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GOV'T REPORT CALLS FOR "COMPLETE RESET" IN STREAMING MARKETPLACE

Across the pond, the House of Commons Digital, Culture, Media and Sport Committee released a new report on the economics of music streaming in which members of Parliament conclude that artists need a legal right to a fairer share of streaming revenues and mandate a "complete reset." 

The DCMS committee, which includes MPs from the Conservative, Labor and Scottish National parties, began its investigation in October 2020. It ultimately has delivered a report that extends beyond streaming, calling out the industry at large. 

The report identifies gross imbalances in the streaming marketplace affecting even the biggest artists in the industry: "Successful artists see ‘pitiful returns’ from streaming while some performers are frozen out of payments altogether." These problems were naturally exacerbated and exposed during the pandemic, when touring came to a halt. The imbalances, the report argues, extend to fundamental problems in the recorded music industry.

Despite the focus on streaming platforms indicated by the name of the report, the investigation leans heavily into the three majors' market dominance, with the committee calling for the Competition and Markets Authority to "examine whether competition in the recorded music market is being distorted."

Additionally, the report posits a right for artists to recapture works after a period of time (in the U.S., reversion occurs after 35 years) and renegotiate contracts if they're successful beyond the remuneration received.

Significant concern is also expressed about services that host user-generated content (UGC), such as YouTube, which is alleged to have an unfair market advantage resulting from "safe harbor" laws.

Members warn that despite the clear benefit to consumers in price and availability, streaming's short-term pricing structure puts the industry at risk in the long term. 

The findings lay out four key reasons the current streaming model isn't working:

  1. Even the top artists see "pitiful returns," with performers having a statutory right to share in recording revenues of a song regardless of their royalty rates and outstanding debts.
  2. Pay disparity between song and record rights holders. Labels collect the majority of a track's revenue, leaving songwriters and publishers with the smallest share of revenue, based on an outdated model that applied to physical sales that required logistical overhead.
  3. An industry ecosystem with three majors (and their respective publishing arms) that share 75% of the U.K. market.
  4. Safe harbor laws that exempt tech companies (YouTube, TikTok and SoundCloud) from being criminally and financially liable for content that infringes on copyrights. These companies negotiate licenses for music after it's uploaded, whereas DSPs negotiate before they can host, creating a "value gap" between revenues from ad-funded services and DSPs' paid services.

The chair of the DCMS committee, MP Julian Knight, said: “While streaming has brought significant profits to the recorded music industry, the talent behind it—performers, songwriters and composers—are losing out. Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do. However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself. We have real concerns about the way the market is operating, with platforms like YouTube able to gain an unfair advantage over competitors and the independent music sector struggling to compete against the dominance of the major labels. We’ve heard of witnesses being afraid to speak out in case they lose favor with record labels or streaming services. It’s time for the government to order an investigation by the Competition and Markets Authority on the distortions and disparities we’ve uncovered.”

The committee calls on the government to support the independent sector and recommends "a broad yet comprehensive range of legislative reforms and regulatory interventions to deal with these issues." Its top five recommendations are: 

  1. Equitable remuneration
  2. Revenue parity for songwriters and composers
  3. A study into market power in the music industry
  4. Fair and transparent algorithms and playlisting
  5. Review of safe harbor provisions

 

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