How’s your week looking?
For anyone at the corporate level at the three major labels, it’s going to be a tense 24 hours ahead of the latest session of the Digital, Culture, Media and Sports Committee’s inquiry into the economics of streaming. Last week, we revealed that the country’s three top execs – David Joseph, CEO/chairman, Universal Music UK, Jason Iley, CEO/chairman, Sony Music UK and Tony Harlow, CEO, Warner Music UK – would be giving evidence to MPs from 10am on Tuesday, January 19.
It is a huge moment for the music industry that could influence the future of the streaming economy. And, of course, we can all watch along live as the virtual session will be streamed online.
We’ll be reporting on what happens when the CEOs are quizzed by MPs, who tend to drop in the names of their favourite bands during the inquiry. Here, Music Week looks at the key issues and what the three record company bosses can expect on the day…
Tougher questions for execs
“MPs call in top record labels” announced the press statement from the committee about this week’s hearing, chaired by Julian Knight MP. It was a very different tone to the previous statements on the artists and songwriters giving evidence (you can catch up on our reporting of those two sessions here and here). So far, most MPs have seemed fair-minded and even asked incisive questions – former Deputy Prime Minister Damian Green grappled with the technicalities of playlisting. But others use parliamentary privilege to play to the gallery (one assertion that major labels were acting like a "cartel" came right out of the blue). So it’s fair to expect some rigorous questioning of the three CEOs this week. And don’t be surprised if they get quizzed by MPs about their pay packets, too. Although recorded music is one of the few industries where at least a few of the workers can potentially earn more than the bosses.
A different perspective
When artists gave evidence in the opening session, Nadine Shah delivered a powerful, personal testimony in which she expressed her concerns about the system of artist royalties for streaming. Having released one of the great UK singer-songwriter albums of 2020, Kitchen Sink (Infectious/BMG), the BBC Radio 6 Music favourite has every right to be aggrieved. But while inquiry (and Musicians' Union) member Kevin Brennan made it clear that he was a fan, no MP asked her how much she streams relative to the overall market, or whether her label had recouped the advance paid to her. And no one asked about the overall sales for the new record since its release last summer. In fact, Kitchen Sink has moved 6,443 copies including 675 ‘sales’ from streams; Club Cougar is the most streamed track with 186,817 UK plays to date. To put that in context, Oliva Rodrigo’s No.1 single Drivers License had 10.9 million streams in one week.
If labels are getting more out of the streaming economy than artists and songwriters (as the evidence so far has suggested), it might have been helpful to balance Shah’s testimony with that of her label for the full picture. The three artist-friendly bosses from the majors could use the session to rebalance the debate. Which leads on to…
A growing music industry should mean more jobs, stronger exports and greater tax receipts for public spending. So the majors might want to point to the success story of the UK music industry in recent years. The BPI has already been flagging up that success with a run of announcements. Labels invest a huge amount and take risks on artist development (£250 million on A&R in 2019). A BPI report this month underlined the strength of British artists globally on streaming. While Lewis Capaldi, Dua Lipa and Harry Styles made the headlines, the trade body also noted that a new wave of UK artists are streaming around the world. In the UK, 8,000 different acts now exceed a million streams annually.
Of course, that doesn’t address the concerns of some artists and songwriters about their share of the streaming spoils. But the CEOs may want to remind MPs that, pre-streaming, the music industry was in a death spiral of piracy and declining physical sales (piracy is officially an area of the inquiry’s remit that has so far been ignored). Despite, the industry’s growth in recent years, the 2019 revenue figure of £1.07 billion was still below the results in 2006. The post-millennium peak for the industry was actually set back in 2001; and the decline lasted until 2015. Now vinyl and streaming are growing strongly and fueling investment in artists.
“Introducing new regulation to a successful and growing music sector would threaten to reduce the value of the UK music business, undermine investment into new talent and new music – leaving fans and artists worse off – and reduce the UK’s global competitiveness," Geoff Taylor, BPI chief executive, was quoted in the Mail On Sunday at the weekend.
Do MPs really want to propose a system that could, potentially, alter the growth trajectory of the British music industry?
Spotify has so far largely been portrayed as neutral in the arguments about revenue splits between labels and artists. Yet it’s market capitalisation has soared above $60 billion in recent weeks, compared to a valuation of €30bn ($36 billion) for Universal Music Group. Apple and Amazon are both tech giants who – as the inquiry has heard – are using music to help sell more products. And YouTube has long been an issue for the music industry.
Might the major label CEOs try and use the inquiry to suggest there should be more focus on the streaming giants? It’s certainly ironic that almost three decades after MPs took the industry to task over the price of CDs, no serious consideration has been given to the £9.99 price point for a streaming subscription, which has not changed for several years. A bigger pie of streaming revenue from a higher subscription price could help artists and songwriters, if changes were made to the royalty system. And there are plenty of other ideas out there. Should there be a digital levy like some European countries impose on blank CDs to support rights-holders? Should MPs look more closely at the power of playlists for certain acts? Could one of the execs even reframe the debate by coming out in favour of a user-centric payment system that sees individual subscriptions go to the artists users actually play?
It’s not just the major labels at the inquiry on Tuesday. PPL CEO Peter Leathem and PRS For Music CEO Andrea C Martin will also be quizzed by MPs. Both bring industry expertise and an eye for granular detail. Just one question: what have PPL got to do with on-demand audio streaming? Not much. They do license some online broadcast services, and with PRS they charge businesses for public performance (including shops playing music on Spotify). However, they are by no means a key player in the streaming ecosystem.
But if you’ve been following the inquiry closely, MPs have been intrigued by the idea that streaming should be licensed like radio – an intervention, it’s suggested, that could be implemented by government without undermining existing commercial agreements. The argument for 'equitable remuneration' by the #BrokenRecord campaign is based on this proposed change. Streaming income for recorded music is based 100% on mechanical royalties, while publishing is split equally between mechanical and public performance (although publishers and songwriters don’t always seem happy with their streaming income either). If MPs can get their heads around this, does it open the door for PPL to step in and become a new royalties super-regulator for the streaming economy?
One big row that could be brewing: where’s the independent label sector? They’re not represented at Tuesday’s inquiry session, despite indies’ substantial market share and streaming innovators. AIM, Worldwide Independent Network, IMPALA, Merlin, BMG, Beggars Group, Domino and more might have had something to say about streaming (in fact, AIM CEO Paul Pacifico has spoken out in Music Week).
And what about diversity in genres among the artists represented? Indie, alternative and jazz artists have appeared at the inquiry (three genres that have never performed strongly overall on DSPs, although with obvious exceptions). What about S1mba, Young T & Bugsey, MoStack and AJ Tracey, who all had songs in the overall Official Charts Top 50 singles of 2020? Surely the MPs on the committee should consider how a successful UK rap artist views the streaming economy before their deliberations are done...