Mark Sutherland on The Future of Music Streaming feat Spotify, SoundCloud, Deezer

They say a week is a long time in politics, so how long is four months?

Certainly, a lot has changed since the Department For Digital, Culture, Media & Sport Committee’s inquiry into the economics of music streaming began back in late November.

As one member of the committee told me recently, the public perception of streaming has changed significantly since then. So, perhaps, has the industry’s. At the start of this process, most people in the biz thought the inquiry would concentrate on the streaming services themselves. But, by the time the evidence sessions came to an end this week with a frustratingly vague appearance from DCMS minister Caroline Dinenage, it was clear that the scope had widened significantly.

Dinenage clearly doesn’t favour government intervention, instead essentially telling the music industry to “get round a table” and sort things out between themselves. That’s what this column called for weeks ago, but how likely it is with only the vague threat of a Competition and Markets Authority investigation to force the different parties to the table remains to be seen.

Nonetheless, the DCMS Committee members do seem to be leaning towards recommending some form of market change. But whether the government follows those recommendations or ignores them, you suspect the genie is now well and truly out of the bottle, and the streaming status quo is under serious pressure to change, even as the latest IFPI and BPI figures show a music business finally getting somewhere close to its previous peaks.

Some in the business will worry change now could derail that progress. Others are already making moves.

This week, European trade body IMPALA issued a 10-point plan to encourage the industry to “make the most of the streaming opportunity”. This included demands to end safe harbour provisions for platforms; for labels to pay all artists a “fair, contemporary digital royalty rate”; an end to schemes, such as Spotify’s Discovery Mode, where streaming platforms pay a lower royalty rate in return for enhancing playlist plays; and for all platforms to explore different ways of allocating streaming revenue.

Given that IMPALA represents thousands of European independent labels and publishers, this is a significant recognition of many of the issues highlighted by the #FixStreaming and #Broken Record campaigns. Not that they agree on everything – IMPALA rejects the ‘equitable remuneration’ concept, whereby streams would be treated like broadcasts rather than sales – but it still raises hopes that agreement can be reached.

They’re not the only ones either. Universal Music boss David Joseph said he was open to experimenting with a user-centric payments system, which many believe would help benefit alternative and niche genres. And even Spotify has now said it is “willing to make the switch to a user-centric model if that’s what artists, songwriters and rights-holders want to do”, although it noted it would “require broad industry alignment to implement this change”.

In the absence of any such alignment, Spotify has launched its Loud And Clear website to try to, in CEO Daniel Ek’s words, “increase transparency and shed light on the complicated economics of music streaming”. It’s long overdue – even the site agrees that Spotify has been “too quiet on the topic” – and it, of course, comes with Spotify’s own, not-always-fully-transparent slant on things. So there’s plenty on how Spotify has “fundamentally changed the music ecosystem” but no explanation of why the platform is opposing the US Copyright Royalty Board’s proposed increased rates for songwriters.

But there is still lots of interesting info to be found. Most notably, there’s a tool that allows artists to compare their own monthly listeners or track streams to others on the platform. For example, Nadine Shah – who has curiously become the streaming inquiry case study by which all others must be judged – has 87,552 monthly listeners, which only puts her in the Top 49,000 artists on Spotify.

And that context actually highlights streaming’s biggest issue: scale. If you have it – like major labels with their huge catalogues, built up over decades of investment; or superstar artists, with lockers full of enduring megahits – streaming works just fine. That even applies to the streaming services – Spotify may argue that it has yet to turn a profit but it has also realised a market cap that’s gone as high as $60 billion off the back of the millions of creators, large and small, on its platform.

Those without such scale – smaller artists and labels – still need streaming, because it accounts for such a huge proportion of music consumption, especially with live music still on hiatus. But the economics only rarely work for such artists.

Now, Spotify also made great play of the fact that 13,400 artists generated over $50,000 in 2020, almost double the number doing the same in 2017. Leaving aside the fact that the term ‘generated’ hides a multitude of sins, what Spotify don’t factor in is how many more artists it now has on its platform. The competition to make it in music is getting fiercer, not easier.

Which is why the other big recent development in music streaming is also noteworthy. Those who remember SoundCloud’s chequered history as an unlicensed platform – it took PRS For Music taking them to court in 2015 for them to take the issue seriously – may find it difficult to see the platform as truly on artists’ side.

But its move to a user-centric system – or “fan-powered royalties” as it prefers – for the 100,000-odd DIY artists with which it has a direct commercial relationship (ie without labels being involved) from April 1, could still be a game-changer, at least for a particular type of artist.

SoundCloud itself says the move will benefit “rising independent artists with loyal fans” and it has a number of case studies that show it will boost some such artists’ incomes by as much as 500%, albeit from a low base.

Whether that actually happens, of course, remains to be seen. But it does give SoundCloud an edge in what might prove to be another crucial scale battleground – the number of new creators on each platform.

A recurring theme of the streaming inquiry is that artists these days have “more options than ever”. And the amount of new tracks uploaded to streaming platforms (60,000 per day on Spotify alone) continues to boggle the mind. But, when it comes to streaming distribution and payment, to date every option for new acts has looked pretty similar. SoundCloud will now potentially give those artists a different option.

And let’s not forget Deezer. The streaming company – relatively low profile in the UK, but a major player in several international markets – has long been the most mainstream service to tout the benefits of a user-centric system. Until now, however, it has been unable to persuade rights-holders to go along with an experiment, and been forced to stand frustrated as SoundCloud and Spotify try to steal their thunder. Now that the climate is changing, surely its moment has arrived.

“Streaming today lacks both transparency and fairness, and benefits the people at the top of the food chain,” said Deezer chief content & strategy officer Alexander Holland when Spotify launched Loud And Clear. “A user-centric model doesn’t magically solve all these problems. But it does connect artists to their fans. It does treat every artist equally. And it makes sure that you as a fan support the artists you love. Saying that something isn’t worth doing because it doesn’t matter enough to you is what defenders of the status quo have always done. And in the end, fairness and change always prevails.”

Whatever the future holds, a lot of musicians will be hoping those words are heard in the corridors of power in the coming long weeks and months.