Major labels talk user-centric payouts and equitable remuneration


Spotify, Apple Music and Amazon Music had their say at the UK’s streaming economics inquiry yesterday: if you missed it last night, here’s our report on their session. But yesterday the parliamentary committee holding the inquiry also published the latest written evidence from the three major labels, in response to some specific questions from the politicians after the earlier hearing involving the UK bosses of UMG, Sony and WMG.

It’s important, because this included questions zeroing in on user-centric payouts and equitable remuneration (ER), two of the measures that the committee seems to be looking on favourably as potential changes to the streaming ecosystem. So what did the three majors think?

On user-centric payouts, Universal’s filing claims to “welcome any proposal that maximizes fairness and transparency and supports market growth”, adding that the label is carefully reading the recent French study into the model. “In all likelihood, it would be difficult to change systems in the midst of an in-force contract but as we indicated at the hearing we are open to various reforms at the streaming services.”

Sony’s filing said “We are agnostic as to whether a user centric model is employed as it is not meant to change the pool of money available to the labels/artists. We feel that whether a user centric model is used is ultimately a matter for the DSPs (who will have to invest significant sums in changing royalty reporting systems) and the artist community (as some artists will win from a changing model and some will lose).”

WMG’s filing is more critical, suggesting that “a user-centric model would not change the overall royalty pool and our analysis suggests that any changes in the allocation of payments to artists would not be significant”, and describing it as “far more complex and administratively burdensome for digital services to implement as it would require a tremendous amount of data – it is likely that digital services would want to pass off some of the associated costs to rightsholders and therefore to artists”.

On equitable remuneration – where royalties from radio-like streams would be split 50/50 between artists and labels, as they are for broadcast usage – Sony Music’s filing offered this rebuttal: “If streaming was treated as broadcast and artists received direct a material share of the fees payable, the balance payable to the label would not be sufficient to maintain investment in new signing, A&R and marketing and so would materially reduce the opportunity to mitigate its risk on the majority of signings which do not succeed and in respect of which we are unable to break even.”

It went on to reiterate one of the arguments from the hearing: that because a collecting society like PPL (which would likely oversee ER) cannot “walk away” from negotiations “it is generally accepted that the rates that would be payable under a collective licensing regime would be significantly less than those that would be negotiated by the labels direct, where we can choose to license or not license our catalogue, or specific recordings, if necessary”.

WMG’s filing follows this line too: “Because rightsholders can refuse to license their content, licences are agreed at market rates as determined by the parties and the rates tend to be higher than for collectively managed remuneration rights such as in broadcasting.” Essentially it’s a claim that under ER, artists might be receiving a bigger slice of a smaller pie: a theory that definitely needs to be independently modelled to understand whether it’s true, and what the impact might be.

There is plenty more to parse in the filings: Universal MusicSony Music, and Warner Music. Some royalty calculations, for example, with Sony estimating that an artist on a 25% royalties deal would need around 1,000 streams on Spotify Premium to earn £1, but 5,479 streams on YouTube. The corresponding section in WMG’s filing is, alas, replete with XXXX redactions, while UMG’s filing does not include that question.

It’s a useful extension of the information and views that the inquiry has already yielded, anyway. As is Broken Record founder Tom Gray’s new op-ed for MBW, in which he sets out at length “what I think might be achievable and practical through compromise, but also place our industry on more sustainable and ethical ground”.

Again, this takes the debate on a step, because like the major labels, Gray is responding to questions about or criticism of his original view – for example about whether the views of artists who do well from streaming have been represented in the inquiry; and whether the sharp growth in the number of musicians scrapping for the streaming pie is a factor in low earnings.

He also expands on how he thinks equitable remuneration could work as a “half-way house” – “some believe streaming is communication and/or rental, some insist it is sales. Okay, let’s split it in two” – including some thoughts on tackling the “negotiating issues of a blanket license”. Read his piece and the three major label filings and you’ll get a good sense of where this inquiry might be leading, and the arguments, hurdles and (whisper it quietly) potential compromise and common ground that lie ahead.

Written by: Stuart Dredge