CMU Daily 10.02.23: Government updates on economics of streaming work, Warner Music boss optimistic in first investor call

UK government provides update on economics of streaming work - and publishes algorithms report that proposes more transparency from streaming services
The UK government's Department For Culture, Media And Sport has posted an update on its work around the economics of music streaming, as well as publishing a new report looking at the impact of streaming service algorithms on music consumption.

A number of government-led initiatives were instigated after the UK Parliament's culture select committee completed its inquiry into the economics of streaming in 2021.

That inquiry was sparked by campaigning from UK artist and songwriter groups who raised various issues with the streaming business, including around music-maker remuneration, transparency, data and the impact of those pesky algorithms on what music gets streamed.

In the report produced at the end of the select committee's inquiry, MPs raised various concerns about how streaming works and how digital income is shared out across the music community, proposing a number of reforms - including changes to copyright law - that could address those concerns.

In response to Parliament's report, the government said that it would prefer industry-led solutions to the issues raised rather than legal reform, although with possible future changes to copyright law still on the table.

To facilitate that process, the government's Intellectual Property Office commissioned research around music-maker remuneration and the copyright law reforms MPs had proposed; and convened expert working groups to discuss issues around transparency and data.

Meanwhile the Centre For Data Ethics And Innovation - which was previously part of the government's culture department - began doing some research into all those algorithms on the streaming services.

Ministers also encouraged the Competition & Markets Authority to look into whether any of the concerns raised were caused by a lack of completion in the marketplace. The CMA did just that via a market study, publishing its conclusions late last year.

In its update on all this yesterday, the government notes: "The CMA found that the concerns raised by artists are not being driven by the level of concentration of the recording market. They also decided not to undertake a market investigation".

"The IPO's work focuses on some of the copyright issues raised in the inquiry", it then adds. "Both the metadata and the transparency working groups met regularly throughout 2022 and work is now at an advanced stage. The outputs will be published in the coming months".

"The IPO also commissioned independent research on the impacts of three potential legislative interventions on creator remuneration: equitable remuneration, contractual adjustment mechanisms and rights reversion", it goes on.

"The research on contract adjustment mechanisms and rights reversion was published on 6 Feb 2023. The research on equitable remuneration is at an advanced stage and will be published once it is finalised".

Restating those upcoming outputs, a timeline of the government's work on music streaming to date includes some future targets, with "metadata and transparency products to be finalised and published" and "publication of the equitable remuneration research" both scheduled for spring 2023.

Of course, the music-maker community - and the MPs back on the culture select committee - have also called for IPO-convened discussions around music-maker remuneration, building on the research reports. Though that's not currently in the published schedule.

As for the research into the impact of streaming service algorithms, that reviewed previous academic research on how such algorithms work and operate, and also surveyed music-makers and music fans.

In its key findings, the resulting report states: "The belief that recommendation algorithms result in unfair outcomes is widespread. Academic literature about these types of biases tends to be divided into those looking at popularity bias and those looking at biases according to demographic characteristics".

"There has been more research into popularity bias and some evidence suggests that issues of popularity bias have reduced in recent years", it goes on. "There is limited evidence proving or disproving the amplification of existing bias or the introduction of biases felt across different demographics".

"The impact of recommendation algorithms cannot be considered in isolation from the wider history and condition of the UK's music industry", it then says. "These recommendation algorithms should be considered one among several different cultural intermediaries that influence how consumers engage with music".

"The majority of listens on [streaming services] remain unguided by recommendation algorithms. Whilst uses of recommendation algorithms bring their own risks and opportunities, these should be considered in the context of other cultural intermediaries".

"Current approaches by [the services] towards transparency in relation to these technologies are not sufficiently alleviating the concerns of consumers, creators, and other stakeholders across the music industry", it concludes. "Feelings of mistreatment and suspicion, whilst not necessarily justified, are widespread".

The report's recommendations hone in very much on that latter point around transparency. "Changes to the ways that [services] communicate about these technologies could help ease feelings of discontent and better foster trust between parties in the music ecosystem", it says.

It then sets out four ways in which transparency could be improve, reckoning that streaming services could...

1. Provide a clearer indication to consumers about when a playlist is curated by algorithms, editors, or a combination of both.

2. Offer consumers a 'why am I seeing this recommendation' function, similar to features provided by other online platforms that allow consumers to understand why they receive certain advertisements.

3. Better communicate to creators and their representatives about how to access data about how their music is consumed, and provide more information about what types of data are available and why this might vary across creators (eg a creator’s audience being too small).

4. Produce more content, tailored to non-academic audiences about how their recommendation algorithms work.

You can access the government's general economics of streaming update here. And the report on algorithms here.

And this timeline in the CMU Library collates all our coverage of the Parliamentary inquiry and everything that has followed.

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DNS resolver web-blocking case back in court in Germany
The dispute in Germany over whether or not a DNS resolver should get involved in web-blocking piracy sites was back in court this week. The targeted DNS resolver, the not-for-profit Quad9, has been sued by Sony Music, and has accused the music major of appearing to "push the idea that they are above and beyond the principles of freedom, decentralisation and proportionality".

Web-blocking, of course, has been an anti-piracy tactic of choice of the music and movie industries for some time now in those countries where it is an option. At a basic level, copyright owners get an injunction from a court ordering internet service providers to block their customers from accessing copyright infringing websites.

However, there are various ways people can circumvent those blockades once they are in place. That includes using either an alternative DNS resolver or a Virtual Private Network. This basically means using a different provider for some elements of accessing the internet, including the element where the ISP has actually instigated the web-block.

In the case of a DNS resolver, that's the element where the system identifies the unique IP address where a website the user has selected is actually located.

Aware of these various workarounds, copyright owners have sought to extend web-blocking to internet services that can be used to circumvent web-blocks put in place by the ISPs. And, most recently, that has included seeking web-blocking orders against DNS resolvers like Quad9.

However, Quad9 has been prolific in pushing back at Sony's moves in court to force it to block access to a specific piracy site.

The argument goes that - while Quad9 doesn't endorse copyright infringement - it's an overreach to suggest a DNS resolver should be getting involved in the web-blocking process. So far those arguments haven't won the day in court, but the DNS resolver continues to fight, hence this week's court hearing.

Quad9, which has been documenting this legal battle on its website, set out its current arguments in a blog post earlier this month ahead of this week's hearing.

"Although this blocking applies only to Quad9's services located in Germany", it stated, "by bringing this court case to fruition, Sony Music - and those who may eventually follow - appear to be pushing the idea that they are above and beyond the principles of freedom, decentralisation and proportionality".

"DNS resolution is a conduit of metadata, not content delivery", it went on. "Imposing content blocking far away from the source of the content puts costs and punishment in the wrong location, and reduces incentives for investment and local implementation which in turn reduces privacy and security".

Plus "the ability of corporate entities to impose their will on unrelated third parties such as DNS resolution services creates a chilling effect which will reduce free information exchange, and introduces a significant risk of overreach and abuse against which there is little recourse".

Sony may well argue that ISPs initially pushed back against the idea of web-blocking as well, often using similar arguments to those now presented by Quad9, with critics of the anti-piracy approach often talking about the potential impact on information exchange online.

Said critics would often ask questions like: "What about entirely legitimate websites that might inadvertently infringe copyright, will they end up being blocked too?"

However, the music company could point out, in those countries where getting web-blocking order against ISPs is now pretty routine, those web-blocks have generally been restricted to what are overtly piracy operations, with the oversight of a court or government agency ensuring things don't get out of control.

With all that in mind, Sony might say, Quad9's fears about the precedent being set here aren't really justified. But we shall see whether higher courts in Germany are more persuaded by the DNS resolver's arguments.

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Hybe announces deal to become biggest shareholder in rival K-pop powerhouse
South Korean entertainment firm Hybe has announced a deal to buy a 14.8% stake in rival K-pop company SM Entertainment. The deal comes amid a growing rift between the founder of SM Entertainment and its management team.

Hybe is best known as the home of BTS, of course, although other South Korean artists it works with include Seventeen, Tomorrow X Together and Enhypen. SM Entertainment has the likes of EXO, Red Velvet, NCT and Aespa on its roster.

The big deal announced today - worth around $335.8 million - will see Hybe acquire shares in SM Entertainment from the latter's founder Lee Soo-man. And it will make Hybe the biggest shareholder in SM Entertainment overall.

In a joint statement, Lee and Hybe founder Bang Si-hyuk said of the alliance between the two K-pop powerhouses that "we decided to collaborate to achieve our shared vision of upgrading K-pop's global competitiveness".

However, the management team over at SM Entertainment don't seem to share Lee's excitement about the Hybe deal. They announced an alliance earlier this week with Kakao, the internet company that has its own entertainment business and operates South Korean music streaming service Melon.

Lee isn't happy with the Kakoa partnership - and the SM Entertainment management team seem equally unhappy about his share dealings with Hybe. So, that's all good fun isn't it?

Hybe's bid to become the biggest shareholder in another K-pop business follows the news earlier this week that it's US division is buying hip hop label Quality Control Music.

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New Warner Music boss discusses reasons to be cheerful despite a "tough quarter"
Warner Music's new CEO - former YouTube exec Robert Kyncl - did his first investor call yesterday as the music major put out its latest quarterly financial report. Although the top line figures in that report were not as upbeat as normal, the new boss was nevertheless upbeat about the future direction of the music rights business at large and Warner Music's position within it.

He honed in three reasons for optimism. First, "as technology opens up emerging economies, the industry's addressable market will continue to expand even further". Second, "innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources". And third, "music is still undervalued, especially when compared to other forms of entertainment, like video".

That latter statement is a long term talking point in the music community, of course. Most recently said conversation has mainly focused on the need for music streaming subscription prices to increase, alongside much chatter about TikTok not paying enough into the music industry.

Kyncl has interesting perspectives on both those elements of the 'music is undervalued' conversation, having worked at YouTube when it was the platform everyone accused of under-paying for the music it utilised.

And before YouTube, he was at Netflix. That's relevant because Netflix has increased its subscription fees several times over the years, while in most markets Spotify is still charging the same as when it launched in the late 2000s.

That is likely to change this year, not least because Spotify's rivals in music streaming have started instigating increases on their headline pricing. And the Kyncl-led Warner Music is likely to join the other majors in pushing for more regular price rises in the future.

As for the TikTok situation, according to Billboard he talked to investors about how YouTube had evolved its relationship with the music industry by launching its standalone music service and refining the Google platform's Content ID system and advertising strategies.

"At YouTube, we looked at this problem very closely, and we decided that music was very important to us, and that's why we did it", he said of that evolution and the strained relationship with the labels that motivated it.

TikTok needs to similarly look into the problem, he added. "It's the right decision for them to evaluate. And you can see from YouTube's execution what the results of the finding was for us. But I can't speak to what TikTok finds. That's up to them. But my answer is, a holistic relationship is what we're looking for".

Total revenues for Warner Music during the last quarter of 2022 were down 3% year-on-year on a constant currency basis, which is depressing given the majors have become used to reporting decent growth in recent years. However, the slip in revenue was partly due to a reporting technicality which meant the 2022 quarter being reported was a week shorter than the same reporting period a year earlier.

However, Kyncl nevertheless admitted it had been a "tough quarter", partly due to a dip in income from ad-funded streaming and a relatively light release schedule. But let's not allow any of that to diminish all of Kyncl's upbeat optimism about the future. Yay optimism!

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MusicBird secures $100 million term loan facility to fund more music rights acquisitions
MusicBird - one of those music rights investment firms everyone loves do much - has announced the signing of a 'term loan facility' with the Mitsubishi UFJ Financial Group worth up to $100 million. It will be used to power the company's "next phase of growth" as it "looks to scale its music rights portfolio in the coming months".

Launched in 2021 to acquire music rights and revenues, MusicBird has already done deals with the likes of Shaggy and songwriter JR Rotem. The new financing arrangement has been negotiated by MusicBird's recently appointed CEO Paul Brown and CFO Roger Howl, the latter of whom had a stint at the highest profile of the rights acquiring investment funds, Hipgnosis.

Confirming the arrangement with Mitsubishi UFJ, Brown says: "We are delighted to be working closely with the MUFG team as we grow our business and continue to pursue our strategy of acquiring diverse music rights in collaboration with incredibly talented songwriters, artists and partners across the industry. Our team is passionate about building a collection of iconic songs which have stood the test of time and continue to delight fans".

Meanwhile, MUFG's MD of Entertainment Finance, Tony Beaudoin, adds: "MUFG is THRILLED to lead the senior debt facility for MusicBird, which will allow the company to expand its catalogue acquisition initiative of valued music rights. Paul and Roger bring trusted experience in the music space to the company and MUFG is confident in their ability to grow MusicBird's IP library".

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Burt Bacharach dies
The music community has been paying tribute to Burt Bacharach, who has died aged 94. A representative confirmed to media that the legendary music-maker died on Wednesday at home in LA of natural causes.

Born in Kansas City, Bacharach studied music at universities and schools in Montreal, New York and California. He then began his music career as a pianist and conductor for the big band singer Vic Damone, subsequently performing a similar role with a number of other artists. He also worked as an arranger and conductor for Marlene Dietrich in Europe in the late 1950s and early 1960s.

However, it was his alliance with Hal David, who he met in 1957, that brought Bacharach to much wider attention. The duo quickly achieved success as a songwriting partnership with 'The Story Of My Life', recorded by Marty Robbins, and 'Magic Moments', released by Perry Como.

Although he initially also co-wrote with some other collaborators, most notably Bob Hilliard, it was Bacharach's prolific partnership with David throughout the 1960s and into the 1970s that really stood out.

And while many artists recorded versions of the duo's songs, they enjoyed a particularly fruitful alliance with Dionne Warwick, who had chart success with the likes of 'Walk On By', 'Do You Know The Way To San Jose?' and 'I Say A Little Prayer'.

Bacharach's output and hit rate did decline after his partnership with David came to an end in the early 1970s, although there were still plenty of interesting collaborations throughout the 1980s and 1990s and into the 2000s, including with Elvis Costello, as well as work on a number of film soundtracks. He also had cameo roles in some films, most notably the Austin Powers movies.

Warwick was among those leading the tributes as news of Bacharach's death was confirmed. In a post on Twitter, she said his passing was "like losing a family member. These words I've been asked to write are being written with sadness over the loss of my dear friend and my musical partner".

"On the lighter side", she went on, "we laughed a lot and had our run ins, but always found a way to let each other know our family, like roots, were the most important part of our relationship. My heartfelt condolences go out to his family, letting them know he is now peacefully resting and I too will miss him".

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DEALS

DJ Khaled has announced a new alliance between him and his We The Best label and Universal Music's Def Jam division. The rapper and producer originally worked with Universal labels on his releases, but has more recently had an partnership with Sony Music's Epic Records. Under the new deal he'll also become a "global creative consultant" for Universal and Def Jam, whatever that means. "We are THRILLED to partner with DJ Khaled … both as a multi-platinum, award-winning artist and as a valued executive", says Def Jam boss Tunji Balogun.

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APPOINTMENTS

Talent development organisation UD has announced that Dr Anne-Marie Imafidon will become its Chair at the start off April, taking over from Lord Victor Adebowale, who becomes Honorary President of the charity. Already a UD board member, Imafidon paid tribute to Adebowale's work for the organisation, adding: "I will seek to build on his achievements as Chair and am excited to be taking on this opportunity at a time when UD's foundations are strong and its ambitions are fierce".

BMG in the US has promoted Allegra Willis Knerr to EVP Global Sync Licensing, a role that involves managing the music firm's sync licensing teams around the world. "Allegra does not only have a profound knowledge in repertoire but is, as well, an excellent and reliable team leader and colleague. I have no doubt that she will continue to thrive and we all look forward to her continuous success", says BMG Chief Content Officer Dominique Casimir.

Universal Music in the UK has promoted Jennifer Hills and Sarah Desmond to co-MDs of its Globe business which is, brags the major, its "industry-leading brand partnerships and sync division". Globe President Marc Robinson says: "Jennifer and Sarah have been pivotal to Globe's extraordinary success creatively and commercially over the last decade. Their ambitious approach has transformed our brands approach and will bring fresh thinking to our ever-evolving sync strategy".

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RELEASES

M83 has put live 'Chapter 1' of his upcoming new album 'Fantasy', which is due on 17 Mar. That first chapter includes six tracks from the new LP, including the previously released 'Ocean's Niagara'.

Hafdís Huld has announced she is releasing an English language version of her 2012 album 'Vögguvísur' which is, and I quote, "the most streamed record in Icelandic history". The new version, 'Lullabies', will be released on 5 May with first single ‘Sleep My Darling' - an old Icelandic folk song about an outlaw on the run with his wife and baby - already streaming.

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AWARDS

The BRIT Awards has announced the winners of the Producer Of The Year and Songwriter Of The Year prizes ahead of tomorrow's ceremony. David Guetta is the very best producer of the last year and Kid Harpoon the best songwriter. No question. That's official now. Guetta is "honoured" and Kid Harpoon thinks it's "unbelievable".

Check out our weekly Spotify playlist of new music featured in the CMU Daily - updated every Friday.

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Bad Bunny label hits back at uncleared sample allegations from Nigerian label
A quick sample dispute to end the week with now, though one that is currently being fought via press release and social media posts rather than litigation.

Bad Bunny and his label Rimas Entertainment are accused of sampling and interpolating without licence a track by Nigerian Afrobeats artist Joeboy on 'Enséñame A Bailar', which appears on 2022 Bad Bunny album 'Un Verano Sin Ti'.

It's fellow Afrobeats artist Mr Eazi - in his guise as founder of Joeboy's label emPawa Africa - who has been hitting out about the allegedly infringing sample and interpolation in various social media posts this week.

"The team at emPawa Africa have attempted to sort this issue amicably since May of last year with our mutual legal teams", Mr Eazi - real name Oluwatosin Ajibade - then said in a press release. "But the intent of Rimas Music is clearly to blatantly appropriate young African creators' work for their gain without attribution".

"Afrobeats has become a global phenomenon and everybody wants to sample a piece of it", he went on. "Unfortunately, Afrobeats artists, their producers and labels often have to pursue legal means to secure publishing and royalties after songs they originally created are co-opted without credit by other artists".

But Bad Bunny has not been bad at all here, Rimas Entertainment was very keen to stress in its own response press release. "We are deeply concerned by the copyright infringement accusations made by Oluwatosin Ajibade, the founder of emPawa Africa, on the track 'Enséñame A Bailar'", said press release read.

"We want to make it clear that, at all times, Rimas Entertainment has acted properly and has followed standard industry protocols", it went on. "Before releasing the aforementioned song, Rimas purchased the master track [which has been sampled] from record producer Lakizo Entertainment, listed as the track's creator and owner in numerous public sources".

"After the song's release last year, emPawa contacted us, claiming ownership over the master", it then added. "Our lawyers have had many communications with emPawa in an effort to resolve the ownership dispute between emPawa and Lakizo, but emPawa has so far failed to provide proof of ownership. Instead, emPawa has chosen only to send us a heavily redacted contract that did not confirm their claims and only served to raise more questions about the validity of their claims".

"Our numerous efforts to obtain the unredacted version of the agreement from emPawa have not been successful", it went on. "It is entirely untrue that we have been unresponsive. Regarding the song's composition, emPawa has also failed to forward documents to prove that they are authorised to act on the writer's behalf. We look forward to resolving this matter cordially and are waiting for emPawa to provide us with the necessary documents that validate their claims".

So there you go. Fun times. Although it seems no formal legal action has been instigated as yet in relation to any of this, the publishing side of emPawa Africa and its administration partner Kobalt have reportedly filed a dispute over the Bad Bunny track within the collective licensing system, which will stop the flow of royalties on 'Enséñame A Bailar' until the matter has been resolved.

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