Ecomms
5 of 7

3 December 2021

Predictions 2022 – 5 of 7 Insights

The economics of music streaming – a catalyst for change across all creative industries?

Xuyang Zhu looks at the impact of the DCMS Committee inquiry into music streaming, the Copyright (Rights and Remuneration of Musicians, Etc.) Bill, and the upcoming CMA market study.

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Xuyang Zhu

Xuyang Zhu

Senior Associate

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The DCMS Committee's inquiry into the economics of music streaming was one of the most important events of 2021 for music and adjacent media industries. Its impacts will be felt into 2022 and beyond, and could drive some of the most significant legal and market changes to affect creative industries in recent years.

The Committee's recommendations

The Committee's recommendations are wide-ranging – they call for significant change to the practices of the music streaming industry, including through legislative reform. They include: 

  • changing the law to provide performers with equitable remuneration when a sound recording is made available digitally (currently equitable remuneration is available only when a sound recording is played in public or broadcast)
  • providing greater transparency for creators, including industry standards for provision of data by streaming services, and transparency about the terms on which their works are exploited and how revenues flowing to them are calculated
  • a market study by the CMA into the economic impact of the major labels' dominance in the market
  • contractual safeguards for creators, including rights to recapture works after a period of 20 years and contract adjustment for disproportionately low royalties
  • ASA regulation of advertising through paid curation of playlists
  • regulation of competition issues caused by vertical integration and leveraging through the government's proposed pro-competition regime for digital markets, and
  • legal obligations for UGC services to proactively license music content.

UK government and CMA response, and the Copyright (Rights and Remuneration of Musicians, Etc.) Bill – actions into 2022

The CMA has already announced its intention to launch a market study into music streaming. It is currently developing its scope with the aim of launching it as soon as possible. The UK government plans to explore the other recommendations listed above further through a work programme that involves:

  • establishing a music industry contact group with senior representatives from across the music industry; the group will meet regularly over the next 12 months to consider issues including equitable remuneration, contract transparency and platform liability rules
  • launching a research programme alongside stakeholder engagement in 2021, with a progress update in spring 2022
  • establishing two technical stakeholder working groups to develop standards and a code of practice for contract transparency and minimum data standards (they will update on progress in spring 2022), and 
  • considering whether to take forward any legislation in spring 2022 and again in autumn 2022. 

In the meantime, a Private Members' Bill – the Copyright (Rights and Remuneration of Musicians, Etc.) Bill (Copyright Bill) – has been published, sponsored by Committee member Kevin Brennan MP. This seeks to implement the Committee's recommendations as to equitable remuneration, transparency, contract adjustment and a right of revocation, with the Copyright Tribunal having jurisdiction over disputes.  

The progress and outcomes of these actions are likely to be a subject of key focus for the music and other creative industries in 2022. 

Wider implications of the recommendations

A number of the recommendations, if adopted, are capable of creating significant change for creative industries beyond music streaming. An extension of equitable remuneration could affect wider audio-visual media industries and apply to a variety of products, such as audio books, podcasts, and videos, as well as music streaming. The Copyright Bill, for example, provides that equitable remuneration applies "[w]here a performer has transferred their making available right concerning a sound recording of the whole or any substantial part of a qualifying performance to the producer of the sound recording" – this has broader application than music only. 

Increasing transparency rights for creators and introducing contractual safeguards, like a right to recapture works and renegotiate royalties, could have far-reaching consequences across all creative industries. The same is true of any new laws in relation to UGC services' obligations to license content. It is in theory possible to limit any new regulations in these areas to music streaming specifically. However, any changes that are brought in could be of broader application (whether intentionally or inadvertently) and/or set a precedent for change in other industries.  The Copyright Bill seeks to limit the contractual safeguards it introduces so that they apply only to authors of music and lyrics, but the safeguards apply more broadly to performers whose performances feature in sound recordings (ie regardless of whether the performances are musical). 

Any legislative change following the recommendations would represent a shift away from making copyright laws – in the sense of laws that delineate exclusive rights and exceptions to them – and towards making laws that regulate the operation of content markets. This is reflected in the involvement of the CMA and referenced in the recommendations to the government's proposed pro-competition regime for digital markets. 

While copyright, and intellectual property generally, have always been about economics and incentives to some extent, adoption of the Committee's recommendations would represent a significant step in using legislation to 'fix' media markets that are seen not to be operating optimally.

The same could be said of the DSM Directive. It is telling that several of the Committee's recommendations – transparency and contractual safeguards for creators, and obligations for UGC services to pro-actively license content – are addressed in the DSM Directive (in Articles 19, 20 and 22, and Article 17, respectively). 

In its response to the recommendations, the government notes that the UK has a unique opportunity to learn lessons from Member States that have implemented the Directive and will consider the approach taken by Member States and countries outside the EU. The results of that analysis and extent to which the government follows or departs from the EU approach will be interesting to see. 

A decision by the government to legislate in these areas may result in parallel regimes. Whereas at present there is divergence by virtue of the EU having in place laws that do not apply in the UK, navigation of regimes that are similar but not identical may prove more difficult for businesses and individuals active in both territories. 

Next steps

We expect the outcomes from the Committee's inquiry – and follow up action from the government, the CMA and the Bill – to remain a key subject of discourse throughout 2022 and beyond. While those operating in the music industry will be most directly affected, individuals and businesses operating in other creative industries should also keep a close eye on these developments.

Find out more

To discuss these predictions in more detail, please reach out to a member of our Technology, Media & Telecommunications team.

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