The music streaming business appears headed for unprecedented upheaval in the U.K., after an influential Parliamentary committee recommended a “complete reset” of the sector.

The U.K. Government’s Department for Digital, Culture, Media & Sport (DCMS) Committee has been running its investigation into the economics of music streaming since October 2020.

And, while British Parliamentary committees are not usually synonymous with radical action, this one did not come to play. Instead, it has recommended a sweeping set of changes that, if enacted, could completely reshape the way the British industry operates.

“While streaming has brought significant profits to the recorded music industry, the talent behind it — performers, songwriters and composers — are losing out,” said DCMS Committee chair Julian Knight MP. “Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do.”

First in the committee’s sights were the “pitiful returns” it said artists and songwriters earn from streaming. To help remedy that, the report calls on the government to introduce a right to equitable digital music remuneration.

A similar non-waivable, non-transferrable right to equitable remuneration (ER) — which is not subject to recoupment — already exists for U.K. radio play, and would mean streaming recording royalties would be split 50/50 between performers and rights-holders.

That was one of the key objectives for the #BrokenRecord and #FixStreaming campaigns that have gathered momentum throughout the COVID-19 pandemic, and attracted support from some of the biggest names in British music, including Paul McCartney, Mick Jagger and Roger Daltrey.

ER would also hit major labels’ income by significantly reducing their share of royalties. BPI, the labels’ trade body, says the system would also hit labels’ investment in new talent.

But the bad news for Universal, Sony and Warner didn’t end there, with the report also recommending referring the big three to the Competition and Markets Authority (CMA) to investigate what it calls the majors’ “market dominance” in both recordings and music publishing. That’s despite figures showing independent music companies’ streaming market share growing in the U.K. for the past five years.

The majors would have known they were on the back foot in the debate after a bruising committee session earlier this year, when the three U.K. label CEOs were grilled mercilessly by MPs. But their worst fears have been realized in the report, which also calls for the creation of a right for artists to recapture works after a period of time from record labels, as well as a right to renegotiate contracts if “an artist’s work was successful beyond the remuneration they received.”

Sony Music has already agreed to pay through on unrecouped balances for deals signed before 2000, with the committee calling on Universal and Warner to follow suit.

In contrast, the streaming services themselves — which many in the industry had initially expected to be the focus of the inquiry — were largely let off the hook… with one exception: YouTube. The report contends that “safe harbor” provisions that exempt the Google-owned service from liability over copyright-infringing user-generated content on its platform give it an unfair advantage, and also recommends that the CMA investigate YouTube’s streaming “dominance” and “take steps to encourage competition.” It also calls for new legislation around safe harbor — perhaps similar to the European Union’s Copyright Directive.

Meanwhile, reaction to the report revealed an industry divided along creative/rights-holder lines.

Musician Tom Gray, architect of the #BrokenRecord campaign, said: “The report brilliantly and coherently cuts to the chase: the music industry has a serious problem. Profits are soaring, margins are better than ever, the value of the once piracy-blighted industry is forecast to eclipse anything seen in our lifetimes within a decade, but performers and songwriters are being left well behind.”

Horace Trubridge, general secretary of the Musicians’ Union, and Crispin Hunt, chair of songwriters group the Ivors Academy — the two organizations behind the #FixStreaming campaign — were similarly elated. Trubridge called the report “revolutionary,” while Hunt said it was “a great day for musicians and music creators.”

The Music Managers Forum and the Featured Artists Coalition also endorsed the report’s findings.

Labels, unsurprisingly, were less keen. The trade body for independents, the Association of Independent Music, welcomed some aspects of the report, but CEO Paul Pacifico dubbed ER “a 20th century solution not fit for the 21st century digital market” that “will leave the next generation of artists worse off.”

And, while the majors are yet to comment, BPI chief executive Geoff Taylor warned: “Labels are committed to ensuring that artists share fairly in the growth from streaming. We will carefully examine the findings of this report, but it is essential that any policy proposals avoid unintended consequences for investment into new talent, and do not imperil this country’s extraordinary global success in music.”

One hope for the labels is that, while the government is obliged to respond to the report, it is not actually compelled to act upon its recommendations. During her appearance in front of the committee, DCMS Minister Caroline Dinenage appeared to favor an internal music industry solution, although the report comes out so strongly for market reform that the government could be risking a big backlash if it opted to do nothing.

There may, however, still be time for the labels to come up with their own compromise proposals. Variety sources suggest many labels could live with ER being introduced for non-elective streams from playlists, while many companies will already have been looking at legacy contract changes in the light of Rob Stringer’s big move at Sony and similarly progressive steps at BMG.

You can certainly expect frantic lobbying from both sides over the next couple of months, as the government considers its response. But, one way or another, some major changes are surely coming to the U.K. industry — and that could have implications for every other music market in the world.