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CMA declines to recommend a full market investigation into music streaming

By | Published on Tuesday 26 July 2022

Competition And Markets Authority

The UK’s Competition & Markets Authority has published a lengthy update on its study of the music streaming market.

Although the study is ongoing, the competition regulator says it is not currently planning to launch a more rigorous ‘market investigation’ into music streaming, a move that would have resulted in a much more in-depth analysis of the streaming business and which could have resulted in the CMA intervening in the market with remedies to address issues that have an adverse effect on competition.

The CMA market study was launched in the wake of the UK Parliament’s big old inquiry into the economics of music streaming, with such a study being recommended by Parliament’s culture select committee.

During that inquiry, a key competition related concern that was repeatedly raised related to the three major music rights companies – Universal, Sony and Warner – being dominant in both recordings and publishing, and the impact that might have on how streaming monies are split between the recording rights and the song rights.

Many songwriters argue that song rights are undervalued in streaming because thats suit the majors. Industry conventions mean that record labels often keep the majority of recordings income, but songwriters get the majority of publishing income.

The majors strongly deny they are skewing the split between recording rights and song rights in that way, but some hoped a CMA market study and/or investigation might put the spotlight on those allegations.

That said, once the study was underway, there were other competition issues raised by representatives of the artist, songwriter and management communities.

Issues raised included the lack of transparency around the deals done between the music industry and the streaming services, meaning artists and writers have to make decisions regarding what record labels, music distributors, music publishers and collecting societies they sign to without fully understanding how their rights will be exploited.

Not only does the lack of transparency around those streaming deals arguably impact on competition in the talent market place, but labels and publishers also sometimes claim that they can’t be more transparent about their streaming deals because of competition law. The same claim – ie “competition law won’t let us” – is also often made when artist groups call for labels to sign up to a minimum royalty rate to be paid across their catalogues.

Elsewhere in the submissions made to the CMA, others focused on the power of the streaming service algorithms when it comes to music discovery, and again the lack of transparency around how they work.

Others still focused on the impact the copyright safe harbour has on the digital music market, arguing that user-upload platforms have used the safe harbour principle to force lower rates on the music industry, in turn depressing the whole streaming music sector. And while the copyright safe harbour is being reformed in the European Union to address those concerns, those reforms are not being applied in post-Brexit Britain.

And some raised concerns about song rights collecting society PRS which – although it doesn’t enjoy a virtual monopoly in digital licensing in the way it does with the broadcast and public performance of music – nevertheless plays a key role in streaming which means its operations and decisions have an impact on the digital rights and royalties of most British writers, and – yet again – there are transparency issues around how the society performs that role.

So, quite a lot for the CMA to process. Plus there was the issue of which market the regulator was even investigating. Pretty much all the issues outlined above have little impact on music consumers, who arguably have never had it so good when it comes to accessing music in a simple and affordable way.

Instead, the market where there are issues is the talent market – which is to say the market where music-makers hire the services of business partners to help them manage and market their music. That possibly makes the study seem less significant – although in the DIY creator age, it’s worth remembering their are millions of music-makers seeking such services.

Anyway, all of these complexities explain why the CMA’s market study update – which isn’t even the final report – runs to 97 pages. Though whether any of that studying and updating will have any impact on the various issues raised by artists, songwriters and managers is debatable, especially given the recommendation that the regulator does not instigate the much bigger deal market investigation.

In its report, the CMA notes that it “has the power to make an market investigation reference when the findings of a market study give rise to reasonable grounds for suspecting that a feature or combination of features of a market or markets in the UK prevents, restricts or distorts competition”.

It then confirms that songwriter groups the Ivors Academy and the European Composer And Songwriter Alliance, as well as Tom Gray’s #BrokenRecord campaign and an unnamed artist management company, all requested that a full market investigation be instigated. The report then sets out the specific issues that were raised which could have warranted such an investigation.

However, it states: “Our judgement is that a market investigation reference is not at this stage the appropriate way forward” because “our initial findings have not identified any significant concerns in terms of consumer outcomes relating to music streaming”.

Expanding on that conclusion, the report talks a lot more about the market of music consumers rather than the market of music-makers, but nevertheless says: “We consider that any competition interventions are unlikely to drive significant improvements to artist and consumer outcomes”.

It then notes that the UK’s Intellectual Property Office is currently undertaking a number of initiatives following the economics of music streaming inquiry, including research into copyright law reforms that could impact on artist remuneration, and discussions within the industry around ways to improve transparency and address certain music rights data issues that impact on the payment of songwriters.

And, it says, given “the apparent lack of a route to significant improvements via a competition-based intervention, we consider that at this stage it would be more proportionate to share our findings with the IPO so they can help inform its work”.

As noted, the market study is ongoing, and the CMA will now consult with stakeholders on its conclusion a market investigation reference is not appropriate, before making a final decision and publishing a final study report. The regulator says that, despite not supporting a full market investigation, “that is not to say that we consider the [music streaming] markets are all working as well as they could be – nor that the situation is unlikely to deteriorate in future”.

“We will revisit this conclusion in the light of consultation responses that we receive and our further analysis during the remainder of the market study”, it adds. “Accordingly, we would like to receive views from a broad range of parties on the proposed way forward”.

Commenting on all this, the Interim CEO of the CMA, Sarah Cardell, says: “Streaming has transformed music. Technology is opening the door to many new artists to find an audience and music lovers can access a vast array of music, old and new, for prices that have fallen in real terms. But for many artists it is just as tough as it has always been, and many feel that they are not getting a fair deal”.

However, she adds, “our initial analysis shows that the outcomes for artists are not driven by issues to do with competition, such as sustained excessive profits”. But “we are now keen to hear views on our initial findings which will help guide our thinking and inform our final report”.

You can access the full 97 page market study update – if you want to – right about here.

And you can review all of CMU’s coverage of Parliament’s economics of streaming inquiry, the resulting government-led initiatives, and related developments, on this timeline here.

This story is discussed on this edition of our Setlist podcast.