As the UK Parliament’s culture select committee prepares for its inquiry into the economics of streaming and how monies generated by the streaming services are shared out across the music industry, the European Music Managers Alliance has called for a pan-European debate on some of the key issues, including legacy record contracts, black box distributions and user-centric royalty distribution.
The issues set to be discussed by the culture select committee – and those raised by EMMA today – have been talking points for years of course, pretty much ever since it became clear streaming was growing into the record industry’s primary revenue stream.
However, the COVID-19 shutdown has reignited the debate. In 2020 most of the music industry’s revenue streams have taken a hit because of the pandemic, except subscription streaming, which has continued to grow throughout the year.
With many artists seeing their income from live, merch, sync and the public performance of their music declining – in the case of live pretty much down to zero – much more attention has fallen on what happens to the money generated via the sale of streaming service subscriptions.
Under the current model, of the approximately 70% of subscription money paid to the music industry, the majority is allocated to the recording rights. Traditionally recorded music is the one aspect of an artist’s business where the business partner – ie a record label – gets to keep the majority of the money, because of the label’s upfront investment and marketing. Therefore the one revenue stream that has been COVID immune is the one revenue stream where many artists get a minority share.
EMMA, which brings together various groups across Europe that represent artist managers, notes that – as a result of the ongoing streaming boom, the fact the majority of streaming money goes to the recording rights, and the tendency for record deals to pay artists a minority share – labels, and especially the major labels, have had a good 2020. Meanwhile other strands of the music industry, and many artist businesses, have been majorly impacted by COVID.
As a result, the ongoing streaming boom is not, EMMA says, the “cause for celebration” it should be. “Commercial inefficiencies alongside outdated licensing and contractual practices mean too little of this revenue is reaching artists and other music makers”, the trade group says.
EMMA puts the spotlight on three issues with the streaming business in particular. On the recordings side, legacy artist contracts where terms written for the CD era are being applied in a digital age. On the songs side, data issues that mean not all monies can be accurately allocated to the songs that have actually been streamed. And finally the perceived problems with the current service-centric system for royalty distribution.
On record contracts, EMMA states: “Artist contracts need updating. Analogue royalty rates should not apply to digital income, outdated deductions should be removed, and unrecouped balances reviewed after a reasonable period of time. Artist debt should not be carried forwards for decades”.
As for song royalties that are not accurately matched to actual songs – resulting in monies ending up in the so called ‘black box’ – EMMA says: “While unidentified and non-matched writers revenues will frequently belong to the lowest-earning songwriters, they are typically reallocated by market share to the highest-earning, or to those with inside knowledge of [collecting society] mechanisms. This is unjustifiable, is not in the interests of [societies’] wider membership and needs reform with immediate effect”.
Those reforms, EMMA adds, should begin with societies and other entities involved in digital licensing being entirely transparent about how much money is not being accurately matched to works and how that black box cash is being distributed. Meanwhile, the sharing of data between societies and licensing entities needs to increase so that more royalties can be accurately matched to the songs that were streamed.
And finally, EMMA supports a trial of a user-centric rather than service-centric approach to distributing streaming royalties, so that each subscriber’s monthly payment is exclusively shared with the people and companies behind the music that subscriber listened to.
Many argue that the user-centric approach is fairer, while others point out that the current service-centric system – where all subscription monies are pooled and are then shared out based on total service-wide consumption share – is easily scammed.
That scam involves people uploading some music onto a streaming platform and then signing up for loads of premium accounts that are set to play that music. Under the current royalty distribution system, the scammers can get more money out in royalties than they paid in via subscriptions.
Deezer is currently trying to persuade the music industry to take part in a pilot of the user-centric approach in its biggest market, France.
“To counter stream manipulation and fraud and to boost consumer confidence in streaming models”, EMMA declares, “[we] would like to see a full and transparent trial of what are known as user-centric payment systems. This method of distribution would reconnect the music played by streaming subscribers with the revenue received by artists and songwriters”.
Commenting on EMMA’s demands for reform, the group’s Chair Per Kviman says: “When live music shut down in Europe and across the world, the incomes of artists, songwriters, producers, DJs and their wider teams went into freefall. They are fast becoming the collateral damage of COVID-19”.
“The robustness and growth of music streaming through the pandemic should have been a lifeline to these people”, he adds. “However, because of fundamental inequalities with how streaming services are licensed and how revenues are distributed, the vast majority are being cut further adrift”.
EMMA also calls on European governments to properly implement last year’s EU Copyright Directive, and especially those articles that seek to provide artists and songwriters with more transparency and fairer deals.
Meanwhile, beyond the specific streaming issues, the manager group also calls for a “unified response” to the wider challenges posed by COVID-19, concluding: “The music and cultural industries of Europe need EU-wide strategies to restart and reopen, financially supporting artists’ businesses to return post-pandemic”.