Time to Face the Music or Just a Broken Record? Calls for a Reset of the UK’s Music Streaming Industry and its Legal Issues:

The evolution of technology and the rise of music streaming platforms over the past two decades has revolutionised the way we listen to music. The era of CD’s and buying an artist’s album in Xtra-vision or HMV on a Saturday (those were the days!) is long gone. Streaming services such as Spotify, Apple Music and YouTube are now the first port-of-call for consumers of all ages to go and listen to their favourite artist’s new single, search for a new album release, or find a punchy “prinks’” playlist. There’s no denying that in the modern age, music is listened to most frequently through streaming. 

However, the distribution of royalties has not updated alongside the growth of the music streaming industry and thus, music revenues. This has caused many artists and creators to compete for a share of increased music revenues and has raised concerns that regulatory frameworks, including copyright, have failed to progress with the changes caused by the rise of streaming revenues. Unsurprisingly, the big music labels (including Sony, Warner and Universal Music) do not want to share their piece of the pie, profits, or copyright. This debate has therefore prompted a long-running government investigation by the Department for Digital, Culture, Media & Sport (DCMS) Parliamentary Committee.

What have been the findings so far? How should the intersecting streaming, copyright and competition issues be regulated, and why?

Let’s discuss!

But First…the Arguments:

We first need to explore some of the arguments forwarded by those in favour of a legal reform of the music streaming industry (this corner has everyone from Sir Paul McCartney to Stevie Nicks, Sting to Radiohead, and KSI to Abba) and those against (Sony, Warner, Universal Music, Spotify, YouTube, but to name a few).

Arguments in Favour of Regulatory Reform:

The music industry is heavily-weighted against artists.

In the DCMS Report, UK MP’s noted that even the largest international artists see “pitiful returns” from streaming. To put it into perspective, recent statistics show that from the estimated £736.5 million of revenue earned each year by UK music labels from streaming, artists only get roughly 15% of the profits from their streamed music. Some may be shocked at just how little some of our favourite artists really do make no matter how catchy their single is – see for yourself!

YouTube, Spotify and Apple Music bag a notable 35%, while the labels snatched 40% or more. For example, it is said that Spotify pays somewhere between £0.002 and £0.0038 per stream. Apple Music pays around £0.0059.

KEY QUESTION: considering the scale of the music and streaming markets, is this distribution equitable? Is there too much power of ownership given to the record labels in these cases, as the copyright holders?

Major record labels are distorting market competition.

When one thinks of record labels, our thoughts first jump to Sony, Universal Records and all the rest. The DCMS Committee have noted that these labels hold a domineering position in the industry which could threaten the music market, and moreover, breach principles of competition law. 

This has drawn the eye of the UK Competition Watchdog (the UK Competition and Markets Authority,) who are now reviewing the legal structure of the UK music industry and the commercial power wielded by these multinational corporations.

KEY QUESTION: The “Big Question” in this forthcoming report will likely focus on whether or not, and to what extent, the dominance of these music & streaming superpowers detrimentally impact music artists. Considering Universal Music was valued at a sweet €45 billion last month, one can see why the Competition Watchdog is sniffing.

The UK – A Sample Streaming State:

Following a complete reset of the music streaming industry and its current stance on royalties would make the UK an anomalous jurisdiction when it comes to copyright reform and the protection of musicians and songwriters. Reform would enable recording studios and the UK music industry to thrive once more which would, as a by-product, drastically strengthen the UK cultural sector. Moreover, such positive change would encourage music in general to prosper for listeners, creators and artists, and would inspire an entire new generation of musical talent. Like one big domino effect, a complete reset of the system would spring life into a multitude of offshooting sectors.

KEY QUESTION: How likely is a complete reset of our system? Is this a realistic expectation from supporters of regulatory reform?

Arguments Against Regulatory Reform:

Streaming has revived the market.

After twenty years of illegal downloads and music piracy (who remembers Limewire?), opponents argue that streaming has saved the music market from MP3 pirates and another decade of copyright criminals. Legislative intervention may potentially damage the UK music industry’s competitiveness, stifle any potential further development, and threaten the rights of copyright holders.

Regulatory reform will damage investment in new music.

Another argument made by record labels is that legislative intervention could also hinder investment in to the music industry and impede the musical and streaming economies. This is bolstered by the fact that streaming is a round-the-clock service – consumers can click at any time to listen to practically any song. Therefore, it can be argued that streaming generates more sales than alternative options such as radio services, and so, is more important to the economy. Indeed, current UK legislation recognises that streaming replaces sales.

The explosion of the music streaming industry itself could be said to be reason alone for a rejuvenation of the current copyright policies on streaming and music royalties. At the moment, streaming royalties are paid to the IP rightsholder – which is typically the all-powerful record label. For more information on royalties in the music industry, see the infographic below.

All image rights belong to According To A Law Student (ATALS).

The pandemic arguably only bolsters the argument that copyright should be updated in relation to streaming royalties, as we saw the detrimental impact that the loss of live performances had on the livelihood of many artists, who were consequently forced to rely on their small slice of streaming revenues more than ever.

One such reform was noted in a letter to Boris Johnston from Desert Island Discs in June 2021. The suggestion was that simply two words could be changed in the Copyright, Designs and Patents Act (CDPA) 1988 to enable streaming platforms to pay artists the same remuneration and royalties as radios – though they don’t specify what these two words are.

Solution One: The Equitable Remuneration Model:

Nonetheless, these changes would likely aim to resolve the current legislative loophole that allows these big music labels and streaming services to avoid paying artists a larger portion of revenues. Thirty years ago, the Parliament awarded music artists and songwriters significant rights to an equitable share of “broadcast” revenues. But as times have changed, broadcasting is no longer as relevant, and streaming (the most current popular method of enjoying music) does not fall under “broadcasting”. This solution would be closer to a “50/50” or “Equitable Remuneration Model”, whereby the artist and record label received equal shares of streaming royalties, like they do with radio royalties. This model would also apply to session musicians, who receive nothing from streaming revenue at present, but a small portion from radio revenue. Therefore, the CDPA 1988 may hold the key to legal reform by allowing musicians and artists to retain more of their intellectual property rights through a model obliging artists to be equally rewarded for their work.

Simple, yet effective.

Solution 2: User-Centric Model:

In this model, consumers subscribe to their favourite artists who would then receive a larger percentage of subscription fees. Instead of a consumer’s subscription fee being spread across the board to all artists, only those you listen to get paid. However, when considering this model to solve the music streaming “value gap”, the UK Government promised to look at lessons learned from the recent rulings on and implementation of the European Copyright Directive, which we touched upon in our recent article.

While this legislation is not directly applicable to the UK following Brexit, the British Government may take inspiration from this the Directive’s Article 17. This provision is designed to overrule the “safe harbour” clauses that allows platforms such as YouTube to avoid liability for unlicensed, copyright-infringing content. Should the UK take inspiration from Directive’s infamous Article 17, streaming platforms such as YouTube may be left quaking in their boots. This would also resolve the issues related to competition law, as it would to some extent, neutralise the “unfair advantage” that streaming platform’s gain from their user’s having the ability to upload music to their platform without licensing it from record labels. This model would also be governed largely by analysing user preferences and utilising specific algorithms.

Conclusion:

Any real change, however, will need to be implemented at both industry and legislative level. In particular, the Government would need to bolster this two-leveled solution with a commitment to implementing a bundle of copyright reforms to ensure UK creators and artists are just as protected as other artists are there are sufficient safeguards in place protecting them from bad contracts, unfair payments and lack of transparency that restricts the contractual freedom of these multinational record labels.

If a meaningful and “full reset” of the music streaming industry is to occur as recommended by the UK Government, a two-tiered system of regulatory industry reform backed by legislative development that balances intellectual property rights of the music labels against simple equitability for the artists that produce their works, seems to be the answer. Moreover, it would limit the power held by big international record labels and hence, address issues of competition law. 

Until that day comes however, movements like the #BrokenRecord and Credits Due campaign, led by Bjorn from Abba no less, will be forced to continue pining for change. You would fairly remunerate an artist for their painting, or a designer for their clothes, so why not a singer for their song?

Maybe it is time for the UK streaming industry, and the labels that rule this sector, to face the music?

Chantelle is a recent BCL graduate from the National University of Ireland Galway, and is currently undertaking a Masters of Law. Chantelle has a keen interest in intellectual property law, international business & human rights, and international public law. Chantelle intends to pursue her professional solicitor qualifications and has aspirations to work internationally in the field of business and human rights.

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