CMU LIBRARY
The Streaming Business
Resources about music streaming
Music streaming services – including free, premium and user-generated content platforms – are now the single biggest revenue generator for the recorded music business worldwide.
DIGITAL LICENSING
To legally access and utilise recorded music, digital services of any variety need to secure licences from the music industry.
They actually need licences covering both the distinct song rights and recording rights, which are managed separately by the music business.
As a result, services often need to negotiate two sets of licences – getting licences covering songs from the music publishing sector and licences covering recordings from the record industry.
LICENSING RECORDING RIGHTS
Many services license the recordings first, because the licensors in the record industry also provide the actual music – ie they upload the digital files.
In the record industry, record labels and music distributors usually do the deals. Bigger labels may negotiate directly. Smaller labels and self-releasing artists often rely on a distributor that has negotiated a deal.
There is also an organisation called Merlin which negotiates deals on behalf of a global network of independent labels and distributors.
LICENSING SONG RIGHTS
On the songs side, sometimes collecting societies issue the licence and sometimes music publishers issue the licence, depending on the repertoire.
Sometimes a society deal and a publisher deal is required for the same repertoire. This is because a stream exploits both the reproduction and the making available elements of the copyright, and with some repertoire a publisher controls the former while a society controls the latter.
Some publishers allow societies to include their rights in society-negotiated digital deals, and some societies allow publishers to include their rights in publisher-negotiated digital deals. But sometimes the service needs to get two separate deals. Basically, it’s complicated!
Some societies actually collaborate on digital licensing and/or the processing of digital royalties via special copyright hubs. Meanwhile some publishers collaborate on negotiating direct deals via a global body called IMPEL.
THE STREAMING DEAL
With subscription streaming services like Spotify and Apple Music, the deal is a revenue share based on consumption share deal.
First the service divides its monthly income (for any one subscription type in any one market) across the catalogue based on usage – so if one track accounts for 0.1% of all listening, it is allocated 0.1% of all revenue.
That revenue allocation is then shared with whoever controls the recording rights and the song rights linked to the track. Generally the label or distributor that controls the recording gets 50-55% of the allocation, and the society or publisher that controls the song rights gets 10-15%.
ARTIST & SONGWRITER ROYALTIES
Labels and distributors then share the money they make with their artists, and societies or publishers share the money they make with their writers.
What cut each artist or songwriter receives depends entirely on the specific label, distribution or publishing deal they have signed – or, with collecting societies, it depends on each society’s rules.
There has been a lot of debate over the years regarding the way the streaming music business works and how the digital licensing deals are structured.
Some argue the current system – and/or the way the money is shared out between stakeholders – is unfair or unsustainable. This has resulted in various campaigns for reform and investigations by law-makers.
USER-GENERATED CONTENT SERVICES
With user-generated content services things might work differently. The rights owner might receive a share of any advertising income directly linked to a track – ie from ads that play alongside the video containing the track.
Or some UGC services actually pay lump sums per year to each licensing partner oblivious of how often a track is used or played. Where that happens, the label, distributor, publisher or society needs to work out how to share the lump sum with their clients, artists and songwriters.
THE COPYRIGHT SAFE HARBOUR
Some user-generated content services have exploited a principle called the copyright safe harbour to either avoid getting music licences at all or to try and negotiate more favourable terms from labels, distributors, publishers and societies. This has proven controversial, with the music industry repeatedly calling for the safe harbour to be reformed to stop this practice.
You will find coverage of all the key developments in and announcements from the digital music market in the Digital & D2F Services section of CMU.
The Dissecting The Digital Dollar Book provides a comprehensive overview of the streaming music business and digital licensing. It is based on five years of research by CMU Insights and the UK’s Music Managers Forum.
There is also a series of free Digital Dollar Guides, including the Transparency Guide that runs through the data and information artists and managers need to fully understand the streaming music business, and the Song Royalties Guide that explains a number of extra compexities that occur in the way song rights are licensed and song royalties paid.
This CMU Insights Guide – commissioned by the PayPerformers campaign – explains in more detail how performer payments on streams are calculated
This CMU:DIY Lecture runs through the basics of digital licensing, and explains what artists and songwriters need to know to get their music streaming and to claim the digital royalties they are due.
This CMU Insights Speed Briefing provides a more detailed ten-step guide to digital licensing, running through the key sections of the Digital Dollar book.
There are a number of CMU Trends Guides on streaming, including one on the digital market, one on digital licensing, one on the key challenges facing the streaming market, and one on the safe harbour debate.
These Setlist Specials – Part One and Part Two – talk through ten of the key debates and controversies that have emerged around the streaming music market and digital licensing, summarising all the arguments from all sides.
This CMU Insights Speed Briefing also runs through the big debate over the streaming business model – mainly focused on the discussions around how streaming revenues are shared out.
This CMU Timeline aggregates our coverage of the UK Parliament’s 2020/2021 inquiry into the economics of streaming – including a review of the written submissions made and the oral hearings that took place.
This Building Trust White Paper provides a user-friendly overview to the copyright safe harbour, discussing the various controversies around the principle, and summarising ongoing efforts to reform it.
Dissecting The Digital Dollar Book
Digital Dollar Guide: Transparency Guide
Digital Dollar Guide: Song Royalties Guide
CMU Insights Guide: Performer Payments From Streaming
CMU:DIY Lecture: How Streaming Really Works
CMU Insights Speed Briefing: How The Streaming Business Works
CMU Trends In Ten: Digital Music Market
CMU Trends In Ten: Digital Dollars
CMU Trends In Ten: Streaming Challenges
CMU Trends In Ten: Safe Harbours
Setlist Special: The ten things people get wrong about streaming – Part One
Setlist Special: The ten things people get wrong about streaming – Part Two
CMU Insights Speed Briefing: The Streaming Debate
CMU Timeline: DCMS Economics Of Streaming Inquiry
Merlin is a global organisation that represents a network of independent labels and distributors in the digital licensing domain.
IMPEL is a global organisation that represents a network of independent music publishers in the digital licensing domain.
ICE is a copyright hub focused on digital licensing and royalty processing co-owned by collecting societies PRS, STIM and GEMA.
The DCMS Economics Of Streaming Inquiry has an official web page collecting all the written submissions made to and oral hearings that took place as part of DCMS select committee inquiry in the UK Parliament.
Spotify Loud & Clear is an official website with various resources explaining how Spotify works from a rights and royalties perspective.
LAST UPDATED: October 2021
