The Culture, Media and Sport Committee of MPs has helped to set the agenda on the debate around streaming remuneration in recent years.
The Committee called for a “complete reset” of streaming in summer 2021. While the Competition & Markets Authority subsequently decided not to refer the streaming market to a full investigation, the government-directed scrutiny of the sector continues with various working groups and research studies.
Today (April 10) the CMS Committee – chaired by Dame Caroline Dinenage MP (pictured) – has produced another report on creator remuneration that covers streaming and beyond, including the crucial areas of support for freelancers in the music industry and copyright protection in the era of AI.
The inquiry into the economics of streaming held progress report sessions in the past six months, including evidence from Hipgnosis’ Merck Mercuriadis, MPA CEO Paul Clements and VV Brown, among others.
“As new means of consuming creative content have become the norm, creators across the sector have experienced persistent declines in their royalties and residuals,” stated the report. “Royalties can provide income smoothing, financial certainty, greater career flexibility and support during retirement for those who receive them. Royalties have been depressed by digital distribution in the UK, which pays out less to creators (if at all) compared to other modes of distribution.”
As well as calling for “fundamental reform” of streaming, one eye-catching recommendation in the latest report addresses the revenue split between recording and publishing rights and calls for a consultation to “incentivise an optimal rate for publishing rights in order to fairly remunerate creators for their work”.
The latest study hones in on the perceived disparity that favours recordings over publishing for streaming royalties, an issue that the Ivors Academy and others have drawn attention to in recent years.
The royalties split is around 55% of revenues for recordings rights-holders (labels and performers) and 15% for publishing (including songwriters and composers), after accounting for the 30% that goes to streaming services (after VAT has been deducted).
The Committee suggests that the digitisation of music distribution, with falling production and distribution costs as well as shared promotion costs with DSPs, means that the case for this traditional revenue share from music retail has been “weakened”. Labels, of course, would argue that they put greater investment into developing acts so deserve a bigger share of the streaming pie.
The report also suggested that songwriters face increasing pressures to self-finance writing sessions and cover expenses incurred during the recording and production process.
It described as “commonplace” the practice of adding more and more people (such as performers) to songwriting credits in order for them to claim shares of royalties, “reflected in the industry mantra, ‘add/change a word, take a third’ – diminishing individual songwriters’ share of revenues”, stated the report.
The report from the Culture, Media and Sport Committee also highlights the precarious rates of pay and employment conditions faced by many working in the creative industries.
Borrowing the private copying levy concept from France and other countries, the report calls on the government to ensure creators are compensated when people copy or move content such as songs to or between their devices. It also recommends that a Freelancers’ Commissioner be established.
Following on from previous Committee reports on the impact of artificial intelligence and the economics of music streaming, the report also calls for action to ensure creators are compensated when their works are used by AI systems.
The government needs to move further and faster to ensure music makers really are properly rewarded for their work
Caroline Dinenage
Dame Caroline Dinenage MP, chair of the CMS Committee, said: “Many of our talented actors, writers, composers and singers are failing to share in the global success of the UK’s creative industries as the sector struggles to navigate a perfect storm caused by everything from the emergence of AI through to the rapid changes in the way content is consumed.
“If creators are no longer to be the poor relations, the government needs to play catch up by plugging the gaps in outdated copyright and intellectual property regulations and ensuring that there is a champion for the rights of freelancers, who make such a vital contribution to their industries.
“Since the Committee called for a complete reset of the music streaming industry to ensure a fairer split of revenues, there have been moves in the right direction, but the government needs to move further and faster to ensure music makers really are properly rewarded for their work.”
In response to the report, Dr Jo Twist OBE, BPI CEO, said: “The Committee is right to highlight concerns around generative AI, in particular the alarming rise in the use of copyrighted work without permission or transparency, which is unquestionably the most significant issue facing the creative industries today. That said, the report fails to recognise that, with the support of their labels, more UK artists are succeeding in the streaming economy than ever before and that the real challenge facing all of us is how we can enable continued growth so even more creators stand to benefit. In an increasingly competitive global industry, their approach risks limiting investment and harming the UK talent of the future, when what we need is a supportive regulatory environment in which British recorded music can thrive.
“We’ve engaged fully with the Streaming Inquiry and the ensuing working groups from the start, and we will now actively contribute to the Creator Remuneration Working Group also.”
UK Music interim chief executive Tom Kiehl said: “This report provides welcome recommendations to government regarding artificial intelligence (AI) to ensure the creative sector is protected from some practices that amount to music laundering by certain firms.
“We need greater transparency from AI companies regarding the creative works they use to enable new music to be generated, as well as robust personality rights to support creators in face of huge technological development.”
Here, Music Week breaks down the Committee’s recommendations on creator remuneration and rights…
ECONOMICS OF MUSIC PUBLISHING
Focus on the economics of streaming, the Committee welcomed the recent metadata and transparency codes agreed by the working groups. Government-backed research has also been published into music creators’ earnings, contract adjustment & rights reversion, and the equitable remuneration model for streaming (also known as the broadcast model).
The Intellectual Property Office report on equitable remuneration in February was not conclusive, but did make clear that it was not an easy fix to introduce. The government doesn’t appear to want to go down that route, based on the letter from DCMS Minister Julia Lopez to Dinenage following the IPO study.
“Its findings suggest that applying the so-called ‘broadcast model’ of equitable remuneration to music streaming is likely to be extremely disruptive for the music industry with a high likelihood of damaging unintended consequences,” wrote Lopez. “That could include reduced investment in new artists and a reduction in choice for artists in how they negotiate with record labels. These risks have been acknowledged by many in the industry, including labels and artists.
“In light of the risks it presents, the government does not intend to apply the ‘broadcast model’ of equitable remuneration to on-demand streaming. Instead, the findings lend weight to the view that the best way to address creator concerns is through dialogue among industry and, where appropriate, industry-led actions.”
The Committee has today simply called on the government to take stock of the research and look at how it can “drive fundamental reform of music streaming with a package of measures designed to make streaming work for all”.
The MPs also welcomed the terms of reference for the Creator Remuneration Working Group and expect to see “tangible steps to improve musicians’ remuneration and performer rights in the next 12 months”. But it noted concerns that the group’s membership leaves creators with a minority voice, urging ministers to address the balance and “give music makers a stronger and fairer voice” over issues of remuneration.
While the adoption of ER of streaming may have stalled, the Committee clearly sees an opportunity to recalibrate the economics of music publishing and streaming.
Its report argues that revenue split between recording and publishing rights “does not reflect the importance of songwriters, composers and publishers in the music streaming process”. The Competition and Markets Authority has concluded that it is for the government to determine what is needed to reach an optimal split.
The report also criticised the “pitiful returns from streaming” for songwriters and publishing rights-holders.
Committee recommendation:
“Given the contribution of songwriters and composers to the success of music streaming, we recommend that the government bring forward measures for consultation with fans, music makers and other stakeholders to incentivise an optimal rate for publishing rights in order to fairly remunerate creators for their work.”
PRIVATE COPYING
PPL’s international collections for members have included revenue from private copying levies in Europe. But there’s no such tax in the UK on electronic devices, for which music is integral to the demand for those products, notes the Committee report.
As well as the absence of such payments from the domestic market in the UK, the MPs suggest that it has also put payments from abroad under pressure due to lack of reciprocity.
Committee recommendation:
“We recommend the government work with the UK’s creative industries to introduce a statutory private copying scheme, which, at minimum, safeguards reciprocal payments from abroad, to be produced within the next 12 months.”
We are concerned that the status quo simply favours AI developers
CMS Committee
AI & CREATORS
The government has been working with rights-holders, tech firms and other industry representatives, but a code of practice on AI and intellectual property has not been established so far. The government could legislate on the issue but there’s also no sign of that happening in the tail-end of a five-year term.
“It is unlikely that simply conducting a further period of engagement with the sectors, with no clarity over its overall aims, will have any meaningful effect,” stated the report. “We are concerned that the status quo simply favours AI developers, given creators’ concerns that their IP is already being used in AI development without licence or any practical means of recourse.”
Committee recommendation:
“The government must ensure that creators have proper mechanisms to enforce their consent and receive fair compensation for use of their work by AI developers. It should set out measurable objectives for the period of engagement with the AI and rights-holders sectors, which it has said ministers will lead on, and provide a definitive deadline at which it will step in with legislation in order to break any deadlock. We will continue to monitor developments in this area and recommend that our successor Committee do the same next year.”
FREELANCING & CONTRACTS
MPs noted that freelancers make up a significant portion of the creative workforce but lack a single clear voice representing their interests to the government. This has resulted in decline in pay and conditions that will cause long-term harm to the sector, according to the report.
The Committee also suggested that creators face “poor working conditions, including inconsistent use of contracts and terms and conditions, uneven responses to bullying, harassment and discrimination and a lack of proper support, accounting, training and development”.
Committee recommendation:
“We recommend that the government appoint a Freelancers’ Commissioner, with appropriate powers and cross-departmental oversight, to advocate across government in the interests of creative freelancers, and of other freelance and self-employed people more broadly.”
The report also called on the government to acknowledge and address issues around contracts and working conditions by implementing the recommendations of the DCMS-sponsored Good Work Review, using the sector’s CREATOR campaign as a basis for fair working standards.
Click here for our coverage of the economics of streaming inquiry.
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