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Merck Mercuriadis criticises CMA for “passing the buck” on streaming market issues

By | Published on Thursday 1 December 2022

Merck Mercuriadis

Hipgnosis chief Merck Mercuriadis has criticised the UK’s Competition & Markets Authority for, as he sees it, confirming the issues faced by artists and songwriters in the music streaming economy, but then choosing to do nothing about them.

The CMA undertook a study of the digital music market following the inquiry into the economics of music streaming undertaken by the Digital, Culture, Media & Sport Select Committee in the UK Parliament. MPs on that committee identified a number of issues with the way music streaming currently works and made a series of recommendations for reform.

For the CMA, the focus of its study was whether a lack of competition in the marketplace is negatively impacting on either music consumers or music-makers. Its conclusion – set out in detail in a 165 page report this week – is a big fat “no”.

The regulator doesn’t necessarily deny that there are issues with the current business models, mainly for artists and songwriters, but it reckons they are not the result of anti-competitive practices and therefore can’t be solved with an intervention by the competition regulator.

However, some in the songwriter community argue that one key issue they face is a direct result of anti-competitive conduct. Currently a much bigger share of streaming income is allocated to the recording rights rather than the separate song rights, so that 50-55% of income goes to the former and 10-15% to the latter.

One argument goes that this split is the result of the three majors being so dominant in both recordings and songs. And, because with most record deals labels get to keep the majority of the money, but with publishing deals the writer gets most of the money, the majors have an vested interest in the status quo.

In his submission to the select committee’s inquiry, Mercuriadis wrote: “The conflict of interest created by the three major record companies owning the three largest publishers is critically important to understand”.

“These three publishers are being prevented from advocating for songwriters’ interests”, he added, “as a result of being controlled by their parent companies who wish to push economic improvement towards recorded music where they make an 80% gross margin and a 40% net margin”.

The majors strongly deny that their recording divisions have influence over licensing negotiations undertaken by their publishing companies. And in its report the CMA said: “[The] evidence is inconsistent with the argument that the majors have tacitly colluded to suppress the publishing share”.

Nevertheless, there are plenty of people in the music-maker community who believe that the dominance of the majors in the music rights business is responsible for at least some of the issues with the economics of streaming that have been raised by the select committee and the CMA itself.

Responding to this week’s CMA report, Mercuriadis said yesterday: “The CMA’s final report has agreed with the DCMS Select Committee about the problems in the industry which result in songwriters not being fairly paid for their work”.

“The CMA have spelt out that most songwriters and artists do not have access to clear payment statements, the damage done by NDAs, and acknowledge the conflict of interests between labels and publishers which results in revenues that go to publishers and songwriters being held down – even though without songwriters there would be no music industry”.

“Yet rather than using the powers they have to fix the problems they identify”, he added, “they have simply looked to pass the buck – a double whammy for songwriters and artists who are losing out on significant streaming income and now find the CMA unwilling to act”.

Although the CMA said that it didn’t believe any intervention in the streaming market on competition grounds was justified, it did say that other measures to address the various issues that have been raised may be warranted. To that end it pointed to other work that was instigated following the select committee inquiry being led by the Intellectual Property Office.

Mercuriadis’s statement noted that other work, stressing it is all the more important now given the CMA’s conclusions. He also reckons that the Digital Markets Bill currently being evolved by the UK government, which will change the way digital markets are regulated, is another opportunity to address the ongoing issues in music streaming.

“The original work and recommendations of the DCMS Select Committee were excellent”, the Hipgnosis chief concluded. “We must now look to them, the IPO and the government who must now pick up the baton dropped by the CMA. The Digital Markets Bill provides the perfect vehicle to solve these problems once and for all, ensure everyone is fairly paid for their contribution and ensure that UK is a centre for great music creation long into the future”.