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Selling Streams: Revenue in the Digital Music Industry

There is a lot of money in music, that is not a secret. Most of us also know that a considerable part of the revenue is not earned by the artists themselves. But it remains somewhat unclear who earns from whom and where exactly the money is coming from. Like the rest of the world, the music industry has changed substantially over the last few decades. Vinyl has had to make way for Spotify (excluding the trendy student and nostalgic enthusiast) and hardly anyone buys albums anymore. It seems as if it has become harder to make money from music, even though access to music from all over the world has increased profoundly. Which begs the question: what is the deal with streaming? 

A question posed before our neighbours in the UK. The Department of Digital, Culture, Media and Sport (‘DCMS’) is investigating the matter in an ongoing inquiry on the effect of streaming on the music industry. There are great concerns amongst the artists. Big names in the industry, such as Ed O’Brien of Radiohead and Guy Garvey of Elbow, have spoken out about the issue. According to them, ‘the future of the music industry is at stake’. The committee is investigating, in its own words, ‘the sustainability of the music industry’ in the current digital climate. 

Particularly newer and smaller artists are having a hard time earning enough to make ends meet, which causes many to give up and disappear from the scene. Additionally, some genres are at a disadvantage on platforms such as Apple Music and Spotify: Songs are generally longer in jazz and classical music, which makes them less likely to be included in influential playlists. Those playlists are important, because many people discover new music through them. Speaking of playlists, those have been criticised as well: Apparently the admins are getting paid to include specific songs in their playlists. 

The revenue from streaming services in the UK was over £1 billion last year, arising from no less than 114 billion streams. That is more than half of the global revenue of the music industry in the UK. And yet, research from Ivors Academy (an association of music creators) has shown that 8 out of 10 songwriters make less than £200 a year from streaming. So, where is that money going? And what changes are artists aiming for?

Currently, Phonographic Performance Limited (‘PPL’) – the British Sena – has the right to grant licenses for radio, tv and some streaming services. However, this is not the case for on-demand services, such as Spotify and Apple Music, and platforms where everyone can upload freely, such as YouTube. What happens instead, usually, is that record companies license their entire catalogue to companies such as Spotify. The proceeds thereof are then divided, for example such that Spotify keeps 30%, the record company receives 55% and the publisher 15%. Because record companies (partially) recoup their investments through royalties, a lot of time can pass until the artist receives royalties from the record company, if ever. 

Normally, an artist has a right to fair remuneration, but there is an exception to that rule in the UK: when a recording is made available to the public by electronic transmission in such a way that members of the public may access the recording from a place and at a time individually chosen by them, there is no such right(182CA(1) Copyright, Designs and Patents Act 1988). That includes Spotify, Apple Music and all other on-demand services. Of course, it had to be too good to be true to spend a tenner a month for access to all music, and then expect that artists and producers get paid fairly. Not to mention free and family accounts. So, artists argue that the right to fair remuneration should be extended to this field. That would mean that PPL could start collecting royalties from streaming services and divide them fairly amongst record companies and artists, establishing a reliable income for musicians and music producers. This could mean that the consumer will have to start paying more, though. 

In the EU, it is exactly this type of modern problem and development where the new Directive on Copyright in the Digital Single Market (‘DSM’) has been created for. Changes in the legislation governing streaming are certainly not unthinkable, we have already seen that advertising guidelines are now going to apply for YouTube as well. It is to be expected that (thematically) similar legislation will have to be invoked in the UK, as well. 

In cooperation with Saar Hoek

19 January 2021 - Copyright, Music Law

About Roland Wigman

Roland Wigman advocaat

In the Netherlands, Roland is the lawyer with the most knowledge about film and all connected contracts (including those in corporate law) and funding.

He is thé expert in the field of film copy right law.

He uses this knowledge for the countless films he is involved with as a lawyer, for their production, release or for finalising funding details. Nationally and internationally.

He has a practical approach: coming from the practice of film-making, he knows how to distinguish main issues from details. Roland finds solutions for seemingly dead-end situations.

Roland taught at the PAO Utrecht and PAO Leiden and now teaches law at the Amsterdam University of the Arts (Netherlands Film Academy) and is a board member of the foundation Nature for Kids and chairman of the foundation Rutger Hauer Filmfactory.

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