Government calls in music industry leaders to consider MPs' recommendations to reform streaming

Government calls in music industry leaders to consider MPs' recommendations to reform streaming

The government has responded to the DCMS Committee’s report on the economics of streaming. It has today revealed its action plan for the next 12 months, which will involve working alongside the music industry to form a contact group that will scrutinise the key issues.

Ministers were unlikely to immediately embrace all of the recommendations of the MPs, who called for a “complete reset” of streaming in their report in July following several months of hearings.

Instead, the debate about the future of the streaming economy will continue for at least another 12 months, following the publication of a timetable of action by the government.

“The publication of the committee’s report is a key moment for the music industry,” said the government in its official response to the report.

Although it noted the success of streaming and its growth to become the main revenue source, the government also recognised concerns about how those revenues are shared.

“But although overall music revenues are growing, many more creators are competing for a share of them, and there are many different and strongly-held views about how streaming revenue should be split to ensure fair outcomes,” said the government. “There is also concern that our regulatory frameworks, including copyright, have not kept pace with the changes brought about by streaming.”

If campaigners were hoping for immediate intervention by ministers to ‘fix’ streaming, they will be disappointed by the following conclusion: “More targeted research and evidence is needed before the government can decide what action it should take on some of the issues highlighted by the committee.”

Nevertheless, the government has directed the committee’s recommendation for a market study into the question of market dominance by the majors to the Competition and Markets Authority (CMA). DCMS Minister of State for Digital and Culture, Caroline Dinenage (pictured), and BEIS Minister for Science, Research and Innovation, Amanda Solloway, have written to Dr Andrea Coscelli, the chief executive of the CMA, to request that the regulator gives consideration to the committee’s recommendation.

And there is still scope for major reforms of the streaming economy, based on today’s announcement.

According to the statement, ministers will continue working closely with music creators, record labels, and streaming services to develop a work programme that includes the following measures:

•  Establishing a music industry contact group with senior representatives from across the music industry. This group will convene this autumn and meet regularly over the next 12 months to drive action and examine stakeholder views on the key issues, including equitable remuneration, contract transparency, and platform liability rules introduced by the EU. This will complement separate ongoing work with industry to address broader welfare issues, such as bullying, harassment and discrimination, in the creative industries.

• Launching a research programme, alongside stakeholder engagement, in autumn 2021, with a progress update in spring 2022.

• Establishing two technical stakeholder working groups during the autumn of 2021. The first will work to agree standards for contract transparency and establish a code of practice for the music sector, and the second will address data issues and develop minimum data standards for the industry. Both will be expected to update on progress after six months. We will also commission and publish an industry guide on data management in the music industry.

In spring 2022, the government will update the music industry contact group and consider whether to take forward legislation in any areas. This review process will be repeated in the autumn of 2022.

The committee’s recommendation to introduce equitable remuneration for recorded music (in line with broadcast royalties) will be assessed, alongside other models, with an update expected by the spring. It will also look into MPs’ concerns about the remuneration of songwriters and the recommendation to expand creator rights by including a right to recapture works

The government will shortly publish the Creators’ Earnings in the Digital Age research, which was commissioned by the Intellectual Property Office. 

Our inquiry into music streaming exposed fundamental problems within the structure of the music industry itself

Julian Knight

On the Committee’s proposal for a requirement to make royalty chain information fully transparent, the government said it is an issue that “the industry can, and should, seek to fix itself”. But it is attempting to prompt them into action.

“To improve transparency for the benefit of musicians, the IPO will convene an industry-led technical working group, with the aim of agreeing standards for transparency in the industry,” said the government. “These discussions would draw on experiences of transparency standards in other countries, including those introduced in EU countries under the recent Directive on Copyright in the Digital Single Market. 

“These standards could then form part of a voluntary code of practice for the music sector. The technical working group will be expected to report on their progress after six months. If the government considers that this process is not leading to a satisfactory outcome, it will consider whether legislative intervention is warranted.”

The government will work with the new industry initiative Credits Due to develop options for a minimum data standard.

MPs on the Committee had also called for black box revenues to stop being distributed pro rata and instead to be reinvested into the industry, either for talent development or for solutions to revenue distribution issues. The government rejected this as it is already regulated under legislation.

However, it has shown a willingness to look at the role of ‘curators’, including payments or benefits for playlisting and whether they should be subject to the Advertising Standard Authority.

“The government has also engaged with Ofcom, which has pointed out that, although the Broadcasting Code specifically prohibits payment (or other commercial arrangements) influencing the selection or rotation of music played on Ofcom-licensed radio services, it has no role in regulating streaming services,” stated the government. “The case for further intervention needs to be carefully considered and the government will look to gather further evidence to explore this complex issue further.”

Ministers have also accepted the following recommendation: “The government should commission research into the impact of streaming services’ algorithms on music consumption, including where creators are forgoing royalty payments in exchange for algorithmic promotion.”

The ‘value gap’ continues to be a concern for the industry. In the summer, MPs called for “robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming ‘value gap’.” 

The government stressed that it has no role in licensing negotiations, which are a “private commercial matter between the parties”. But it will analyse how EU Member States have implemented Article 17 of the Copyright Directive, which was designed to supersede safe harbour legislation that allows platforms to avoid responsibility for unlicensed content.

In its response today, the CMA said it cannot consider designating YouTube’s streaming services as having strategic market status, as recommended by the committee. The government launched its consultation on the pro-competition regime for digital markets in July. Any new digital markets framework would be subject to the government’s proposals following the current consultation.

Chair of the DCMS Committee Julian Knight MP said: “Our inquiry into music streaming exposed fundamental problems within the structure of the music industry itself. It is testimony to all those who gave evidence to our inquiry that the government has acknowledged our report as a ‘key moment’ for the music industry.

“Crucially, ministers have accepted a key recommendation to refer the dominance of the major music groups to the Competition and Markets Authority. Our report laid bare the unassailable position these companies have achieved. We provided evidence of deep concern that their dominance was distorting the market.

“Within days we expect to see the government’s own research published into the pitiful earnings of creators in this digital age and hope it will corroborate what artists and musicians told us. We will be monitoring the outcome and what tangible steps the government pledges to take to redress this unfairness and reward the talent behind the music.”

Industry reaction

A spokesperson for the BPI said: “Competition in the UK music industry is fierce. As the government observes, streaming has provided more routes to market for artists and creators. We note the government’s response that the CMA is an independent regulator and any decision to conduct a market study rests with them. Should the CMA conduct a study, we look forward to detailing labels’ role in supercharging the careers of British talent within a complex and dynamic ecosystem.
“At a time when much of the UK music sector has come under pressure as a result of the pandemic, recorded music has returned to growth and continued to invest, benefitting the wider music community when most needed. We welcome government’s recognition of the need for a better understanding of the complexity of the music streaming market, and that industry action to address issues of concern is preferable to legislative intervention that may negatively impact performers, jeopardising the hard won return to growth after years of decline – and harming music creators and UK music’s global competitiveness.
“We look forward to participating actively in further research and industry working groups on transparency and metadata. Streaming means that more artists are succeeding commercially than ever before.  Supporting further market growth and preserving UK music’s dynamism, investment and innovation is the most effective way to ensure that even more artists benefit.”

AIM CEO Paul Pacifico said: “For many years, the independent community has been pushing back against hyper-consolidation in the music market and the government’s referral to the CMA is an opportunity for a proper assessment of the negative impact this might be having on artist choice, deal terms and other crucial factors needed to achieve a well functioning music ecosystem.

"We have stated all along that much can be done to improve the music streaming market and the Impala 10-point plan set out numerous ways that this could be achieved. We welcome the government’s willingness to examine proposed solutions including AIM’s Artist Growth Model to enable more - and more diverse - artists to earn better from streaming. We look forward to continuing to work with government and industry partners to pursue better outcomes for artists and entrepreneurs in music together.”

For many years, the independent community has been pushing back against hyper-consolidation in the music market

Paul Pacifico

Merck Mercuriadis, founder of Hipgnosis Songs, said: “The government’s decision to refer the major music companies to the CMA is a very positive next step in our collective efforts to rebalance the industry in favour of songwriters and artists. The government’s recognition of the imbalance that exists for the Songwriters, Artists and Producers, without whom there is no Music business, and its willingness to invest 12 months into ensuring it comes to the right conclusions gives us many reasons to be cheerful.

"The CMA and the government must now act rapidly to tackle these issues and Hipgnosis is committed to playing an active role in the important discussions ahead, advocating on behalf of songwriters and artists to ensure that the necessary steps are taken to give them a bigger slice of the pie. It’s a timely response with Universal’s very successful IPO yesterday and the positive knock-on effect it has had on Warner Music. This demonstrates there is plenty of abundance in our industry to share with the creators that are our lifeblood. In the wake of that, I also believe those companies will come to the conclusion that it’s in their own best interest to be important catalysts for the changes that are critical not only to songwriters and artists, but to their own future wellbeing.”

IMPALA executive chair Helen Smith said: "Having a competitive, open and responsible music market is vital. As a sector, we have been raising concerns about increasing consolidation for decades. We have repeatedly flagged the need to have structural and remedial measures in place to address the consequences and ensure the music market is competitive and open. IMPALA welcomes the investigation by the CMA into concentration in the music market in the UK. As far as streaming is concerned, we have key recommendations for labels as well as services in our 10-point streaming plan. We also looked into equitable remuneration and concluded it is not equitable. Our view is that it would be damaging for emerging artists and would not actually introduce effective change.

"Our members’ job as independent music companies is to maximise revenues for our artists and help diverse artists break through. Our members are inundated more than ever before by artists looking for label partners and we need the right conditions to take on these artists. Our vision is for a market full of opportunity and market access is crucial.

"The digital music market is of course fundamental in today’s ecosystem. We have raised the question of competition in this sector too and the power of a handful of global digital players. Being indispensable trading partners comes with responsibilities. Our 10-point plan for streaming reform flags many of these issues. We believe for example that more needs to be done to maximise revenues for artists and to boost diversity."

"We understand that this is to be the remit of the new Digital Markets Unit within the CMA. We would urge a clear investigation into these issues, including why the music market today still only represents 35% of its peak when adjusted for inflation, why the real subscription prices for music have actually gone down, the impact of the key factors exerting downward pressure on prices such as the value gap, an assessment of royalty reduction programmes such as Spotify’s Discovery Mode and whether the very structure of the digital market and key players is in the public interest. We would also urge the UK government to pursue a legislative response on the value gap and not fall behind the rest of Europe. We look forward to working with the CMA, the Digital Markets Unit and the UK government on all these issues."

David Martin, CEO, Featured Artists Coalition & Annabella Coldrick, CEO, Music Managers Forum, said: "In the week where recorded music companies hit stellar valuations due to the streaming boom, we are pleased to see that the systematic inequalities faced by generations of artists, songwriters and musicians, which were highlighted by this groundbreaking inquiry are now being acknowledged by the Government. It’s encouraging to see the government agree that regulatory frameworks, including copyright laws, have not kept pace with the changes brought about by streaming.

"As the FAC and MMF have continually advocated through our Dissecting the Digital Dollar work, addressing these issues will require both legislation and industry change. On this front, we are especially pleased that the majority of arguments detailed in our recent White Paper have been acknowledged. We fully support the push for a full-blown investigation of the recorded music market by the Competition & Markets Authority building on their recent work with AWAL and Sony. We also have long called for the creation of an industry forum overseen by government - now called the ‘contact group’ - to drive forward changes across the recorded and publishing sectors in areas such as contracts, licensing, transparency and welfare.

"However, we find it a pity that the issues around royalty chains, transparency and black box distribution have not been adequately acknowledged, as current legislation overseeing CMOs is ineffective. We hope that these can be explored further within the contact group. The government using its influence to pressure our sector to agree to a modern code of practice covering all these issues would be a big leap forward and, as part of the contact group, both the FAC and MMF stand ready to contribute."

Horace Trubridge, general secretary of the Musicians’ Union, said: “We are pleased that the government has responded positively to the Select Committee’s report into the Economics of Music Streaming, and has understood why we are seeking equitable remuneration for musicians. While we are disappointed that there isn’t an immediate commitment from the government on this point, we are pleased that the door is open to explore it in more detail. As highlighted by the committee’s report, now is the time for a ‘complete reset’ of the system to ensure that our fantastic musicians are fairly and properly rewarded for their work. A Private Members' Bill will be put before Parliament in December which will present legislative solutions to ensure artists get the rewards from their work which they deserve.”
Naomi Pohl, deputy secretary general of the Musicians’ Union, said: “It is fantastic that the government is willing to further investigate streaming economics with a view to ensuring performers and songwriters get a fairer deal. The government’s response to the DCMS Select Committee’s report shows a willingness to engage with our key concerns around unfair remuneration and address what the report described as “deep concerns” around the dominance of the major music companies.”
Graham Davies, CEO of The Ivors Academy, said: “This is an exciting moment and opportunity for change which we fully embrace. We are pleased the government has recognised that the global streaming environment must be transparent and fair. They have accepted that the music industry is failing in a number of areas, and needs help to embrace this modernisation and reform agenda. Like us, the Government sees the growth and benefits that will come from a modern music industry that properly rewards creators.”
Tom Gray, founder of the #BrokenRecord Campaign, said: “The government have accepted that our critique and the inequities facing music-makers are all too real. But the tens of thousands of British musicians, songwriters, producers and artists are not merely ‘stakeholders’. Unlike multinational corporations, we are citizens, constituents and taxpayers. Now is the time to redouble our efforts and challenge our political leaders to truly represent us. Change is possible and should be made real.”

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