Digital, Culture, Media and Sport Committee hears evidence on the economics of music streaming

Panel 1 witnesses:

• Maria Forte, Managing Director, Maria Forte Forte Music Services Ltd
• Kwame Kwaten, Manager, record producer and owner, Ferocious Talent
• José Luis Sevillano, Director General, Artistas Intérpretes o Ejecutantes, Entidad de Gestión de Derechos de Propiedad Intelectual (AIE)

Responding to questions by committee chairman Julian Knight, Maria Forte said streaming had had a positive impact on the music industry. She stressed the importance of treating song writers fairly. She felt the system of applying royalties to streams did not work. Kwame Kwaten agreed that streaming had “nuked” piracy but now the system of paying writers was unfair because it went through two or three sets of hands. José Luis Sevillano said streaming was not replacing sales any more, it was replacing broadcasting. Performers should be able to negotiate and manage their own rights. Record companies were receiving too big a percentage. It was not only the artists who were not receiving fair pay - others, like assistants, were receiving nothing at all from streaming.

Steve Brine questioned the pricing models adopted by streaming companies. Maria Forte said there was an element of competition, but they were competing with YouTube, which was free. It was well known that artists and composers were not earning enough to live on. People would pay more if they felt their money was fairly distributed. Kwame Kwaten called strongly for representatives from all elements of the music industry to be involved in ongoing discussions. José Luis Sevillano said the price of music was right, but the question was how to fairly distribute the money.

Julian Knight questioned the motivation for record companies to “fix the leaky pipe.” Kwame Kwaten said they could easily be bypassed by technology. There had to be honesty and transparency to ensure there would not be problems in the future.

Damian Hinds asked about pricing and copyright and the amount of revenue in the record industry. Was the total amount of money in the industry more or less than in the past? Maria Forte said there was less because music was now sold on a subscription “all-you-can-eat basis.” She agreed with Mr Hinds that services like Amazon Prime were even better value. Asked why the industry didn’t do something about that, she said streaming was still on an upward curve, with a huge demographic - the older generation - that had not yet been involved. She stressed the importance of making streaming available as widely as possible, but equally that there had to be fair distribution of profits. Kwame Kwaten pointed out that streaming was needed to overcome piracy, but fixing one problem had caused another.

Clive Efford asked about the traditional role of music makers and how that had been impacted by streaming. Maria Forte explained the importance of metadata in ensuring correct payments were made to artists and others. Once the metadata was fixed, the flow of income would be more accurate. It should be compulsory for record companies to provide song data and writer information. This would also need to be done for the back catalogue.

José Luis Sevillano said in Spain there was an equitable remuneration (ER) system for performers on top of contracts. A rebalancing of profit distribution had been happening in Spain over the past ten years. Replying to Kevin Brennan, Labour MP for Cardiff West (a member of the Musicians’ Union), he said the UK earned about £800,000 per year as a result of ER redistribution from Spain. He agreed ER was the simplest way for redistributing money in the music industry. Maria Forte said ER would be good if it went through PPL in the UK. But the rate needed to change to 50-50.

Damian Green, Conservative MP for Ashford, questioned why Apple, Google or Amazon didn’t approach artists directly, taking out the intermediaries. Maria Forte explained that artists were assigned to labels, which were very good at doing what they did. You would have to “re-engineer the wheel” to do it differently. And artists would still need to have contracts. Kwame Kwaten said some artists did already self-release.

Responding to John Nicolson, Scottish National Party MP for Ochil and South Perthshire, José Luis Sevillano explained the Spanish system which had been enshrined in law since 2006. Mr Nicolson asked if there should be a legal obligation on streaming services to provide artists with transparency about how much they should earn. Maria Forte said there was a problem there because of the contractual relationships covered by NDAs. But there could be guidelines according to groups or categories.

Panel 2 witnesses:

• Fiona Bevan
• Soweto Kincho
• Nile Rodgers

Answering questions by Steve Brine, Fiona Bevan talked about the lack of transparency from the point of view of song writers. Payment statements were not clear and the amounts differed between countries. Soweto Kincho said the lack of transparency was definitely by design by people with a vested interest, resulting in “market failure.” However, it had never been easier to collect meta data. Nile Rodgers said he regarded record labels as his partners, but there needed to be transparency. It wasn’t known what a stream was worth and there was no way to find out. Streaming companies were seeing exponential growth and the system needed to be changed before the next stage of growth, which would certainly be explosive. He was hopeful of a change because it made sense to keep the artists happy. The conundrum was it was hard for the labels to fight against their own interests, but that was short-sighted. That would change if artists were given a voice.

Soweto Kincha said the pro-rate system of payment was iniquitous, with the top artists being paid for streamed music, even if it wasn’t their own.

Kevin Brennan asked about the distribution of payment. Fiona Bevan pointed out that eight out of 10 songwriters were paid less than £200 per year, even for the most successful songs.

Nile Rodgers contested that a music stream should be treated as a license, not a sale, giving the artist 50% of the royalties, compared to 18-30% for a sale. Artists and songwriters needed to update clauses in their contracts to reflect the true nature of how their songs were being consumed; ie, via a license.

Julian Knight asked about the proposal to ban NDAs. Fiona Bevan understood why they were necessary, but every digital transaction could be traced, so there was no reason not to have transparency.

Clive Efford said the committee had heard a recommendation that there should be a limit on the amount of time a corporate partner could recoup their investment and own a copyright. All three witnesses agreed. Nile Rodgers added that negotiations should take place to come up with a formula. The streaming services were not the problem, it was the labels which were acting unfairly. Fiona Bevan agreed that it was ridiculous that the record companies were making billions while artists were on Universal Credit. The UK had a great opportunity to fix this issue.

Responding to Julie Elliot, Fiona Bevan and Soweto Kincho agreed that streaming and the way it was paid for changed the way music was being written.

Replying to Alex Davies Jones, Labour MP for Pontypridd (a member of the Musicians’ Union), Nile Rodgers suggested there could be a broadcast rate of payment to musicians for passive listening. So artists would be paid even if their music had not been searched for. Fiona Bevan said that even if there was a user-centric model, the biggest problem was the labels and publishers didn’t have an even split of revenue, devaluing the value of songs.

On John Nicolson’s question on Brexit, Fiona Bevan was worried that artists would not be protected by EU copyright law, but there was an opportunity to make protections even better in the UK.