Despite the ongoing COVID-19 pandemic and the end of the Brexit transition period looming, potentially fundamental changes to the music industry may soon be added to the UK Government's legislative agenda. Against this backdrop, initial steps towards important (and arguably overdue) changes within the music industry came earlier than anticipated with last month's announcement by the UK's Digital, Media, Culture and Sport Committee of an inquiry into the 'Economics of music streaming'.
The deadline for responses to the inquiry is Monday 16 November 2020. Whilst it is possible that nothing comes of the inquiry given the lack of Parliamentary bandwidth, there are more than a few hints that the calls for change are gaining traction.
Why is the rise of streaming causing concern?
Essentially, it relates to how the pie from streaming revenue is split up between stakeholders, with particular concern regarding the "value gap" in the music industry (i.e. the difference in income generated by the streaming platforms compared to the royalties received by creators, such as the artists and songwriters).
The music streaming industry has grown extraordinarily quickly in the past 20 years - gone are the days of cassette tapes and Walkmans, although vinyl has continued its recent comeback. Platforms such as Amazon Music, Apple Music, Google Play (to become YouTube Music from December 2020) and Spotify earn huge revenues (over £1 billion from 114 billion streams in 2019), whilst many artists, songwriters and creators may only see a slither (as little as 13%). Whilst streaming provides consumers with greater choice, access and flexibility in what, how, when and where they watch or listen to their chosen content, there are concerns regarding the impact on the music industry of streaming in its current guise.
COVID-19 has resulted in the cancellation of gigs, concerts and festivals, reduced royalties for songwriters, artists and record labels and adversely impacted merchandise and physical sales. Absent these (as well as other) revenue streams, the sustainability of the music industry's current model is facing even greater scrutiny than before given the current reliance on streaming income by musical creators.
What questions does the inquiry ask?
The DCMS Committee's inquiry is seeking written submissions to a number of questions from across the industry:
- What are the dominant business models of platforms that offer music streaming as a service?
- Have new features associated with streaming platforms, such as algorithmic curation of music or company playlists, influenced consumer habits, tastes, etc?
- What has been the economic impact and long-term implications of streaming on the music industry, including for artists, record labels, record shops, etc?
- How can the Government protect the industry from knock-on effects, such as increased piracy of music? Does the UK need an equivalent of the Copyright Directive?
- Do alternative business models exist? How can policy favour more equitable business models?
Where might all this lead?
Given the potentially wide ranging implications of this inquiry, we look at a number of the key issues that arise from this inquiry and where things might end up.
- Business models
- At the heart of the inquiry is the overarching question as to what the future business model for streaming services will (or should) look like and to what extent laws will be passed that shake up the status quo on how artists and songwriters receive their royalties from streaming platforms via record labels, publishers or collecting society.
- Protecting against piracy and a version of the Copyright Directive
- The UK Government has confirmed it has no plans to implement the EU Copyright Directive. However, there is the possibility that the UK will prepare its own domestic version of this Directive which replicates some of the key components of the Directive. For example, Article 17 of the Directive which seeks to regulate the use of copyright-protected content by online content-sharing service providers (OCSSPs). This provides that OCSSPs will be liable for copyright infringement where protected copyright material is uploaded onto the OCSSP's platform by users if it doesn’t have a licence or if no authorisation is obtained. Further, Article 17 requires OCSSPs to (i) remove access to copyright works upon receipt of a notice from a rights holder, and (ii) use their best efforts to prevent future upload of those works.
- Any change in the UK along the lines of Article 17 of the Directive would no doubt be welcomed by copyright creators and holders, but would likely see similarly fierce resistance to the Directive from the OCSSPs as well as end users.
- Algo-rhythms and playlists
- Algorithms using AI implemented by streaming platforms draw upon a variety of different data collected – for example, song type, beats per minute, song genre, duration of listening time (including if skipped) and the playlists in which a song or artist is included. This affects the exposure and opportunities different artists get on the different platforms, impacting their access to audiences.
- The way in which algorithms impact the music market was of particular concern for the Chair of the DCMS Committee. When you consider the potential impact (particularly for the 'less established' artists) of algorithms and playlists (whether editorial, algorithmic, personalised, branded, personal and user), these elements of the streaming platforms' business model are likely to be a key topic for debate, with the streaming platforms likely to resist any intrusion into the operation of their algorithms.
- Consumers - how are they affected?
- How algorithms and playlists operate and affect the consumers is clearly a concern for the DCMS Committee. The collection of data and use of algorithms draw upon a user's profile, behaviour, listening history and other factors, distort and shape musical trends, popularity, tastes and habits.
- Given the impact that greater consumer audiences (and hence the number of streams) have on the remuneration of artists, we expect to see changes proposed to address this. At the same time, there's also a chance to change consumers' use of the streaming platforms in a beneficial way in the future with a fairer, more transparent user experience. Additionally, there is the opportunity to provide consumers with a greater understanding of what they are consuming on the streaming platform and how much of the consumers' fees are paid directly to the artist.
We are following this inquiry closely and will report on future developments.