Governments Ready Music Streaming Policies

Hello, happy I can return to my regular newsletter groove. My job hunt continues, so if readers hold any connections or recommendations for work in New York City government, organized labor, or even research more broadly, please let me know! For a little self-promo: I recently covered trance music’s enduring legacy for No Bells and I appeared on the Music Tectonics podcast to talk about a range of industry issues. Otherwise, if you enjoy my work, do share this newsletter and subscribe here to donate if so inclined. Now, let’s look at some recent government actions in regard to streaming...

Over the years, I’ve tracked how government decisions impact the music industry. I wrote quite a bit on the initial UK Parliamentary inquiry into the digital music business; multiple newsletters on the Copyright Royalty Board in the US; and China’s own regulatory intervention in its tech sector the last few years. Each country is going about this on its own terms, so I figured it was a ripe time for a check back in. With that said, let’s see what’s going on in France.

France

In 2020, France established the Centre National de la Musique, a government-run music think tank to help produce more insight and information about the government. (For disclosure, I helped co-author a paper on music catalog sales with Kaitlyn Davies and Henderson Cole for the CNM last year.) Right now there is a proposed 1.75% tax on music streaming platforms revenue that would help provide more consistent funding for the CNM, which during its first few years was boosted with temporary Covid-era funding. A bit more context is that this tax is building upon an already existing French ticketing tax that helps pay live musicians but also results in the live music industry being taxed less than others. These bits of context may be lost in translation within the little coverage of this by the English-speaking press but it's to say this tax isn’t out of nowhere.

Still, the SNEP (Syndicat National de L'édition Phonographique), which represents the major labels in France, balked at the tax. Unsurprisingly, Deezer isn’t also a big fan of the tax and suggested they’d be forced to pass along the costs to consumers, which feels like a somewhat naked attempt to justify price hikes they already were eyeing to make. Thankfully, such complaining will likely fall on deaf ears. French president Emmanuel Macron is supportive of the measure and it has the votes to pass and thus come into effect in 2024.

Even though the major labels and Deezer complained, the tax adjustment in a way just affirms streaming to be sustainable enough to help fund deeper government study. The cries about imperiling the industry should be rightfully ignored, because streaming is the industry's primary form of revenue and if that cannot be touched, then just how fragile might this house of cards be? (Especially now as nearly every streaming service is beginning to increase prices after nearly fifteen years of never adjusting.) Over in Canada, a similar squabble is being had over its own bill placed at the feet of streaming platforms.

Canada

A couple of years ago Canada adopted a 3% “digital services tax” that included Netflix, Amazon, Spotify, and others that were said to potentially raise a half billion dollars a year. The tax specifically targeted revenue generated in Canada and appeared because of the lack of taxes generated paid by Netflix since it is a non-Canadian company. What’s odd is that while that bill passed, there’s been a much fiercer response to Bill C-11 that would require digital platforms from Netflix to TikTok to promote and support Canadian works.

Companies like TikTok and YouTube took to government lobbying to stand against this piece of legislation. Will Page, Spotify’s former economist, publicly spoke out against the legislation, and YouTube, according to the BBC, founded an influencers lobbying group explicitly to give an even louder voice of dissent on the matter. Meanwhile, SOCAN, Canada’s largest performance rights organization, and the Writers Guild of Canada are supportive of the bill, because they see it forcing these tech companies to invest more into Canadian content, which would appear to be the main sticking point here. There’s a reasonable critique to be made of the effectiveness of Canada’s policies around the arts and who/what can get state support. However that’s not why tech platforms, and even major labels like UMG, are bellyaching, and I wanna avoid such conflation of criticism.

These companies want to avoid any government regulations, especially ones that force them to make investments into international content they’d rather not. Netflix is explicitly eyeing markets like South Korea to produce cheaper content for global audiences, but if each country begins to force its hand in what needs to be produced and promoted then it’ll have a harder time navigating its business future. YouTube and others are attempting to muddy the waters by suggesting this would complicate what might be recommended via recommendation algorithms but it’s not like these companies don’t brag about how they’re always shifting and changing products for consumers anyway.

Despite such opposition, Bill C-11 did pass the Canadian Senate and is now in the process of being properly drafted, where there will be more time for public comment. I may be partial towards funding a government think tank devoted to studying the music industry, but Canada’s slightly more demanding approach holds merit through both taxes and placing its thumb on what content the platforms support. This may be why streaming reforms in the United States can feel slight by comparison.

United States

Over in the United States, at the national level, the regulatory appetite for streaming platforms is a bit more muted. A good part of that can be found in most of these companies are American firms, so the desire for a country to keep an eye on a foreign company is suddenly diminished. That dichotomy may explain why at the local level there’s been far more pushback. A bill floated in the New York state legislature might’ve taxed streaming platforms and Uber to fund public transit, but never went anywhere; however Chicago back in 2015 successfully extended its amusement tax to include digital platforms. Despite some lower-level success, the fight in the United States is taking a slightly different shape.

The United States Congress repeatedly has expressed skepticism at Spotify’s Discovery Mode with an eye that it may just be modern-day payola. The ability to promote one’s music with the tradeoff of making less on the royalties rubs many independent musicians the wrong way and also feels ripe for exploitation to decrease payments for less exposure as more people potentially use the product. A rapid race to the bottom could pursue and concern policymakers. This has not resulted in any public flogging of Daniel Ek in front of Congress, but it's something that appears to remain an ongoing concern for certain elected officials.

Last year, Rashida Tlaib working alongside the Union of Musicians and Allied Workers proposed a bill that would create a new streaming royalty, administered by SoundExchange, akin to what already exists with satellite radio. (Disclosure: I know a number of folks working on this effort.) What’s notable to me about this bill is the divergence from other tax efforts by more directly providing money back into the pockets of artists. That decision does make me want further clarity around implementation since how much individual artists would benefit from such an approach is still a bit unclear to me, less the viability for streaming platforms to take the financial hit. All of these efforts show an understanding that streaming isn’t going anywhere and instead of looking towards an unknown future; there is a fight to make sure what’s sustaining musicians today can be made to work better.

United Kingdom

While Canada and France are building upon existing cultural industry regulatory frameworks, the United Kingdom appears to be in a bit of a holding pattern. The years-long inquiry by the Competition and Markets Authority in the UK produced some wonderful reports, a great archive of materials to understand the current industry by various industry players but didn’t see the passage of any dramatic laws on the topic. Instead what’s been produced so far is an agreement around music streaming metadata, which is certainly worthwhile, but feels a bit small-bore compared to where things previously stood.

There is still an ongoing debate around equitable remunerations, and trying to include streaming into paying into this system for recorded acts much like radio already does in many other markets. The extent and form this may take has been the source of much debate but still remains to be agreed upon. Instead, the UK government did convene another working group to look into “fair remuneration”, so the political jockeying continues in this space. While many artists groups were frustrated at the lack of wider legislation put out by the parliamentary inquiry in many ways the UK is at a standstill of how the government should try and shape this industry. Hopefully, policymakers and advocates across the globe are looking at each other’s attempts to regulate the music industry and can move forward so the artists and workers that sustain this industry can thrive.

Unheard Labor

Employees at the rap/R&B state Power99, in Philadelphia are unionizing with SAG-AFTRA. Speaking of that union, they’re also now out on strike with the WGA with no real signs of the strike that’s basically shutting Hollywood and coming to an end soon. The Directors Guild did pass their contract with an abnormally high turnout and voted against it just to again show the mood of the industry right now. I mentioned it in June, but the Teamsters agreed to a tentative agreement with UPS that is waiting on the membership vote that concludes on August 22nd.

Discord laid off 4% of its staff, particularly those in marketing and entertainment partnerships, which makes me think the company may or may not be doubling down on its core audience as growth likely ebbed from the pandemic peaks. Similarly, DICE, the ticketing app, which raised over $120 million led by Softbank only two years ago, also laid off around 30 folks in their marketing department. Hopefully, everyone finds new work soon but also why did a ticketing app need to raise nine figures…for a business of skimming a few bucks off every ticket sold through a decently designed app.

Government Tunes

You win some, you lose some. Microsoft is inching ever closer to purchasing Activision in a $69 billion deal winning a lawsuit against the Federal Trade Commission. Meanwhile, the Department of Justice may be looking at an eventual antitrust case against LiveNation. Even if the business press pounced on the defeat of Khan and the FTC, increased government oversight is clogging up the deals pipeline and forcing companies to preemptively make less anti-competitive moves. (See: Microsoft bending over backward to say how Activision’s IP won’t be limited to their products.) Certainly a shift from the last number of decades where deals would just breeze by American regulators.

This might be flying under the radar, but Chris Castle is asking a lot of good questions about the investment choices for the hundreds of millions held by the MLC. The prime one being: “Why is the MLC investing in the stock markets at all?” If anyone else is following this, would love to learn a bit more since I’ll be writing a bit more on this in a couple of weeks.

A Note of Financialization

Here’s a quick list of all the individual song catalogs that have been sold since late June: Joey Tempests, Paul Simon, Joe Cocker, Benny Blanco, The Spinners, George Brown, Amblin Partners, Logic, Chris Demetriou, Chocolate Puma, King Street Sound, Mashrex, Nelly, Wiz Khalifa, Tom Howe, Greg Khin, Blackbear, Cher, Fraser T Smith, and J. Peter Robinson.

In addition to those deals, CTM Outlander, the wonder duo of Outlander Capital, a Dallas-based financial firm, and CTM, a Dutch independent music publisher, bought Strengholt Music Group, a long-running Dutch music publisher. Interscope bought the catalog of Cinematic Music Group, which appears to be shutting down as Jonny Shipes looks to his new company GoodTalk. Last month, Universal Music Group bought 70% of RS Group, one of Thailand's biggest music companies. Unsurprisingly major labels remain committed to global expansion as more countries move towards digital streaming.

The Financial Times remains tapped into the ongoing struggles of Hipgnosis, as certain investors want the company to sell off part of its catalog, as its stock continues to languish. (This is also matched with a quiet exodus of executives from Hipgnosis Songs Management.) The amount of heat Hipgnosis faces is curious to me when other firms with nearly identical business models continue to gobble up, I’d wager, less valuable IP. Perhaps that’s one reason Harbourview, and others, continue to make such public deal announcements.

6 Links 2 Read

Spotify Plans to Raise Price of Premium Plan in U.S. - Wall Street Journal / Tidal to Become Latest Music Streaming Platform to Raise Subscription Prices - Music Business Worldwide

Finally, finally, finally streaming platforms are introducing price hikes. I’m fine saying prices for music streaming should go, especially when the main aversion is still somehow over music piracy. An underbaked, unproven, thesis that may be further discredited as Spotify’s revenues increase without a massive exodus of users.

Would it be worth Spotify shutting down its free tier in the US? - Music Business Worldwide

Tim Ingham sketches out the pros and cons of Spotify potentially removing its free tier. He mentioned my own research into the struggles of the ads-based streaming business, so it feels nice to see a bit more consensus beginning to form around this particular side of the business.

The US recorded music industry grew by $500m on a wholesale basis in 2022. The US music publishing industry grew by nearly double that amount. - Music Business Worldwide

While Hipgnosis faces investor blowback, the traditional music publishing industry continues to thrive.

Giant Sucking Sounds - The Baffler

Liz Pelly dove into the many incoherent music initiatives pursued by Amazon over the last few years. The company holds enough capital and projects to dominate the music industry, but perhaps it was wrong to project that outcome just yet.

Music’s Addicted to the ‘Monthly Active User’ Metric. But It Tells Us Nothing. - Music Business Worldwide

I said as much five years ago, but happy more seeing through the fog of tedious music industry metrics.

The Great M&A Slump Is Shaking Up Giants of Investment Banking - Bloomberg (Subscription)

An interesting portrait of the investment banking industry, which is undergoing a reshuffle thanks to a prolonged slowdown in mergers and acquisitions. The constant waffling in the piece about whether it makes sense for smaller firms to bulk up different parts of their business without a clear sense of when deals will return certainly stuck out to me. An interesting contrast with the music industry where deals have certainly slowed down from the 2021 mania, but money continues to circulate.