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What is the problem?

In recent years the way we consume recorded music has changed out of recognition. Where once it was delivered in physical format – singles, albums – now it is more likely to be “streamed” over the internet. With digital downloads as well as physical album sales declining, these changes present a threat to the traditional models for distributing royalties to those who create recorded music. Songwriters and producers complain that they are especially hard hit since, unlike music performers, they may have no other sources of earnings.

Two models dominate.  YouTube gathers the revenue generated by advertising into a pool and then distributes it to rights-holders.  The alternative model is exemplified by Spotify. Unlike physical or download sales, which pay a fixed price per song or album, Spotify pays artists based on their “market share” (the number of streams for their songs as a proportion of total songs streamed on the service). Spotify operates on the “freemium” principle (basic services are free, while additional features are offered via paid subscriptions). Spotify makes its revenues by selling streaming subscriptions to premium users and advertising placements to third parties.

YouTube

The recorded music industry points to a “value gap” between the number of songs being streamed and the money generated for rights-holders. Their UK trade association, the BPI, cites statistics from 2015 to support this: the number of advertising-supported online music video streams (i.e. YouTube) last year rose by 88%, yet the royalties paid to rights-holders grew by just 0.4% to £24.4m – less than the £25.1m of revenues from sales of vinyl.  Although YouTube has struck deals with labels, publishers and collecting societies to share revenues from advertising around their music, and has paid out more than $3bn so far to the industry, much unlicensed material finds its way onto the site.[1] YouTube responds that it is working in collaboration with artists “to bring more money to artists” and some musicians have built entire careers out of exposure through their service. It also allows rights-holders to identify their works through a service called Content ID and share in associated advertising revenues.[2]

“Safe Harbour”

At the heart of contention lies a copyright concept known as “safe harbour”. This shields an intermediary service such as YouTube from legal liabilities for content uploaded by users to its site, provided they remove it when notified by the rights-holders. Artists (including Paul McCartney) are currently petitioning the US Congress to change the laws on digital copyright. But it is not certain that stripping away “safe harbour” would lead to greater revenues for artists. The Financial Times suggests that “it is just as likely that consumers would sate their appetite for free content by turning to piracy instead”.[3]

Subscription services

By contrast, services like Spotify and Apple Music, which are not protected by “safe harbour”, have to negotiate licences before they can stream any music. Some argue that the availability of free music on YouTube makes it harder for these other companies to persuade music fans to pay for their subscription services. In July 2015, the number of audio streams in the UK exceeded 500m a week. Spotify estimate that they pay roughly $0.007 to labels for every stream, which is then split between the label, artist and songwriter(s). Around 10% of royalty income is estimated to go the songwriter(s). [4]

New players are entering the market and presenting new challenges. In August 2015, PRS for Music, the UK collecting society, took legal action for unpaid UK royalties against SoundCloud, a German music-streaming platform. The dispute was resolved in December 2015, when the parties announced that they had reached an agreement for a multi-territory licence to cover the service.[5]

Calls for change

Some see grounds for optimism, however, with high-profile artists forcing change in the industry. For example, Taylor Swift, who had already withdrawn her back catalogue from Spotify – arguing that “valuable things should be paid for” – successfully campaigned to force Apple Music to pay artists for music streamed during users’ three months trial period.[6] Last year, PRS for Music launched Streamfair, a campaign to create a “sustainable ecosystem” and “to highlight the need for legislative reform to protect music creators’ rights in the music streaming market”.[7]

At European level, the copyright regime is in process of change. In June 2016, 58 MEPs sent an open letter urging the European Commission to put an end to the transfer of value currently taking place at the expense of creators, and called for a legal clarification of the liability regime for online platforms.[8]

A 2015 Digital Music report by the International Federation of Phonographic Industry (IFPI) predicted that “within the streaming sector, there is substantial untapped potential for growth within the paid-for category.”[9]

Government position

In an oral exchange in the Commons in 2013, DCMS minister Ed Vaizey was asked about payment to artists by online music streaming services. He responded that “where music-streaming services are legitimate, the payment of royalties is a commercial arrangement between the rights-holder and the online service provider” (c1063).

Statistics

According to a survey published by the Intellectual Property Office (IPO) in July 2015:

  • 15.6 million UK internet users accessed music online. 12 million users streamed music and 10.5 million users downloaded music. 16-24 year-olds were the most active in music downloads
  • YouTube, Amazon and Spotify were the top platforms used for downloading and streaming with 54 per cent of all music streaming and downloads were accessed via YouTube
  • 26 per cent of users have accessed content illegally [10]

References

[1] “Why is the music industry battling YouTube and what happens next?” Guardian, 20 May 2016

[2] “British songwriters not receiving ‘fair pay’ from tech platforms”, FT.com, 19 May 2015

[3] “Big music’s misguided assault on YouTube”, Financial Times, 22 June 2016

[4] British Academy of Songwriters, Composers and Authors (BASCA) Streaming – An In-Depth Look – by Stephen Jones

[5] PRS for Music press release, PRS for Music and SoundCloud reach a multi-territory licensing agreement ending legal proceedings, 21 December 2015

[6] “Can songwriters survive in the age of music streaming?” BBC Online, 20 November 2015

[7] PRS or Music press release, PRS for Music launches Streamfair  campaign, 3 July 2015

[8] PRS for Music press release, MEPs call for a level playing field on copyright for online platforms, 21 June 2016

[9] “Taylor Swift and other musicians against Spotify have to accept streaming is ‘final destination’ for music industry, says Sony Music CEO”, Independent, 14 April 2015

[10] Gov.uk press release, UK consumers give boost to legal downloading and streaming for TV, films and music, 22 July 2015

Other material

“Why safe harbour will be the music industry’s big battle in 2016”, Musically.com, 16 November 2015

Jeff Price, “The more money Spotify makes, the less artists get paid”, Digital Music News, June 11 2015

“Pop stars complain to Brussels over YouTube”, FT.com, 30 June 2016

“Taylor Swift, Paul McCartney and U2 lead YouTube backlash: Stars sign petition claiming Google’s site is a ‘safe harbor’ for stolen music”, Mail Online, 20 June 2016

“Spotify revenues surge 80% to more than £1.5bn”, Guardian, 24 May 2016

“Debbie Harry: ‘Music matters. YouTube should pay musicians fairly’”, Guardian, 26 April 2016

“David Byrne: ‘The internet will suck all creative content out of the world’”, Guardian, 11 October 2013

“Music groups claim YouTube ‘abuses’ copyright law”, Financial Times, 14 April 2015

“How much money DO musicians get out of Spotify?” Mirror, 19 November 2014

British Phonographic Industry (BPI) press release, New BPI data shows surge in video streaming is not benefiting UK labels and artists, 24 June 2016

Websites

Debate packs are intended to provide a summary or overview of the issues being debated and identify any relevant briefings including press and parliamentary material. A more detailed briefing may be prepared for a Member on request to the Library.

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