UK Parliament report: Streaming needs complete reset

In the report, the committee recommends that the British government make a number of changes to the structure and legislation of the music streaming ecosystem.

“Streaming has undoubtedly helped save the music industry following two decades of digital piracy, but it is clear that what has been saved does not work for everyone,” the report reads. “The issues ostensibly created by streaming simply reflect more fundamental, structural problems within the recorded music industry. Streaming needs a complete reset.”

Equitable remuneration

Many of the recommendations have been targeted at labels. Most notable is an introduction of the broadcast system of equitable remuneration for streaming earnings similar to music recording royalties for radio and TV in the UK. The report says that the British government should explore “ways to provide performers with a right to equitable remuneration when music is consumed by digital means”, including differentiating between “actively selected and passively consumed” streams, which is the difference between cases where streams are specifically chosen by the listener and those suggested to them by playlists or recommendation algorithms.

The right to recapture work and adjust contracts

The committee also urges the government to introduce legislation that gives artists a “right to recapture” their works after 20 years and a “right to contract adjustment” if the royalties generated are unreasonably low compared to the success of their music. The latter would be applied to long-term contracts where labels wipe out unrecouped balances that artists have not been able to pay after a certain number of years, in order for artists to begin earning royalties again. In the US, the standard period before rights can be recaptured is 35 years. Sony Music introduced a new recoupment programme shortly after the matter was presented during the inquiry.

Monopolistic market

The committee also highlighted major labels’ unfair dominance of the market, suggesting a Competition and Markets Authority (CMA) investigation into the major rights holders’ market dominance and business practices in the UK.

“There is no doubt that the major music groups currently dominate the music industry, both in terms of overall market share in recording and (to a lesser extent) in publishing, but also through vertical integration, their acquisition of competing services and the system of cross-ownership,” the report says.

YouTube also received criticism in terms of its service as a ‘safe harbour’, with the report recommending that the CMA examine YouTube’s dominance of the music streaming market. “Safe harbour gives services that host user-generated content a competitive advantage over other services and undermine the music industry’s leverage in licensing negotiations by providing user-generated content-hosting services with broad limitations of liability.”

Royalty splits and songs

The committee recommended that the CMA intervene in the system of streaming royalties distribution, which is currently set at 55% for labels, 15% for publishers and 30% for streaming services. Here the committee dismissed an argument by major publishers who were campaigning for a bigger share of distribution, as their parent companies already receive a bigger share of recording royalties.

“As long as the major record labels also dominate the market for song rights through their publishing operations, it is hard to see whether the song will be valued fairly as a result,” the report says.

Another contentious topic in the report is that of metadata, which has been exacerbated in the digital music ecosystem. The committee suggested the establishment of a “minimum viable data standard within the next two years.”

User-centric payout systems, meanwhile, did not receive much attention. The committee merely suggested that the models were compelling, but not enough to justify adoption in the industry. Spotify’s Discovery Mode will also be put on the spot following the committee’s call for the government to “commission research into the impact of streaming services’ promotion of algorithms on music consumption at the cost of royalty payments to artists.”

Whether the DCMS Committee’s recommendations will become regulation or legislation is yet to be determined. Next, the UK government is expected to make a referral to the CMA. In terms of legislation, the government could either enact the report’s recommendations as a parliamentary bill or leave that to the private member’s bill tabled by the DCMS, which will receive a second reading later this year when MPs will vote for or against it.

Read the full report below (PDF).