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.
Guides and lectures from the CMU:DIY education programme…
The CMU:DIY Guide Music Streaming Explained explains the deals streaming services do with the music industry and how streaming royalties are calculated each month.
The CMU:DIY Guide The Streaming Debate Explained reviews the big and ongoing debate around the economics of streaming, outlining issues that have been raised and solutions that have been proposed.
Guides, reports and briefings from the CMU Insights consultancy unit…
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.
The Performer Payments From Streams guide from CMU Insights and the PayPerformers campaign explains which performers are paid when their work is streamed and how those payments are calculated.
The Digital Dollar Transparency Guide from CMU Insights and the UK’s Music Managers Forum runs through the data and information artists and managers need to fully understand the streaming music business.
The Digital Dollar Song Royalties Guide from CMU Insights and the UK’s Music Managers Forum explains the extra compexities that occur in the way song rights are licensed to streaming services and the impact that has on how song royalties are processed and songwriters are paid.
The Digital Dollar Song Royalties Manifesto from CMU Insights and the UK’s Music Managers Forum proposes a new way of licensing song rights and processing song royalties in the streaming domain to address many of the issues songwriters currently face.
This Building Trust white paper on the copyright safe harbour from CMU Insights and Friend MTS discusses the copyright responsibilities of digital platforms, and how the safe harbour which restricts the liabilities of internet companies has proven controversial and has been subject to reform.
This Building Trust white paper on harmful content from CMU Insights and Friend MTS reviews how digital platforms deal with offensive, unlawful, abusive and misleading content, and the challenge platforms and law-makers face as they seek to reduce online harms while respecting free speech.
The Economics Of Streaming Timeline aggregates our coverage of the UK Parliament’s 2020/2021 inquiry into the economics of music streaming and the government-instigated research and initiatives that followed which seek to address many of the issues that have been raised.
Special editions of Setlist – the music business podcast from CMU – on how streaming works and the debates around the streaming business model…
The ten things people get wrong about streaming – Part One
The ten things people get wrong about streaming – Part Two
The things people still get wrong about streaming – dissecting the Economics Of Streaming report
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: July 2022
