How is the growth of streaming impacting creators in Canada?
That’s the question at the heart of a study recently commissioned and now under review by the Canadian government. But the major record companies, which didn’t participate, are concerned that the report is inaccurate and misleading amid a broader debate over how creators should be compensated in the digital world.
The study — commissioned by Canada’s Department of Canadian Heritage and conducted by Canadian economist Gerry Wall, president of economics consulting firm Wall Communications — was launched as part of the “mandate to collect economic data and evidence in support of policy development at Canadian Heritage on issues such as technology and creator remuneration,” a spokesperson for the government unit says. “The views expressed in the study are solely those of [Wall]. Department officials are currently analyzing the study’s key findings.”
Wall says the findings show there’s “been a ‘hollowing out’ of the middle class of music creators,” noting in the study that “the revenue generated by streaming services is likely insufficient to pay all music creators for the value they have created.”
Rights-holder earnings for 1 million streams across the various music streaming platforms range between $4,000 and $5,000, Wall estimates in the study, obtained by Billboard, but notes few reach that milestone as “the majority of Canadian artists on streaming services do not achieve 1 million streams in a year.”
The study also states that that record labels took home 52% of Canadian recorded music industry earnings in 2019, compared to 20% for songwriters, 15% for publishers and 13% for performers. Of the country’s total 2019 streaming revenue, record labels took home 69%, performers pulled in 17%, publishers took 8% and songwriters earning just 6%, the report estimates, pegging the major labels’ control of the Canadian streaming music market at 72% and the country’s total sound recording market at 75%. (According to MRC Data compiled by Billboard, the major labels control 63% of the market share in the U.S., while globally, the major labels and BMG maintain a 66% market share of sound recordings.)
Those breakdowns aren’t necessarily surprising: they generally reflect both the structure of the licensing deals that the major record companies and publishers have struck with the streaming services, as well as the terms of music companies’ individual agreements with artists and songwriters. But it’s difficult to gauge the significance of the details as the study doesn’t offer comparable statistics using the same methodology in other countries. More notably, the study doesn’t reflect the advances the labels and publishers give artists and songwriters when they sign new recording and publishing deals, which normally requires repayment. And like venture capitalists, record companies take a financial risk signing hundreds of unproven artists each year, only a handful of which develop into superstars, so labels seek the lion’s share of the returns in exchange for that risk they undertake upfront.
Patrick Rogers, CEO of Music Canada — the trade organization that represents the Canadian outposts of Universal Music Group, Sony Music Group, and Warner Music Group — warns that “the project is the work of a single contractor” and that “the draft document that we saw contained fundamental inaccuracies and omissions. We notified department officials of the flaws in the methodology and the omissions and assumptions that lead a reader to erroneous conclusions. Unfortunately, this contracted writer has a problematic track record – including having previously written an erroneous paper about music. Most basically, this flawed report fails to reflect the role record labels play in supporting artists and helping them achieve their greatest creative and commercial potential. Labels are the leading investors in artists and play a critical role in supporting the broader music ecosystem.”
Wall says that the major labels declined to share data for the study and that their trade group Music Canada “refused to allow meetings with its three members and did not accept an offer to discuss in detail the draft findings of the report and any concerns.”
Wall says he “has not made any finding on the economic or ethical appropriateness of the earnings distribution,” nor has he “suggested that record labels — and major labels in particular — do not play an important and essential role in Canadian music creation.”
The study is based on “extensive data and information contributed by almost every key stakeholder in Canadian recorded music as well as government and other data agencies. Songwriters, publishers, performers and record labels (all with representations from royalty rights collectives, trade associations and individuals) provided questionnaire responses as well as public and in some cases confidential financial data,” he says.
This study follows an inquiry by the U.K. Government into its own music industry that took place over the past year which eventually resulted in a call for a “complete reset” of the streaming business. The final report from the Digital, Culture, Media and Sport (DCMS) Committee requested the matter be referred to the Competition and Markets Authority (CMA) which can force divestments or begin criminal proceedings when it finds businesses engaged in anti-competitive or abusive behavior.
The study also comes as DSPs experiment with new payment models: SoundCloud launched a user-centric payment model it calls fan-powered royalties back in April, which allows artists to get paid based on how many fans listen, instead of how many total streams the artist accrues, a move designed to benefit smaller artists.
This report is tiny in scope compared to the full inquiry undertaken by the U.K. government, which included testimony from representatives of the major labels and key streaming platforms like Apple Music and Spotify. The Canadian government is also in the middle of an election cycle that’s eclipsing other issues.
Also noted in the study: The top 50 songs streamed in Canada last year generated 2.42 billion streams (Canadian and non-Canadian performers), with tracks featuring Canadian artists accounting for 15.4% of those streams, or 372.9 million streams. Drake, Justin Bieber, Shawn Mendes and The Weeknd account for almost 90% of those 372.9 million streams.
The 50 most-streamed songs featuring Canadian artists generated 1.15 billion streams last year, of which more than 60% — or roughly 700 million streams — were songs featuring Drake, Bieber, Mendes and The Weeknd, all of whom are signed to labels administered through Universal Music Group. (There were 88 billion streams in Canada last year.)