UK Gov't Report: Music Streaming Math Needs A Creative Rewrite

By David Farrell

Last week, a cross-party UK Parliamentary inquiry into the Economics of Music Streaming turned in its 100+ page report that offers a broad yet comprehensive range of legislative reforms and regulatory interventions to right the appalling inequity in monetary renumeration paid to performers, songwriters, composers and music publishers.

The findings cast the major record companies in a dim light, suggesting the rules have been tilted in their favour using questionable practices and outdated agreements. But the report digs a lot deeper than this by suggesting the metrics used to measure streams is in itself flawed, and provides some proof that the 30-second rule (used to log a streaming payment) is proving detrimental to the creative process and makes no allowance to adequately reward long-form creative works that are particularly evident in the genres of classical and jazz composition.

It is a long read, but it is probably the benchmark document that can effectively deal with the economic distortions’ music streaming has had in providing fair compensation to the creative economy.

From the committee summary:

In order to address artist remuneration and the disparity in power between creators and companies, we recommend that the Government introduce a right to equitable digital music remuneration, a right to recapture the rights to works after a period of time and the right to contract adjustment if their works are successful beyond the remuneration they receive. We have deep concerns about the position of the major music companies and call on the Government to support the independent sector and take advice from the Competition and Markets Authority as to whether competition in the recorded music market is being distorted. We also advise the Government to proactively normalise the requirements on streaming services both within the streaming market and with other modes of music consumption, by placing greater licensing obligations on user generated content (UGC) hosting services, future-proofing the public service broadcasting prominence regime and addressing ‘payola’ concerns about algorithms and playlist curators

A PDF download of the entire report is available for free here.

What follows is taken from Sections 78 through 86 dealing with renumeration of song rightsholders.

Valuation of the song

As discussed in Chapter 2 (see paragraph 26), streaming services keep approximately 30 to 35 percent of gross revenues and distribute the remaining 65 to 70 percent, known as the royalty pot, to the music industry. Whilst the majority accrues to master rightsholders, who receive approximately 78.5 to 80 percent of revenues distributed to the industry, song rightsholders receive approximately 20 to 21.5 percent.

Despite this, many witnesses to our inquiry have emphasised the importance of the song to music streaming. Representatives of song rightsholders contrasted the poor rate of remuneration for songwriters and composers relative to other parties, despite the fact that the song and recording rights of any track are logically symbiotic insofar as both need to be licenced for recorded music to be consumed.

Roberto Neri questioned why the streaming services’ share of the gross revenue pot was twice as much as that of song rightsholders, arguing that: "Our songwriters are half of what is brought to the table. Without the songs, there are no music services. [...] Without a songwriter creating a song, there is no music industry."

Graham Davies, Chief Executive of the Ivors Academy of Music Creators, similarly emphasised the importance of the underlying song to the recording: “The songwriters, as we all know, invent the music. You do not have a recording, you do not have music, without the song”.

Academic research has begun to explore this assertion further with statistical analysis, which has suggested that the quality of songwriting is as important as performing talent in determining the extent of music consumption.

The importance of quality songwriting and composing should also be contextualised by how streaming technology has influenced music consumption. Many written submissions have recognised that streaming has provoked a decline in album sales concurrent to an increased consumption of individual tracks, referred to as a ‘song economy’.

The song economy of streaming services have been in part driven by changing demand-side consumption habits underpinned by functionality such as playlisting, alongside the weakening of supply-side incentives to create album-length music to capitalise on economies of scale for physical manufacturing and delivery costs.

This shift in consumption behaviour is not unprecedented: ERA posit that the concept of ‘albums’ did not exist before the invention of vinyl LPs, and moreover were limited to around 40 minutes of play until the invention of CDs.

Instead, creators are now incentivised by platforms to release tracks continuously to optimise streaming revenues. Daniel Ek, founder and CEO of Spotify, attracted criticism last year for saying in an interview with Music Ally that “you can’t record music once every three to four years and think that’s going to be enough”, which many musicians felt demonstrated a misunderstanding of the creative process of making music.

However, even as the industry moves towards a song economy, songwriters and composers face new social and technological influences when creating music.

Most significantly, most on-demand streaming services only register a user’s stream if that user listens for thirty seconds. BMI Award-winning singer-songwriter Fiona Bevan and critically-acclaimed jazz saxophonist, MC and composer Soweto Kinch both noted that that they had observed similar trends as fellow creators are incentivised to write for a particular aesthetic based on quick beats and catchy hooks, leading to greater homogenisation around a “disposable sort of sound”.

Guy Garvey, meanwhile, told us that whilst “Elbow is an album band”, the band has and would shorten the introduction to a track if it optimised the track for streaming and playlisting with the aim to then lead listeners to the album.

The BPI has similarly asserted that number of tracks on albums and EPs have also increased, in order to maximise the number of tracks streamed (and therefore generate additional revenue) in case an artist’s music is left playing.

Impact on music publishing: Songwriters and composers

From the creator side, the current valuation of the song despite the importance of song writing and composing has resulted in financial hardship for all but a select few.

In oral evidence, Fiona Bevan disclosed that one track that she co-wrote, of which her share was 48 percent, earned her approximately £100 on an album that was the fastest-selling solo artist album of the year at the time of release and reached No. 1 in the UK album charts.

Successful songwriters and composers also provided written testimony, both publicly and confidentially, about low rates of remuneration for successful songs.

One songwriter and composer, who co-wrote an NME and Rolling Stone award-winning song that was streamed 137 million times on Spotify, received a royalty of £3,013.47. Another prominent songwriter and producer received approximately €352 in Spotify payments over three years from a one-third writing share for a song that was streamed over 14 million times. Yet another composer and artist, who has created music for some of the biggest films in the world, wrote confidentially that they make more money from a track being played on TV than out of millions of record streams.

Several witnesses asserted that, as a result, many hit songwriters and composers were also working in ‘gig economy’ jobs for Uber or Deliveroo in lieu of adequate remuneration from streaming.

Creators of music in genres such as classical, national and traditional music and types of popular music such as jazz are particularly disrupted by streaming, even accounting for the fact that their specialist or supposed ‘niche’ nature meant that it would already be difficult to achieve the numbers of streams that mainstream music would.

Several witnesses, for example, argued that paying rightsholders after 30 seconds of streaming a track meant that a seven-minute classical piece or a nine-minute jazz symphony would pay the same as a 31-second album interlude.

One classical composer noted in written evidence that Ariana Grande’s ‘thank u, next’ could be streamed three times for every stream of Pink Floyd’s nine-minute ‘Comfortably Numb’ from the band’s concept album The Wall, and seven times for every stream of Simon Rattle conducting the twenty-four-minute first movement of Symphony No. 2 by Gustav Mahler.

Effectively, this means that, particularly for services that use ‘pro-rata’ payment models, regular long-form, classical, jazz and traditional music listeners subsidise the consumption of consumers with popular or mainstream tastes, especially where mainstream music has optimised for streaming. Many witnesses also asserted that these issues were further compounded by algorithmic curation and playlisting that disadvantages these genres over mainstream pop and commercial music.

The algorithmic and playlisting problem too is multifaceted: on the one hand, these types of music may be overlooked by recommendation systems entirely, but one submission we received also highlighted that niche music is being contextualised in problematic ways when it is playlisted, arguing that “if a highly trained soloist views getting included on a Spotify ‘Sleep’ playlist as a career booster, something is really wrong”.

As a result, it is estimated that the value of music such as jazz has been suppressed by about three to six percent, reducing financial incentives to its continued investment and production.

Moreover, for songwriters and composers particularly, there are often likely to be several creators contributing to a song. This means that what revenues that are allocated to song rightsholders are often divided between more parties than on the recording side. Fiona Bevan noted that “if you look at the charts, the vast majority of music in the charts is written through collaborations and teams, songwriters and producers and artists together or producers and songwriters together”.

It is not unusual for songwriters to share revenues for writing credits with at least three to four other songwriters, if not more; ‘Havana’ by Camila Cabello, ‘Uptown Funk’ by Mark Ronson featuring Bruno Mars and ‘Strip That Down’ by Liam Payne featuring Quavo credit ten, twelve and fifteen writers respectively.

Soweto Kinch observed that “if you are independent, you would be looking to pay splits to a composer, a band arranger, songwriters, lyric writers and so on”. Sometimes the recording artist may also contribute to the writing of songs or otherwise negotiate a credit, writing fee or upstreaming bonus.

Maria Forte explained why this trend may be increasing: The easiest explanation is, first, sampling is quite prevalent.

When you sample a song and you give up a share of the copyright, you immediately have the songwriters of that sampled song in your song. That can be a way in which suddenly you get 17 songwriters.

Somebody can write a song and then the producer, who is a producer-writer, will get it and add bits to it. There can be a number of people in the room who will be given a percentage.

Often, if it is a major artist, they will require a percentage of the song irrespective of whether or not they contributed to it. Indeed, the latter practices, where song writing revenues have become fair game, have become an industry norm to the extent that they are summarised by the maxim ‘add/change a word, take a third’.

Since we heard this evidence, a group of top songwriters, including Emily Warren, Tayla Parx, Victoria Monét, Justin Tranter and Savan Kotecha, have penned an open letter to express concern about “a growing number of artists that are demanding publishing on songs they did not write” and have resolved to “not give publishing or songwriting credit to anyone who did not create or change the lyric or  or otherwise contribute to the composition without a reasonably equivalent/meaningful exchange for all the writers on the song”.

As with performers, the lack of financial remuneration often compounds other barriers facing songwriters and composers. However, unlike performers, who may receive advances or session fees, songwriters are often unpaid for their work unless and until their work is released commercially.

Fiona Bevan explained that “songwriters spend a lot of their own time, energy and money unpaid, because we do not get paid to go to work, we get paid solely on royalties, so we are taking the risk and we are developing the artists for free for the record label and not getting paid for it”.

Furthermore, evidence we received from successful professional British songwriters revealed that not only has it become an industry norm for externalising the recording costs of music production to be passed to the performer, but also the songwriter.

Songwriter, producer and performer Iain Archer described in written evidence the songwriter perspective of this dynamic: "A songwriting session will require two days of my time with an artist, then up to two extra days of my own time completing the work. I provide a studio with world class equipment and instruments, lyric, melody and chordal writing, playing, arrangement and production. I pay the energy company to power and heat/air condition the studio. I provide snacks and drinks.

"This is all at my own expense, despite the artist often being signed to a multinational record label.

"Songwriting is not only a process of creating a world class combination of lyric and music, it is also about developing the identity of an artist, working with the artist towards a piece of work that will actively promote their unique selling point—it is a highly skilled task to get this right."

The labels work off the claim that they develop the artist and are deserving of the extra remuneration for undertaking this task—all the while aware that the vast majority of this work is being done for free by the songwriter.

The label skill is knowing which songwriter to use, getting them involved and then using their time, resources and skillset for free. One songwriter, who has created music commercially across the world, wrote confidentially that they were typically expected to self-finance hundreds of pounds in costs for a song that has subsequently earned them less than £1,000 (as one of four writers) for over 17 million streams on Spotify alone.

Helienne Lindvall, another award-winning professional songwriter and Chair of the Ivors Academy’s Songwriter Committee, similarly wrote that even hundreds of thousands of streams often would not cover the expenses incurred in writing sessions, let alone uncompensated investment such as working with emerging artists to develop their sound and musical direction.

These financial difficulties disincentivise new and upcoming songwriters and composers in particular. Several self-described emerging performer/songwriters, including one who had already earned seven million streams, wrote to us both publicly and confidentially describing their disaffection for making music commercially due to poor remuneration rates from streaming.

These sentiments have also been expressed by composers, songwriters and industry professionals. Soweto Kinch told us that the disparity between song and recording undermines the message that there are many viable career paths in the music industry:

"When I do lectures and teach university undergrads, I say, “We need people in PR, we need people to organise, to curate shows and to arrange and compose,” but if all the income is either coming to the star performer or the backing and the label, it doesn’t make the idea of being a professional arranger or composer particularly viable."

Moreover, the externalisation of production costs to songwriters similarly creates barriers to entry for new, young songwriters, and particularly those from low-income backgrounds. Iain Archer asserts that poor remuneration, the diminishing of songwriter control and the over-saturation of the market due to the demand for new content means that young new creators are already unable to establish a career.

Finally, witnesses have asserted that disincentivising new talent, compounded with the risk-averse nature of many industry professionals, may harm musical experimentation. Soweto Kinch emphasised several times that the modern music ecology would not produce “a Kate Bush or a David Bowie [...] or somebody like Rod Stewart” because of the prioritisation of short-term profitability.

Music publishers

Just as songwriters and composers have faced financial hardship, music publishers have argued that the economics of music streaming do not work for them.