MPs have urged regulators to probe major UK record labels and Youtube as part of a radical overhaul of the music streaming market aimed at tackling “pitiful returns” for artists.
In an eagerly-awaiting report published today, the culture select committee called for comprehensive reform to existing legislation as well as new regulations to “reset” the market for the modern streaming age.
It said the radical changes were needed “not only to redress the balance for songwriters, performers and composers, but to tackle fundamental problems within the recorded music industry”.
The recommendations include new laws to ensure creators are fairly remunerated by streaming after the committee found successful artists saw “pitiful returns” while others were frozen out of payments altogether.
MPs also called on the Competition and Markets Authority (CMA) to carry out a market study into Universal, Sony and Warner amid concerns about the dominant position of the major record labels.
They also said the watchdog should investigate Youtube’s power over streaming and urged the government to review copyright laws for user-generated platforms.
“While streaming has brought significant profits to the recorded music industry, the talent behind it — performers, songwriters and composers — are losing out. Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do,” said committee chair Julian Knight.
“However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself.
“We have real concerns about the way the market is operating, with platforms like Youtube able to gain an unfair advantage over competitors and the independent music sector struggling to compete against the dominance of the major labels.”
The conclusions are likely to draw the ire of the UK’s record labels, which have long insisted that streaming has helped to stamp out piracy and argued that artists are earning more now than they did in the CD era.
Geoff Taylor, chief executive of record labels group the BPI, said: “When considering this report, the government also needs to consider the vital role that labels play as the leading investors into artists’ careers, with investment in artists by record labels growing year-on-year. Artists also now have more choice in how to manage their careers, with independent and self-releasing artists growing their share of the market.
“Labels are committed to ensuring that artists share fairly in the growth from streaming. We will carefully examine the findings of this report, but it is essential that any policy proposals avoid unintended consequences for investment into new talent, and do not imperil this country’s extraordinary global success in music.”
Writing in City A.M. this week, Tory MP Dehenna Davison also warned that reforms to the streaming market should not quash innovation.
“Ministers should only put in place policies which support the growth and continued success of the UK’s music industry and be wary of any interventions that will hold it back or create unintended consequences for our artists, labels and economy,” she wrote.
The proposals for sweeping reforms come after an inquiry by the Digital, Culture Media and Sport select committee that featured evidence from artists such as Nile Rodgers, as well as the major record labels and streaming giants including Spotify, Apple and Youtube.
One major recommendation is the introduction of equitable remuneration for digital music — a right afforded to music played on the radio or performed in public but not currently applicable to streaming.
The MPs described this as a “simple yet effective solution to the problems caused by poor remuneration” as is a right already enshrined in UK law.
However, record labels have described the proposals as a “recipe for disaster”, saying they would divert money away from labels and artists and towards the platforms.
Other moves under consideration are a change in the way streaming royalties are distributed by platforms such as Spotify. This includes the user-centric model, which would charge subscriptions according to what each user listened to, rather than pooling all revenue and distributing it between artists.
But the commitee warned current contractual agreements between record labels and platforms could stifle further innovation if misused and asked the CMA to consider this as part of its investigations.
Record label ‘dominance’
The report also took aim at the music sector more widely, calling for the CMA to examine whether major labels Universal, Sony and Warner were causing harm through their dominant market position.
It said the government should make sure UK law was not enabling this market dominance and should support independent labels, while pointing to concerns that the majors’ position in direct licensing negotiations allowed them to benefit at the expense of indies.
MPs also questioned whether songs were fairly valued given the labels’ dominance over song rights and urged the competition watchdog to look at their position in both recording and publishing.
Record labels said streaming had allowed artists to access a greater share of revenues than ever before, adding that this was evidence the market was working.
Youtube and ‘safe harbour’
In addition, the DCMS committee took aim at user-centric platforms — most prominently Youtube — over the issue of copyright disputes.
Sites such as Youtube are exempt from legal liability for copyright infringement unless and until they obtain “actual knowledge” of infringing activity. The committee found this had a “profound impact” on the market as it gave the companies leverage in licensing negotiations.
MPs called on the CMA to probe Youtube over these advantages and urged the government to introduce new legislation that would “normalise” licensing agreements for platforms.
“We recognise the role that YouTube Music plays within the music industry and are deeply committed to helping it grow and thrive,” said Youtube Music’s global head of music Lyor Cohen.
“In the last 12 months alone we’ve paid out more than $4bn to artists, songwriters and rights-holders, 30 per cent of which has come from UGC, with fan-made videos proving to be an invaluable source of revenue. We are spearheading the twin-engine model of ads and subs, allowing music fans around the world to pay with both their wallets and their eyeballs.”
A CMA spokesperson said: “The CMA strongly supports competitive digital markets. We will consider carefully the recommendations in the report that relate to the CMA, and we will work with DCMS to respond to these in due course.”