tom gray helen smith nylon panel

The debate about how the music streaming economy works for artists and how it could be improved has reached new heights in the last couple of years, fuelled by efforts on both sides of the Atlantic to understand its workings and spark change.

A pair of panel sessions at the NY:LON Connect conference in London explored where we’ve got to and what might happen next.

The first panel, on regulating the streaming economy, featured Ivors Academy chair and Broken Record founder Tom Gray; Impala executive chair Helen Smith; DiMA president Garrett Levin, whose body represents streaming services; and MLC CEO Kris Ahrend. The chair was Downtown Music Holdings CMO Molly Neuman.

Gray kicked off by talking about the nature of regulation and policymaking, and occasional perceptions that it is more burdensome than positive.

“When we talk about regulation, if you said to a bunch of people having to get up and do a job, respond to their corporate KPIs and all the rest of it: ‘Hey, would you like some more onerous bureaucracy, some more friction in your life, and to be inconvenienced by legislation?’ I think the answer is probably going to be no,” he said.

“But if the question is: if we see injustice and inequity in the world, do we change law? I think the answer would be slightly different.”

“What we should never lose sight of is that policy is created with intent, and it’s the intent of that policy that matters. Whether or not it creates unintended consequences, there are intended consequences, and those are the things we’re trying to achieve,” continued Gray.

He then outlined why he thinks the Broken Record campaign has been successful in the UK – at least in terms of convincing the politicians on the streaming inquiry’s committee that there are problems to fix.

“The reason why a lot of our campaigning has functioned and has worked is we’re not being shouty and ridiculous. We’re being rational and clear and asking for things that seem very reasonable to politicians,” he said. “That’s quite an easy argument to win, it turns out!”

Gray also praised that committee for its most recent report, and the call – backed across the music industry – for a national strategy for music in the UK.

“It isn’t just about creators getting paid. It’s about kids in schools learning how to be creative, learning how to use their minds, learning emotional regulation. Really deep, societal things,” he said.

“How music works with dementia. How it works in our communities as a ritualistic, cohesive activity. How nightclubs and bars and places with music keep our streets alive rather than being abandoned. This is policy! This is just policy. And they’re saying we need to do better.”

“We need to have a cohesive approach to this. Government naturally behaves in siloes, because we divide it up: culture, business etc. Music falls between them: copyright is in business, but culture is the output? It’s really strange, and that makes it really hard to deal with government.”

He also said that what goes wrong with legislation tends to be “someone bodging a policy on top of an old law that doesn’t suit the now, instead of going back to the beginning and recreating the law in the image of the industry we have now”.

Smith agreed with the importance of a joined-up music strategy: that is one of Impala’s big focuses at the European level, as it lobbies politicians and bodies on behalf of its members.

Impala is also working hard to help those members (and the wider industry) understand the impact of streaming, including new angles on research such as adjusting the figures for inflation – something that spurs some policy ideas – such as encouraging DSPs to increase their prices.

Levin talked about the landscape in the US, and particularly the settlement for mechanical streaming rates (‘Phonorecords IV’) reached between DSPs and music publishers last year, and ratified by the Copyright Royalty Board at the end of 2022.

The settlement seemed like it came out of the blue, given past tensions (to put it politely) over such negotiations. Levin explained the context: it wasn’t until July 2022 that the CRB made its preliminary decision about the final rates for 2018-22 (‘Phonorecords III’), which delayed serious talks on Phonorecords IV for 2023-27.

“It is particularly complicated to discuss what you will pay in a five-year period, when you don’t know what you will pay for the prior five-year period,” he said. “If you’re on either side of the table in that conversation, what’s the starting point?!”

“Once that [decision] happened, it allowed the services to really think about well, what could the next five years look like?”

Levin also said that the existence of the Mechanical Licensing Collective (MLC) was an important factor too, because it “took a lot of the underlying challenges of mechanical licensing off the table… allowing a conversation in Phono IV that was just about the rates”, and also because it provided publishers with a lot of data to inform their negotiating.

“It allowed for a level of trust between the publishers and the services, where the services would say ‘here’s what we think we can actually afford under this byzantine formula’ and the publishers could actually gut-check that. They could look at the data and say well, actually that’s not crazy.”

(To tie this back in to policymaking and regulation, it was a piece of legislation, the Music Modernization Act of 2018, which created the MLC. So in the case of Phonorecords IV, a settlement brokered within the music industry was underpinned by an earlier point when politicians stepped in.)

Streaming economy panel at NY:LON Connect

The conversation moved back to new models for streaming payouts. Smith explained how Impala has been setting its policies based on its streaming reform group.

“We felt we had a remit to really make sustainable change that would make a difference. Not just change for the sake of it,” she said, referring back to those inflation-adjusted calculations that informed its thinking.

“When they saw the inflation-adjusted numbers, our members were really surprised at how low the market is, despite the headline figures.”

Smith went on to explain that a key principle for Impala is “labels paying proper digital royalty rates”, but that it would also like to see streaming services testing different models for calculating their payouts.

That doesn’t mean the much-discussed ‘user-centric’ model, however. “Although it is reform, and in principle fairly easy to implement… we believe that it’s really more creating a new set of winners and losers,” she said, citing UK indie body AIM’s proposal for an ‘Artist Growth’ model as more interesting.

Impala has also come out against applying broadcast-style ‘equitable remuneration’ to streaming – “the model we looked at there, we didn’t feel it was particularly equitable” – but instead is keen to focus the industry’s attention on the bigger picture.

“It’s really imperative on us all to work together to actually grow the market, and make sure we’re not talking about a market which is a third of what it was, but really talking about a huge and massive market where everybody is properly remunerated,” she said.

Smith also said that she prefers change to be forged within the music industry, rather than imposed by external regulators and legislators.

“In terms of regulating the streaming economy, most of our proposals are really aimed at industry negotiations: the industry taking control and deciding together where it’s possible. But obviously you need to have a framework of copyright to start with.”

The user-centric and artist growth models have been proposed as alternatives to the current ‘pro rata’ system for streaming payouts. Gray did not mince his words on the latter.

“I think the pro rata system is incredibly dissociative, and it makes us all feel insane. You can’t figure out what’s going on, you can’t figure out who you should be selling to, you don’t know quite where you are in the world,” he said.

“It’s really hard for artists particularly. Labels have been saying ‘why can’t we get young artists off the ground?’ Well let me tell you why: it’s a totally dissociative system.”

He continued: “Consumption isn’t the same as consumer. The number of people who engage with your music culturally, socially, is more important than the number of times that your music gets heard. That’s the bit that’s broken.”

Gray stressed he is open-minded about what the solutions might be, rather than married to any particular model like user-centric. The key for him is to bring cultural value, reach and audience back into how music is valued.

“The same amount of value comes from three people listening to a track 3,000 times as from 3,000 people listening once. That’s totally dissociative,” he said. “The reason why user-centric is so appealing to me is that if people’s direct spend gets connected to the music they listen to, that will change their behaviour.”

Levin offered his own context for why pro-rata has become the system used to calculate streaming royalties: because it was “created at a time when the question of whether streaming was going to work was a clear and present one… it is a model that speaks to some of that risk aversion, and thinking ‘how do we protect physical sales, and ensure that the physical model is not undermined by whatever the economics of this end up being?’”

He turned back to the bigger picture of regulation and policymaking. “Policy moves at the speed of a horse and buggy! That’s not the speed at which this industry moves,” said Levin.

“We always need to be careful, I think, about being so proscriptive in policy discussions, to address a problem in the moment that could end up being addressed through market solutions, that we might not all love but which might actually just change the paradigm as it goes forward.”

The session ended on a note of warmth. “We should add being nice to each other to our corporate KPIs!” mused Gray.

The NY:LON Connect global music summit is run by Music Biz and Music Ally. This year’s event is held in association with Orfium and Viberate, and hosted by Reed Smith. The Streaming Economy track is sponsored by Luminate and Downtown. You can find all our coverage of the conference sessions here.

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