/change a word, take a third’. Since we heard this evidence, a group of top songwriters, including Emily Warren, Tayla Parx, Victoria Monét, Justin Tranter and Savan Kotecha, have penned an open letter to express concern about “a growing number of artists that are demanding publishing on songs they did not write” and have resolved to “not give publishing or songwriting credit to anyone who did not create or change the lyric or melody or otherwise contribute to the composition without a reasonably equivalent/meaningful exchange for all the writers on the song”.
84.As with performers, the lack of financial remuneration often compounds other barriers facing songwriters and composers. However, unlike performers, who may receive advances or session fees, songwriters are often unpaid for their work unless and until their work is released commercially. Fiona Bevan explained that “songwriters spend a lot of their own time, energy and money unpaid, because we do not get paid to go to work, we get paid solely on royalties, so we are taking the risk and we are developing the artists for free for the record label and not getting paid for it”. Furthermore, evidence we received from successful professional British songwriters revealed that not only has it become an industry norm for externalising the recording costs of music production to be passed to the performer, but also the songwriter. Songwriter, producer and performer Iain Archer described in written evidence the songwriter perspective of this dynamic:
A songwriting session will require two days of my time with an artist, then up to two extra days of my own time completing the work. I provide a studio with world class equipment and instruments, lyric, melody and chordal writing, playing, arrangement and production. I pay the energy company to power and heat/air condition the studio. I provide snacks and drinks. This is all at my own expense, despite the artist often being signed to a multinational record label. Songwriting is not only a process of creating a world class combination of lyric and music, it is also about developing the identity of an artist, working with the artist towards a piece of work that will actively promote their unique selling point—it is a highly skilled task to get this right. The labels work off the claim that they develop the artist and are deserving of the extra remuneration for undertaking this task—all the while aware that the vast majority of this work is being done for free by the songwriter. The label skill is knowing which songwriter to use, getting them involved and then using their time, resources and skillset for free.
One songwriter, who has created music commercially across the world, wrote confidentially that they were typically expected to self-finance hundreds of pounds in costs for a song that has subsequently earned them less than £1,000 (as one of four writers) for over 17 million streams on Spotify alone. Helienne Lindvall, another award-winning professional songwriter and Chair of the Ivors Academy’s Songwriter Committee, similarly wrote that even hundreds of thousands of streams often would not cover the expenses incurred in writing sessions, let alone uncompensated investment such as working with emerging artists to develop their sound and musical direction.
85.These financial difficulties disincentivise new and upcoming songwriters and composers in particular. Several self-described emerging performer/songwriters, including one who had already earned seven million streams, wrote to us both publicly and confidentially describing their disaffection for making music commercially due to poor remuneration rates from streaming. These sentiments have also been expressed by established composers, songwriters and industry professionals. Soweto Kinch told us that the disparity between song and recording undermines the message that there are many viable career paths in the music industry:
When I do lectures and teach university undergrads, I say, “We need people in PR, we need people to organise, to curate shows and to arrange and compose,” but if all the income is either coming to the star performer or the backing and the label, it doesn’t make the idea of being a professional arranger or composer particularly viable.
Moreover, the externalisation of production costs to songwriters similarly creates barriers to entry for new, young songwriters, and particularly those from low income backgrounds. Iain Archer asserts that poor remuneration, the diminishing of songwriter control and the over-saturation of the market due to the demand for new content means that young new creators are already unable to establish a career. Finally, witnesses have asserted that disincentivising new talent, compounded with the risk-averse nature of many industry professionals, may harm musical experimentation. Soweto Kinch emphasised several times that the modern music ecology would not produce “a Kate Bush or a David Bowie […] or somebody like Rod Stewart” because of the prioritisation of short-term profitability.
86.Just as songwriters and composers have faced financial hardship, music publishers have argued that the economics of music streaming do not work for them. Music publishers fulfil several important functions, should a songwriter or composer choose to work with them. As noted above, music publishers work with songwriters and composers to exploit song rights that they administer. Because the song rights underpin the recording, publishers may work with songwriters and composers from the start of the creative process by investing in and/or initiating creative projects. Publishers also ensure that creative works are brought to market and are made available as widely as possible, and that copyrights are protected and enforced. Additionally, since the advent of digital music consumption, music publishers have begun working with collecting societies to ensure that the relevant metadata for their assets are captured and disseminated to ensure that rightsholders are remunerated accurately and efficiently. Notably, evidence we received from publishers, ranging from independent companies to BMG, the world’s fourth largest publisher, typically argued for greater remuneration for songwriters and composers and endorsed the creator perspective. The IMPF, for instance, asserted in written evidence that “the amount of revenue that streaming services make off the back of creators’ work and the gross disparity and inequality of what they pay out has become scandalous” and called on streaming services to “pay up and pay fair”.
87.Alongside their creative partners, independent publishers have therefore called for a greater share of streaming revenue. This was, however, in contrast to the major music groups, who dominate music publishing as well as recording, and the MPA (which is discussed in detail in paragraphs 130–134 in Chapter 4). Like arguments made by and about songwriters and composers, the Independent Music Publishers’ Forum (IMPF) argues that the disparity between the recording and song rights mean that:
while record labels are reporting dramatic increases in revenues from streaming services, the publishing sector (and thereby the songwriters and composers they represent) does not benefit from this growth […] at a time when the song is becoming more valuable as the business moves to a track-based model.
Maria Forte, managing director of UK-based consultancy and management services company Maria Forte Music Services Ltd, argued that “the economics do not work for a publisher to have 15 percent and a record label to have 55 percent”. One manager of a music publisher argued that they had sometimes funded deals where the creator had received a similar or greater advance than the performer had received from the record label, despite expecting significantly less return in revenue for the song than the recording side would. Similar to songwriters, for classical music there may also be more than one publisher (including separate publishers for the arrangement and the original composition), diminishing publisher revenues further.
88.Despite being an important part in the music creation and music streaming process, song rightsholders are not effectively remunerated for their work. The Government should work with creators and the independent publishing sector to explore ways in which new and upcoming songwriters and composers can be supported to have sustainable careers and independent music publishers remain commercially viable. As part of this, and in the context of increasing digital music consumption through streaming, we urge them to consider how to ensure that the song is valued in parity with the recording. If necessary, the Government should bring forward legislative proposals alongside the introduction of equitable remuneration for performers proposed in paragraphs 76–7 to ensure that all creators benefit from these reforms.
89.When recorded music is licensed by streaming services, there are three key elements transferred by the record label: the asset (i.e. the track), the artwork and the metadata (which is data about the track itself). Allison Noble of the University of Southampton notes that there are three types of metadata relevant to music streaming. First, there is the descriptive metadata, which details the contents of a track, such as the title, album, track number, genre, and so on. Second, there is the ownership metadata, which details the creators, their corporate partners, the contractual terms agreed by them, and so on. Third, there is the recommendation metadata, which are tags applied and constantly refined by the service using signals such as observed and quantified user behaviour that enable its recommendation systems to function in the most effective manner. Both the descriptive and ownership metadata are generated by the music industry when the piece of music is created and recorded. Songs and recordings are all each given unique identifiers—called an International Standard Musical Works Code (ISWC) and International Standard Recording Code (ISRC) respectively—to help authenticate them, distinguish them from other works and catalogue the relevant rightsholders. These data are fundamentally important to the economics of music streaming because they account for who is remunerated, by whom, how and on what terms.
90.There is widespread consensus across the music industry and amongst the music streaming services that issues with the metadata are a significant challenge to efficient and correct rightsholder remuneration. Metadata received by streaming services from the music industry creates issues at source. This may be due to the complexities of music rights and licensing. Because the recording and song rights are licensed separately and often held by different music creators and companies, many labels do not supply the relevant ISWC when licensing music to streaming services, meaning that songwriters often lose out altogether when music is streamed. Often, this is by choice because of the difficulty of doing so: in oral evidence, Maria Forte asserted that in conversation with one record label, a representative said “‘I don’t care about composer information because it’s nothing to do with me. I’m not changing my system to do that’”. This is exacerbated when one song has multiple recordings or covers (as there will then be one ISWC for the song but a different ISRC for each recording). Finally, this often occurs with recordings in labels’ back catalogues, where paper records need to be digitised or otherwise have been lost or destroyed.
91.The data retrieved by the music industry also causes issues for rightsholders. Maria Forte noted that collecting societies often have to work out how to distribute revenues to publishers, songwriters and composers using only ISRCs rather than the relevant ISWCs, or otherwise receive metadata that is incomprehensible or impossible to process. The sheer quantity of streams (and therefore data) further compounds this problem. Finally, streaming services themselves often create barriers to providing good metadata or challenging bad metadata, such as requiring that these demands be made by the exclusive rightsholder or a representative. This prevents both third-party ‘concerned citizens’ from intervening and creates impracticalities where there are many performers and/or songwriters and composers, such as in the case of classical music.
92.That said, streaming services themselves have called for solutions to bad metadata. The ERA acknowledged the problem, writing that:
Whether it be the poor quality of industry metadata which creates delays, how revenues from unidentified streams are divided up, blockages in payment or the slow speed of payments and high level of commissions through some collection societies, there are a number of significant steps which could help the music industry make the best of the opportunities presented by streaming.
YouTube’s written submission similarly urged policymakers to “solve the data problems that plague music licensing; poor and missing ownership data cause unnecessary risk and expense for music services, and prevent timely, accurate royalty payments to songwriters and publishers” and “explore the development of a comprehensive musical works and sound recording ownership database that would have beneficial applications across all areas of music licensing”.
93.At best, mismatched, incomplete or missing metadata can result in delays to creator royalties for months or even years. At worst, this can result in payments being misallocated or otherwise consigned as unclaimed or non-attributable royalties to ‘black boxes’. Black boxes consisted of $2.5 billion in unallocated income in 2019 alone. After a period of time, black boxes are then assigned pro-rata to streams that have been correctly identified, which is established in standard publishing agreements. This means that those creators and companies, particularly who are most listened to, are effectively are paid twice: first for their own streams, and then for streams that cannot be allocated. More recently, Phonographic Performance Limited (PPL), the performer collecting society, has changed how it allocates black box income: Peter Leathem, CEO of PPL, told us that the performers’ share of reallocated revenues are now allocated to causes such as the Momentum Fund, which tries to identify and support up-and-coming artists (it should be noted, however, that labels do not contribute to the Momentum Fund). For its part, the Government is (or should be) aware of these issues: in the 2019 ‘Music 2025’ report commissioned to investigate the ‘Music Data Dilemma’, it was summarised that the digital value chain was being severely affected by various factors, including: “unprecedented volumes of data being generated, divergent velocities across the data flow, exponential increases in the variety of data sources, a lack of confidence in the veracity of the information and difficulties with access”; competing data protocols; diverging data standards; and “multi-layered fragmentation of metadata and a preference for proprietary walled data silos”.
94.Metadata issues compound the poor terms on which creators are remunerated. Whilst there is a significant challenge, it is not insurmountable. First, the Government must oblige record labels to provide metadata for the underlying song when they license a recording to streaming services. Second, it should push industry by any means necessary to establish a minimum viable data standard within the next two years to ensure that services provide data in a way that is usable and comparable across all services. Third, it should work with industry to end the practice of distributing black boxes pro rata and, instead, place obligations on collecting societies that mean that this revenue is reinvested in the industry, such as to support creative talent and or develop solutions to revenue distribution issues. The Government should concurrently commission an exploratory audit of black boxes to achieve greater clarity as to what is genuinely impossible to allocate and what is mis- or un-allocated due to a lack of will. Finally, the Government should explore the practicalities of creating or commissioning a comprehensive musical works database and task the IPO with co-ordinating industry work on a registration portal so that rightsholders can provide accurate copyright data to necessary stakeholders easily.
95.Exacerbating the issue of songwriter remuneration are the complexities in how song rights are licensed and how royalties are subsequently processed. The licensing of song rights is more complex than the licensing of the recording rights for the same track. Recording rights in the UK are licensed directly; as such, when a track is streamed and the service has subsequently ascertained how revenues should be allocated, the monies are distributed to the featured performers’ labels or distributors, who then subsequently remunerate their performers according to the terms of their contracts. This process is referred to as a royalty chain. For the song rights, however, this process works differently. First, there may be more institutions between a streaming service and a songwriter or composer than between a service and a performer. This could include one or more collecting societies, publishers and sub-publishers and/or a special purpose vehicle (joint ventures between collecting societies and publishers). Second, a stream exploits both the mechanical rights and performing rights of the song; by convention, a single songwriter/composer is paid down separate chains for each, with the 50 percent allocated for the mechanical (including the songwriter/composers’ royalties) paid in full to the publisher first. Third, a songwriter or composer’s contract may specify that the creator receives a cut of the publisher’s share of income paid by their collecting society, which is paid via the publisher rather than the society. This means that, for UK songwriters and composers at least, there will likely be three royalty chains per stream.
96.As a result of these complexities, songwriters and composers face several issues that impact when and how much they may be remunerated. First, these complexities exacerbate existing issues with the metadata. ICE, a digital licensing hub co-owned by PRS for Music, Swedish collecting society STIM and German collecting society GEMA, estimates that over €100 million in royalties for Europe alone was unmatched in 2019. Second, as money flows down these chains, it will be subject to deductions. These could be fees and administrative costs levied by collecting societies or shares of revenue claimed by corporate partners under contractual terms. Third, there may be delays and, as creators will be at the end of these chains, they are impacted most often and by the greatest degree. Songwriters and composers, by virtue of being at the end of longer and/or more complex chains, typically must wait longer than performers to receive their royalties: whilst performers may wait months to receive royalties for streams of their work, songwriters may have to wait years. The delays in each of the three chains for one song alone may also occur at different stages, meaning that a songwriter or composer may not be fully remunerated for the total streams for one track in any period at the same time. Furthermore, royalties may be subject to ownership or data clashes and/or audits. A lack of transparency means that these often happen unbeknownst to the creator, which therefore means that creators are reliant on parties further up the chain acting on their behalf. Finally, industry norms add further layers of confusion, complexity and potentials for data disputes and misallocation of royalties. This includes divergence between how song rights are licensed in different countries, regions and copyright systems or conventions in how song rights are remunerated. The Music Managers’ Forum and Featured Artists’ Coalition estimate that between 20 to 50 percent of songwriter royalties are either mis- or un-allocated due to incomplete, missing or inaccurate data, lost to deductions or delayed for years due to these inefficiencies.
97.The licensing and royalty chains of song rights causes considerable confusion and complexity to the system, and songwriters and composers pay the price. There is no single solution to create more efficient and timely royalty chains but the Government can work with industry to facilitate this. The Government should require all publishers and collecting societies to publish royalty chain information to provide transparency to creators about how much money is flowing through the system and where problems are arising. This should be done periodically, and in a way that is practical and useful to other stakeholders, including other collecting societies and publishers. It should also require publishers and collecting societies to put in place efficient, practical alert systems to inform creators and representatives about data conflicts. Finally, the Government should leverage the size of the UK market to explore how global licensing deals could be made possible by policymakers around the world, including in trade deals, which would support creators both domestically and abroad.
173 Will Page ()
174 Will Page ()
175 The Ivors Academy of Music Creators (); see also Q165–6, 171 [Fiona Bevan], 194 [Soweto Kinch]
176 The Ivors Academy of Music Creators ()
177 BPI ()
178 Verity Susman (); Association of Independent Music (); BPI (); Q3
179 Qq4 [Colin Young], 53 [Tom Frederikse, Colin Young]
180 Q53 [Tom Frederikse, Colin Young]
181 Qq53 [Tom Frederikse], 83–4
182 BPI ()
186 Association of Independent Music ()
187 Verity Susman (); Musicians’ Union (); Q347 [Rupert Skellett]
189 “”, BBC News (11 June 2021)
190 Hipgnosis Songs Fund Limited ()
191 International Federation of Musicians (FIM) (); Ben Sizer (); Chris Whitten (); Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) (); BPI ()
192 The Ivors Academy of Music Creators ()
193 The Ivors Academy of Music Creators ()
195 Will Page ()
197 Niall Parker ()
198 Thomas Verity ()
199 Chris Whitten ()
200 Marcus Cain () ; Anna Neale (); Martin Green (); Matthew Tong ()
203 The Ivors Academy of Music Creators ()
204 All Party Parliamentary Jazz Appreciation Group ()
205 Leaone ()
206 The Ivors Academy of Music Creators ()
207 Marcus Cain ()
208 Henry Bird (); Verity Susman ()
210 Anthony Hamer-Hodges ()
211 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020)
212 Association of Independent Music (); BPI ()
213 Intellectual Property Office, , 16 October 2019
214 Association of Independent Music ()
215 BPI ()
216 BPI ()
217 Association of Independent Music (); Robin Firman (); Anthony Hamer-Hodges ()
218 Intellectual Property Office, , 16 October 2019; Musicians’ Union, , accessed 12 May 2021
219 Robin Firman (); International Federation of Musicians (FIM) ()
220 BPI (); Musicians’ Union, , accessed 12 May 2021
221 Robin Firman (); Peter Oxer (); Just East of Jazz ()
222 Robin Firman (); Peter Oxer (); Anna Neale (); Just East of Jazz (); Dr Gareth Bonello (); Chris Tombling (); Joe Newman (); Thomas Verity ()
223 Q505 [Horace Trubridge]; Musicians’ Union ()
224 Qq10, 187
225 Qq77–8 [Ed O’Brien]
226 Q733 [Caroline Dinenage]
227 Association of Independent Music (); BPI ()
228 BPI ()
229 Association of Independent Music ()
230 BPI ()
231 CMU ()
232 Association of Independent Music ()
233 Gordon Bennett ()
234 Matthew Tong (); Qq77, 104
242 The Ivors Academy of Music Creators (); #BrokenRecord Campaign ()
243 The Ivors Academy of Music Creators (); #BrokenRecord Campaign ()
244 MIDiA Research (); DIUO (); Patreon, Inc. ()
245 “”, The Guardian (23 April 2020)
249 Warner Music UK (); Sony Music UK & Ireland (); Universal Music UK & Ireland ()
250 Warner Music UK ()
251 Universal Music UK & Ireland ()
252 Universal Music UK & Ireland ()
253 Warner Music UK ()
255 Qq363–5 [Paul Pacifico]
256 Sony Music UK & Ireland ()
257 Warner Music UK ()
259 An exception, however, would be Resonate Co-operative’s ‘stream2own’ model, whereby a track is streamed by a user until payment for this consumption covers the cost of an MP3 download sale, after which it is owned.
262 Qq645 [Elena Segal], 583–5 [Horacio Gutierrez]
263 The Ivors Academy of Music Creators (); SCRIPT (); Qq505–6, 512
265 Q682 [Horacio Gutierrez]
266 Q681 [Kevin Brennan MP, Horacio Gutierrez]
267 BBC ()
270 Wendy Kirkland (); Anna Neale (); Joe Newman (); Isaac Anderson (); Fran O’Hanlon (); Thomas Verity (); Joshua Magill (); Matthew Tong (); Josienne Clarke (); All Party Parliamentary Jazz Appreciation Group (); Irish Music Rights Organisation CLG (); Willis (); Iain Archer (); Luke Williams (); Renee Sheehan (); Anonymous (); Dr Gavin Wayte (); Chris Baron (); Niall Parker ()
271 Wendy Kirkland (); Anna Neale (); Dr Gareth Bonello (); Just East of Jazz (); Musicians’ Union (); Joe Newman (); Chris Tombling (); Isaac Anderson (); Fran O’Hanlon (); Verity Susman (); Thomas Verity (); Joshua Magill (); Matthew Tong (); Josienne Clarke (); All Party Parliamentary Jazz Appreciation Group (); Irish Music Rights Organisation CLG (); Willis (); Iain Archer (); Luke Williams (); AJ Dean-Revington (); Renee Sheehan (); Anonymous (); Dr Gavin Wayte (); Chris Baron (); Niall Parker (); Dr Hayleigh Bosher (); see also CREATe: UK Copyright and Creative Economy Centre, University of Glasgow ()
272 Qq491 [Graham Davies], 493 [Horace Trubridge], 506 [Horace Trubridge], 510 [Graham Davies]
273 Just East of Jazz (); Musicians’ Union (); Music Publishers’ Association (); Willis (); AJ Dean-Revington ()
274 Wendy Kirkland (); Anna Neale (); Joe Newman (); Isaac Anderson (); Fran O’Hanlon (); Thomas Verity (); Joshua Magill (); Matthew Tong (); Josienne Clarke (); All Party Parliamentary Jazz Appreciation Group (); Irish Music Rights Organisation CLG (); Willis (); Iain Archer (); Luke Williams (); Renee Sheehan (); Anonymous (); Dr Gavin Wayte (); Chris Baron (); Dr Hayleigh Bosher (); Niall Parker ()
275 CC Young & Co Limited (); Qq12 [Colin Young], 197 [Nile Rodgers]
276 CC Young & Co Limited ()
277 CC Young & Co Limited (); Q197
278 Dr Hayleigh Bosher ()
279 Dr Hayleigh Bosher ()
280 Dr Hayleigh Bosher ()
282 Qq728, 731 [Robert Specterman-Green], 734–40
283 Qq728, 730, 734, 736, 740, 755
284 Qq12, 17, 48
286 Qq238–9, 341
287 #PayPerformers (); Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) ()
288 Robin Firman (); Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) ()
290 #PayPerformers (); Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) ()
291 Robin Firman (); #PayPerformers (); Q131 [José Luis Sevillano]
292 #BrokenRecord Campaign (); Musicians’ Union ()
293 “”, NME (20 April 2021)
294 AEPO-ARTIS ()
295 Qq12 [Tom Frederikse], 169 [Nile Rodgers]; AEPO-ARTIS (); Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) (); SCRIPT (); Dr Hayleigh Bosher ()
296 SCRIPT ()
297 Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE) (); Q510 [Graham Davies]; see also The Copyright and Related Rights Regulations 1996, ; Musicians’ Union, , accessed 12 May 2021
298 Horatiu Coldea ()
302 Copyright, Designs and Patents Act 1988,
304 Q430 [Roberto Neri]
305 Q501 [Graham Davies]
306 The Ivors Academy of Music Creators ()
307 Q494 [Graham Davies]; MIDiA Research (); BPI (); Niall Parker ()
308 Entertainment Retailers Association ()
309 “”, Music Ally (30 July 2020)
310 “”, NME (2 August 2020)
313 BPI ()
314 Qq171–3 [Fiona Bevan]
315 Qq136, 170
316 Ed Hughes (); Just East of Jazz (); Simon Lasky ()
317 Q36 [Tom Gray], 182 [Fiona Bevan], 184 [Soweto Kinch]; All Party Parliamentary Jazz Appreciation Group ()
318 Matthew Whiteside ()
319 Q183 [Fiona Bevan]; Just East of Jazz (); Patreon, Inc. (); All Party Parliamentary Jazz Appreciation Group ()
320 Christian Castle ()
321 Qq169 [Soweto Kinch], 193
323 Helienne Lindvall (); Association of Independent Music (); see also MIDiA Research ()
324 Entertainment Retailers Association (); see also Q501 [Graham Davies]
326 “”, BBC (14 April 2021)
328 “”, BBC (31 March 2021)
329 #ThePact, , accessed 30 April 2021
330 Anna Neale (); Helienne Lindvall (); Q523 [Graham Davies]
331 Q197 [Fiona Bevan]
332 Q501 [Graham Davies]
333 Iain Archer ()
334 Helienne Lindvall ()
335 Verity Susman (); Julian Henry ()
337 Iain Archer ()
338 Qq166, 169, 185
339 The Ivors Academy of Music Creators ()
340 IMPF, Independent Music Publishers International Forum ()
341 Q132; IMPF, Independent Music Publishers International Forum (); The Ivors Academy of Music Creators ()
342 Qq132–4 [Maria Forte], 142 [José Luis Sevillano]; The Ivors Academy of Music Creators ()
343 IMPF, Independent Music Publishers International Forum (); Steve Farris (); BMG (); Qq111–2, 136, 150–1, 424, 427, 429–31
345 IMPF, Independent Music Publishers International Forum ()
347 Steve Farris ()
348 Dr Sasha Valeri Millwood ()
350 Allison Noble ()
351 Allison Noble ()
352 Hipgnosis Songs Fund Limited ()
354 Helienne Lindvall (); Hipgnosis Songs Fund Limited (); Q135
360 Dr Sasha Valeri Millwood ()
361 Entertainment Retailers Association ()
362 YouTube ()
363 Q132; Anna Neale (); Entertainment Retailers Association ()
364 Helienne Lindvall ()
365 The Ivors Academy of Music Creators (); Dr Jay Mogis ()
366 Qa113 [José Luis Sevillano], 141
367 Qq142 [Maria Forte], 149; Helienne Lindvall (); The Ivors Academy of Music Creators ()
368 The Ivors Academy of Music Creators ()
370 Allison Noble (); Intellectual Property Office, (18 June 2019)
371 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), pp.196–9
372 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), pp.201–2
373 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), pp.197–8
374 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), p.203; Music Managers Forum and Featured Artists Coalition ()
375 Music Managers Forum and Featured Artists Coalition ()
376 Music Managers Forum and Featured Artists Coalition ()
377 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), p.205
378 Will Page ()
379 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), p.203
380 Chris Cooke, Dissecting the Digital Dollar, 3rd edition (Wrocław, 2020), pp.185–6
381 Music Managers Forum and Featured Artists Coalition ()