MP’s to Investigate the ‘Economic Impact’ of Music Streaming

Much to the delight of the music industry, the Digital, Culture, Media and Sport Committee (DCMS) announced on 15 October 2020 that an inquiry is to be launched into the economics of the music streaming industry.

The Context of the Inquiry

The inquiry appears set to examine the following aspects of the global music streaming industry:

1. The ‘business models’ operated by music streaming service providers and whether, in their present state, they promote sustainability for the music industry at large;
2. Whether the ‘algorithmic curation’ of playlists unfairly balances listenership figures in favour of more established artists; and
3. How the Government can protect the industry from knock-on effects, such as the increased piracy of music.

Reading between the lines of the specific inquiries, the Committee appears primarily concerned with addressing the commonly referenced ‘value gap’ in the music industry.

The ‘value gap’ is the term used to illustrate the disparity between the revenue the music streaming giants generate and what the artists receive as royalties. To exemplify the disparity, the DCMS note that streaming giants such as Spotify, Apple Music, Amazon Music and Google Play account for over 50% of the revenue of the global music industry and its contributors receive as little as 13% of this revenue. To flesh this out further on a localised scale, of the 114 billion music streams which took place in the UK last year, over £1 billion revenue was generated. Of this £1 billion revenue, Spotify is thought to pay its artists between £0.002 and £0.0038 per stream, with Apple Music paying around £0.0059.

The Contents of the Inquiry

As noted, the Committee have called for the submission of evidence on the following:

Dominant Business Models

The Committee seek submissions as to the dominant business models of the platforms that offer streaming, how these differ among competitors and whether there are alternative models available. With the Committee “hoping that the inquiry will show that a more equitable model is possible” it appears that the inquiry may begin with the presumption that the market presently adopts an inequitable position.

Consumer Influence

The Committee also seeks submissions as to whether the new features associated with streaming platforms, such as the algorithmic curation of music or company sponsored playlists, influences consumer habits and tastes. With the rise of company sponsored playlists such as those promoted by Gymshark (music for exercise) and KFC (which exclusively includes tracks which reference the fast-food chain) the Committee are concerned that despite these algorithms maximising income from streaming “they are a blunt tool to operate in a creative industry with emerging talent risking falling at the first hurdle”. Whilst as the listener we may at times be grateful for curated playlists, there is an inherent risk that our ears are being pointed away from newcomers to the industry and directed towards established artists with a consistent audience and marketability.

Copyright

Aside from the intricacies of music streaming services, the Committee have also expressed their concerns with how the Government can protect the industry from any knock-on effects, such as the increased piracy of music and whether the UK needs an equivalent of the Copyright Directive in response. The Committee recognises that the piracy of music remains a large contributor towards the ‘value gap’.

Conclusion

In the short term, the inquiry looks to examine whether the ‘business models’ used by the music streaming giants inherently disadvantage the performers and writers that provide the streamed material. Longer term, the inquiry seeks to examine the implications of streaming on the music industry, including for artists, record labels, record shops, etc. The Musicians’ Union for one, welcomed the inquiry, particularly following concerns about the amplification of the ‘value gap’ throughout the COVID-19 pandemic with artists losing touring as their main revenue stream.

Deadline for submissions

The call for evidence by the Committee extends to all those involved in the music streaming industry such as industry experts, artists and record labels as well as streaming platforms themselves. Evidence is to be submitted by 6pm on Monday 16 November 2020 via the following link.