Thought you’d heard the last of the UK’s parliamentary inquiry into the economics of music streaming. Soz, but no.
The politicians on the Digital, Culture, Media and Sport (DCMS) committee published their report in July 2021, but yesterday they held a pair of follow-up sessions with six music industry interviewees.
The stated aim: to discuss “whether the ‘reset of streaming’ urged in the Committee’s report is underway”. And if you’re thinking that’s code for ‘we don’t think it is; we’re going to find out why’; and if anyone from the record label side of things tries to avoid our questions we’ll give them a piece of our mind!’… well, you are wise in the ways of parliamentary committees.
Before we get into the day’s main talking points, we have some catch-up material if you need it. Here is Music Ally’s free ebook collecting our coverage of the original inquiry. Here’s our analysis of its report’s recommendations, and here is our index of follow-up stories about what happened next.
What were yesterday’s talking points? Read on.
Who’s on the transparency working group? That’s… opaque
Let’s ease ourselves in with a LOL. One result of the original inquiry was the creation of two ‘working groups’ to discuss how to reform the music industry in two specific areas: one on contract transparency and rights revocation [musicians regaining their rights after a period of time], and another on data.
Both working groups are made up of industry experts chosen by the Intellectual Property Office (IPO), which convened them. Fans of delicious irony, stand to attention! The list of who sits on these working groups – yes, including the one that is literally about improving transparency within the music industry, has never been published.
Or as Dr Hayleigh Bosher, senior lecturer in intellectual property law at Brunel University put it during the first of the day’s sessions: “We don’t know what’s going on. They haven’t been reporting on what they’ve been doing. We don’t even know publicly who’s involved in those groups.”
This may soon change. During the second session, the committee tasked BPI boss Geoff Taylor with writing to them within the next week with a list of names from both groups, which it then expects to publish. Transparency in action!
Progress is being made, if slowly
More seriously, are these working groups evidence of progress in tackling some of the problems and challenges identified in the committee’s report last year? Some, but perhaps slower than many involved in the process were hoping.
“There have been small steps taken in the right direction. However, we haven’t seen any public outcomes, and a lot of the things that were set out in the recommendations of your report, and then agreed upon by government, have not come to fruition,” Bosher told the committee.
This includes one of the report’s key recommendations: introducing broadcast-style equitable remuneration (ER) to music streaming royalties in the UK. The IPO has commissioned some research into ER which is “still ongoing and has been delayed” according to Bosher.
“There wasn’t a working group set up on remuneration, and I think there probably should have been, because conversations have not been going on specifically looking at fair remuneration,” she added, noting that the British government has also failed to look into the question of safe harbour protections for services like YouTube, as called for by the committee’s report.
Bosher would be keen for government ministers to be part of the two working groups that have been set up; that those groups should be “much more transparent about what they’ve actually been up to in this last year”; and that the government should remind the music industry that “if negotiations don’t become fruitful, and agreements aren’t met, they will legislate”.
Chris Cooke, founder and MD of CMU – and a member of the transparency working group – was more optimistic about progress being made.
“They are not yet at the point of having outcomes, but I think we will see some outcomes early in the new year,” he said, stressing that “I don’t think there’s any sinister reasons why it’s taken longer to get to where we are: it is a step-by-step process.”
Cooke, for the record, wasn’t aware that the list of people on those groups was not in the public domain. He suggested it was less a decision to keep them secret, and more a lack of anyone thinking to make the lists public.
Steps towards a code of practice on transparency
Cooke did talk about the main goal for the transparency working group: an industry code of practice that labels, publishers and other entities will sign up to and “set themselves the obligation of being more transparent about certain aspects of the streaming business”.
The code is based on a wishlist from artists, songwriters and managers of the data they would like to have access to. That is now in the process of being reviewed, amended and reviewed again.
When might it emerge? “We are hoping early 2023, so it is a work in progress,” said Cooke, who was prodded on whether this really is the timescale.
“I would hope so,” he said, with a caveat. “This is a big issue. The fact we’ve got people around the table – and that’s thanks to your report – is a big step forward. So [it’s about] getting it right, even if it takes a couple of months.”
There are some sticking points. Music rightsholders and streaming services don’t want to share the specifics of their confidential licensing deals, noted Cooke.
“Having said that, the majority of what’s being requested is still on the table as part of the negotiation,” he said, suggesting that progress has also been made on the process through which this information might be made available.
“How proactive the industry will be, versus ‘we will answer these questions when we are asked them’. “What the artists, writers and managers have been pushing for is that for a lot of this information, it should just be available,” he said.
“And rather than having to phone up a label and ask these questions individually, there should be an FAQ available that explains how TikTok money is distributed, for example.”
Cooke added that he thinks the discussions are “moving in the right direction regarding being proactive rather than reactive with a decent proportion of the transparency… there’s still work to be done, but I am lightly optimistic that we will get a code that actually results in some tangible change – on the transparency side at least.”
He later offered a shrewd assessment of the key challenge with all this. “With data and transparency, it’s almost cultural. We just need a culture where data and transparency is seen as being really important,” said Cooke.
“Inevitably you can’t involve everybody in every conversation, but I think everybody has to be involved with data and transparency. We need the entire industry to embrace that for the solutions to work.”
‘A tale of two crises’
When the original inquiry was held, musicians were struggling in lockdown, unable to tour – with the level of their streaming royalties thus in even sharper focus.
But fast forward to now, and while lockdowns are (hopefully) in the past, a cost-of-living crisis (or cost-of-working crisis as Help Musicians called it this week) is hitting just as hard.
“We have a tale of two crises,” said Page, drawing a comparison with the period between 2014 and 2019 when people’s spending on streaming subscriptions and concert tickets was growing.
“Disposable incomes were growing, and music was getting a bigger share of those bigger wallets of disposable income,” he said. Then came Covid-19, which flattened the live market, but did not hurt streaming.
While live has bounced back to some extent – mainly in terms of stadium concerts and festivals – Page noted that “when you apply the spending squeeze, we’ve gone from getting an increasing share of an increasing wallet to perhaps holding a constant share of a shrinking wallet. So it’s very uncertain times.”
This is the important backdrop to all the discussions about how streaming should evolve: professional musicians below the uppermost tier of stars are struggling.
There was some more discussion about the issues facing the live market, with Cooke addressing the nuances of those challenges.
“The live side of the industry is still really struggling. It is not a case that the pandemic ended, and live returned. At the upper level, things are going well, but in the middle level, people are really struggling, and costs are surging,” he said.
“Live has always been a top-heavy business, okay, because of the economies of scale. The grassroots always struggled, but we’re starting to see the middle level struggle too. So even though the pandemic is over, artists who rely on touring income as a significant part of their revenue, if they’re at the middle level, actually they’re in as much pressure at the moment as they were 18 months ago.”
He later returned to this theme. “The middle level is more of a struggle because costs are going up, but artists generally don’t feel they can increase ticket prices to the same scale as the energy costs and the travel costs have increased.”
Will music streaming’s herbivores turn into carnivores?
Page brought one of his favourite metaphors to the first session: herbivores and carnivores. He suggested that for the last decade, streaming services have been herbivores, happily grazing for new users.
“Everyone seems to be growing and nobody is stealing each other’s market. Amazon’s up, Spotify’s up, Apple is up and YouTube is up. But when you reach that saturation point, then herbivores turn into carnivores… the only way I can grow my subscribers is by stealing someone else’s,” he said.
Page thinks that moment is coming. “There will be that tipping point where we go from herbivores to carnivores, and market stealing becomes the domain as opposed to market growing.”
Page, formerly chief economist at Spotify, suggested that in this context there are risks for that pureplay service.
“It’s worth thinking about Spotify in terms of its greatest strength. It is largely, almost entirely music focused. But its greatest weakness is it doesn’t have hardware sales to cross-subsidise with. It doesn’t have search revenue to cross-subsidise with. It doesn’t have Amazon Prime to cross-subsidise with,” he said.
“So it’s a standalone music entity. And since the launch of Rhapsody in 2002, I’ve yet to see a standalone music streaming service actually become profitable.”
Page pointed to the bundling seen with Apple One (music, video, news, storage, games and fitness workouts) or Amazon Prime (music, video, gaming benefits and free shopping delivery) as something that will only be more powerful as the market shifts from herbivores to carnivores.
Later in the session, he was asked about who the ‘top predator’ might be in the carnivores scenario. “Perhaps a way of reframing this question is to think about a predator entering a different part of value chain,” he said.
“So streaming services are here, record labels are here, publishers are here, collecting societies are there, they all mind each other’s gardens. But perhaps a predator is one that decides to stray into a neighbour’s garden, and that’s a way of thinking about how this market could develop over time.”
‘Catalogue is an antiquated term that’s not fit for purpose’
One reason the inquiry has been so interesting has been the moments where interviewees talk about wider trends, or offer nuggets of opinion on assumed truths. Page offered that in a diversion on the importance of catalogue music.
“Broadly speaking, the industry works out as 70% catalogue, 30% frontline. 70% old, 30% new. But if you go into that 70% over a third of it is content released between 2019 and 2020. It’s not that old, it’s just not quite new,” he said.
“Catalogue is an antiquated term that’s not fit for purpose. Actually, most of the content being consumed today was released in the past six years.”
He also offered an arresting stat based on the fact that 100k new tracks are uploaded to DSPs every single day. “Today, streaming services are ingesting more music than was released in the calendar year of 1989,” said Page.
Cooke talked about a different aspect of this environment, noting that ‘artists’ are not a single, homogenous group facing the same challenges, and thus requiring the same solutions.
“When it comes to artists’ remuneration, actually the issues are different for those grassroots artists versus the full-time artists versus the heritage artists, and where there are challenges, the challenges are different,” he said.
Copyright, competition, and CMA criticism
Another result of the DCMS committee’s 2021 report was a music industry ‘market study’ by the UK’s competition regulator the CMA.
You can read more about its findings here: in short, it decided not to up the ante and conduct a full ‘market investigation’ after publishing an interim verdict that there were no competition concerns that would trigger such a move.
Bosher made it clear that she disagreed not only with the CMA’s decision, but also on the scope of its study.
“They’re looking at the same problem from a competition perspective, and I really think at the heart of the streaming inquiry is a copyright issue. And this thing about fair remuneration can be solved through copyright,” she said.
“The problem with the CMAs remit is that they are looking specifically at the user experience more than anything, and the user’s having a great time: the price hasn’t gone up in ever, and they’re just getting more and more for their money.”
“I think it’s a short-sighted way of looking at the industry, but you can see how they came to that conclusion, even though I disagree with it. I think that what we should really focus on is the copyright perspectives… we haven’t got this remuneration discussion going on.”
This came back to the question of whether equitable remuneration would be a good step forward for the UK. Bosher noted that nine countries in Europe have introduced or are introducing some element of ER, in contrast to the lack of progress on this front in the UK.
“There isn’t any movement in those really important areas, which is about the redistribution and fair distribution of the wealth in the music industry,” she said.
“Even if you solve the competition problem, if you’re not looking at the distribution of the wealth, and how the money is fairly shared between the creators and the industry and the platform, I think you’re still going to have those problems.”
Bosher also pointed to the agreement brokered in France this year for a minimum royalty rate for streaming, including tiered royalties (“once you hit a certain number of streams, you get extra money”).
She suggested that the way it is legally binding under French intellectual property laws, with monitoring and a review in five years’ time, could be a lesson for future changes in the UK.
The case for and against a music industry regulator
One question raised in the first session (and then again in the second session) was whether the music industry can be trusted to reform itself, or whether it needs a dedicated regulator. Cooke had reservations.
“I would need to have a better idea of what that body was going to be specifically regulating and with what powers,” he said.
“Things do move fast, and I think the danger with this conversation is that maybe in five years’ time, maybe a chunk of what we’re talking about here today is irrelevant, as user-generated content and metaverse and NFT platforms become bigger.”
“And I guess the challenge for the regulator would be: it would then need to keep up with the changing beast,” continued Cooke. “Enforcement is a key issue, I acknowledge, but I think there are voluntary solutions that can be considered, and I think should be considered before formal regulation.”
Page agreed, warning of “regulatory fatigue… you’re constantly chasing your tail, trying to catch up on time before you can catch the criminal and fine and punish… I just don’t see how a regulator could keep pace with this market.”
However, Bosher was more positive about the need for some layer of regulation as the music industry evolves.
“You could have a regulatory input in safeguarding minimum standards, and then allow the industry to be flexible through the negotiations,” she said.
“I think it could work. Copyright’s the same. We have had the same law since the fifties, but it’s still relevant today because it has flexibilities that allow for modern technology to apply in certain areas.”
“You’ve got to have that kind of safeguarding of principles such as proportionate remuneration, and then allow for the flexibility in terms of the way that remuneration is made and distributed.”
That was the first session. Here’s our report on the second session, which included Geoff Taylor (BPI), Tom Gray (Ivors Academy / Broken Record) and Naomi Pohl (Musicians’ Union).