A Step Towards Fairness? The UK Voluntary Code of Good Practice on Transparency in Music Streaming explained

As part of its work on transparency in the music industry, the UK Intellectual Property Office (“UKIPO”) published its UK Voluntary Code of Good Practice on Transparency in Music Streaming (the “Code”) on 31 January 2024. The aim of the Code is to establish a framework for information sharing within the music streaming supply chain.

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Development of the Code

The Code has been developed by an industry led working group, that was set up to address transparency issues identified during the course of the Economics of Music Streaming inquiry. The working group found that in order to keep pace with increasingly sophisticated licensing models and the developments in usage data processing and reporting, clearer information sharing is needed to build trust between music industry stakeholders.

The Code is intended to act as a framework for good practice, addressing the entire music industry supply chain. The Code has twelve signatories so far, including the Digital Entertainment and Retail Association (ERA), the Music Publishers Association (MPA) and the Music Producers Guild (MPG). The aim of the Code is to improve standards across the music industry, particularly in respect of transparency and fair remuneration.

What does this mean for the UK music industry?

The Code is a balancing act between maximising transparency and information sharing, whilst acknowledging confidentiality and data privacy constraints. It is recognised in the Preamble that transparency should not undermine competition and innovation in the industry.

The Code is voluntary and underpinned by good faith, so non-compliance does not constitute any statutory or contractual breach by the signatories. However, a complaints mechanism is expected to be developed over the next six months.

The Code focusses on six key areas:

  1. Contracting with music makers – The Code states that record labels and publishers should encourage artists to seek independent legal advice when assigning or licensing their rights and to provide artists with financial assistance where appropriate. Artist managers should also ensure that artists fully understand the terms of their contracts. To this end, record labels and publishers should clearly draft remuneration provisions in the relevant assignment or licence agreements including how royalties are calculated, what costs may be recouped, and how and when royalty information will be shared with artists. The minimum frequency of royalty statements should be twice a year and the tax treatment of royalties should also be indicated. The aim is that recording agreements are unambiguous, and structured in such a way that artists can understand the remuneration that is payable to them, as well as their contractual rights to information.
  2. Supply chain – Parties must endeavour to comply with their reporting and audit obligations so that accurate and timely information can promptly move downstream to artists. This is particularly important, as record labels and publishers can only share accurate information on usage reports and royalties with artists once this information has been received from the relevant digital service provider or collection management organisation (“CMO”).
  3. Royalties – Data provided by digital service providers should be sufficient to allow for the verification of royalties payable to rights holders (including any associated calculations) and reporting should be based on accurate and unaltered metadata. The information should be readily accessible via an online royalty portal, which should allow artists to see usage and royalty information. Where royalties reach artists via a CMO, the duty owed to the artist falls to the relevant CMO, who must make their commission and any applied deductions clear. Artists must also comply with their royalty reporting obligations to labels, publishers and distributors.
  4. Audits – Parties throughout the supply chain should have a right to audit the financial information of parties who are contractually obligated to report to them. Digital service providers and other relevant parties should seek to cooperate with these audits.
  5. Licence agreements with digital service providers – Digital service providers should outline to artists and copyright holders how their service operates and what their consumer offerings are. Labels, publishers and CMOs should make clear to artists how remuneration paid by a digital service provider is calculated, including any fixed fees, lump-sums or other contractual payment mechanisms.
  1. Music maker communication – Licensees/assignees (e.g. record labels and publishers) throughout the music industry supply chain should have formal communication channels with artists and provide them with the information they need to better understand the remuneration mechanisms that apply to their respective contractual positions. Artists should be encouraged to request information and should have clear channels through which to do so.

The guidance is clear that the provision of information under the Code is not required where it would constitute a contractual breach or a breach of statute (e.g. data protection law or competition law).

The Code is expected to come into force in July 2024 with the aforementioned complaints mechanism to follow within the next six months. A formal review of the Code is expected in 2026.

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