James Hanley 24th Aug 2021

How to fix streaming (if it needs fixing at all) – What IMI members say

Equitable remuneration, AIM's Artist Growth Model, increased subscription fees... There seem to be a million different opinions on how streaming could and should be 'fixed'. We spoke to executives at the top of IMI member companies to get their take on whether the streaming ecosystem needs to change and, if so, how...

Six weeks after the DCMS Committee report sensationally called for a “complete reset” of streaming, two words remain on the lips of the independent community: what now?

The blockbuster inquiry followed months of heated evidence-gathering sessions on streaming economics and concluded that artists were seeing “pitiful” returns for their art. Recommending a “comprehensive reform of legislation and further regulation”, MPs encouraged the Competition & Markets Authority to investigate the impact of the majors’ market “dominance”.

“While streaming has brought significant profits to the recorded music industry, the talent behind it – performers, songwriters and composers – are losing out,” said DCMS committee chair Julian Knight. “Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do.”

The FAC and MMF reacted favourably to the report’s findings, crediting the “serious and comprehensive piece of work”, adding that it constituted a “once in a lifetime chance” to restart the business along “fairer and more equitable lines”.

“It contains a wide range of recommendations, many of which, if implemented, could fundamentally reset and improve the current economic model for recorded music,” said the groups in a joint statement. “It demands quite clearly that those companies and corporations regarded historically as ‘rights holders’ must urgently modernise their business practices, and go further and faster in their pace of reform.”

The government, which was urged to “support independent labels to challenge the majors’ dominance”, is yet to fully respond to the recommendations.

The report served as vindication for the #FixStreaming and #BrokenRecord campaigns and has been largely welcomed by the indie sector.

earMUSIC MD Jonathan Green tells The IMI that the findings mark a potential watershed moment.

“Streaming has led to new business growth and opportunities but also new inequalities for creators and labels,” he says. “This could be a generational opportunity to reset and improve the digital arena, so it will be interesting to see how much of the report is earmarked by this government to be implemented.”

International Director at both AntiFragile Music and Indegoot Entertainment Wally van Middendorp says he is “all in favour of fair compensation for artists and writers”, but expresses scepticism with regards to the likelihood of government action.

“The thought of the DCMS recommendations being supported by the UK government made me laugh as this is the same government who did not want to negotiate with the EU on enabling artists to tour in mainland Europe without having to comply with work permits for each country,” he says.

“I have not seen a mention of labels investing into signing new artists and the marketing and promotion of their releases. As we all know, not all signings to labels become global superstars, not all signings to labels break-even, so if the DCMS recommendations are implemented it will most likely have a negative impact on the number of artists being signed. Not every student who leaves art school becomes a successful painter or sculptor, not every person who plays an instrument will become a successful artist and will have to support their art by taking on a full-time or part-time job. This is the simple and brutal reality of today’s world.”

"What is the problem that we are trying to fix? Streaming has driven massive growth for the industry - from selling music to 5% of the population in the richest countries, to monetising the whole world."

LAB Records Director Mark Orr and Music Federation CEO Achal Dhillon both stress that the proposed changes would have less of an impact on independent businesses.

“There’s no doubt the DCMS report was scathing of the current major label royalty structure,” says Orr. “Of course, the sort of changes proposed would have less impact on independents, whose royalty rates already generally carve up net receipts equally – or, in some cases, are weighted even further in the artist’s favour.”

Dhillon notes: “We have been ignoring onerous contractual provisions towards our rights-holders that put them in perpetual debt for quite some time. I can’t remember an instance where one of our artists has been in financial dire straits and we haven’t waived our revenues, outstanding advances or commissions due unto us to help them out.

“We have never seen our artists as simply money-growing assets; they are our friends. So I guess we’ll keep doing that, and not wait for a big news headline to encourage us to do the things I feel we should be doing as a matter of course.”

Cooking Vinyl MD Martin Goldschmidt is a voice of dissent on the issue, arguing there is nothing wrong with the current state of play.

“My question is: what is the problem that we are trying to fix?” he asks. “Streaming is working brilliantly. It has driven massive growth for the industry and taken it from selling music to 5% of the population in the richest countries in the world, to monetising and connecting with the whole world. The biggest winners financially and growth-wise are independent artists – there are far fewer barriers to entry.”

MPs have pushed the government to introduce a right to equitable digital remuneration for performers – similar to that which already applies when a recording is broadcast or played in public. But Goldschmidt suggests that even that scenario creates winners and losers.

“The big losers are major labels and artists on artist services deals and distribution deals – i.e. most Cooking Vinyl artists and independent artists,” he insists. “The impact on Cooking Vinyl is negligible.”

Year Of The Rat Records owner James Illsley shares an alternative view.

“Equitable remuneration is something I believe will work well, especially as DSPs are effectively overtaking radio as the main tastemakers in 2021,” he says.

Illsley also claims that DSPs are devaluing music by not charging enough for monthly subscriptions.

“If subscription costs increased by 50% or so, then any customers that didn’t renew subscription would be covered by the price increase, which would ultimately free up more royalty money across the board for labels and artists,” he says. “I also believe that in an age where a lot of labels are now taking cuts on merchandise, live and other revenue streams in 360-esque deals, there should be a more attractive streaming royalty rate for artists, provided by the labels. Most labels pay out streaming royalties at 16-18% which is simply not sustainable for most new bands.”

Green shares similar thoughts on streaming platforms’ long-established price point. “It would seem time for a price rise for premium use given how long the current price has remained at this level for so long,” he says. “This would also help in the hard fact that many artists have seen much lower recorded income as CDs declined and many have seen their live income being stopped altogether by the pandemic.”

"The Artist Growth Model seems to be the only real offering that encapsulates earners giving back to the community that has been good to them."

The indie sector was represented at the DCMS hearings by AIM chief Paul Pacifico, Beggars Group general counsel Rupert Skellett and Jazz Re:freshed co-CEO Yvette Griffith. In the wake of the report, AIM’s Pacifico said the committee had “impressively zeroed-in on some of the key issues in music”. “Many of the report’s findings endorse and vindicate the ethical practices of the independent music community,” he added.

Pacifico also dismissed equitable remuneration as “a 20th century solution not fit for the 21st century digital market” and said it would “leave the next generation of artists worse off”.

Arguing that the pro-rata and user-centric models both fail to solve the fundamental issue of emerging and niche artists struggling to get to scale on digital platforms, AIM has devised a “fairer” alternative streaming proposal – the Artist Growth Model – in which the value of streams decreases as they accumulate. Reaction to the plan has been mixed across the board.

“The Artist Growth Model seems to be the only real offering that encapsulates earners giving back to the community that has been good to them,” says Dhillon, who declares an interest as an AIM Director. “I think we do, therefore, have to create equitable incentives – like any government creating tax incentives to encourage rich people to invest into new businesses – to encourage rights-holders to do this in earnest.

“Given, from what I can tell, most commercially successful artists then go on to create another business to service their existing fanbase – whether that’s a TIDAL, a Beats, or a Vitamin Water – perhaps the solution lies within the labels and distributors collecting money and benefiting from that money in offering that incentive to those rights-holders in question. It’d be cool to see Universal doshing out shares in Universal or Vivendi to artists that contribute in this manner, like a building society.”

“There is no doubt that an artist growth model would likely be welcomed by the vast majority of the indie sector,” offers LAB Records’ Orr. “However, it feels as if this proposal – or an adaptation of it – has been on the table for the past two to three years with little widespread support.

“With that said, working with the DSPs to increase the fixed pot seems to be the best option. Easier said than done I’m sure, and of course it’s the 1% who see the most benefit.”

However, earMUSIC’s Green contends that the AIM model poses “some major problems” and considers the user-centric payment approach the “most transparent” way forward.

“Why would it be OK to take from the most successful to give to those below?” he asks. “Is a penalty for the successful streaming artists and labels to have an arbitrary skimming – as proposed to serve a greater good – acceptable if they already are being taxed more on this income? They might be seen as paying twice for the success. Levelling the more lucrative live industry, where income is greater, isn’t being proposed, and it doesn’t happen in other creative industries.

“This model might help the next ‘tier’ of artists in [terms of] streaming income, but they may [already] be large earners in the live sphere. It may be distributing revenue to those who already earn significantly and do not need it. It doesn’t therefore look like a winning model to get us moving forward together as an industry.”

Ultimately, suggests AntiFragile’s Van Middendorp, it is a fact of life that not every artist will be able to make a living just from their music.

“That is the brutal truth,” he says. “We are in a commercial business and a commercial business is never fair. Even the communist system is not fair for the workers, and a heavily subsidised support system is not always good for development of talent and businesses.”

Whether the government takes the DCMS up on its advice remains to be seen. But whatever happens next, it seems certain that finding a solution to satisfy all parties will be the most arduous task of all.

James Hanley

Freelance Journalist, United Kingdom

James Hanley is a freelance journalist, specialising in the live music business. He began his music industry career as news editor of Audience/Live UK magazines in 2012 before moving on to Music Week, where he spent six years as senior staff writer and remains a regular contributor. He also writes for publications including M Magazine and Champions Journal.