Business

Most UK Music Consumers Think Artists Are Underpaid by Streaming Services

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Are musicians getting a bum deal from streaming? The majority of music consumers in the U.K. think so, according to a new survey. Of the 2,000 British adults surveyed, 77% said they believe streaming services don’t pay artists enough; 76% believe the same of songwriters.

Respondents were shown a breakdown of streaming royalties: in a typical case, 41% to record labels, 29% to streaming services, 16% to performing artists, 14% to songwriters and nothing to non-featured artists such as session musicians. Respondents were also told that some independent labels may receive a smaller share of revenue, and some independent artists might receive a larger piece.

#BrokenRecord conducted the survey with two high-profile trade groups for independent creators, the Musicians' Union and The Ivors Academy.

The results are fodder for #BrokenRecord, a campaign started with a Twitter hashtag by musician Tom Gray. With just a few thousand followers, Gray didn’t expect a large reaction. But #BrokenRecord -- not related to the Broken Record podcast by author Malcolm Gladwell and record producer Rick Rubin -- struck a chord with musicians. Frustration over streaming royalties has been amplified by stress of losing touring income during the pandemic. Without touring income, streaming is the breadwinner "unless the government gives handouts," says Gray. "And guess what? Streaming is fucked."

Gray wants more for artists than just a larger share of the royalties "This isn’t about fairness," a word that has become "meaningless" in artists’ efforts for higher royalties, he says. Gray, frontman for the rock group Gomez, wants to change the factors that determine royalties. "This is about big, structural economics," he says. Gray starts by suggesting subscription services raise their prices.

The individual subscription price -- $9.99/€9.99/£9.99 -- is unchanged in over a decade; the actual revenue per subscriber is much less. At Spotify, the world’s largest streaming royalties payer, between 2018 and 2020 the average revenue per user fell from €4.89 ($5.78) to €4.41 ($5.21), effectively watering down each royalty paid to rights owners. Student discounts, bundling with telecom services and family accounts -- up to six people on a single account -- contribute to the falling per-head revenue. If cost of living adjustments were applied to the $9.99 price a for the past decade, the standard rate would be $11.70 today.

#BrokenRecord’s survey found about a third of respondents would pay a higher price if the money only went to the artists they streamed. Currently, services pool creators’ share subscription fees and pay royalties pro rata; the track streamed the most often will get the largest share of royalties. But survey participants prefer a user-based accounting method that pays only the artists the subscriber streamed. It's more equitable to those artists in genres without broad appeal such as jazz, heavy metal and classical.

The release of the survey’s findings coincided with the U.K. Parliament opening an investigation into the impact that the economics of music streaming have on artists and record labels. The committee that oversees digital businesses will consider if the government should help shape more equitable" businesses models. Gray suggests separate tiers of royalties for passive and active listening. The royalty from a stream from a playlist or radio station would be collected by a collection society -- SoundExchange in the U.S. -- rather than through their record labels. That would be a big break from tradition. Current licensing contracts pay royalties to distributors -- some labels have direct licensing agreements with streaming services -- which pay the record labels. The royalties then make their way to artists not in debt to their labels.

The U.S. Congress is unlikely to enforce or discourage one business model over another; startups’  "growth over profit" approach is ingrained in American capitalism. Take Amazon, which famously prioritized profits secondary to growth; now profits come naturally from its dominance in many aspects of ecommerce. With digital startups, investors accept deep losses in exchange for growth and market share. Most famously, Amazon didn’t turn a profit for nearly a decade; its investors accepted steadily low profits while Amazon invested in itself.

A consumer-led, grassroots movement is unlikely to materialize. Music consumers have a long record of knowingly purchasing -- and now streaming -- recordings tainted by financial controversy. In the ‘50s and ‘60s, Atlantic Records executives earned a reputation of not paying royalties and taking undeserved songwriting credits. Singer Ruth Brown, one of Atlantic’s most popular artists in the ‘50s and ‘60s, fought the label for unpaid royalties for 20 years. While Brown testified about Atlantic’s "creative" accounting in a 1986 Congressional hearing, her lawyer appeared on national television to raise public awareness. Atlantic  Eventually, Atlantic funded a foundation that made grants to pioneering R&B artists. But for label co-founder Ahmet Ertegun, an esteemed figure in music lore, the controversy is a tiny asterisk on a fabled career.

Gray counters by pointing out that modern consumers hold companies’ accountable for the treatment of workers. "The appetite for ethical business [and] ethical investments and for progress is huge," he argues. That’s true. Americans were horrified to learn of poor working conditions at the manufacturing plants of some Apple suppliers in China. Apple had little choice but to ensure consumers that its products were sourced ethically. People will pay more for fair-trade coffee beans and expect auto manufacturers to manufacture affordable electric cars. Record labels and streaming services could be next to change their business practices.

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Some record labels are making small, incremental changes to royalty accounting. BMG’s announced last week it will end the "controlled competition" clause that discounts the publishing royalties a label pays its recording artist for physical format sales. When a recording artist writes an albums’ songs, record labels ask -- require -- for a 75% rate capped at ten tracks. BMG CEO Hartwig Masuch described the clause as "solely designed to reduce the incomes of musicians." Gray simply calls the clause "hideous" and commends BMG for "breaking the mold and want[ing] to operate ethically." To play devil’s advocate, BMG won’t sacrifice much because the average artist gets nearly all their sales from digital formats not subject to the clause.

But the public hasn’t held record labels accountable for their business dealings. Instead, record industry excesses have been lionized in print, television and movies. The Internet has helped spread artists’ criticisms of record label practices in ways not feasible in decades past. Hole front person Courtney Love’s widely read 2000 article broke down the numbers in a recording contract and likened the artist’s experience to "sharecropping." More recently, Radiohead famously left Parlophone Records in 2007 and independently released albums -- including a groundbreaking "pay what you want" offering for the 2007 album, In Rainbows. Radiohead singer Thom Yorke called Spotify "the last desperate fart of a dying corpse" in 2013 as the band’s catalog began a three-year hiatus from the service’s catalog.

A final option for royalty reform would come for investors -- namely Spotify’s shareholders. "You’d hope at some point they wake up," says Gray. Institutional investors -- T. Rowe Price, Morgan Stanley Investment Management, Tiger Global Management, BlackRock Fund Advisors, among others -- "need to be told it’s not an ethical investment."