DCMS Committee calls for CMA to carry out market study relating to music streaming

July 21, 2021

The House of Commons DCMS Select Committee has issued its Report into the Economics of music streaming. The report concludes that comprehensive reform of legislation and further regulation is needed, not only to redress the balance for songwriters, performers and composers, but to tackle fundamental problems within the recorded music industry.

The report’s key findings and recommendations are for the government to:

  • legislate so that performers enjoy the right to equitable remuneration for streaming income
  • refer case to the CMA to undertake full market study into the economic impact of the major music groups’ dominance
  • introduce robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming “value gap”.

According to the report, performers, songwriters and composers receive only a small portion of streaming revenue due to poor royalty rates and because of the lower valuation of song-writing and composition, compared to the value of a song’s recording. Earnings are insufficient to live off, which has been made worse by the pandemic leading to a loss of income from live performances. 

The report calls on the UK government to introduce a right to equitable digital music remuneration. It says that such a right could draw on the precedent of how the right to equitable remuneration applies to rental. It also argues that this would address the inconsistency whereby a performance royalty already applies to songwriters and composers. The government should also consider how to increase the value of a song to give parity with a recording to support songwriters and composers.

The Report also calls on the CMA to make a full study into the economic impact of the dominance by major music companies Universal, Sony and Warner of the UK’s music recording industry, and to a lesser extent in publishing. Further, the government must make sure that UK law is not enabling market dominance. 

‘Safe harbour’ gives services that host user-generated content such as YouTube a competitive advantage over other services, exempting them from legal liability for copyright infringement unless and until they obtain “actual knowledge” of infringing activity, in which case they must remove or to disable access to it. The committee said that these exemptions have had a profound impact on the market, with UCG-hosting services gaining broad limitations of liability that undermine the music industry’s leverage in licensing negotiations. It recommends the CMA examine YouTube’s dominance of the music streaming market and take steps to encourage competition. To prevent market distortion, the Government should introduce obligations enforceable in law that would ‘normalise’ licensing arrangements for UCG-hosting services.

To address a wider imbalance, the Report recommends a right to recapture the rights to works after a period of time from record labels, and a right to contract adjustment if an artist’s work was successful beyond the remuneration they received.

The Committee heard evidence of different models to distribute streaming revenues, either the predominant pro-rata payment model or alternatives such as user-centric. It welcomes the consideration by new services of ways to address fairness and transparency in remuneration. However, MPs are concerned that current contractual agreements between the major music companies and streaming services could stifle further innovation if misused, and recommend consideration by the CMA. 

The Report also made recommendations on licensing and royalty chains to increase transparency to creators.