Spotify under pressure to make changes

Spotify and other streaming services are under pressure to pay musicians and songwriters fairly following a new report by the Digital, Culture, Media and Sport Parliamentary Committee. The Recs looks at the implications for the music industry.

Back in 2017, streaming services such as Spotify, Tidal and Deezer began overtaking physical and download music formats for the very first time. In an article for the Londnr Magazine (“Can Music Streaming Survive & What Does it Mean for the Industry?“), I questioned if this model was remotely sustainable for musicians and the music industry itself.

The Pandemic Hits

Fast forward to 2021. The global Covid pandemic forced an immediate and sustained halt to touring to musicians worldwide. 

The effect of the live music lockdown was to remove touring and merchandise income from musicians overnight. With record shops, as an non-essential service, forced to close their doors and record label employees furloughed, album releases were kicked into the long grass.

With music streaming pretty much the only source of income for music makers, the streaming companies came under the spotlight like never before. The prevailing view that companies such as Spotify were hugely underpaying musicians for their releases came into such sharp focus that the Parliamentary Committee for Digital, Culture, Media and Sport launched a wide-ranging investigation into the economics of the music industry.

The Parliamentary Committee's Findings

The Report published today (15 July 2021) is an unflinching look at the manifest unfairness of the streaming services and calls for an industry-wide reset.

While the Committee acknowledges that cheap and sometimes free streaming managed to end nearly two decades of digital piracy that hugely damaged the music industry, it also concludes that this shift to a streaming modal created its own fundamental, structural problems. The Report insists that “streaming needs a complete reset”. 

Let’s look at the details.

“Pitiful Returns”

The Department for Digital, Culture, Media and Sport (DCMS) report highlights what terrible returns musicians across the board get from streaming: “Successful, critically acclaimed professional performers are seeing meagre returns from the dominant mode of music consumption.”

Legendary Chic-front man, Nile Rodgers, who gave evidence to the committee attested: “Artists and songwriters are not fairly remunerated for their streams. As much as I love the convenience, the fact is that the system is unfair. We need to have transparency.”

Rodgers questioned the way musicians relationships with labels are shrouded by NDA clauses. He posited: “We don’t even know what a stream is worth. Does anyone? I look at a very learned group of people here. Can anyone tell me what a stream is actually worth? You can’t and there is no way you could even find it. There is no way you can find out what a stream is worth. That is not a good partnership.”

Despite lobbying from the BPI, the DCMS committee has recommended the Government legislates a right for artists to earn from ‘equitable remuneration’ on digital platforms.

Currently a stream is treated like a record sale, so falls under the musician’s contract with their label – thus royalties could range from 20% for a modern artist to as little as 2% for older artists with historical contracts.

Under ‘equitable remuneration’, plays of music on streaming platforms like Spotify would be treated as ‘rentals’, similar to how radio plays are treated, with 50% of the generated recorded music royalties paid direct to performers via a collection society.

Labels vs Artists – who wins with streaming?

The report looks at where the revenue of any streaming track goes. It refers to estimates that streaming services take 30-34% of revenues from a stream, with the label recouping 55% and the rest shared out between the recording artist, publisher and songwriter.

The committee found that songwriters and publishers with the smallest share of revenue, despite being integral to the creative process. The Ivors, the independent trade body for songwriters and composers in the UK, recently published that eight out of 10 songwriters earn less than £200 a year from streaming.

Singer-songwriter (and The Recs’ favourite) Fiona Bevan spoke to the committee from a songwriters’ perspective on streaming and where the revenue split is going wrong: ” It comes from an archaic split where the labels had huge physical overheads to produce vinyl and CDs, to store them and to ship them. We have heard about breakage as well during these sessions. There is not really an excuse for these huge behemoth companies to have 55% when they do not have these physical overheads anymore.”

Fiona included the sobering evidence: “Right now, hit songwriters are driving Ubers!”

The committee, in its recommendations, has encouraged the Government to work with creators and the independent publishing sector to explore ways in which new and upcoming songwriters and composers can be supported to have sustainable career.

Although somewhat wooly as a recommendation, this could loosen the major labels’ influence over the relative value of songs and recording rights, and bring some much needed money in the songwriters’ direction.

The Control of ‘The Big Three’

The DCMS committee lastly looked at how, out of the disruption caused by digital piracy and new technologies such as streaming, three major companies have expanded to control a 75% share of the UK recording market.

The MPs were gunning for the so-called Big Three music companies of Universal Music, Sony Music and Warner Music Group. 

Despite some signs that independent labels’ share of streaming has increased in the last five years, the committee was concerned about the three majors’ “market dominance” in both recordings and music publishing.

So concerned, they’ve recommended that the Big Three should be referred to referring the Competition and Markets Authority (CMA) – if enacted, the competition watchdog would examine into major labels’ market power and business practices.

This could benefit independent labels and self-releasing musicians’ negotiating powers when it comes to the streamers and their playlists. 

The Reaction

Reaction to the report’s striking finding have been mixed.

Tom Gray, founder of the #BrokenRecord Campaign, hailed the report as ‘damning’, saying “In every single instance it reflects an industry that is pocketing a fortune while failing UK performers and songwriters.”

Crispin Hunt, chair of The Ivors Academy, said it was a “great day for musicians and music creators”, claiming the report “gives the government the firepower and political mandate it needs” to protect British musicians against what he described as “foreign-owned major record labels [that] have recklessly gambled with the UK music economy”. 

Geoff Taylor, chief executive, BPI, cautioned that the government needs to take account of “the vital role that labels play as the leading investors into artists’ careers”.

The Recs looks forward with interest to see how many of the report’s recommendations that the Government will take onboard. We’re sure that many music makers in the UK will be doing so likewise.