Written By: Lily Kalati
In this two part article, we discuss the evolution of music consumption in relation to streaming and re-examine the way in which the law will have to adapt traditional principles in favour of a more balanced approach towards exploitation in a modern day economy.
Digitalisation and technological change have profoundly influenced the evolution of the music industry. Streaming platforms offered a viable solution to the war against music piracy and illegal downloads from the likes of Limewire and Napster. They combated this by providing consumers ongoing, legal access to vast catalogues of music as part of a subscription. This has now become the dominant means of consuming music in the UK with ‘83% of consumer consumption of music via streaming in 2021, compared to just 3% in 2012.’ Despite this growing market, in 2020, 80% of musicians earnt less than £200 a year from streaming out of a sector which generated $4.4bn in revenue. According to the International Federation of the Phonographic Industry (IFPI), the global music industry generated $21.5 billion in revenue in 2020, with streaming accounting for 62.1% of that revenue. This represents a 7.4% increase from the previous year, despite the impact of the COVID-19 pandemic on live music events. This raises concerns about fair pay for musicians and performers in the industry. Under the Copyright, Design and Patents Act 1988 (CDPA) radio play in the UK gives rise to a right to equitable remuneration for musicians but a stream of that same song would not. Legislative intervention is required to restructure the law to reflect this change in the music industry.
What is equitable remuneration?
The right to equitable remuneration is a legal concept that relates to the compensation owed to creators for the use of their copyrighted works, such as music or literary works, by others. It is a right granted to authors, performers, and producers of sound recordings, and it requires that they receive fair and reasonable compensation for the use of their works, regardless of whether they have assigned or licensed their rights to third parties e.g. record labels. Historically, this has been particularly important in the context of radio play, where artists receive royalties for their music being played on the radio. However, with the rise of music streaming services, there has been a need to reform the right to equitable remuneration to enable streaming to be treated the same. This right is an important legal protection for creators, as it ensures that they receive fair compensation for the use of their works and helps to support their livelihoods.
The current law
Currently, under the Copyright, Design and Patents Act 1988, the right to equitable remuneration only applies to recordings played in public or communicated to the public via live streams and broadcasts, but not to music streamed on platforms such as Spotify, Apple Music, and YouTube. Musicians have the right to consent and prevent their music from being streamed altogether, but they cannot assign their right to equitable remuneration to anyone except a collecting society for the purpose of enabling it to enforce the right on his behalf e.g. The Performing Rights Society (PRS) for UK songwriters, composers and publishers. This was implemented as a safeguard for musicians as traditional recording agreements typically require the performer to assign all copyright, performer’s property rights and all analogous rights ‘existing pursuant to the laws of any jurisdiction now and in the future existing in or in relation to the product of services of the artists rendered pursuant to the agreement’. As music streaming is specifically excluded from this right, musicians are left to negotiate streaming remuneration as part of the commercial arrangement with their label.
The making available right
The making available right was made to capture streaming and is defined as ‘electronic transmission in such a way that members of the public may access the recording from a place and time individually chosen by them’. At the time the right was implemented, iTunes had been newly introduced as a means to purchase and download music virtually. The making available right was put into effect to deal with this change in consumer behaviour and proved to do so effectively.
However, the legislation was designed to respond to the legal challenges which were posed by the internet in the 1990s. Since then, the vast change in technology has shifted the internet landscape thus causing structural changes in the music industry. There has been a rapid growth in the rise of digital content services and streaming that would not have been anticipated previously. Instead of buying singles and albums on iTunes, individuals are using on-demand music services for a monthly cost. The Competition and Markets Authority (CMA) reported in 2022 that the number of monthly active users of music streaming services between 2019 -2021 increased from 32 million to 39 million. This doesn’t account for the reality of giving up remuneration rights where streaming has become the top revenue stream. By excluding the right, the adequate safeguards that were once in place are now outdated.
Radio vs streaming
The differing approaches to radio broadcasting and streaming create inconsistencies in the law. Streaming can be seen as a sophisticated version of radio for the new generation. However the general rule is that if the transmission is interactive, it cannot be a broadcast. The mere ability to select any song at any given time creates an interactive element which bars musicians from this protective right to equitable remuneration. Record labels are relying on contract clauses conferring all ‘rights existing now or that come into the existence in the future’ to defend their assumption of ownership of the making available right, paying musicians the same royalty rate as that paid for a physical sale. There is logic behind this rule since equitable remuneration is a right given for the use of recordings in linear media, such as radio and television, while on-demand access to music is more comparable to the sale of sound recordings, which are better suited to receive royalty payments. However, the sale of a digital download spares the record company the cost of making, storing, transporting, and distributing physical products yet the labels still insist that they should receive the same royalties as CD sales. It is not appropriate to categorize the definition of making available into either a sale or broadcast. Streaming requires a clearer provision in the law to reflect the ongoing impact it has within the music industry. Without this, the legislation is not clear, leaving its interpretation open to argument and further questions as to whether creators are truly being compensated for their artistic works.
It is worth noting that over the course of the last few years, Musicians have been more vocal in their response to the current state of play across the music industry and what this means in real terms. Highly acclaimed songwriter, musician and performer Nile Rodgers gave evidence at the 2021 DCMS Inquiry into the economics of music streaming stating in a later interview that as musicians, ‘We don’t know what a stream is worth…there is no way you can find out what a stream is worth and that’s not a good relationship.’
Keep a look out for Part 2 next week as we discuss the intention behind the ‘making available’ right and its impact on performers working in the industry.
If you missed our last piece looking at AI Generated Music and Copyright, take that one in here