A bigger bite of the Apple music: Music industry revenue sharing under fire

July 27, 2021

2 min read

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What's going on here?

MPs have called for a “complete reset” of the music streaming industry to give a bigger share of revenue to artists.

What does this mean?

Currently, the music streaming service model results in artists receiving about 13% of the revenues, as compared to the 42% which music labels scrape off for themselves. 

In redressing this imbalance, MPs from Parliament’s Digital, Culture, Media and Sport committee said in a report that a “complete reset” was required, and suggested legislating that revenue be shared 50/50 between labels and artists. Music label bosses questioned by the committee pushed back, pointing out the small margins of the industry and the need to invest in future talent, to maintain viability in the long term. The committee’s report also praised independent record labels, who pay a higher percentage to artists.

The 50/50 model is already in place for songs used in TV and on the radio, but not for the sale of music. Streaming now accounts for 80% of the revenue in the music industry, having “saved” it from the piracy and illegal downloads rife in the 2000’s and early 2010’s. Music industry revenues, whilst still lower than they were twenty years ago, have been climbing since 2014, as the percentage of illegally downloaded music has fallen from 13% to 5% in 2020. Click here to read a LittleLaw article on the streaming boom in the music industry. 

What's the big picture effect?

The British Phonographic Industry (BPI) believes streaming works in favour of artists, 2,000 of whom are set to receive 10m streams this year, roughly equivalent to selling 10,000 CDs. This would earn approximately £29,000. Changes like those suggested by MPs could prevent labels investing in new music and hurt the industry in years to come. CEO Geoff Taylor pointed out that record labels are the primary investors in artists’ careers and that this investment is constantly growing.

The Musicians’ Union called the report “revolutionary”. With other groups hailing the “landmark” report and claiming it could improve the lives of thousands of musicians.

It is unclear whether the reports suggestions, which are broad and cover a wide range of issues, would resolve the “fundamental, structural problems” within the streaming industry. Streaming services and record labels have reiterated their position that the equitable remuneration suggested in the report would lead to reduced revenues within the industry. They have pointed to the increasing revenues from the music industry in the years since streaming became the dominant force, suggesting that changing the model would lead to this trend being thrown into reverse.

The report also suggested the government ask the Competition and Markets Authority to investigate whether competition is being distorted in the recorded music industry by the big three labels: Sony, Warner Music and Universal. It claims they are benefiting at the expense of independent labels and self-releasing artists, particularly when it comes to playlist curation. 

So, with the music industry once again under the spotlight, will wholesale changes like those discussed in the report finally give musicians a fair deal, or could it cripple the ability of record labels to support up-and-coming artists?

Report written by Joshua White

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