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Industry insight into UK’s streaming royalties

Royalties for music streaming will see huge improvements after the European Parliament heavily voted in favour of making the current system more sustainable and fairer for the industry, which has been supported by The European Composer and Songwriter Alliance.

These proposed measures remain as a pledge, however, this vote will create a new EU legal framework in the hopes of creating a fairer system for distributing streaming royalties in the music industry.

The resolution was voted in favour by 532 Members of the European Parliament, as they aim “to ensure the music streaming sector is fair and sustainable,” as “the current imbalance in revenue allocation in the streaming market disfavours both authors and performers and puts the sustainability of their professional career in the digital market at risk.”

The way royalties have been distributed to artists since the pandemic has raised questions about how fair it is. During COVID, the prominent source of income for those musicians was through streaming. When all everyone could do was listen to music. But four years later, change has only started to be implemented in the industry.

In the UK in 2021, the average royalty rate for major labels (Sony, Warner and Universal) sat at 23.3%. These majors in 2021 held an overall market share of 73% in recorded music.

The inequalities for artists were amplified when Sony issued written evidence when the UK Government created their Final Music Streaming Report. The evidence included how much the company receives in royalties from Spotify, and the average rate per stream is approximately £0.005. If an artist had a royalty share of 25%, they would need to receive 800 streams to make £1, whilst Sony would take £3.

That number is getting better, but it’s clear that improvements need to be made to make streaming a viable and reliable source of income.

The improvement commonly thrown around is remastering the ‘pro-rata’ system currently in place. The system collates all the total streams into a giant pool based on the country, and artists are subsequently paid on their total share of the streams. This system heavily favours major artists and record labels whilst alienating emerging artists as they don’t have a wider reach.

As Rolling Stone reported in 2020, 90% of streaming revenue went to the top 1% of artists. This is why it felt that progression was going backwards when Spotify announced that songs with less than 1,000 streams would not receive royalties. As per Luminate’s 2023 Year-End Music report, 158.6 million tracks received less than 1000 plays on audio streaming services, 86.2% of songs. Spotify did affirm, however, that these songs make up less than 1% of the total number of streams on the service.

Audio streaming is the most consumed it has ever been after consecutively growing for the previous nine years. In the UK alone, 179.6 billion streams were amassed; streaming now accounts for 87.7% of the market. It was the first time global on-demand audio song streams broke the four trillion mark, up by 22.3%. These numbers that make it crystal clear the ‘pro-rata’ system needs to be updated to ensure fair remuneration.

The European Composer and Songwriter Alliance (ECSA) have echoed these improvements to the system. The ECSA represents over 30,000 professional composers and songwriters in 27 European countries. The Alliance speaks for the interests of music creators and has been a keen advocate for creating a fair and sustainable framework for creators, as well as ensuring appropriate and proportionate remuneration for all music authors.

The stance of the ECSA was affirmed by the Secretary-General, Marc du Moulin, who spoke to GigPig about its objective surrounding streaming royalties. He said: “It’s been a long-term advocacy objective to improve the remuneration of songwriters and composers in music streaming. So we are very pleased that parliament is looking at this to make streaming more sustainable for those who are making the music.

“We think the report is going in the right direction for our advocacy, and of course, we like that the report is asking for more action. It’s only a parliamentary report at this stage, so it’s not binding, but the parliament want to see things change.

“We want the European Commission to put it on its agenda, so for us, we need to look at the wider issues for streaming. We will welcome the European Commission to look at how music streaming works and the lack of communication between the major streaming companies. The fact that all along the revenue chain is getting lost, and then it’s about looking at how music can have fairer alternatives to the current ‘pro-rata’ model as we don't think it works well as it leads to an approach where the top artists are getting most of the revenue, so we would like to some changes in the system.”

With the UK not being a member of the European Union anymore, any legislation passed through the European Parliament will not be binding. However, the British Government has been implementing changes to improve the system.

The Industry Transparent Code on Music will come into force on July 31st this year, ensuring UK artists will get protection and transparency over royalties and licensing. The voluntary code commits to improving transparency across the industry by setting out standards of good practice, as well as regarding how royalties will be calculated in the contract.

Metadata highlights who has contributed to a track’s creation, and is essential to ensure that music creators are accurately credited and paid. This is something that the UK Government has implemented to improve the streaming royalties model. The agreement will see the quality and timeliness of work and songwriter metadata improve for new recordings.

On improvements that du Moulin would like to see to attain fair remunerations, he said: “Metadata is very important. Without the metadata, the songs don't get properly credited, which makes royalties more difficult to distribute. So a lot of work needs to be done on metadata.

“The fact that the UK is not in the EU anymore, we need to be seen as a global industry, so everything that is coming from the UK in a way influences the music industry, so it's not two separate initiatives it’s looking at the same thing for the industry which is very much global.

“Streaming is very much booming, but the remuneration from streaming is very low, and the community isn’t able to rely on streaming royalties. In a way, the situation improved the awareness of royalties as the revenue was so low that it was impossible to live from it.”

The Industry Transparent Code on Music was created to make being a recording artist a viable option to live. It was introduced in response to the Parliament's Culture Media and Sport Committee's Inquiry into the Economics of Music Streaming. The findings and significance of the industry to the economy have prompted change by introducing a right to equitable digital music remuneration, a right to recapture the rights to work after a period of time and the right to contract adjustment if their work is more successful than the remuneration they receive.

The UK music economy generates approximately £5.2 billion in revenue, with one in every ten tracks streamed globally by a British artist. Whilst those numbers are staggering, the national average wage is relatively disappointing. The Office of National Statistics outlined that professional musicians earned, on average, just above £23,000, which is well below the national average of £29,832. This is despite musicians contributing £1.1 billion to the UK’s export revenue.

A survey conducted by the Ivors Academy and Musicians’ Union in 2019 discovered that 82% of professional musicians made less than £200 from streaming, with only 7% making more than £1,000. The ongoing cost-of-living crisis is only amplifying how low these numbers are and making it all the more important to improve the current model.

Whilst there is still a long way to go in ensuring fair remunerations for artists, solutions are being proposed to move towards an industry where recording musicians receive the credit they deserve. Since the boom of music streaming, the sector has lagged behind the trend in consumers streaming music.

Identification has been made of ways to improve the current model, such as introducing metadata and improving contractual agreements between artists and their record labels. But for those musicians who rely on streaming ro