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Yesterday, the UK’s Digital, Culture, Media and Sport (DCMS) committee held a pair of follow-up sessions for its inquiry into the economics of music streaming.

We’ve already reported on the first of those sessions, which saw economist Will Page, IP expert Dr Hayleigh Bosher and CMU boss Chris Cooke give evidence. Now for the second.

It promised to be sparky, thanks to the combination of two advocates for musician’s rights (Ivors Academy chair and Broken Record founder Tom Gray, and Musicians’ Union general secretary Naomi Pohl) with Geoff Taylor, CEO of British labels body the BPI. Read on for the key talking points.

How’s that ‘complete reset’ going?

As we noted in our report on the first session, yesterday’s hearings were convened to find out whether the DCMS committee’s recommendation of a “complete reset” of the streaming market had been taken up – with Taylor seemingly cast in the role of being given a firm telling off by the politicians if it had not.

Gray and Pohl set out their cases first: that some progress has been made, but slowly and not enough.

“Had you not done that report, we would not be going anywhere. But if your complete reset of the music industry is New Zealand, we are on a beach in Normandy and talking about how we’re going to get to Italy in two years’ time,” said Gray.

“A beach in Normandy isn’t an unpleasant place to be, but it’s certainly not New Zealand.”

Gray noted that since the start of the UK inquiry, the French government had “instructed their music industry to get round a table and to sort it out within a year” – a process that resulted in the announcement of a minimum digital royalty for musicians in May 2022.

Gray also said that there has been no progress in even discussing the idea of implementing ‘equitable remuneration’ in the music streaming world, despite that being one of the committee’s recommendations – and something that is being done in a number of EU countries.

“The political will that is needed to bring about the profound change which you instructed us to do is not there,” summarised Gray, and Pohl agreed.

“I don’t think that we are getting anywhere close to a complete reset of the music streaming economics,” she said. “The discussions have been useful in the working groups around data and transparency. But the music makers’ side of the table, if you like, we’re very keen to see stronger commitments. And we would be in favour of some form of regulation.”

“The elephant in the room is fair remuneration for creators and performers from music streaming. Obviously we’ve talked about equitable remuneration. We’ve not yet had the full report on equitable remuneration, and what we need is to sit round a table and have a negotiation, and it’s not happened.”

Pohl said that while the MU backs the idea of ER, it would be keen to see a wider package of measures, which may include some kind of minimum digital royalty, inspired by the French model.

Group scene

‘Could you please answer the question?’

One thing we learned from the inquiry’s original sessions is that the committee’s chair, Julian Knight MP, absolutely does NOT like it when he thinks interviewees are avoiding answering a question.

Execs from major labels and YouTube alike caught blasts of his you-will-answer-the-question fury last year, and the BPI boss was in the line of fire yesterday. However, it felt like Knight was over-keen to pick a fight in this case.

Taylor was asked by committee member Kevin Brennan MP ‘Broadly, what’s your assessment of where we’re at and how the process is going?’ as the first part in a multi-pronged question, which also asked him what the BPI’s alternative proposals are if it doesn’t like the idea of ER.

He started answering the first part, talking about the findings of competition regulator the CMA’s market study, and the progress made by the working groups and research studies set up by the UK’s Intellectual Property Office. Broadly, it was an assessment of where we’re at and how the process is going, but…

“Excuse me Mr Taylor. Kevin’s question was very specific. Could you please answer the question?” broke in Knight, leading to a tetchy exchange (albeit with all the tetch on one side of it).

We note this not to criticise Knight or to defend Taylor, but as an observation. It was a small but significant insight into how Knight feels about the arguments of rightsholders that the streaming economy is healthy and progress is being made, versus the arguments of others (like Gray and Pohl) that this is not the case.

That, in turn, is a reflection of where the inquiry has ended up: less a scourge of streaming services, and more a scrutineer of the biggest companies in the music industry itself, with a palpable distrust of their willingness to reform.

If you’re an artists’ rights campaigner, that’s marvellous: politicians standing up for fairness, and cracking down on any attempts to evade that scrutiny. If you’re on the major rightsholders’ side it may feel unfair: casting you in the role of the villains and cutting off your defence. It’s a noteworthy dynamic either way.

But about that progress… and negotiations underway

Taylor did get to have his say once the dust settled. “We have seen artist royalties increase as the CMA noted, and shorter terms of contract for artists, and much more choice in terms of the types of deal that they can strike. We’ve seen progress in songwriter royalties, which was covered by the CMA,” he said.

“We’ve also seen the three major companies announce that they would write off unrecouped balances for pre-2000 deals, which is a very substantial announcement, which means that thousands of artists will now be receiving streaming royalties on top of their advances.”

(One small fact-check: those announcements were about paying through royalties as if the balances had been recouped, rather than writing off the debts. A small difference, but one with legal significance we suspect.)

Taylor also revealed that the BPI and Musicians’ Union are in negotiations about rates paid to session musicians for their work on recorded music in the UK.

“A significant increase in session rates for the session musicians to ensure that they’re not left behind,” as he described it. “The increase that we put forward in the session rates is historic: it’s much larger than has ever been the case before.”

Pohl offered some context for that. “The session fee’s been static for quite a long time, so we’re due an uplift. And in the proposal as it stands, there are some strings attached to having a decent uplift. But we’re in quite early stages, really, in that negotiation.”

Taylor also offered optimism about the work going on to produce a transparency code of practice for the British music industry, which is expected to be published early in 2023.

“The code could provide for artists and, I guess, songwriters to be given on a more proactive basis communication when new deals are struck about what those deals [between rightsholders and streaming services] look like,” he said.

“What is the business model? What is the term and territory of the deal? When will royalties start to flow through to a songwriter or to an artist from a new DSP deal? I think that would be positive if we can get there on the code, because it would mean there are fewer questions about how royalties are calculated.”

Naomi Pohl

Criticism of the CMA’s music industry market study

The recent CMA interim report came up several times during this session. The BPI sees it as evidence backing up its arguments that the market is healthy and evolving in the right direction.

For example, Taylor noted its finding that publishers’ share of music royalties has grown from 6.5% in the CD era to 15-16% now. “Ultimately, songwriters, as the CMA found, and publishers have been the biggest winners from the transition to streaming…”

Pohl and Gray criticised the report however. Gray said that the competition regulator “refused in their scope to deal with the fact that streaming competes with radio… they just rejected that wholesale”.

Why is that important? Radio royalties include equitable remuneration for artists, but streaming royalties currently do not.

“Let me tell you this. If we lose the well established rights – performing rights and performance rights – that successive governments have given to us in radio, because radio effectively disappears and streaming takes over… the threat to the income of working musicians is beyond existential,” he said. “Everybody has to have some kind of fair dividend from the streaming pie.”

Pohl offered some other criticisms, noting its finding that the pricing of streaming subscriptions has been “remarkably static” for a long time, while not finding that enough of an issue to act upon.

“My question back to the CMA would be, okay, show me another functioning market that’s that’s got such static pricing for such a significant period of time,” she said.

Pohl also pointed to that report’s suggestion that there is weak competition between the major labels, and that independent labels may not be getting the same access to the streaming market as their larger rivals.

“I was quite surprised that the Association of Independent Music so warmly welcomed the findings of the CMA report,” she said pointedly. “I would have thought that was a bit of a red flag for them.”

Back to the ER-lephant in the room…

If the literal definition of ‘elephant in the room’ is an important issue that nobody wants to discuss, well, that didn’t apply to this room. The committee members came back to ER and the topic of fair remuneration regularly, with Taylor encouraged not just to say why the BPI doesn’t like ER, but to suggest alternatives that it might support.

Taylor revealed a new stat from the Official Charts Company showing that in 2021, 645,000 different artists were streamed in the UK. That’s up from 200,000 who were on streaming services (per the CMA) in 2014.

“It isn’t label contracts that are the source of the challenges that artists face with streaming. The source of the challenges they face with streaming is the explosion in the volume of music available on streaming services,” he said.

“There are 100 million tracks on streaming services. This is the cause of the challenges, not just for artists, but also for labels with streaming, which is how do you get yourself heard against that enormous volume of content?”

Taylor offered a precis of the BPI’s latest research on British artists doing well on streaming (400 with more than 100m annual streams; 1,500 with more than 10m; 20k tracks streamed more than 1m times in a year) and also on the increasingly crowded market.

“There’s a huge amount of success going on. Equitable remuneration would not help that. It would just get in the way.”

Here, again, Julian Knight MP interrupted to ask Taylor what alternatives the BPI would back, or at least be prepared to negotiate on. Knight noted that there is currently no working group exploring ER and remuneration.

“Will you commit to negotiate over remuneration as a separate strand of the IPO? Look at this entire market, yes or no?” he asked Taylor, who offered a straight answer.

“I guess the answer chair is I won’t make that commitment for a good reason, which is the terms that are negotiated with artists are a factor of competition,” said Taylor.

“In fact, the key factor of competition in our marketplace. I think that is best done individually between artists and their managers, and their labels, in a competitive marketplace.”

“The CMA has found that the marketplace for that is competitive and that is the right place to do it. I don’t believe that the right solution to the issues that have been raised is some kind of standardised, collectivised replacement of the market with some industry and government-sponsored process. That’s my view.”

Tom Gray

Minimum digital royalties on the table?

Tom Gray quickly jumped in at this point. “The truth is that there is no reason not to introduce minimum royalty rates into the market. It should be on the table. I don’t know why it’s not on the table,” he said.

While labels’ willingness to pay through royalties to artists with unrecouped balances is a positive step forward, Gray noted that in some cases, the actual royalty rates on those longstanding deals might be as low as 2%-6% “on a stream that’s worth a third of a penny”.

“If you don’t lift people up to a minimum of 15 or 20 [percent] as governments have seen fit to do with minimum wages, it’s not gonna cost you an awful lot of money to do it [paying through royalties to unrecouped musicians] if I’m honest,” he said.

Gray suggested that streaming services might have a key role to play here. “Making a pool of money available… to give some small remuneration to sessions musicians for performance seems like the most pragmatic thing in the world,” he said.

“It doesn’t have to be a right. Doesn’t have to be legislation… Netflix didn’t pay residuals to actors, and then they just did. They went ‘this is probably the right thing to do’ and they did. Same thing with the platforms: why can’t we just pay some money to session musicians? They can do it if they want to. They just don’t.”

Pohl also agreed that a minimum digital royalty could work. “We’re a trade union. We’ve got over 70 collective bargaining agreements, and we set minimums. So it’s not anti-competitive because people can always pay above the minimum if they want to,” she said.

Later, Gray would express his understanding but also his regret that the IPO hadn’t set up a working group to tackle these questions of remuneration.

“One of the reasons they didn’t set up a working group around remuneration at the beginning was to avoid us immediately getting into a row,” he said.

“There was some good sense in that, but in terms of not introducing a real conversation around it at some point over the past year, I would say has probably not been the wisest decision.”

So, what really happens next?

One question the DCMS committee was very keen to ask was about what it should do next. Gray and Pohl both asked it to keep up the pressure on the British government to make sure change happens.

“Everything in your power to maintain political pressure on this process,” said Gray.

“In terms of what this committee can do: absolutely keeping the pressure on,” said Pohl. “I think the key thing is that we need to have this negotiation. We need to come out with a package of changes, and I don’t think that’s going to come out without the pressure from the government.”

There is a glimmer of a French-style settlement brokered within the music industry to head off any prospect of legislation. Kevin Brennan MP mischievously asked Taylor (who is stepping down from his BPI role in 2023) whether he wouldn’t like to leave as “the hero of the songwriters and musicians, having agreed to a package of reforms”.

“Once you’re out, everything gets blamed on you,” noted Taylor wryly, before saying that he is determined to make some kind of deal happen.

“I’m working tremendously hard to try and make sure that is the case,” he said, before carefully setting out his desire for this to be a voluntary process.

“We firmly believe that a voluntary package of measures based on the talks that we’re having, will be a much better outcome for British music than intervention that could have really quite serious negative consequences, and reduce not only the size of the industry, but our international competitiveness going forward.”

What about the prospect of a dedicated music industry regulator to make sure that any agreed reforms are carried out (and that, for example, the upcoming transparency code of practice is adhered to)?

“Without somebody given that job, I don’t know how we’re going to see any enforcement. And maybe that does speak to the fact that there isn’t a lot of trust in this industry!” said Gray.

“But that’s historic and problematic, and why we have to go into these negotiations wholeheartedly and pragmatically. But I don’t think there is a musician in the country who wouldn’t like to see a policing of the situation.”

“There’s got to be somewhere that people can go and make complaints when the codes are not being adhered to, and you’ve got to have a proper procedure for that,” said Pohl.

Taylor did not disagree with this premise. “It is part of the discussions that we need to talk about implementation and make sure that there is a process to make sure that the codes work and that they’re actually followed. So we agree, that is a piece of work that needs to be done.”

Geoff Taylor

Exports, soft power, and a proper UK music strategy

It’s encouraging to note that this hearing ended on a strong note of agreement between the three interviewees: about their desire for the British government to up its backing for the music industry and its musicians.

Gray talked about past sparks for the British music scene – “a brilliant music education policy post-war, the the dole in the seventies and eighties, and the vibrant high street we had in the nineties and early noughties” – but warned that “When radio money’s gone, and we’re sitting here just left with streaming and picking over the bones, and live struggling, we’ve got to see some kind of change.”

“We also need to be much more ambitious in promoting our music overseas and our culture overseas,” said Taylor, citing a recent trip to South Korea that included a chat with its equivalent of the DCMS.

“I asked them how much support they give to the Korean music industry… and it’s many times the level of support the UK gives to SMEs in music. They mentioned 20 to 25 million pounds a year of support, whereas we’re more at half a million pounds a year through the MEGS scheme, through the Showcase Fund,” he said.

“Ultimately we have to be a lot more ambitious than that if we’re going to compete for market share. And UK market share globally has been under pressure.”

All three speakers gave their backing to the idea of a proper national music strategy for the UK: something that could encompass exports, support for grassroots music scenes and other forms of backing.

“People on the opposite side of the arguments to me frequently talk about the fact that the UK is losing market share. Who’s growing market share? South Korea are growing market share,” said Gray.

“They have a complete, integrated music policy in order to develop their soft power around the world, because they recognise the power of music. We tend to forget it.”

“It would be great to have a coordinated plan,” said Pohl. This is a separate issue from the debates about remuneration, transparency and other reforms.

Who knows, perhaps if the industry can pull together to campaign for this national music strategy, it may build trust and relationships that help smooth the path to progress on the other issues too.

Well, you know Music Ally: we always like to end on a note of optimism…

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Stuart Dredge

Music Ally's Head of Insight

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