The research looks at two proposals to change domestic copyright law in relation to the contractual interests of UK music creators. One of the proposals is to introduce a reversion right, which would provide a means by which the transfer of copyright reverts to the music creator at an agreed time period after the contract with a rights holder has been signed. The other is to introduce a contract adjustment right, which would enable music creators to address disproportionate revenues resulting from contractual terms.

The research report, written by Dr Richard Osborne (Associate Professor in Music and Creative Industries, Middlesex University) and Dr Hyojung Sun (Lecturer in the Business of Creative and Cultural Industries, University of York), explains that it had its genesis in the Inquiry into the Economics of Music Streaming that was launched by the Digital, Culture, Media and Sport (DCMS) Select Committee of the House of Commons in October 2020. The Inquiry aimed to study ‘the impact of music streaming on the creators and companies that comprise the music industry” and examine ‘the long-term sustainability of the music industry itself”. In particular, it was concerned with the fact that music creators are not proportionately sharing the profits made by the industry as a whole.

The Committee published its report in July 2021. It included recommendations for legislative reform and regulatory intervention, including that the Government expand creator rights by introducing a right to recapture works and a right to contract adjustment where an artist’s royalties are disproportionately low compared to the success of their music.

According to the research report, the right to recapture works (also known as a “reversion right”, “revocation right” or a “termination right”) was suggested by several participants in the Inquiry, who advocated for measures that currently exist in US law where authors are entitled to “terminate” the transfer of the copyright in their works to a contracting party “thirty-five years from the date of publication”.

The right to contract adjustment was also proposed by participants in the Inquiry, this time advocating for measures that in German legislation, Dutch legislation and the Digital Single Market (DSM) Directive (2019/790/EU), to which the UK would have been a party if it had remained in the EU. Under Article 20 of the DSM Directive, authors and performers “are entitled to claim additional, appropriate and fair remuneration from the party with whom they entered into a contract for the exploitation of their rights […] when the remuneration originally agreed turns out to be disproportionately low”.

Following the Select Committee’s report, the Government asked the IPO to commission research into both these suggestions. The IPO outlined three initial research questions:

• what similar measures exist in other countries and what has been their impact?
• based on the available evidence, what are the likely benefits and costs to music creators and performers of implementing a reversion and a right to contract adjustment in the UK?
• based on the available evidence, what are the likely benefits and costs to the wider music industry of introducing such rights in the UK?

The research analyses:

• copyright contracts in the creative industries generally: considers “contractual asymmetry”, where creators are in an inferior bargaining position to rights holders, and how the issue has been addressed around the world;
• copyright contracts in the music industries: considers that these contracts are usually a risk investment as it is not known if recordings will be successful, and finds evidence that contractual terms have improved for music creators over the last 50 years;
• royalty contracts: considers how music creators can feel aggrieved if the royalty revenue is disproportionate to the success of a recording or composition; considers rights holders’ arguments, e.g., increased costs in the digital environment;
• lump sum payments: considers situations where music creators feel aggrieved, e.g. where on-demand streaming is not remunerated in addition to the lump sum payment for session work;
• stakeholders’ views on copyright contracts: considers the views of record companies, music publishers and creators; considers recent contractual developments, legacy contracts and views on renegotiation;
• rights reversion: considers the prevalence of rights reversion in other countries and which systems work best; also looks at the implementation of reversion rights, the impact that introducing such rights would have, the knock-on effects and stakeholders’ views;
• contract adjustment: considers the prevalence of contract adjustment measures and the fact that EU Member States will have such measures in their legislation when the DSM Directive is implemented; also considers the implementation of contract adjustment measures, the impact that introducing such measures would have, the knock-on effects and stakeholders’ views; and
• industry-led initiatives: considers music industry-led initiatives for contractual reform, e.g., a code of conduct that stipulates minimum royalty rates for on-demand streaming and waives long-standing unrecouped balances.

Meanwhile, the Government has also published research led by the Centre for Data Ethics and Innovation into the impact of streaming services’ algorithms on music consumption (see item below), as well as a web page drawing together all the Government’s ongoing work addressing the key issues identified by the Inquiry, including an indicative timeline for upcoming milestones.

To access the IPO’s commissioned research report, click here. To access the Government’s summary of its programme of work, click here.