The latest day of hearings for the UK’s parliamentary inquiry into the economics of music streaming was the busiest yet, with three sessions – including the first to involve streaming services.
As before, there was a mixture of tough questions, grandstanding and moments of farce. And plenty to think about as the digital, culture, media and sport (DCMS) committee works its way towards recommendations on how to improve the streaming market for musicians and the industry.
One of the running themes of the inquiry is whether a stream should be treated as a sale for the purposes of royalty payouts, and it was the first question for Geoff Taylor, head of labels body the BPI, in the opening session.
If a stream isn’t like a sale – if it’s more like a radio spin – musicians would get a 50% share of the payouts, just as they do for broadcast usage of their works. Unsurprisingly, labels think a stream *should* be treated as a sale.
As the boss of their representative body, Taylor took the same view, although he did note that “it’s not necessarily always helpful to take older concepts and to try to apply them to streaming… a stream is a stream”.
Questioned about why artists whose streams are in the millions have been complaining about the royalties, Taylor suggested that it’s a question of scale.
“A million streams sounds like a lot, but in the modern streaming business it actually isn’t. If you have a million streams, you’re about six or seven thousandth on the list of artists in the UK,” he said.
Taylor added that 1,800 British artists are now getting more than 10m streams a year. “More artists are benefiting, but because there are a lot more artists in the business, obviously there are some artists who are not generating enough streams for that to provide a living on its own.”
“Ultimately, the economics of streaming are what they are. If you look at 2019, there are about 100 billion streams, that generated about a billion pounds in retail revenue, and that was divided by popularity. Each stream is worth about a penny, and then that flows through the system.”
If anyone was expecting this session to see the committee of MPs giving Taylor as much of a (metaphorical) duffing up as they gave the three UK bosses of the major labels earlier this year, they’d have been disappointed.
He pushed back or deflected awkward questions without raising the hackles of the politicians, while smoothly steering the conversation onto the BPI’s key policy aims: for example YouTube and safe harbours.
“Not only does it take users away from the streaming services, but it also exerts price capping pressure on the other streaming services,” he claimed, while also pointing to piracy sites and apps. From those two rightsholder bugbears alone: “there’s almost half a billion pounds in revenues that could be coming into the streaming economy, but which is not.”
An inquiry that has focused a lot on the fairness of labels’ contracts with musicians was suddenly much more about the infamous ‘value gap’, with Taylor honing in on YouTube and the question of whether its safe harbour gives it unfair negotiating leverage with the music industry several times.
“We think that the ratio of their risk and reward is out of kilter,” he said. “They are building this [huge] business… and yet they are paying such a tiny fraction. The differential between what YouTube pays and what Spotify and Amazon Music and other services pay is so huge.”
Taylor had company in front of the committee. Roberto Neri, chair of the Music Publishers Association, was also on hand. But again, expectations were confounded – in this case, that he might call for labels to get a smaller share of streaming royalties so that publishers could get a larger one.
That much-debated (including in this inquiry) dynamic that sees publishers get around 15% of the streaming pie and labels upwards of 55%? “I think it’s fit for purpose as it currently is,” said Neri, who was quickly pressed on that question.
“If we go back to where we were 10 years ago when streaming first surfaced, we were at eight to 10 per cent, and we’ve moved up in the right direction. Equally, my understanding is that in more recent negotiations, the label share has actually come down slightly as we’re moving up,” he said.
“We’re very convinced that we’re moving in the right direction… Could we do more, would we like more? Of course, yes. But we are moving in the right direction. We could question what maybe the streaming services are taking in what’s called ‘the new normal’ that we’re living in. But we are moving in the right direction.”
Neri declined to offer a target percentage where the MPA would like to end up – “it wouldn’t make sense for us to have any form of bar or ceiling: we want to push the rates on behalf of songwriters as far as we can get them” – but he did return to the question of whether publishers’ share should rise at the expense of the streaming services’ 30% cut, rather than the label share.
“I can understand why people discuss these things,” said Neri. “We would like to take the share from wherever we can take it. I would argue: why are the streaming services taking double what the underlying work, the composition, takes?”
Neri also backed Taylor’s claim that YouTube is exerting an unhealthy influence on the streaming market. “The 9.99 [standard streaming subscription cost per month] has been in play for 10 years now. It would be £13 plus with inflation alone, if we could allow them to combat and raise the prices. But they’re fighting against free.”
Neri’s comments on the streaming royalties split between recordings and publishings being “fit for purpose” will spark debate, especially as it diverges – as the committee noted during the session – from the written evidence submitted to the inquiry by another publishing body, the Independent Music Publishers Forum.
You can read that here. On publishing’s 15% share of streaming revenues, the IMPF wrote that: “Simply put songwriters, CMOs and publishers need to generate a larger share of digital revenue. 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.”
That last word was quoted back at Neri during yesterday’s hearing, but he stood by his claim that “we’re moving in the right direction” in the face of questions about whether the major publishers are unwilling or unable to press for a greater share, because their owners – the major label groups – take a bigger cut of recordings revenues than they do of publishing royalties.
“The major publishing companies are helping to push their rates up in the other forums that I sit in, on different boards,” said Neri. “Music streaming is one element. I can only say in the forums I’m sitting with these major companies in, they’re absolutely helping songwriters collect better rates from other sources of income.”
There were some frustrating moments during the session. For example, the committee trying to put Taylor on the spot about the salaries of major label’s senior executives: a query as easily wiggled out of (“That’s their issue, not really anything to do with the BPI”) as questions about labels’ deals with individual DSPs like Spotify are.
Instead, Taylor successfully turned the conversation back to the policy measures that the BPI would like the British government to adopt: changing safe harbour rules, and bringing piracy and unlicensed content into the scope of the government’s upcoming ‘online harms’ legislation.
“I think the issue that has rightly been raised is there are artists who are critically acclaimed who are not able to earn enough money from streaming to support themselves. We want to see those artists earn more money from streaming,” he said. “But you can only do that by increasing the total amount that comes in to the streaming economy.”
Taylor was also asked about YouTube’s suggestion in its written evidence that “record labels agree it is possible we will become the music industry’s number one source of revenue by 2025” and – in comments that would later draw a rebuke from YouTube – disagreed with that prediction.
“I would be thrilled if YouTube overtook Spotify and others in terms of how much they pay the music industry. We’re not on a path to achieve that, let’s put it this way,” he said.
“I think last year, we received something like £35m in the UK for all the tens of billions of views of music videos, which is largely on YouTube. Which is about half what we earn from selling vinyl records. That can’t be right. And to me, I don’t really recognise the projections that YouTube has.”
Taylor did welcome YouTube’s efforts around paid music subscriptions, although there was a noticeable sting in the tail of his praise.
“If they can grow YouTube Premium, their subscription tier, then that could generate a lot more money and that would be a fantastic thing. The industry is waiting to see them do that successfully.”
Taylor was asked to clarify that he was outright disagreeing with YouTube’s claim that it might be the music industry’s largest revenue source by 2025.
“The data so far doesn’t suggest it to me. They may have business plans and investment plans and brilliant ideas that will help them to achieve that. I’d love to see it happen. They should be contributing a huge amount more to the creators of the content that drives their business.”
Neri chimed in. “I wouldn’t call them a platform. They’re a music service. 450 of the top 500 most viewed videos are music related. It is not fair,” he said, returning to the idea that YouTube is the reason why the audio streaming services have felt unable to raise their basic subscription prices beyond £9.99 a month.
“We would like them to push their prices up, but they can’t when YouTube is such a mammoth offering, and almost the default for the consumer to go to,” said Neri. “We really want the government to look hard at this.”
Another frustrating moment came when Taylor was put on the spot about the BPI’s use of a lobbying company to prepare it for the inquiry, and to advise it on its public relations strategy around it.
One of the committee members described this as a “revelation” and pressed Taylor on the company’s name and cost (Fleetwood and £20k-£30k, if you’re wondering).
But it felt like a strangely meaningless ‘gotcha’ moment – skewered neatly later on by Musicians’ Union general secretary Horace Trubridge when he was asked the same question, and explained that the issues around this inquiry are so important for his membership, that bringing in external help (for around the same price) was worth doing.
The session ended with Taylor dancing neatly along the tightrope of a question about whether the streaming ecosystem (but by extension, the music industry itself) needs a full-blown competition investigation focused on the topics of fair value for musicians and songwriters.
That’s the kind of inquiry that might open all manner of worm-cans for rightsholders, and Taylor steered the conversation accordingly.
“The streaming market overall shows signs of healthy competition, generally. The safe harbour is a distortion of that competition, but if one eliminates the safe harbour… from where I sit, it’s a highly competitive sector, the music streaming sector. We just need to get rid of the distortions,” he said.
The session concluded, it was on to the next hearing, with Trubridge and Graham Davies, chief executive of the Ivors Academy. You can read our report on that session here. Meanwhile, our report on the day’s final session with YouTube and SoundCloud is here.
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