Major record companies hammered by UK politicians’ streaming inquiry report

Kristin Callahan/Everett Collection/Alamy Live News
Coldplay's Chris Martin has called on the UK government to adopt 'equitable remuneration' on streaming services

Back in January, MBW watched as a series of UK politicians took turns to challenge (and lambast) the market’s major record company bosses live on camera.

They did so in name of a cross-party UK Parliamentary inquiry into the Economics of Music Streaming.

The written report from that inquiry is set to be published in the coming hours. And according to MBW’s sources – perhaps unsurprisingly – the majors take something of a textual battering.

Our sources tell us that the report, published by the Digital, Culture, Media and Sport (DCMS) Committee, makes two particular recommendations to the British government that are bound to leave large record companies  uncomfortable.

The first of these recommendations concerns the right of ‘equitable remuneration’ (ER), a notion recently backed by artists such as Sir Paul McCartney, Chris Martin and Stevie Nicks.

The Members of Parliament (MPs) behind the streaming inquiry are calling on the British government to introduce a right for artists to earn from ‘equitable remuneration’ on digital platforms, say our sources.

This would prospectively see non-interactive plays of music on platforms like Spotify treated under UK law as ‘rentals’, with 50% of the generated recorded music royalties paid direct to performers via a collection society.

Previously, UK record industry figures have railed against this prospect.

The BPI, which represents major record companies in the UK, has described ER “a recipe for disaster” that would “dramatically shrink the total pool of royalties available to labels and artists”.

The other standout recommendation in the new Economics Of Music Streaming report sees the DCMS Committee turn its guns on the majors more directly.

MBW understands that the report recommends that the UK government refer the so-called “dominance” of Universal Music, Sony Music, and Warner Music to the UK’s Competition and Markets Authority (CMA).

Within this recommendation, MBW is told, the report points to particular concerns over an alleged imbalance in the market power faced by artists who are negotiating to sign with major record companies.

(This argument was directly challenged by the heads of the UK’s majors in January, who posited that the recent success of independent artists – via industry distribution partners – demonstrates that the balance of power in the music business has shifted more towards the artist community, with more options to release music in the market than ever before.)

MBW understands the new DCMS report also argues that a CMA referral is justified by a lack of transparency surrounding the major record companies’ private licensing negotiations with streaming services – especially whether these discussions might give rise to playlisting perks for the majors that hinder independent labels and/or artists.

Additionally we’re told, the DCMS report raises concerns about the ‘safe harbour’ protections currently enjoyed by YouTube in the UK market. It also encourages the UK government to consider the balance between the remuneration of a song right versus a recording right from royalties on streaming platforms.

In terms of the report’s more material recommendations, though, it’s looking two-fold: (i) That the British government introduce / adopt a right to kickstart ‘equitable remuneration’ for recording artists on streaming services in the UK; and (ii) That the British government refer the market power of the three major record companies in the UK to be investigated by the CMA.

What happens now? That all depends on whether the UK government replies to the DCMS Committee inquiry and its recommendations.

Previous DCMS Committee inquiries have required a government response, while others have not.

As well as oral submissions, over 300 pieces of written evidence were submitted to the DCMS Economics of Streaming Inquiry.

Submissions came from the likes of Universal Music, Sony Music, Warner Music, Spotify, Hipgnosis Songs Fund, Beggars Group, BMG and a number of British artists and songwriters.Music Business Worldwide