The Digital, Culture, Media and Sport Committee (the government department in the UK covering culture and sport) held the latest in a series of inquiries into the economics (or not) of streaming music on 19th January.
Artists gave their side in late November 2020 and this time it was the turn of the labels, (well, the UK heads of each of the three major labels) and the PROs (well, PRS for Music and PPL) to face a series of questions from MPs.
Giving evidence were Peter Leathem (chief executive of PPL), Andrea Martin (chief executive of PRS for Music), Tony Harlow (chief executive of Warner Music UK), Jason Iley (chairman and chief executive of Sony Music UK & Ireland) and David Joseph (chairman and chief executive of Universal Music UK & Ireland).
No publishers (major or independent) were included in this phase of the inquiry, but there was plenty of note for the music publishing world in what was covered in the session (broken into two parts and running for around two and a half hours in total).
It got heated at various points (Joseph was accused by MP John Nicolson of “living in cloud cuckoo land” when he argued Universal’s recording artists were more than happy with the advances and investment they receive from the major).
It also got slightly farcical (Joseph attempted to make a Harry Potter analogy by saying the majors “often [have] this depiction of Slytherin rather than a company of Gryffindors” but was bounced down where the inquiry’s chair described the day’s proceedings as “a bit more Hufflepuff”).
Sadly it also got befuddled at times when some of the MPs wasted both time and questions by getting different types of music rights jumbled up, meaning those who were asked the questions had to explain why they could not answer them.
There were also refusals to publicly answer questions about deal terms (with both artists and DSPs) as they were commercially sensitive, doing little to quell concerns – and, frankly, undermining the entire point of the inquiry – that this is an industry that hides behind wilful obfuscation.
This swerving of questions prompted the Ivors Academy to, via its Twitter account which was live tweeting the two sessions, to ask if the three majors were scared they were going to be outed as “anti-competitive” while demanding that transparency be used here to “stop information being hidden that enables conflicts of interest, and prevents creators and performers understanding what they’re being paid and why”.
Why are the three major label heads continuously emphasising how competitive the market is? Can they prove it? Or are they afraid their behaviour will be deemed anti-competitive by the @CommonsDCMS?
We need transparency and accountability to #FixStreaming
— The Ivors Academy (@IvorsAcademy) January 19, 2021
Transparency matters. The streaming model must stop information being hidden that enables conflicts of interest, and prevents creators and performers understanding what they’re being paid and why.#MusicStreamingInquiry #FixStreaming #KeepMusicAlive
— The Ivors Academy (@IvorsAcademy) January 19, 2021
And before it even began, Merck Mercuriadis of Hipgnosis had lobbed a grenade into the middle of the debate. “The reason songwriters are not being paid what they should be getting paid is that the three biggest publishing companies are not advocating for songwriters, because they’re owned by the three biggest recorded music companies in the world,” he told Music Week. “The main motive, above making money [for Hipgnosis], is to change where the songwriter sits in the economic equation,” he said. “In the music business, without the song we don’t exist – it’s the energy that makes the world go round.”
Mercuriadis might not have had his specific concerns about the politics of consolidation addressed, but there was clarity and insight on a number of important issues. Here are the most significant arguments and quotes from the day with a publishing-centric focus.
1. Clean and accurate music data is still impossible from tech behemoths that are themselves built on data – and the UK government is failing to intervene here
That may sound like doublespeak but this was the argument from Martin when asked if Facebook was supplying data on what music was being used on its platform (and, one presumes, Instagram too). She said PRS for Music “processed almost 19 trillion usage of music” in 2019 and expects this to rise to 25-30 trillion uses this year.
“The more data we get, the more accurate and quickly we can pay our members what’s due to them.”
– Andrea Martin, PRS For Music
“It depends on the accuracy of the data and how quickly we get it,” she said of Facebook specifically. “Yes, they do [supply it]. In some cases, because of the hosting defence and safe harbour, we don’t always get [that]. And because of content recognition we don’t always get all the data and all the content. I think the government can really help us on that […] Definitely on article 16 [of the Copyright Directive], the government can help us make sure that we do get data, and in a certain standard […] It’s really important, because the more data we get, the more accurate and quickly we can pay our members what’s due to them.”
2. PROs still believe safe harbour exemptions are badly letting them down
The spectre of the value gap was raised early and Martin took the stance that the laws that cover safe harbour/hosting defence are archaic and unfit for purpose today, dating back as they do to 2001.
“If you think of it, the iPod didn’t even exist then,” she said. “Yes, there has been evolution, but the market is moving really quickly and it has to be modernised. Yes, the EU has recognised that and issued a directive – article 17 of the Copyright Directive – that limits the scope of safe harbour or the scope of hosting defence […] I think it’s really important that we update that legislation. The hosting defence allows some online platforms to claim that they aren’t liable for music and don’t pay out to our members.”
3. Unlicensed platforms make customers think music does not have to be paid for
Martin referenced streamripping several times as a persistent problem but also lambasted sites that allow user uploads of copyrighted material without a licence in place that ensures payments to all rightsholders.
“These unlicensed platforms […] have to be stopped because then there’s the concept with consumers that music is free.”
– Andrea Martin, PRS For Music
“These unlicensed platforms […] have to be stopped,” she said, “because then there’s the concept with consumers that music is free […] There’s a couple of things that could be implemented to protect the value and make sure that our members – the songwriters, composers and publishers – are paid.”
4. Content ID is a busted flush
One of those things that could be implemented is a more robust version of Content ID, YouTube’s own system for sweeping user uploads for copyrighted material.
“Content recognition depends on how its deployed and how it’s supplied,” she said. “For our members, we need to be confident that the content recognition tools are being applied on all content uploaded on the services. We know that our members’ works are being identified [but are] not always identified by these recognition tools.”
Asked if the specific technology used by YouTube to enforce copyright was working, she was far from convinced.
“I think it’s effective to a certain point, but it has to be used on all content and we have to make sure that all that content is licensed before it is put on the service,” she said. “I am talking [here] about our rightsholders – the songwriters and composers of the song.”
5. The major labels appeared to maybe (possibly) be warming to user-centric licensing
Deezer seemed to be in a field of one when it was trying to get the major labels to adopt a user-centric licensing approach to streaming payments (and, of course, that would mean a user-centric approach for mechanicals). At the end of last year, the service admitted that its utopianism was fading fast as it kept finding the doors at the record labels being slammed in its face when it brought up the idea.
Iley said the inertia at the label level was down to a lack of consensus among artists, with some wanting to hold tightly to the existing payment systems and others wanting to try user-centric licensing. It was a convenient escape hatch, where the label can claim that if most of its artists do not want it then it can’t take a unilateral approach and impose it on them.
“That’s a very difficult conversation because I look after artists across many different genres, and I have many artists who favour the current model of getting paid per stream,” he said of the conversations happening at Sony now. “Are we favouring one subset of artists over another? That’s a difficult position in this debate. I can listen to Harry Styles 10 times or The Clash 10 times and that’s my choice. But ultimately, the difficulty is that I have different artists that favour the two different options.”
Joseph, however, hinted that Universal could be coming alive to the idea – although he was careful not to mention the phrase “user-centric licensing” himself. He said there could be “models the services can do just to pay that artist rather than be diluted” but chose not to say what those models could be. “Streaming is at the start,” he said. “It’s not perfect yet […] I’ve got tons of ideas for how to improve streaming for the artists.”
“Streaming is at the start. It’s not perfect yet […] I’ve got tons of ideas for how to improve streaming for the artists.”
– Jason Iley, Sony Music
Again, it was all allusion rather than illustration, but one was left with the feeling that for supporters of user-centric licensing it might not be a pipe dream forever.
6. Sony definitely (100%) hates freemium
Iley might have prevaricated over user-centric licensing, but he’d very much like to see the end of freemium in the streaming world. He was asked if – by allowing music to be licensed for ad-supported services or tiers within wider subscription services (i.e. Spotify) – labels were effectively accepting a discounted licensing rate that benefitted DSPs (and their expansion) far more than it could ever benefit them. He did not hold back.
“Services such as Spotify are ad-funded and my personal view is we would much rather that the ad funded model was not there – that actually people literally went to subscription straightaway,” he said. “95% of our revenue comes from the subscription model. Spotify argue very, very strongly that that ad-funded model is the funnel into subscription.”
Challenged on this being something that, of course, Spotify would argue (out of towering self-interest) served to raise Iley’s hackles.
“Frankly, if the ad-funded model went tomorrow, I’d be delighted,” he retorted. But then, as with artists not being unified on user-centric streaming, he passed the buck.
“Spotify’s business model says it works for them,” he said. “I think that’s a conversation you should have with them. I sympathise with your point. I’m not disagreeing with you. But that’s what their business model says – that that part helps increase subscribers. I’m with you.”