Artist revenue and “equitable remuneration”

  • One of our members’ jobs is to earn as much money as possible for their artists. This is part of what labels do that’s indispensable alongside risk taking, providing stability, scale, investment, brand, experience, as well as the all important “belonging“ or identification with what a label stands for which adds huge value to creators. It is vital that the role of these structures in today’s music ecosystem is understood. As mostly small businesses, they need the right market and financial conditions to grow.
  • In October 2022, IMPALA published a call for renewed collaboration across the whole music sector to grow revenues, address fairness across the digital market, and develop a clear strategy on risk-taking. IMPALA also calls on governments to introduce new investment measures across Europe. The main requests are to:
    • Grow revenues: reappraise the value of music and close the value gap.
    • Address fairness across the market: pay fair contemporary digital royalties and oppose so-called equitable remuneration.
    • Focus on growing the investment stream across Europe: every country to put place a system of tax credits, favourable loan guarantees and other fiscal tools to boost investment and have a strategic approach to growth.
  • The whole question of remuneration for artists is key and we are very engaged in the debate around streaming. We want to see reform of streaming to help improve revenues, but it doesn’t mean we agree with all proposals put forward by the artist community. In April 2023, We issued a new call to action (infographic here) on April 2023 titled It’s Time to Challenge the Flow #2 – Revisiting how to make the most of streaming. This followed a month-long review process launched on the two-year anniversary of our first plan launched in March 2021. Building on IMPALA’s initial plan, our ten-point plan has various recommendations:
    • Increased subscription prices, fair digital royalty rates for artists, bespoke deals for fans, and a higher share for master rights, are among our new proposals for a fairer, more dynamic market
    • We ask all record labels to pay artists a fair contemporary digital rate.
    • Our plan rejects so-called “equitable remuneration” (for performers to negotiate with services for a parallel fee), in line with the outcome of the EU copyright directive. We believe it runs counter to our job of earning more for our featured artists and hampers our ability to take risks with emerging artists (see more below). This also links to our work on equity, diversity and inclusion, which is flagged in the section on “cutting the digital pie – what is equitable” in IMPALA’s second annual report on this area, see more below.
    • Differentiation in rates by services continues to be one of our main priorities. There are several proposals for services to explore, which would shift how revenue is generated and allocated – Pro Rata Temporis, Active Engagement, Artist Growth, Fan Participation (all explained in point 6 of the plan).
    • Coming out clearly against reducing royalties for plays or privileged treatment in algorithms or other features is also there, because we see this as payola.
    • Our plan is underpinned by a call to end the dilution of revenues generated by value gaps which continue to exist as well as other type of bad practices (such as streaming manipulation), non-music content eating on music’s revenues, and the “moment economy”. 
    • We also have a whole host of other recommendations for services to really boost local markets in Europe.
    • Our plan was also featured in an op-ed for Billboard in September 2023.

Sharing the pie

  • The question of how the overall pie should be shared also comes up.
  • Every part of the music business should be paid properly.
  • Current remuneration models for digital and physical exploitation tend to reflect the risk taken by the respective parties. 
  • Compared to physical sales, under streaming artists’ share of revenues has increased at the expense of labels; and the share allocated to publishing rights has increased significantly more than that of recording rights (with songwriters seeing a corresponding increase). (for more stats on this see below).
  • In this context, our ten point streaming plan asks whether the master right share for labels and artists is being undervalued compared to other parts of the sector, and how to boost it to ensure investment in new talent can continue.
  • We do not agree that revenues between different parts of the sector should be reviewed without a change as regards risk taking.
  • We ask all decision makers to fully map the question of how risk works in the music sector as well as the key role of labels and self-releasing artists in the ecosystem before any assessments are made on whether there should be a change to how different parts of the sector are remunerated and their share of the overall digital pie.
  • In addition, we believe increasing revenues overall and growing the pie is one of the primary means to improve the situation across the market for all rightsholders. 
  • For some stats on the situation of authors and publishers in the digital market, please see below.
More on “equitable remuneration”
 
The debate in some countries around performer remuneration tends to centre around whether artists should have a new right to “equitable remuneration”.  As explained above, this is something we don’t support because our assessment is that it would deplete value from the commercial market, would reduce capital for investment in new artists and projects and would certainly not result in greater pay-outs to artists. “Equitable remuneration” simply does not mean “fair payment” in the sense it is commonly understood. It is a legal mechanism that allows for compensation to be paid to rightsholders whose work is uses where they have no right to say “no” or to negotiate a payment, such as radio or public performance. The model on which equitable remuneration is based pays up to 200 times lower than streaming. The system would be far from equitable, especially for emerging artists. For more on this, read our note on artist revenue and equitable remuneration as well as a note on why equitable remuneration got rejected during the negotiations on the copyright directive. Proper royalty deals is the answer, plus differentiation by streaming services to reallocate revenues meaningfully. The “equitable remuneration” model is not suitable for streaming. Streaming is core business, not radio! It is core business where rightsholders should be able to say yes (or no) and negotiate commercial terms. Recently, in 2024, the UK Intellectual Property Office recently published its report on ERWhile the report doesn’t make any recommendations, it concludes
that implementing ER does not offer a simple solution to the streaming conundrum and that there are a range of further questions that merit deeper consideration. Following the publication of the report, the UK minister for media, tourism and creative industries wrote in a letter that the government wouldn’t apply broadcast-style equitable remuneration for music, rather leaving discussions to industry-led actions when relevant .

IMPALA’s Executive Chair Helen Smith spoke of how the independent sector aims to maximise artist revenues and what it sees as the solution in an Op-Ed for Creative Industries Newsletter entitled ‘We don’t believe equitable remuneration is equitable at all’. IMPALA also published a statement pointing to streaming reform and to national negotiated sector agreements as the way forward, in contrast to the Belgian copyright rules adopted in June 2022 which include “equitable remuneration” provisions. As we explain in this statement, IMPALA is fully supportive of the full performer package in the Directive but does not agree with grafting on additional rights such as “equitable remuneration”.
 
Commenting on the question of equity in streaming reform in a section of IMPALA’s annual equity, diversity and inclusion report from October 2022 entitled “Cutting the digital pie – what is equitable?”, Ben Wynter – AIM Entrepreneur and Outreach Manager, co-founder of POWER UP and founder of Unstoppable Music Group – said: “For people from a low socioeconomic background and particularly people of colour, streaming has been a game changer. Whilst there is no doubt that streaming reform would benefit many, my concern is that in any reform there will always be a loser. The majority of solutions that I have seen would have a detrimental impact on those from low socioeconomic backgrounds as income would be repurposed from their share elsewhere, threatening to dismantle the democratisation that exists. This is why I find it hard to support solutions such as “equitable remuneration”. When searching for a solution, it is important to take into account the wider impact on ALL creatives that changes to streaming would have.” Ben further commented: “We have to be honest about who the winners and losers would be and the long term impact those changes would bring. We need to ask ourselves what the long term effect will be on business, investment, creativity and innovation. For example “equitable remuneration” would inevitably lead to smaller label advances and lower royalty rates, which disproportionately affects certain groups. We need more resources for investment in new artists and projects, not less. We also need to think about artists who prefer to own their rights. Exclusive rights are essential for artists and labels and trying to pour everyone into a single mould is simply not an inclusive approach.”
 
The results from a study in the UK done by economic experts Will Page and David Safir for AIM and co-funded by IMPALA are also interesting. The study focusses on the Artist Growth Model (a proposal put forward by AIM, which is also one of the suggested approaches in IMPALA’s streaming plan). The authors summarised their conclusions on impact of this model alongside the status quo and the likely impact of equitable remuneration in the table below.
 
They concluded that equitable remuneration would lead to:
  1. Significant upside for DSPs with less value flowing through the industry and to artists
  2. Increased administration costs to be borne by industry – and ultimately artists
  3. A decrease in transparency for artists
  4. A decrease in investment in artists – and particularly new artists
  5. A potential loss of choice for artists – particularly if equitable remuneration results in a drift towards blankets
This assessment was substantiated by the findings of a significant AIM member who submitted an outline impact assessment of equitable remuneration on streaming.
Option Appraisal  Status Quo Equitable Remuneration Artist Growth Model
Impact on Label Return on Investment Investment likely to increase in line with UK revenue growth Less investment in UK artists as ROI falls and foreign competition increases Increased investment in more diverse and niche content
Impact on DSP Cost of Goods Likely to edge downwards (increasing DSP leverage) Increased downside risk for labels under compulsory blanket licensing Negligible – labels will have marginally different agreements with DSPs
Impact on Economies of Scale Indie share increases with prominence of Merlin and DIY PPL licensing shifts costs but mainly benefits larger labels More equitable allocation of costs and benefits
Impact on Transaction Costs Likely to fall as systems are re-engineered Likely to increase due to legal implications of ‘switching costs’ One-off increase in transaction costs to calibrate scales
Impact on Artist-Label Contracts More transparency as artists negotiate more confidently Less transparency accompanying increased switching and auditing costs Potential for less transparency as complexity increases
The UK study is based on real data supplied by the Entertainment Retailers Association on the top 10,000 tracks over 4 months. The figures are taken from March 2021. You can watch here a recording of the webinar organised by AIM where Will Page and David Safir presented their research results. On the same page, you will find links to the experts presentation and to an extended Q&A.
 
Will Page and Dr Hayleigh Bosher, Senior Lecturer in Intellectual Property Law and Associate Dean at Brunel University London, also joined a podcast in October 2022 by Music Ally on the topic of equitable remuneration, you can listen to it on YouTubeSpotifyApple or any other podcast platform. 

More on the situation of authors and publishers

  • The following figures are taken from independent research conducted in the UK where the most recent analysis of the music streaming market has taken place – See the UK Intellectual Property Office’s study on music creators’ earnings in the digital era from September 2021 and the UK’s competition authority (CMA) study on the music streaming market from November 2022 (full report).
    • Between 2008 and 2021, the earnings of composers and lyricists increased by 11%, while the remainder going to music publishers increased by 8%. (UK IPO)
    • The CMA’s analysis shows that  the publishing share went from 8% in 2007 to 15%  in 2021, almost doubling. (UK CMA)
    • In absolute terms, overall publishing revenues paid out by the UK’s largest music streaming services have grown (from £[100-200]m in 2017 to £[200-300]m in 2021, a [110-120]% increase) as streaming revenues continue to grow. Major publishers in particular have seen above average streaming revenue growth between 2017 and 2021 – significantly outpacing their recording counterparts’ revenue growth. In this period, the total publishing streaming revenues for the majors increased by 244%, whilst total recording streaming revenues for the majors increased by 121%. (UK CMA).
    • “Traditionally the record labels have earned a greater share of revenue from music sales, which reflect the higher costs and risks of their business”. (…) “With the advent of music streaming, the costs of manufacture and distribution are considerably lower, but other costs have also changed and the record labels continue to face significant risks when creating new recorded content for the streaming services”. (UK CMA)
    • “It is possible any significant shift in revenues from recording towards publishing could adversely impact artists relative to songwriters as artists could lose out from lower recording revenue”. (UK CMA)
Other work to boost artist revenues

Other areas we work on to improve artist remuneration include performance rights. Here we have various working groups, including one looking after the vital question of whether countries that don’t have their own performance rights can claim revenues from European performers and labels. This could cost 125m euros a year just for the USA, see more here.

Finally of course we have the WIN Fair Digital Deals Declaration where labels committed to sharing new types of revenue with artists without any contractual obligation. This is another example of the independent sector leading the way on reform of artist remuneration.

IMPALA – Independent Music Companies Association

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