An influential group of UK lawmakers want a “complete reset” to the music streaming business model, so artists can earn a fairer share of the revenue generated by giant companies like Spotify, Amazon and Apple.
The committee of the Department of Digital, Culture, Media and Sports, which has heard testimony from more than a hundred artists, record companies, producers and streaming companies since last October, found that musicians and songwriters make “pitiful returns” – if they do anything at all. Often, artists don’t even know how much they’re supposed to make, as deals between record companies and streaming services are subject to nondisclosure agreements. The industry standard, the committee found, “is that of opacity.”
In the UK, musical artists earned an average of £ 23,059 ($ 31,963) in 2018. (The average annual income in the country is just under £ 30,000.) About 92% of these artists have said less than 5% of their income came from streaming, according to a survey by the Ivors Music Creators Academy. Rave reviews often mean little. Nadine Shah, singer-songwriter whose third album was nominated for the prestigious Mercury Prize, told the committee: “I am now in a position where I have difficulty paying my rent.”
The streaming services themselves make money. In 2019, streaming brought in $ 11.2 billion of the music industry’s $ 20 billion in revenue, and it’s now such a big part of the industry’s future that investors and the funds spend hundreds of millions of dollars to recover the catalogs of celebrity rights. But the musicians themselves, especially if they are not stars, or even relatives, depend on live performances for 70% of their income, the committee found. And that revenue completely dried up during the pandemic in 2020.
How do streaming services pay artists?
If a song is streamed for at least 30 seconds, it has officially been “played” for revenue purposes. Spotify and other services keep around 30-35% of their gross revenue, according to an industry estimate. Then each month a service like Spotify will add up the number of times songs from a particular label have been played and pay an agreed percentage of the revenue generated by the service that month. In turn, the record company keeps a large part of this percentage and distributes the fractional remainder to its artists.
This system asks artists to take record companies at their word and record companies to take streaming services at their word. Everyone has to trust the algorithm that selects and serves music based on their personal taste, for example, but no artist or label can peek inside the algorithm to see how. it works.
Artists and labels also have the legal right to “check” streaming services every two or three years, to make sure song plays aren’t underestimated. But in reality, it doesn’t always work that way.
“I constantly encounter a lot of resistance and there are always reasons why [the data] is not available, ”Colin Young, a music accountant, told the committee. When audits take place, music creators often find evidence of underreported song parts and money that should have been paid but was not paid.
“Every time – and I’m not making this up for drama or comedy – I’ve audited a label, I’ve made money,” musician Nile Rodgers said. “Sometimes it’s mind-boggling the amount of money.”
What does streaming music mean?
In part, it’s difficult to decide how to split the revenue, as no one can determine what exactly a song that is streamed under copyright law is. Is it a sale, like customers were buying CDs? Is it a rental of a song for a period of time? “It’s hard to find analogues in the physical world of what streaming is,” Horacio Gutierrez, legal director of Spotify, told the committee.
In its report, the committee supported a different model, closer to music played on the radio, or DVDs rented from libraries. Under copyright law, this would give musicians “fair compensation”, splitting the revenues 50/50 with the record companies.
In April, more than 230 leading musicians, including Paul McCartney, Sting, Kate Bush and Lily Allen, wrote a letter to Prime Minister Boris Johnson recommending the “fair pay” model. A version of it has been in place since 2006 in Spain, where an agency collects royalties directly from streaming services to pay them to artists and songwriters.
Restoring fairness could also mean higher subscription rates for listeners, especially as venture capital money begins to shrink, making it less viable for platforms to compete on price alone. . “Overall,” Gutierrez said, “prices will go up.”