Issues with the current model of streaming platforms are laid bare in the newest report from the Digital, Media, Culture and Sport Committee titled Music streaming must modernise. Prompted by the huge increase in streaming since the live music industry took a nosedive, this investigation queries how big platforms such as Apple Music and Spotify operate, and calls for an overhaul in the payment of their artists.
It’s no secret that streaming platforms pay the bare minimum per play. The Wall Street Journal reports that Apple Music pays approximately $0.01 per stream which is double that of Spotify’s average. This meager amount of income is further reduced due to the fact that artists only receive part of those royalties according to their record deal. In some instances, this could be as little as 20% of the profit.
The other 80% is reserved for the label itself. The culprit for this pay inequality is due to outdated cost recuperation. The physical production of CDs and vinyl have massive overheads, and record labels turn to recording royalties to foot this hefty bill. When applied to digital distribution, the overheads are little to nothing. This means massive profits for the labels while the artists are left in the dust.
Although artists may try to lobby for better royalties in the songwriting department, a change can only take place if a label can disrupt the status quo. Unfortunately doing so is becoming increasingly challenging because the current record market is dominated by only three major labels.
‘The big three’ as they are known, are responsible for 75% of the music market share in the UK, and it is in their interest to keep their profits as high as possible. Nowadays even independent labels tend to operate as part of one of these labels to some extent, making negotiations all but impossible.
When studying user-generated content hosting platforms such as YouTube and TikTok it is revealed that they are continually exploiting safe harbouring to increase leverage in music license negotiations. Under safe harbour, platforms that host user-generated media are not responsible for the content that breaches terms of copyright – so long as they remove the content quickly
From the moment a song is uploaded, until it gets taken down, that song is free for anyone to listen to. This gives the platform a huge advantage in negotiations as at this point they are licensing after the song is uploaded. Due to the music already being available on the site, artists and labels are willing to receive less to ensure they get any money at all.
To address these issues, the committee has put forward a range of changes to current legislation. If passed, these reforms could make streaming revenue a viable income for UK musicians big and small. The recommendations include equitable remuneration for streaming. This is a fee paid every time music is broadcast on radio or television. The payment for which is an even 50/50 split between artist and label – as opposed to streaming payments which are split according to royalty percentages outlined in the artist’s record deal.
On the subject of royalties, the committee calls for a further investigation into payment for songwriters and composers. Redressing the gap in songwriter copyright payouts vs recording revenue would make composing a commercially viable career, ensuring they get a fair cut of the royalties.
The committee aims to tackle market exploitation by launching a study into the hoarding of recording and publishing companies that labels have been buying up in their quest for market domination. By shining a light on the economic impact of these business practices, pressure will be put on the government to put an end to any further growth.
On the digital side of things, the report calls for a normalised licensing agreement for user-generated content hosting sites. Along with this, a code of practice is suggested to ensure that all forms of advertising – such as playlisting and music discovery algorithms – are both fair and ethical.
Change is inevitable
Since their inception, streaming platforms have sought to make as much profit as possible by maximising the number of artists on their platform, while paying them the bare minimum when it comes to royalties.
Horacio Gutierrez, the head of global affairs and chief legal officer at Spotify argues that payouts are low to provide users with an affordable service. While this may be part of the reason for such pitiful rates, Spotify ran a staggering profit of nearly £20 million this quarter alone – more than enough to justify a raise.
Artists are the foundation of streaming services. They provide the content that keeps users coming back for more, and yet they are left struggling to earn a living off of their own work. Hopefully, this report is one of many investigations to come, and marks a step in the right direction for the fair representation of musicians online.p