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Equitable remuneration takes centre stage at UK streaming economics inquiry


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This morning saw the first two oral evidence sessions in the British Parliament’s inquiry into the economics of music streaming, focusing on musicians and their advocates. Two words loomed large: equitable remuneration.

It’s already clear that ER is the biggest change that this side of the debate – artists and their representatives – is going to be pushing for the Digital, Culture and Sport Committee to recommend in its ultimate report.

ER already exists in the UK: it’s the system used to pay royalties from broadcast usage of music, with collecting society PPL splitting them 50/50 between labels and artists.

What today’s speakers want is for legislation to extend that system to some (not all) streams on services like Spotify and Apple Music. For example, their more radio-like ‘passive’ listening modes and playlists.

“Equitable remuneration does what it says on the tin,” said Tom Gray, founder of the #BrokenRecord campaign. “It’s equal pay for equal work… when it gets paid to PPL, it is split 50-50 between the artists and the labels, and a small portion of the artist side goes to the non-featured artists: the backing performers.”

“If you just apply equitable remuneration, to some extent, to on-demand, suddenly for the first time in history money goes directly into the pockets [of the artist] from the first stream – irrespective of what awful contract terms an artist has,” he continued.

“This produces an income from stream one for artists, and an income for our entire music community. It’s a very, very simple solution.”

tom gray

It’s also a solution that’s already been put high in mind for the politicians on the committee. In his evidence, Tom Frederikse, partner at Clintons Solicitors, referred to it being mentioned in “many of the written submissions” to the inquiry.

Meanwhile, a follow-up question to Gray from the committee made it clear that some submissions from labels have already raised objections to applying ER to streaming: that streaming isn’t broadcasting; that it might go against some of the UK’s treaty obligations; or that it might stifle industry (i.e. labels’) growth and investment.

“They have some valid points,” said Gray. “We are not saying streaming is broadcasting. I agree, streaming isn’t broadcasting. It is one-to-one algorithmic playlisting, and equitable remuneration can be applied to it. You [addressed to the committee of MPs] have the power, legally, to do it.”

Colin Young, streaming auditor and accountant at CC Young & Co, suggested that such a move would merely bring the recorded music industry into line with how the publishing business treats streaming in the UK: dividing royalties into mechanical and performance payments.

He contrasted that with the current system for recordings where streams are treated essentially as physical sales – reproductions rather than performances.

“Streaming is fundamentally different to the physical model,” he said. “What is being suggested is, on the record, is that distinction be made. Should part be physical and should part be public performance? And that’s where equitable remuneration would kick in, if you make the same distinction as we do in publishing.”

It’s early days in this inquiry, but there was certainly a feeling that labels – particularly the majors – will be under the spotlight in this inquiry as much or even more than streaming services are.

The committee heard about how recoupment clauses in label contracts work; about why ‘breakages’ are still a thing in streaming-era contracts; and heard Gray suggest that equitable remuneration would recapture money from “a few multi-national, foreign based corporations”.

“If we rebalance this, money goes into the UK economy. It goes into UK PLC. It goes into every single one of your constituencies. It seems like a bit of a no-brainer as far as I’m concerned,” he told the committee. “We need to protect our talent pipeline.”

Gray was asked about artists who are doing well from streaming, and he accepted that some are, but that “they tend to be a solo artist, they tend to be fully independent… and they tend to be working in a genre that is highly playlisted”.

He contrasted that with the situation for bands, citing Spotify’s figure that 43,000 artists account for 90% of the royalties paid out by that service – a number that has been increasing over time.

“That works out at about £70,000 average [a year] for each of those artists. But their work produces £70,000: they’re not saying the artist gets £70,000,” he said, suggesting that in label deals with an 80-20 split, the artist “if you’re not indebted” will get around £14k. “If you’re in a band, with a manager and you’re paying tax, imagine how far that £14,000 goes…”

tom frederikse

The conversation later turned back to equitable remuneration, with Gray claiming that songwriters have seen their PPL royalties from radio declining because of a listener shift towards streaming.

“18-35 year olds are not using linear broadcasting any more, and so our PPL has been going down steadily. ER, the existing right, is going down by about 5% every single year,” he said. “So there’s another reason for introducing this right into streaming: young people are going to be using this service as their broadcast… It is replacing it. It is substitutional for broadcast, even if it isn’t broadcast.”

The hearing threw up some fun stats and gossip. Young talked about a recent audit for an independent record label in which he found that it earned £884 per million streams from Spotify’s free tier, and £4,191 per million streams from its various premium tiers – “And with Spotify, when I was doing that audit, for this particular record label there were 31 different subscription rates that I was looking at…”

Young also talked about crunching Warner Music’s financial results, and noticing that A&R has gone down as a percentage of its overall revenues from 31.92% in 2017 to 28.03% in the last six months this year.

Gray, meanwhile, said that “I’ve heard regularly people say that around 30% of all listens on Spotify are pure algorithmic”. Getting to the bottom of that metric would be important as part of any move towards introducing ER for streaming royalties in the UK.

“No one is suggesting that there should be a wholesale change to the infrastructure here. Labels are very good at what they do,” said Frederikse, later in the session. “What we’re talking about is that over the past 20 years, and particularly over the last five years as there’s been a [recorded music industry] recovery… there does seem to have been a shift in the resulting profits.”

“There are a number of ways the government could address this. One is equitable remuneration, and it’s difficult not to recognise that expanding the mandate of PPL in the UK would go some way towards levelling up, and creating new opportunity in the UK record industry.”

Labels and their representative bodies may disagree – they’ll have the chance to explain why at future hearings in this inquiry – but they’ll be more aligned with Gray’s views on YouTube, expressed with reference to a songwriter friend’s royalties from that platform.

“This is a very successful Scottish songwriter. He’s making £70 per million streams on YouTube,” said Gray, who referenced the attempt with the EU’s new digital copyright directive (and whatever the UK chooses as its equivalent post-Brexit) to modernise the ‘safe harbour’ protection for platforms like YouTube which let users upload content.

“The continuation of safe harbour is up to you,” Gray told the MPs on the committee. “But it’s an obscenity as far as I’m concerned.”

However, Frederikse noted the challenges in creating effective legislation to modernise safe harbours. “It’s incredibly difficult to find wording that will catch exactly what we’re trying to catch, and not have unintended consequences,” he said. “Witness how difficult the implementation processes [of the directive across the EU’s member states] have been.”

What about user-centric payment systems for streaming? The topic did come up, raised by the MPs, but while Gray professed to be a big advocate for the idea, he suggested that with it being “at the core of the contracts between the DSPs and the labels… the centre of a private contract” it may not be something a government could or should step in to enforce.

“The biggest problem for me is remuneration, and I don’t want that to fall down the list,” he said, shortly after delivering another salvo in favour of ER.

“Artists sit on the board of PPL. If you introduce equitable remuneration, you give a right to the creators within streaming. Artists will have a say in the licensing of that money for the first time,” he added.

“By introducing this right, you’re not only putting money for the first time directly into the pockets of artists and performers instead of foreign-based corporations, but also you’re going to break up the power here. Rights are always associated with power,” he continued. “It’s going to change the balance of the entire market.”

guy garvey

That first session was followed immediately by a second involving three artists: Ed O’Brien of Radiohead (and a prime mover in the Featured Artists Coalition since its early days); Guy Garvey of Elbow (and 6Music DJ); and solo artist Nadine Shah.

They offered some more personal takes on streaming’s impact – for better as well as for worse – and stressed why they want action to be taken.

“The system as it is, is threatening the future of music,” said Garvey. “That sounds very dramatic, but if musicians can’t afford to pay the rent, if they can’t afford to live, we haven’t got tomorrow’s music.”

Garvey made it clear that he is a fan of streaming as a listener, calling it a “bit of a miracle” for the way it opens up the last century of recorded music.

“The fact that you have access to every recording every made, in your back pocket for 10 pounds a month is a miracle. Almost,” he said. “It’s almost a miracle. If musicians are equitably paid, then it’s a miracle, because then it’s sustainable, and then it’s something for everybody to be proud of.”

O’Brien, meanwhile, said that Shah was an example of the kind of musician who is successful in terms of fans, radio play, critical acclaim and awards nomination, but who is nevertheless struggling financially, who shows why change is needed.

He also praised streaming for having seen off the existential (certainly at the time he was first involved with FAC more than a decade ago) threat of filesharing piracy, and cited Spotify’s freemium system – where people can sign up and listen legally without paying – as a positive thing for the industry.

“It just needs some parity and fairness in the system. Not many artists are profiting from the spoils of this.”

nadine shah

Shah talked about her personal situation. “The earnings from my streaming? They’re not significant enough to keep the wolf away from the door,” she said.

“I have a substantial profile, a substantial fanbase, and [I’m] critically acclaimed, but I don’t make enough money from streaming. I’m in a position now where I’m struggling to pay my rent, and I’m embarrassed to talk about these issues publicly.”

Why? Because, Shah said, money is still to some extent an indication of success in music. “I am a successful musician! I’m just not being paid fairly for the work that I’ve made,” she said. “Musicians in the same position as me, they are struggling. They can’t afford to be musicians… The reality is that we could lose lots of musicians. Lots of great music.”

Garvey agreed. “I’d argue we’ve already lost an awful lot of music,” he said. “So much of the new music that I play, I don’t hear album two, I don’t hear album three, and I know why it’s happening.”

He acknowledged Shah’s embarrassment about talking publicly about financial struggles, but hoped that her decision to speak out will encourage other artists to follow suit.

“What I hope happens is that an awful lot more musicians are honest about their income. However leaky the boat has got, young musicians don’t rock it. But if they don’t rock it, they can’t make ends meet.”

“We’re not after Robert Plant’s third limousine!” he said later – as in, artists aren’t demanding 70s rock star level royalties. “What we’re talking about here is allowing people to live as working artists, to provide something that we all need.”

“A meaningful income is what I ask for. I don’t want to throw anybody under the bus either,” said Shah. “What Tom Gray was saying about equitable remuneration: equal pay for equal work. And then a meaningful income from streaming.”

“I truly believe that it’s entirely possible to fix streaming, and to make it work for everyone. The labels, and the streaming platforms, and the artists. It has to be fairer. I think right now, presently, it’s wrong. Ultimately it is wrong and it is unfair.”

Garvey came back to the idea of user-centric payments, which he thinks would be “very, very valuable” but like his fellow speakers, hit on ER as the priority he’d like to see the parliamentary committee focus on.

“Right at the top. Something that isn’t negotiated in any way, that is a right,” he said. “That is a viable first step that the committee can recommend. Something it could do right now, that would have a lasting effect.”

ed o brien

Garvey also returned to the positive side of streaming, and how it has enabled Elbow to find audiences they didn’t expect across the world. “We went to Mexico in January,” he said. “We wouldn’t have known we had an audience there if it wasn’t for streaming. I think it’s a wonderful thing. It’s close to being the future.”

He also dampened down some of the anti-labels rhetoric, noting that he has worked with “people who I have known and loved within those labels who I have known to be motivated positively” to work for artists’ benefit.

Shah also praised Spotify. “I don’t want to be in a fight with streaming platforms. I also think Spotify is brilliant, and I use it and pay my subscription to Spotify,” she said, adding that it’s opened her up to a wealth of “really quite obscure artists”. Although she does worry about whether they’re getting paid fairly for her listening.

As to what the parliamentary committee should recommend: “Equitable remunerations. This seems to be equal pay for equal work. I do make a meaningful income from my PPL, so I don’t see why that shouldn’t be able to translate to this model as well,” she said.

“I don’t believe this will answer all of my questions or solve every problem, but I do believe this will be a step in the right direction, and the knock-on effect of providing this legislation could be phenomenal for us musicians.”

The strength and repetition of this message – that ER could make a difference, and that it should be the top priority – is important, because to some extent it sets the tone for future hearings in this inquiry.

When the labels, their representative bodies, and the streaming services give evidence, they can expect to be asked why this model shouldn’t be introduced.

They’ll also have their own talking points to hammer home, of course. Labels are likely to focus on the YouTube and safe harbour debate, for example, and what the British government plans to introduce as its equivalent to the EU’s new copyright directive.

This is just a flavour of today’s hearing – for example, there were some sections about Brexit’s likely impact on musicians too. You can watch the whole thing here.

Stuart Dredge

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One response
  • It would be extremely interesting if you could prepare a report on what having streaming paid as ER would mean, from a legal and business perspective. From the legal side, that would mean eliminating the exclusive right to a remuneration rights, where the rightowner is entitled to a payment but is deprived of the exercise of the right.Would that ER be coexisting with the current exclusive right or substituting it? If coexisting, labels will have to sacrifice part of their tariffs. Very interesting!In fact, Spain PPL equivalent ( AIE) claims there is a ER right for artists and performers, besides the exclusive right which is exercised by the labels and includes the exclusive rights also for the artist and performers, although I believe this ER has not yet been enforced in the market.

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