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Will the United Kingdom Reshape the Record Industry?

Penny Fractions
Will the United Kingdom Reshape the Record Industry?
By David Turner • Issue #153 • View online
Hello readers! Last summer in the middle of research I realized it’d be really nice to have a centralized database for all the articles, books, etc. that I’ve read over the years. So, I began working on a document that includes every link I’ve included in this newsletter since November 2017. The Google Sheet can be viewed here and features over 2,000 entries at the moment. I’ll continue to fill it out and am certainly open to suggestions from folks who’ll use it to improve it. On another note, one of my favorite recent music podcasts, Money 4 Nothing, which I was on last year, started its own newsletter, so go sign up for that if you’re interested! Now, let’s hop into what the UK Parliament is doing with the record industry. 

Last October, the British parliament’s Digital, Culture, Media and Sport (DCMS) committee announced an inquiry into the “economics of music streaming”. The call for a government investigation came from The Ivory Academy, in particular Tom Gray of the #BrokenRecord social media campaign, and the UK Musicians’ Union. I’ve written for years about wanting more government oversight and investigation into various aspects of the recording industry, and with this inquiry, the U.K. went straight for this newsletter’s primary point of interest. Now, I’ll say I’ve talked, and tweeted (!), to Gray and a couple of other Musicians’ Union folks before, but my interest is a little less in the government’s final decision this week. (Though I’ll be sure to cover that whenever such recommendations are made.) Rather, I’m far more interested in the written responses to the government and the implications they could hold for recorded music.
Though not comprehensive and only a couple hundred submissions were made, the endeavor still provides a colorful tapestry of how industry factions interpret not only the current record industry but also how we got to this moment. Will Page, Spotify’s former Chief Economist, shared his thoughts; Patreon gave a short submission where they mentioned supporting user-centric streaming; and the British Copyright Council, along with a number of others, expressed continued concerns over piracy. It can be hard to find any writing from major music firms that explain their own understanding of the industry they inhabit. I, therefore, want to center on three submissions from the Music Manager Forum, YouTube, and the Hipgnosis Song Fund. Each outlines potential proxy fights across sectors of the recorded music industry. So, here is where the Music Manager Forum draws the line. 
Last month, I wrote about how the record industry is in great shape for the coming decade because of the rent it can collect from tech firms (think: Facebook, TikTok, and even Twitter). My main concern centered on how artists would even enter the conversation about Facebook’s money being split amongst major label rosters (if that even ever happens). It’s this exact pot of money that the Music Manager Forum, which represents thousands of musician managers across the United Kingdom and the United States, highlights:
With some social media services that are still working out how they plan to actually use music, the advance may be a one-off lump sum payment covering a set period of time. No additional payments are made during that time period and what music has actually been streamed may not be reported.
The MMF raises a good number of questions about this particular pot of money and points towards it becoming an increasingly contested realm by artists, much like traditional music streaming. Yet, highlighting this gap within the context of this government inquiry exposes the lack of a clear understanding of how music is used by social media platforms. Unlike traditional music streaming, there are no clear guidelines for how these funds should be split amongst publishers and record labels. 
Even more importantly, when someone interacts with music on Instagram, TikTok, Triller, or Snapchat, it isn’t at all clear whether the songwriting or recording should take priority. Nor is there, as the letter argues, currently any comprehensive method for managers or artists to know how much their music is really being used or consumed and how that might compare to other acts. There’s potentially a whole shadow, or regulatory, industry that could be formed to fight over percentiles of TikTok revenues. The MMF’s callout will certainly keep me asking questions to shed some light on who is and isn’t benefiting from this fresh source of revenue and where the UK government might throw its weight into the discussion. While some drew lines in future record industry profits, another tech firm is interested in maintaining the status quo. 
YouTube’s submission to the DCMS was noteworthy enough for the Guardian to cover it but the actual ideas contained in it were profoundly bland. YouTube’s perspective on the record industry could easily be summarized as: Don’t change a thing! There are plenty of anti-regulation suggestions pretending that such changes might hurt smaller startups or that YouTube might not be able to sustain its business if it has to deal with copyright-infringing content on its platform. Another suggestion is that YouTube might need to pay artists more and that it might not be able to survive under such conditions. However, another firm that’s been accused of shaking up the record industry the last few years isn’t playing so conservatively.  
The Hipgnosis Song Fund’s submission achieves similar corporate talking points but is far more insidious than YouTube’s blunt anti-government musing. Instead, the company trotted out its usual story of how it’s helping songwriters find value from their song catalogs, which it then flips to advocate for pro-songwriter reforms. The company supports the user-centric streaming model, moving to a broadcast model to devalue passive streams (think: Spotify radio), increasing songwriter voice in deals made with streaming platforms, and a number of other suggestions. This could appear fairly altruistic, except that Hipgnosis owns quite a large catalog of music, and while there’s an assumed steadiness of publishing returns, the company is effectively lobbying the government to help its bottom line on behalf of artists. 
That’s the long game that Merck Mercuriadis, the company’s CEO and co-founder, lays out in this report. These submissions illustrate who really is winning from the current recorded music industry (major labels and major streaming platforms) and show potentially interesting alliances that could be formed. The Hipgnosis Song Fund might be more vocally curious about the deals being signed with TikTok if it means that the song catalogs they hold could receive an additional, government-imposed source of revenue. Much speculation could emerge from these reports but I find them a great way to understand that there are a number of strange coalitions and struggles ahead in the coming decade of recorded music.
Unheard Labor
A little bit of news adjacent to the music labor space: last month, Ampled, a music co-op where fans can subscribe to support their favorite artists, announced its Board of Directors. I contribute to Ampled ($25 a month), threw my name in the hat for a board seat, and ended up getting selected. I’m extremely excited about what the co-op can do over the coming year to display the power of a worker-owned business. 
A Note of Financialization
Too much news this week so let’s kick this off. The Hipgnosis Song Fund purchased Bob Rock’s complete catalog, which includes production work with Metallica and Michael Bublé. The firm also announced plans to raise money by selling off a number of shares, so it can keep spending money on vintage catalogs. BlackRock’s favorite music publisher, Primary Wave, bought a majority of the Sun Records catalog for $30 million, though Elvis Presley and a few smaller labels weren’t included. Yesterday morning, it was reported that Round Hill Music’s IPO’d fund (Round Hill Music Royalty Fund Ltd) already bought $281.86 million worth of song catalogs including the Beatles, Marvin Gaye, and The Supremes. The twentieth-century American and British music canon continues its accelerated financialization. 
On Monday, Sony Music reportedly bought AWAL and Kobalt Neighbouring Rights from Kobalt Music Group for $430 million. If music firms were at all regulated this wouldn’t be allowed, because it only further consolidates the recorded music industry. However, this now frees up Kobalt Music Publishing for further acquisitions or perhaps an acquisition of a Primary Wave or Round Hill Music. However, if KMP remains independent then certainly expect Kobalt Capitol to be ready to bring in more cash to purchase songwriter catalogs. 
A few other bits of news swirling around finance caught my eye. Native Instruments was sold by the EMH Partners, an investment firm, to the private equity firm, Francisco Partners. Sherrese Clarke Soares is leaving Tempo Music Investments, which raised $650 million in 2019 in partnership with Warner Music Group. Reportedly she’s stepping away to start her own investment firm, so I’m sure I’ll be mentioning it here in this section again. A couple of weeks ago, Liberty Media announced a special-purpose acquisition company (SPAC) that’s looking to have a $500 million IPO. What’s the acquisition target is unclear but should be interesting to see what gets added to the Liberty Media corporate universe.  
6 Links 2 Read
A boom in live streaming music companies is unfortunately positioned to quickly consolidate into already established major players (YouTube, Twitch) as it matures. Certainly, it would be nice if some aspect of mainstream music wasn’t partly owned by major labels or financed by big tech. 
I’ve been skeptical of Spotify’s podcast “play” for years and Anchor’s failure to provide advertising inventory for amateur podcasters doesn’t change my suspicions. The company’s certainly made a dent in the market but it’s increasingly unclear how it’ll lasso this very fragmented industry beyond spending more, and more, money without concern of sustain profitability. Oh wait, Spotify’s done that for over a decade with music, so I’ll wait to see whatever next pivot is on the horizon. 
Just a few interesting stories of how the Korean record industry continues to mature and consolidate. Again, record labels may be called “rivals’‘ but they share the same goals. 
Spotify’s previous middling success across Asia would leave little reason to think the company’s paid-only debut in South Korea will be any different. However, the South Korean labels mentioned above certainly could be welcoming of Spotify’s free money to advertise their biggest stars. 
DIY vs. Beast Mode Capitalism - Art in America 
This peek into Denver’s arts scene highlights the tension between smaller artist communities and local governments. 
Cherie Hu’s examination of music-tech startup funding reveals the ever-changing currents of money in recorded music. Certainly always appreciate these examinations to better understand shifts in the market.
Blog Roll
My name is David Turner and I started Penny Fractions back in November 2017, as a way to think through various topics within the world of music streaming. Since then, the newsletter, which is delivered every Wednesday morning (EST), has grown to reach over four thousand subscribers with an archive that can be found right here. I’m currently a Program Manager at SoundCloud, so all thoughts here represent me, not my employer. Prior to this, I wrote for Music Business Worldwide, Pitchfork, the New Yorker, Noisey, Rolling Stone, and Spin. I also create content on Patreon to help cover email billing costs and to compensate my copy editors, Mariana Carvalho and Taylor Curry. Artwork is produced by graphic designer Kurt Woerpel. If curious, here is the newsletter’s budget sheet, publishing schedule, and research database. Any comments or concerns can be sent to pennyfractions@gmail.com.
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