Music streaming is fair for both consumers and artists – a watchdog

Composers and musicians have long argued that music streaming treats them unfairly, with smaller artists earning small sums. But a UK competition watchdog has ruled that the music streaming industry is fair to both artists and consumers…

Background

Music streaming services like Spotify and Apple Music are reaching revenue-sharing deals with record labels. This is usually done on a percentage basis divided between:

  • Music labels
  • Composers
  • Musicians
  • The streaming service

The economy is pretty brutal. When users typically pay around $10 a month for unlimited music, that’s a small pie to split. Add in the fact that the biggest artists account for the majority of the profit and that leaves even mid-sized artists making pennies. The typical artist only gets paid a fraction of a cent per stream.

The UK’s Competition and Markets Authority (CMA) has conducted an investigation into whether the music streaming market is fair.

Music streaming is fair, says CMA

Today, the CMA released its final report and concluded that the streaming music industry is fair to both consumers and artists.

It is not surprising to conclude that market competition has resulted in consumers paying less for music.

Consumers benefited from digitization and competition between music streaming services. Consumer prices fell by more than 20% in real terms between 2009 and 2021 – with many services also offering music streaming for free with ads. The study found that there are around 39 million monthly listeners in the UK who stream 138 billion times a year.

The CMA acknowledged the concerns of smaller and medium-sized contractors.

The CMA also heard concerns from creators — artists and songwriters — about how much they earn from streaming. With a growing number of artists, songs and streams, streaming money is shared more widely – with those with the most streams earning the most. CMA found that over 60% of streams are of music recorded by just 0.4% of the top artists.

However, it said there was no evidence of any party making excess profits and therefore no possibility of paying out a larger share to artists.

Music streaming services in particular operate on extremely thin margins. Spotify has consistently struggled to make money, posting a loss nearly every quarter since it launched. Apple doesn’t disclose Apple Music’s finances, but the company is believed to be running the service to increase the sustainability of the ecosystem, not to make a profit.

The issue is more about the divide between artists and labels, but here CMA concludes that things have actually improved in recent years.

Some parts of the streaming market have improved for some creators in recent years, with the CMA finding a greater selection of record label deals available. While individual deals can vary widely, the report highlights that average royalty rates for major artist deals have steadily increased from 19.7% in 2012 to 23.3% in 2021. For songwriters the share of revenue going to publishing rights has increased significantly from 8% in 2008 to 15% in 2021.

9to5Mac’s Take

As frustrating as this is for composers and artists, it’s hard to argue with the facts. The unequal relationship between labels and artists is nothing new, and the divisions observed are not significantly different from those that existed when physical media sales dominated. It has always been the case that the artists at the top of the charts pocket almost all the money.

What there is the change is that consumers are paying less for music than ever before. This, more than anything else, has hurt composers and artists. Some suggest we need a tax on music streaming services paid for by consumers and given directly to artists as an additional source of income. While I would personally support this, it seems unlikely that it will gain the mass support needed to make it happen.

Photo: Mark Cruz/Unsplash

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