Is Spotify in for a rough ride from the UK government?

Picture credit: Fabio Alves

Could Spotify soon be forced to review the model it uses to calculate royalties paid to artists in the UK?

That’s the big question being asked in the music industry today in the wake of the news that the country’s government plans to investigate the “economics” of music streaming services.

The ‘Economics of Music’ streaming inquiry, to be undertaken by the British Government’s Digital, Culture, Media and Sport (DCMS) Committee, will analyze business models operated by streaming firms like Spotify, Apple Music, Amazon Music and Google Play (i.e. YouTube Music).

“Music streaming in the UK brings in more than £1 billion in revenue with 114 billion music streams in the last year, however artists can be paid as little as 13% of the income generated,” states the announcement.

“While streaming is a growing and important part of the music industry contributing billions to global wealth, its success cannot come at the expense of talented and lesser-known artists.”

Julian Knight MP

DCMS Committee Chair Julian Knight MP said: “While streaming is a growing and important part of the music industry contributing billions to global wealth, its success cannot come at the expense of talented and lesser-known artists.

“Algorithms might benefit platforms in maximising income from streaming but they are a blunt tool to operate in a creative industry with emerging talent risking failing the first hurdle.

“We’re asking whether the business models used by major streaming platforms are fair to the writers and performers who provide the material. Longer-term we’re looking at whether the economics of streaming could in future limit the range of artists and music that we’re all able to enjoy today.”

The announcement adds that the DCMS Committee will also consider whether the government should be taking action to protect the industry from piracy in the wake of steps taken by the EU on copyright and intellectual property rights.

In order to carry out the inquiry, the DCMS Committee is initially asking for the submission of “perspectives of industry experts, artists and record labels as well as streaming platforms themselves”

The DCMS is inviting written statements to be sent in by 6pm on Monday, November 16, 2020 with answers to the following questions:

  • What are the dominant business models of platforms that offer music streaming as a service?
  • Have new features associated with streaming platforms, such as algorithmic curation of music or company playlists, influenced consumer habits, tastes, etc?
  • What has been the economic impact and long-term implications of streaming on the music industry, including for artists, record labels, record shops, etc?
  • How can the Government protect the industry from knock-on effects, such as increased piracy of music? Does the UK need an equivalent of the Copyright Directive?
  • Do alternative business models exist? How can policy favour more equitable business models?

The UK’s impending streaming inquiry follows this week’s news that Spotify has been forced to pay a national licensing tax in Turkey in addition to its usual royalty distributions.

Legislation was introduced in the country last year requiring a license to be obtained to broadcast content online. The law applies to local and overseas firms operating in the country.

Spotify was one of three companies named by Turkey’s Radio and Television Supreme Council (RTÜK) as broadcasting online without a license in a notice published on Monday (October 12), which gave the companies 72 hours to pay for a broadcast license fee for three months in advance.

The notice added that Spotify and the other companies named can continue to operate for those three months if they submit an application request and pay the fee in advance.

Failure to either submit an application request or terminate their services within 72 hours following the announcement would result in “a criminal complaint” filed against those companies. The notice ends with the words, “You are warned”.

Turkish news site Sabah reports that SPOT swiftly responded to the Turkish Government’s warning, and has now been granted a license, which must mean that the company paid the up-front fee.


Today’s news from the UK was welcomed by various UK-based music industry bodies, including the Music Managers Forum, whose membership currently stands at almost 700 managers based in the UK.

The Ivors Academy, which represents songwriters and composers, as well as the Musicians’ Union, also welcomed the news.

“We look forward to submitting evidence on behalf of our membership.”

Annabella Coldrick, MMF

Annabella Coldrick, CEO, MMF: “This is a welcome announcement by the DCMS Select Committee.

“Managers are at the epicentre of changes in the recorded music business, and the MMF have been at the forefront of debates around streaming through our long-running Dissecting The Digital Dollar initiative.

“We look forward to submitting evidence on behalf of our membership.”

“Most creators cannot make a living from streaming, it simply does not pay enough and millions of pounds each year is not properly allocated due to poor data.

Graham Davies, The Ivors Academy

Graham Davies, CEO of The Ivors Academy, said: “On behalf of all music creators we are delighted that Government will investigate the streaming market so it can work for all parts of the music industry.

“Most creators cannot make a living from streaming, it simply does not pay enough and millions of pounds each year is not properly allocated due to poor data.

“Following our campaigning with the Musicians’ Union, performers and creators to Fix Streaming this is an opportunity to create a transparent, fair and equitable approach.”

“We hope this inquiry will show that a more equitable model is possible and that streaming royalties can and should play a significant role in sustaining the careers of creators and artists.”

Naomi Pohl, Musicians’ Union

Naomi Pohl, Deputy General Secretary of the Musicians’ Union, said: “It is extremely welcome that the DCMS Select Committee has announced an inquiry into the economics of music streaming at a time when musicians are making very little money from live performance due to Covid-19.

“The Musicians’ Union and the Ivors Academy have been calling for a Government review because the current crisis has highlighted that the royalties generated by streaming are far too low and the market is failing the vast majority of our members.

“We hope this inquiry will show that a more equitable model is possible and that streaming royalties can and should play a significant role in sustaining the careers of creators and artists.”Music Business Worldwide

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