Dear Sir or Madam,

Re: The Economics of Music Streaming

I would like to thank you for commissioning this

committee to discuss what is and has historically been a
cornerstone of the UK’s capital in the world. Music
represents both a major economic force and our cultural
impact across the world through music dwarves our
population. Music is vital to a global Britain.

However, in the last decade, streaming has complicated

the lives of musicians in many unforeseen ways.

I have been a professional musician for 20 years; and in

that time, I have seen the destruction of revenue from
record sales, and the rise of streaming. Streaming, in my
view, does not provide a replacement for the previous
revenue.

The headline statistics – £1bn in revenue – does not tell

the true story.

Firstly, the vast majority takes place on one platform,

Spotify. Spotify constitutes a modern monopoly in this
area; like many digital-era businesses, the winner-takes-all
approach is the business model.

To prove this, Spotify themselves are not profitable. At the

very same time they post losses that would sink any
company without serious private investment, they claim
that they cannot afford to pay musicians more (https://
www.musicbusinessworldwide.com/spotify-accused-of-
giant-lie-as-it-defends-attempt-to-block-songwriter-pay-
rise-in-the-us/).

Secondly, that revenue stream is not equitably shared

between songwriters. Those signed to the same major
labels that have a stake in Spotify get paid at a higher rate
than the rest of us – in spite of the fact that all songs are
presented as being equal on Spotify.

In regards to your point about piracy – I do not believe

that piracy is a threat to music anymore, because the
threat of streaming services (particularly Spotify) is so
much more pernicious: users believe, in good faith, that
their subscription fee goes to the music that they listen to.
When in fact that money does not go to your listens:

https://www.theringer.com/tech/2019/1/16/18184314/
spotify-music-streaming-service-royalty-payout-model
https://qz.com/1660465/the-way-spotify-and-apple-music-
pays-artists-isnt-fair/

The business model of Spotify is to keep streaming

payments to artists down and to grow exponentially.
Neither of these ambitions is in the service of the artists –
 and the other stakeholders, the major record labels, have
actual stakes in Spotify, and so have an incentive to keep
streaming costs (for non-major label artists) low.
Consumer habits have been changed by streaming for the
worse: they have devalued music as a commodity worth
paying an artist for. And the monthly payment to Spotify,
as noted above, has taken the place in the consumer mind
for the money they previously paid to buy albums.

The economic impact to artists, smaller labels and record

shops is disastrous. Though vinyl sales are up, they do not
sufficiently cover the massive loss of revenue caused by
streaming.

Spotify have created a business model which is

intentionally unsustainable. They have successfully, in my
view, become the monopoly provider of music – and they
intend to use this position to further depress royalty
payments.

Where this becomes relevant to government policy in

terms of addressing the problem is the question: what is
Spotify?

Their most vaunted feature is their playlist generation:

using users’ previous listening habits as a guide, Spotify
puts together playlists for every occasion (running,
bedtime, Friday Nights, and so forth) – users may then
enjoy a “curated” experience.

These streams are paid for at a royalty rate which treats

them as if the user has personally selected the tracks.
In fact, the end result is more like a radio station, and
should pay artists a commensurate royalty rate.

Spotify is curating these playlists algorithmically, using

computers to replace DJs and producers who would
traditionally curate radio stations for their listeners.

Like so many industries, it is not that we – small and

medium sized artists – desire the punishment of the
successful, large players. Only that they play by the same
rules as everyone else; and while the major labels have a
stake in and a differing royalty rate; while playlists are not
treated as the radio stations that they obviously resemble;
while Spotify works to reduce royalty payments to artists
and songwriters, the rules are not equally applied. The
game is fixed.

I would happily share anything else on request.

Yours sincerely,

D McConville