The Great Streaming Debate: Royalties and Revenues

For this week’s blog, we’re diving into some huge news on the music streaming front as we start to see the results of a piece of ongoing government research into the streaming business model.

Launched at the end of November 2020, the ‘Economics of Music Streaming’ inquiry heard evidence from creators, industry experts and streaming services to understand if services are paying their fair share to writers and performers, and what the current system means for the future of music. 

Streaming royalties have been a hotly debated topic for as long as they have been a main revenue stream for the music industry, and a quick Google will throw up a huge list of blogs, discussions and debates about whether it’s a fair model. In fact, we even did a panel talk about this as part of ACC Live with Crispin Hunt (multi-platinum songwriter and producer – Jake Bugg, Florence and The Machine, Lana Del Rey) and Tom Gray (former Gomez frontman and music activist), which you can watch here.

Check out the table below that shows how much you get from major streaming services for 100,000 streams:

± rates sourced from Dittomusic.com

The table above highlights the severity of the issue. To earn the same from 100,000 Spotify streams as you would from 100,000 physical CD single sales, you would need to have 45,766,590 streams. And that’s just Spotify. Looking at the wider streaming market, the royalties vary wildly highlighting the second biggest issue affecting streaming as a revenue route. Streaming revenue has no regulation, allowing services to payout whatever they please. Writing, recording, mixing and mastering recorded music isn’t easy work and it’s easy to understand why musicians aren’t happy with the incredibly low rate of return for putting their music on streaming services.

And yet most artists don’t really have a choice but to offer music streaming. Ever since the rise in popularity of streaming in the mid-2010s, these services are the place to find your audience. The interesting thing is that when audiences were asked if they believe that artists deserve a greater share of revenues from streaming services in a recent YouGov poll, 77% said that artists are not paid enough. 

But what are streaming services and record labels saying? The three major record labels that control the vast majority (75%) of the market (Sony, Universal and Warner Music) have said ‘any disruption could damage investment in new music and argue(d) against the idea that streaming was comparable to radio, where artists already receive an equal 50/50 royalty split.’ – macrumours, 2021. 

Streaming services are not opposed to rebalancing the system but claim ‘70% of their income already goes to labels, publishers and artists, suggesting that it should be labels who reduce their share of royalties to give more to artists’ – macrumours, 2021.

With the debate rolling on and record labels and streaming platforms saying that changing the system could damage streaming irreparably, it’s easy to see why the government has launched an inquiry. 

So what are the government recommendations from their research? Here’s the main five recommendations: 

1. Equitable Remuneration: This system has been in place since the 90s via PPL licensing and involves streaming services paying a proportion of their revenues to an organisation like PPL to be paid directly to the artist or writer.
   
   
2. Revenue Parity: The government will work with creators and the publishing sector to find new ways to help songwriters and composers have more sustainable careers, which could include increasing the value of a song to bring it in line with the value of a recording, two very separate things.
   
   
3. Referring the case to the Competition and Markets Authority (CMA): The CMA is a body set up to ensure the market is fair for all. The government wants the CMA to investigate the economic impact of 75% of the music industry being controlled by three major labels, and whether this is uncompetitive.
   
   
4. More transparent algorithms and playlists: Playlist curators should be subject to the same Advertising Standards Authority code that social media influencers have to keep to, to ensure that their work is transparent and ethical. Essentially, this would ensure that anyone who creates playlists of music professionally would have to ensure they chose music independently and without taking payment from record labels or artists to feature their music.
   
   
5. Address concerns about Safe Harbour: Safe Harbour is the rule that YouTube can’t be held legally liable for copyright infringement on their site, as long as they remove any cases of copyright infringement when the infringement is highlighted to them. At the moment, YouTube can’t be penalised for allowing the upload of any copyright song unless a copyright claim is sent to them by the copyright owner.

Complicated stuff right? To put it simply, the five recommendations above would ensure fairer payment, higher value for songwriting that matches the value of a song recording and controls over how music is consumed to ensure that creators are paid for each listen of their music. If you want to read more about the government findings, find them here.

While audiences are widely accessible on streaming platforms, this debate will continue to rage. There are many ways to make money from music outside of songwriting and recording including touring and merchandise, but clearly further regulation and legislation is needed to ensure that artists are paid fairly for their work. With consumers and the government backing changes to the industry, the future looks very open for music creators.