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Abstract

After over a decade of decline, music industry revenues have witnessed a resurgence thanks to the rise of music streaming. However, the rapid transformation of the industry has maintained old inequalities and created new challenges for composers, songwriters, and musicians, who consider the current streaming ecosystem to be unsustainable. This article identifies and discusses the main issues facing the music streaming market, highlighting the European Parliament’s recent report on cultural diversity and music streaming and other policy initiatives. It also advances a series of recommendations for making streaming more sustainable, including ensuring more fairness in revenue distribution, addressing the high level of concentration in the music rights sector, improving the identification of music creators on streaming platforms, reassessing the legal classification of a stream, and increasing the transparency of streaming platforms’ algorithms and playlists. Only by addressing all these issues in a holistic manner can we ensure a fair and sustainable future for the entire music ecosystem.

Introduction

Over the last 15 years, the rise of music streaming as the predominant method of music consumption has changed and revitalised the music industry (Hesmondhalgh, 2021), boosting revenues, expanding consumer access to music, and decreasing piracy (Halmennschlager & Waelbroeck, 2014). However, the extremely low level of remuneration that music creators and musicians receive from streaming has sparked heavy criticism. A recent study on the German music streaming market shows that music authors receive a meagre share of less than 10 per cent of the net revenues generated by music streaming (out of the 15 per cent going to the ‘song’ rights), with around 55 per cent going to record labels and 30 per cent to streaming platforms (Goldmedia, 2022). According to a report by the UK House of Commons, a prominent songwriter and producer received approximately €352 in Spotify payments over three years for a song that was streamed over 14 million times (House of Commons, 2021a: 45).

Is music streaming sustainable if it’s not able to sustain the livelihoods of music makers? Urged on by calls from music creators, policymakers at the international, European, and national levels have recently started to look into this crucial issue for the future of music. This article sheds light on the flaws and imbalances of the current streaming ecosystem and briefly discusses recent actions taken by policymakers and industry players to address them. It then proposes a series of recommendations to achieve sustainable conditions for music creators.

The current music streaming market

The emergence of streaming revitalised the music industry, whose revenues from physical sales had steadily declined from 2001 to 2014, ushering in a new period of growth. While in 2014 streaming services generated USD 1.9 billion, this number had increased to USD 11.4 billion by 2019 (Hesmondhalgh, 2021), with streaming now accounting for 67 per cent of all recorded music revenue (IFPI, 2023: 10–11). However, the rapid flourishing of streaming services has been based on low subscription prices (and the freemium model) and has not mitigated pre-existing inequalities and competition concerns in the music market.

Indeed, subscription prices and catalogue offerings are practically the same among all platforms (Towse, 2020: 1466–1467): for less than the price of a single traditional physical record, listeners get access to catalogues of over 100 million songs (Hoover, 2023). In 2023, and for the first time since their launch, most platforms have increased the prices of their subscriptions by 10 per cent, raising them from USD/EUR/GBP 9.99 to 10.99 (Ingham, 2023). However, the price increase is far from compensating for the value lost to inflation alone (Forde, 2023), with evidence indicating that the average revenue per user decreased by 37 per cent over the period 2015–2021 (Goldmedia, 2022). Growing the ‘streaming pie’ is a step in the right direction but it cannot solve the issue of unfair remuneration on streaming services as long as the share going to music creators is so small.

Past and current actions of policymakers

Policymakers have increasingly been paying attention to the issue of music authors’ conditions on streaming platforms. In the UK, the House of Commons Digital, Culture, Media and Sports Committee conducted an inquiry into the functioning of music streaming and published an extensive report in 2021 (House of Commons, 2021a). The report highlighted the imbalances in the streaming market and advanced several recommendations, including establishing equitable remuneration, ensuring revenue parity for composers and songwriters, conducting an investigation into the market dominance of major record labels, ensuring fair and transparent algorithms and playlisting, and addressing licensing concerns on services hosting user-generated content (House of Commons, 2021b).

The rapid flourishing of streaming services has been based on low subscription prices (and the freemium model) and has not mitigated pre-existing inequalities and competition concerns in the music market.

At the international level, the World Intellectual Property Organisation (WIPO) held an information session on the music streaming market in March 2023. On this occasion, music creators highlighted the issues posed by music streaming, discussing the importance of music metadata requirements and how legislators can improve transparency in music streaming (WIPO, 2023).

At the European Union (EU) level, the 2019 Directive on Copyright in the Digital Single Market harmonised copyright rules in the EU and introduced provisions aimed at improving transparency and the contractual position of authors and performers, including in the area of music streaming (Furgal, 2022). However, even though an ambitious implementation of the Directive will improve authors’ contracts, it will not resolve the variety of issues that music streaming poses for music creators and the sector at large. In January 2024, the European Parliament adopted a report on the conditions of authors in the music streaming market, drafted by MEP García Del Blanco (S&D, Spain) (European Parliament, 2023). The report called for fairer remuneration of authors and performers, the improvement of music metadata, the exploration of alternative revenue distribution models, the creation of a European Music Observatory, and the promotion of European works. It also called for an assessment of the impact of contractual practices, revenue models, and the high level of concentration in the European streaming market on creators’ remuneration and cultural diversity. These recommendations are to be adopted through an ambitious strategy and a structured dialogue with all stakeholders. It is now up to the European Commission, EU Member States, and stakeholders in the music industry to take concrete action to implement these recommendations.

Imbalances in the current streaming system and how to solve them

The streaming market and competition issues

A significant disparity exists in the distribution of revenues from music streaming. The market is dominated by three major record labels (Universal, Sony, and Warner) (Hesmondhalgh, 2021: 3605), who continue to have the upper hand in negotiations of licensing terms with streaming platforms and royalty rates compared with music authors and performers. The current revenue repartition reflects a business model based on sales of CDs (Sinnreich, 2015), where over 60 per cent of the cost of a CD came from manufacturing and distribution expenses (Wallis, 2007). This no longer makes sense in today’s digitalised music market. In addition, major record labels own both the recording and the publishing rights, and they tend to favour the former over the latter in licensing deals, as record deals traditionally benefit the labels, while publishing deals are more favourable to music authors. This uneven playing field has seriously negative repercussions on the income of music authors (ECSA, 2023). Policymakers need to tackle these conflicts of interest and address the negative effects caused by the high level of concentration in the music rights sectors, where the three major record companies leverage their market power to secure preferential treatment.

A supermarket would not be able to sell even a sandwich without displaying information about its content, yet a track can be featured on a streaming service despite lacking any music author information. Minimum viable data requirements from point of release are essential to ensure accurate and comprehensive metadata allocation, and a recording should not be allowed to be featured on a streaming service without an International Standard Musical Work Code (ISWC).

What are streams and how to count them?

Adding to the overall remuneration problem is the current system for distributing the income generated by each stream. The so-called pro-rata model, adopted by Spotify and other services, sees revenues being allocated among rights holders based on the proportion of total streams that each track has generated on the platform (Hesmondhalgh, 2021). The pool of revenues from subscription fees is thus divided according to the number of overall streams generated by each track, and not according to the streams of each single user (Maasø, 2014: 4). The resulting system encourages fraud and overvalues tracks listened to by heavy streaming users while undervaluing those played by average listeners. A 2021 French study indicated that only 30 per cent of listeners are responsible for determining 70 per cent of the overall royalty distribution on streaming platforms (Centre national de la musique, 2021: 17).

Industry discussions and agreements

In order to respond to increasing criticism, major labels and streaming services recently announced new models on their platforms. One such initiative is the so-called artist-centric model, announced by French streaming service Deezer and major label Universal in late 2023 (UMG, 2023). Among other reasons, the joint project is motivated by the rise of what the two companies call ‘non-artist noise content’ – functional audio, such as ambient sounds, uploaded with the sole aim of generating quick royalty payments (Bedingfield, 2023).

The new model has two main components: tracks with at least 1,000 monthly streams and 500 unique listeners will receive extra compensation, while functional audio will be excluded from the
distribution of royalties (UMG, 2023). Spotify has announced similar changes to reduce royalties distributed to fraudulent or non-music content, arguing that these types of tracks divert royalties
from actual music creators (Spotify, 2023). Its three-pronged approach sees the introduction of a minimum annual stream threshold under which tracks will not generate any royalties, financial penalties for distributors whose tracks have been involved in fraudulent activity (‘fake’ streams) (Nicolaou, 2023), and a minimum play-time threshold for functional audio tracks before they start generating royalties (Spotify, 2023).

Despite introducing a few positive developments, such as tackling fraudulent practices, these models, which have been announced without consulting music creators and artists, will further skew the distribution of revenues in favour of dominant market players. Minimum-stream thresholds are set to boost the revenues of major labels (Stassen, 2023) to the detriment of self-releasing artists and cultural diversity (Mulligan, 2023), in part because 86 per cent of total streams go to the ‘back catalogue’ (music older than 12 months) (Gilbert + Tobin, 2023). One argument advanced in favour of the thresholds is that, at any rate, artists with few streams do not earn much from royalties and thus the impact on their income would be minimal. Other industry players have criticised this new model and described it as a ‘reverse Robin Hood’ system (Cooke, 2023). Indeed, streaming revenues from self-releasing artists have been growing in recent years and accounted for 8 per cent of revenues in 2022 (Mulligan, 2023). The introduction of minimum-stream thresholds will completely erase these revenues, which will instead be distributed to major labels, increasing their market share, with harmful consequences for new and emerging acts (Smith, 2023).

It is due time for policymakers and competition authorities to assess these new models and, more generally, to reflect on how streaming services allocate their revenues, together with the community of music makers and music lovers. Despite conflicting evidence on its feasibility and efficacy (Centre national de la musique, 2021), the user-centric payment system represents a fairer and more transparent alternative to the current model by distributing subscription revenues according to each user’s individual streams. This solution would not only help prevent fraud and increase consumers’trust but also promote cultural diversity and niche genres.

The legal nature of a stream

Addressing the legal nature of a stream is fundamental to fixing the unfair repartition of the streaming pie. The current classification of streaming, supported by the major labels, sees streams as being equivalent to sales (House of Commons, 2021a: 36). This definition favours recording over publishing rights, leading to a revenue distribution that rewards record companies to the detriment of music authors. The argument behind this is that streaming, unlike broadcasting, has an on-demand functionality: listeners can choose which songs they want to play (House of Commons, 2021a: 36).

However, this definition fails to recognise the complexities of music streaming and the way in which listeners are introduced to and consume music. For instance, the autoplay function and algorithmic playlists on streaming services allow listeners to have a more passive experience, consuming music that the platforms select for them (House of Commons, 2021a: 38). Streaming can be considered a new mode of exploitation, more akin to a broadcast than a sale, with repercussions for the repartition of revenues to rights holders. In addition, streaming is itself affecting other modes of exploitation, for example, by decreasing the prominence of radio and public broadcasting services (House of Commons, 2021a: 38). For these reasons, policymakers should address the issue of the legal classification of streaming by providing a solution that reflects the complexities of music streaming and ensures a fairer distribution of the revenue pie.

Metadata and identification of creators on streaming services

Another issue impacting the remuneration of authors involves the inaccurate reporting of music metadata on streaming platforms. Inaccurate metadata has become a well-known and costly issue within the music industry (House of Commons, 2021a: 50), with misallocated or unallocated streaming royalties amounting to at least GBP 500 million globally every year (Ivors Academy, 2021). Metadata refers to key information about an audio file, including details about the creators and rights holders of the track (ECSA, 2023). Missing or inaccurate metadata can lead to problems with identifying and remunerating the legitimate rights holders. When the correct authors cannot be identified, it is common for royalties to be withheld and allocated to other rights holders according to their share of the market, even resulting in payments being made to the wrong creators (Sellin & Seppälä, 2017: 7). This issue stems in part from an established tradition of poor data management by record labels, which has led to tracks being released with inaccurate or insufficient metadata (Sellin & Seppälä, 2017: 12). Another cause is the existence of multiple reporting standards, which hinders the consistent and uniform application of identifiers, as well as the absence of a comprehensive and authoritative database for music metadata. Further making the process less transparent is the fact that metadata can also be modified by different participants along the chain (Sellin & Seppälä, 2017: 16–17).

Music metadata plays a pivotal role in ensuring that music authors receive accurate and timely remuneration for their work. A supermarket would not be able to sell even a sandwich without displaying information about its content, yet a track can be featured on a streaming service despite lacking any music author information. Minimum viable data requirements from point of release are essential to ensure accurate and comprehensive metadata allocation, and a recording should not be allowed to be featured on a streaming service without an International Standard Musical Work Code (ISWC, 2023). In 2021, the Ivors Academy and the Music Rights Awareness Foundation launched the global initiative Credits Due (2023) with the aim of ensuring that accurate and complete metadata is attached to all music recordings at the point of creation. Streaming platforms should also collaborate more closely with collective management organisations to ensure and facilitate the identification process of rights holders. Additionally, policymakers could support initiatives to increase awareness among young music authors about the importance of metadata.

Transparency in algorithms and playlists: streaming platforms as gatekeepers?

Music streaming has transformed not only the way in which music is consumed, but also the way in which it is discovered. Combining proprietary algorithms and human curators, streaming platforms serve as today’s gatekeepers of the music industry, whereas in the past this role was played by human
intermediaries such as radio programmers, journalists, and other experts (Bonini & Gandini, 2019). Placement on an influential playlist, especially towards the beginning (Hesmondhalgh, 2021), can have a major impact on a music creator’s chances of success and remuneration (Legrand Network, 2022: 22). One study indicated that 20 per cent of music listening on streaming platforms comes from playlists (Competition & Markets Authority, 2022: 61), and many more consumers listen to playlists than to albums (Bonini & Gandini, 2019). Despite their influence, however, transparency on how these playlists are curated is often lacking. In addition, streaming services make use of algorithms to drive music discovery, provide recommendations, and shape consumer profiles. According to Spotify CEO Daniel Ek, more than 30 per cent of music consumption on Spotify is the direct result of recommendations made by Spotify’s own algorithms and curation teams (Bonini & Gandini, 2019).

The lack of transparency in how these tools work and affect consumer listening behaviour raises important questions regarding discoverability, cultural diversity, and the promotion of works by European creators (ECSA, 2023). The promotion of cultural diversity and of European works should not be left to the commercial whims of a handful of dominant global platforms. Given the major influence of algorithms and playlists in determining the success and remuneration of music creators, policymakers should require streaming platforms to be more transparent about the way in which these tools operate while guaranteeing the visibility and accessibility of European works.

Conclusion

The rise of music streaming has revitalised the music market, returning revenues to levels unseen in the past 15 years. However, the transformation of the industry has also maintained old inequalities and created new problems for music authors, who consider the current streaming ecosystem to be unsustainable. With music streaming continuing to expand, it is paramount that these issues are addressed in a timely manner. While policymakers have increasingly been seeking to improve the situation, further action is needed:

  • It is crucial that they address the consequences of increased concentration in the music market, which is dominated by three major companies.
  • In parallel, policymakers should tackle the flawed pro-rata distribution model and ensure that the revenues from music streaming are shared fairly among all rights holders, including by investigating the legal classification of streaming.
  • There is also a need to be more transparent and establish mandatory standards on metadata reporting and on the use of algorithms for recommendations and playlists, which impact the remuneration of music creators as well
    as cultural diversity and the visibility of European works.
  • Building on the report adopted by the European Parliament, the European Commission and EU Member States should work closely with all music business stakeholders on an ambitious and comprehensive reform.

Addressing the current issues is the only way to ensure a fair and sustainable future for music creators and the entire music ecosystem.


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