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CMA concludes that competition issues are not creating challenges for music-makers in the streaming economy

By | Published on Tuesday 29 November 2022

Competition & Markets Authority

The UK’s Competition & Markets Authority has published the final report from its study of the streaming music market, concluding that challenges faced by artists and songwriters in the streaming economy are not the result of competition issues within the marketplace, and that therefore an intervention from the competition regulator is not appropriate.

Although, it says, it hopes that its detailed report on the sector can inform ongoing discussions about other possible measures that government could instigate to address concerns in the music-maker community.

The CMA market study was commissioned in response to the big inquiry by the UK Parliament’s Digital, Culture, Media & Sport Select Committee into the economics of music streaming. It considered the impact of the streaming boom on both music consumers and music-makers.

Though, given that most people agree that music consumers have never had it so good – them now having access to 100 million tracks for £9.99 a month – there was more interest in the CMA’s findings regarding how artists and songwriters interact with and benefit from the streaming market.

Commenting on its final report this morning, the CMA confirmed it had heard plenty of “concerns from creators – artists and songwriters – about how much they earn from streaming”. However, it added, a key factor in that domain is the sheer quantity of music now available, meaning the issue is too much competition rather than too little.

“With an increasing number of artists, tracks and streams, the money from streaming is shared more widely – with those that have the highest number of streams earning the most”, it went on.

And a really small number of artists account for a lot of the streams and therefore they and their labels get a lot of the money. “The CMA found that over 60% of streams were of music recorded by only the top 0.4% of artists”, it noted.

While it is true that a small number of major players dominate both the music streaming sector and the record industry, the CMA concluded that “the concerns raised by artists are not being driven by the level of concentration of the recording market”.

“Analysis found that neither record labels nor streaming services are likely to be making significant excess profits that could be shared with creators”, it went on. “Consequently, the issues concerning creators would not be addressed by measures intended to improve competition, but instead would need other policy measures in order to be addressed”.

And, it added, “some parts of the streaming market have improved for some creators in recent years, with the CMA finding a greater choice of deals with record labels available. Whilst individual deals can vary considerably, the report highlighted on average royalty rates in major deals with artists have increased steadily from 19.7% in 2012 to 23.3% in 2021”.

Meanwhile, it stated, “for songwriters, the share of revenues going to publishing rights has increased significantly from 8% in 2008 to 15% in 2021”.

The share of streaming income that flows to songs and songwriters was actually a key element of the CMA’s study, given many in the songwriting community reckon they should be getting a much bigger cut, and that it’s entirely competition issues that are stopping that from happening.

That is based on the theory that because the three majors – Sony, Universal and Warner – are major players in both recordings and songs, they can use their market power to keep the streaming income splits favouring the former over the latter.

They might want to do that because under record deals the label often gets to keep the majority of any income, whereas with publishing deals the songwriter always gets the majority.

However, the CMA’s new report states: “[The] evidence is inconsistent with the argument that the majors have tacitly colluded to suppress the publishing share or that there is otherwise particularly weak competition to sign songwriters that is leading to a split in the allocation of music streaming revenues that favours recording rights over publishing rights”.

“The majors having both a recording and a publishing business is also not necessarily problematic”, it added. “For instance, if the majors did not have a publishing business they might have a stronger incentive to block increases in the ‘publishing share’ by refusing to accommodate such an increase through reducing the recording share since any losses to their recording revenues which occurred would not be mitigated by gains to their publishing revenues”.

Therefore, while the CMA recognises the ongoing dispute regarding how streaming money is split between the recordings and the songs, the regulator is nevertheless convinced “competition policy is not therefore the right tool to reach an optimal split”.

On that issue – and pretty much all the other issues raised by the music-maker community, including things like transparency – the CMA’s report points to the other government-led work that was instigated following the Parliamentary inquiry, all of which is being overseen by the Intellectual Property Office. Which is to say, as far as the CMA is concerned, competition law can’t help, but there might be an argument for copyright law intervening in some way.

“While the CMA understands the concerns from creators about the level of income many receive, the analysis in the study suggests it is unlikely that an intervention by the CMA would release additional money into the system to pay creators more”, the regulator concluded earlier today.

“The study does however highlight that the issues raised by creators could be further considered by government and policymakers as part of their ongoing work following the DCMS Select Committee’s inquiry into the economics of music streaming”.

The CMA’s decision to not intervene in the music streaming market is not surprising, given that was pretty much the conclusion of an interim report back in July.

However, the music-maker community will be hoping that at least some of the comments in final the CMA report will motivate record labels, music publishers, collecting societies and streaming services to be as proactive as possible within the IPO-led initiatives that are ongoing.

Lots of comments on the CMA report into music streaming:

CMA Interim CEO Sarah Cardell: “Streaming has transformed how music fans access vast catalogues of music, providing a valuable platform for artists to reach new listeners quickly, and at a price for consumers that has declined in real terms over the years”.

“However, we heard from many artists and songwriters across the UK about how they struggle to make a decent living from these services. These are understandable concerns, but our findings show that these are not the result of ineffective competition – and intervention by the CMA would not release more money into the system that would help artists or songwriters”.

“While this report marks the end of the CMA’s market study, which addresses the concerns previously posed about competition, we also hope the detailed and evidence-based picture we have been able to build of this relatively new sector will provide a basis that can be used by policymakers to consider whether additional action is needed to help creators”.

Featured Artists Coalition CEO David Martin and Music Managers Forum CEO Annabella Coldrick: “The CMA report today focuses on how music streaming has benefited consumers and does not find that a competition intervention would be beneficial. However, it acknowledges that other issues raised by artists, songwriters and managers, including fair remuneration and transparency, require a different kind of scalpel. We welcome the overriding conclusion that government and policymakers should be driving forward reform”.

“This should put a renewed focus on the ongoing pan-industry work being led by the Intellectual Property Office, and ensure that this activity delivers tangible changes in areas such as improved remuneration – whether through ER, contract adjustment or rights reversion – better transparency and progress on song data to get the right people paid fairly and quickly”.

“If these outcomes fail to materialise, then the MMF, FAC and other creator-led organisations will call on the government to intervene and fulfil their promise of legislative action”.

Ivors Academy CEO Graham Daviess: “The CMA has asserted that it is the government’s responsibility to introduce policy interventions to support music creators. While consumers have never had it so good the system is concentrating earnings to an unsustainable extent. Streaming benefits consumers and rewards few music creators”.

“The creative industries are central to the UK’s economic success and they rely on creators, but they are leaving the industry because of threats to live music, the disastrous impact of Brexit on touring and the cost of living crisis. We need action to fix streaming”.

Record label trade group BPI: “We welcome the CMA’s objective, evidence-based report which confirms that the streaming market is competitive – delivering fans accessible and affordable music and artists greater choice in an environment in which many more are succeeding and where artist and songwriter royalty rates have increased”.

“As the most definitive analysis of these issues to date, this report will help inform the work that we and industry are already doing in partnership with government to further strengthen British music and ensure the UK remains competitive globally. The report reinforces our view that the most effective way to enable even more artists to have a sustainable career in music is for labels to keep investing in talent and grow the market”.

Association Of Independent Music CEO Paul Pacifico: “While consumers have clearly benefited enormously from greater access to music at decreasing cost, we must take care to ensure music is not undervalued and that we balance that with the opportunity for more creators to benefit from a sustainable digital ecosystem”.

“The independent sector has led the way in developing the innovative deal structures and business models that the CMA highlights as having been key in evolving music’s response to digital disruption and we need to ensure any measures the government may consider do not harm those essential entrepreneurs and investors in creative careers”.

“Going forward, we must continue to work together as an industry on transparency and data to maximise the opportunity for our industry that the streaming inquiry represents”.

You can download the CMA’s rather lengthy full report here – or the more punchy exec summary here.

For an overview of the IPO-led work on the economics of music streaming, check out this recent edition of CMU’s Setlist podcast.

To get a full understanding of the wider economics of streaming conversation, why not sign up to the upcoming CMU webinar series The Digital Dollar Debates – click here for more information.