The figures published by the industry are clear: since 2012, the music streaming market has been progressing continuously. This growth is accelerating year after year, in a spectacular way. In the United States, streaming-generated revenues for 2019 exceeded the total recorded music market for 2017 (RIAA data). The trend is the same on the British market, where figures for 2019 set new records: for the first time, the annual number of streams exceeded 100 billion (BPI data).
As the streaming economy develops, the questions grow as to the way in which revenues are divided between the various sector players. Music performers are not the only ones to question the economic model adopted by phonographic industry platforms. For example, the European directives adopted in 2011 (term of protection) and in 2019 (copyright in the digital single market) and the prior impact assessments are partly based on the finding that non-featured musicians –i.e. the great majority of musicians– are forced to accept contractual conditions that only give them a single lump-sum payment, which generally does not amount to very much or is purely symbolic.
Problems noted by the European legislator and WIPO Member States
The impact assessment published on 16 July 2008 by the European Commission preparing the directive extending the term of protection for related rights thus recognises in its section 4.2.4.: “Session artists transfer their exclusive rights against a lump sum payment, irrespective of the success of the work. The rights recognised to performers under the acquis do not result in concrete benefits for performers.”
The impact assessment of 14 September 2016 preparing the directive on copyright in the digital single market stipulates in its section 5.4.1: “Weaker bargaining power of authors and performers in contractual negotiations. The main underlying cause of this problem is related to a market failure: there is a natural imbalance in bargaining power in the contractual relationships, favouring the counterparty of the creator […]. The difference in bargaining power can also create a “take it or leave it” situation for creators and therefore full “buy-outs” using catch-all language that covers any mode of exploitation without any obligation to report to the creator.”
Several European Parliament reports have come up with similar findings
Similar concerns are voiced by WIPO’s Group of Latin American and Caribbean Countries (GRULAC), in a working document published in December 2015 within the framework of the Standing Committee on Copyright and Related Rights (SCCR): ” […] the low payment of creators, composers, songwriters and performers is today the most visible part of the impact caused by technological advances in the use of protected works in the digital environment. Particularly in the music industry, […] there are questions about the importance that has been attributed to these creators and performers and if it is enough.” GRULAC considers that recourse to a right for equitable remuneration “could ensure greater balance in the relationship between these artists and record companies.”
The streaming market cannot generate decent revenues for artists so long as current practices are not put into question
In addition to the problem of the unfairness of contracts, there is the lack of transparency in the transmission of exploitation data, which does not ensure performing artists that the royalties they receive actually correspond to what is due to them. This problem is exacerbated by the fact that the royalty statements with which they are supplied only offer a very partial image of the value chain and provide no information on the shares levied upstream by the various market players: platforms, banking establishments, tax departments, aggregators, authors and composers, labels…
User-centric distribution: a necessary contribution to transparency
Lack of transparency also affects the way in which revenues from consumers are distributed between rightsholders of the streamed tracks. According to the currently prevailing model (pro-rata), the portion of revenues associated with a track over a period of reference is calculated as the ratio of all the streams for this track and the total number of all tracks in the catalogue used by the platform. In practice, such a system tends to exclude niche artists and productions, the relative portion of which is too low to give rise to any payment. In addition, as the number of times the same user listens to one single track individually is taken into account in the calculation, it is possible to use automatic processes (“robots”) to generate massive listening from a single subscription, for a small number of recordings, whose revenues thereby increase artificially.
Going over to a “user-centric” model would make it possible for revenues levied from the consumer to accurately match the repertoire such user will have listened to during a month’s subscription. For example, if the consumer chooses only to listen to one artist for a month, his/her subscription cannot be used to remunerate other artists over this period. From the consumer’s point of view, this represents clear progress when it comes to transparency. It is also a way of ensuring that artists receive what is due to them, no more, no less.
The Deezer platform is currently experimenting with this approach under the term UCPS (User Centric Payment System). Nevertheless, it should be noted that however fair such a “user-centric” distribution may be for niche artists with a royalty contract and their labels, it has no effect on the remuneration of artists when their exclusive rights have been covered by a buy-out transfer. By highlighting the positive impact of this model on artists, Deezer is therefore communicating on what is a very incomplete image of the way things really are.
The exclusive right of making available is not adapted to all services included in streaming subscriptions
As we have seen, in the immense majority of cases, the performer receives (at best) a one-off lump-sum compensation at the time of the recording. If it is a commercial phonogram, communication to the public and broadcasting of such phonogram also give rise to payment by the user (broadcaster, discotheques and other venues receiving the public) of a remuneration shared between the artists concerned and the producer, almost always in equal shares. For performers, such remuneration has the advantage of being unwaivable and constitutes (with the remuneration for private copying when such exists) the sole source of revenue after the transfer of their exclusive rights to the producer. Making a phonogram available via downloading –which corresponds to the exclusive right of “making available”– generates no revenue for artists without royalty contracts.
NB: for musicians remunerated by royalties, another problem may arise for contracts drawn up before the digital era since, in many cases, the exclusive right of making available was not transferred in the initial contract nor is it covered by a rider to the contract. Making available by streaming or downloading then constitutes an infringement of the artist’s rights. In this way, Universal was sentenced in Finland in 2015 for the making available online of albums from the Hurriganes band without obtaining authorisation from the artists.
It is difficult to ascertain to what extent streaming services compete with music broadcasts. According to the industry, digital services have exclusively substituted physical sales, while the revenues collected from radio services continue to grow. Even if the latter are increasing, one can still reasonably consider that a share of this market is captured by the platforms and the numerous playlists that they offer to their subscribers. It is also clear that it is the industry’s best interest to exploit a recording under the exclusive right regime (on platforms) rather than having to share its revenues with the musicians concerned on a 50/50 basis (on radio services).
Broadcasters themselves are gradually offering their own contents in the form of partially interactive services, which are not subject to the payment of the “Equitable Remuneration” and, therefore, deprive many musicians from the revenues they receive when their recordings are played as broadcasts.
When it implemented its streaming offers, the photographic industry decided unilaterally to place the various services offered to the consumer under the single banner of making available on-demand, treating them in exactly the same way as a download (here too, artists without royalty contracts do not receive any revenue for the exploitation of their recordings via streaming).
Nevertheless, a subscription covers at least four different services:
1. Access to specific tracks, at a given moment and from a place chosen by the consumer, corresponding to the original understanding of the “right of making available”;
2. Access to playlists drawn up by third parties (human or machine), in the composition of which there is no intervention on the part of the consumer, corresponding in practice to a thematic radio enriched with a limited dose of interactivity;
3. Passive reception of tracks sent by the streaming service without any specific consumer demand, linked to their listening habits or for promotional ends;
4. Storage of local copies of tracks for offline listening, within the limits of the subscription’s period of validity.
The use by industry of the concept of “interactivity”, instead of the notion of “exclusive right of making available” and without making any distinction between the various levels of interactivity (see ##1, 2 and 3 above), is aimed at justifying extending the field of the exclusive right to all services provided, which, for the industry, has the advantage of excluding the large majority of musicians from benefitting from any recurrent revenue that might be associated with such services.
Although case #1 does correspond to exercising the exclusive right of making available in the meaning of articles 10 and 14 of WPPT, this is far from being clear in the other three cases which correspond to additional services supplied in a bundle with the first.
The service referred to in case #2 is widely used by subscribers, for whom the playlists constitute an enriched version of thematic radios. A playlist consists of a small fraction of the repertoire exploited by the platform, whose tracks have been selected depending on criteria such as the type of music (jazz, fusion, pop, variety, rock, classical etc.), the period (the 60s, 70s etc.), an activity or particular occasion (jogging, an evening spent with friends, relaxation etc.) or a moment in the day. Selecting the tracks in the list may be done by an algorithm or by a person remunerated for this by the platform. Even if the consumer chooses not to listen to a track or jump directly to another, these choices can only take place within the initial list, whose content and size are limited, a priori, by the choice of a third party.
The limited level of interactivity offered to consumers in access to playlists can in no way be compared to the freedom of their choice in cases of access to a specific title by downloading or streaming within the platform’s whole catalogue and this limitation is not the result of consumer behaviour but of the very nature of the playlist.
The consumer’s lack of choice is even more blatant in case #3.
In the light of all this, the services quoted in cases ## 2 and 3 should be submitted to the regime of article 15 of WPPT (right of remuneration for communicating to the public and broadcasting commercial phonograms) and not to the exclusive right of making available. In these two cases, it should be noted that the platform may highlight titles, for promotional ends, when it has received payment for such from the label (Spotify’s Marquee service, for example). What is sent to the consumer, in this case, is a forced promotional track, and in no way a deliberate choice on their part, and without necessarily being related to listening habits.
Case #4 is of a hybrid character. On the one hand, it introduces an act of copying whose vocation is to come under an exception known as “private copying” On the other hand, it enables the subscriber to have a copy of a phonogram for a limited amount of time (that of the subscription), which corresponds to the concept of rental.
The way in which recordings are exploited online by the record industry fulfils a clear objective: giving precedence to the exclusive right over any other possible model, which, given the abovementioned contractual practices, is tantamount to depriving most musicians of a fair part of revenues generated by their work and talent. As we have just seen, services associated with a streaming subscription are of different natures, come under different rights and, consequently, must give rise to distinct payments depending on the type of service. The streaming market cannot generate decent revenues for artists so long as current practices are not put into question.
Benoît Machuel, September 2020