The UK's Competition & Markets Authority recently published its interim report on the music streaming market, prompting mixed responses from the music industry. Record labels, publishers and streaming providers appear generally pleased with the findings, but various artists, musicians, songwriters and managers say they believe it has underdelivered.
Following an inquiry into the economics of music streaming, in July last year the Department for Digital, Culture, Media & Sport (DCMS) Select Committee identified concerns around whether music creators were getting a fair share of streaming revenues. The Select Committee also raised concerns around whether the world's largest music companies were dominant suppliers to the music streaming market, and recommended that the Government request a competition market study into these activities.
Many were waiting with bated breath to see what the outcome of the Competition and Markets Authority (CMA) report would be.
The CMA has now published its interim report. The report primarily focusses on whether having such small numbers of digital companies within music streaming, and the resulting flow of money in the supply chain, poses any competition law issues for consumers. Based on its findings, the CMA has taken the view that it will not be launching any formal investigation. A parallel study currently being run by the UK's Intellectual Property Office (IPO) may still shed further light on renumeration, transparency and data issues in the music industry.
What are the findings?
The CMA report is filled with statistics offering fresh insights into the size and scale of the music streaming industry, including the following:
- Streaming of back catalogues still remains hugely popular: back catalogue streaming (which means streaming of anything over a year old) has increased to 86% in 2021 – an increase of 10% - from 76% in 2017.
- Streaming still the preferred way of accessing music: recorded music revenues reached £1.1 billion in 2021, with 80% of recorded music now listened to via streaming services. Last year there were over 138 billion music streams in the UK with streaming service prices falling in real terms.
- More artists are finding global audiences: the numbers of artists streaming music has doubled between 2014 and 2020 - from around 200,000 to 400,000. This means greater access for local artists to international listeners.
- The music market remains challenging for many creators: even though the industry's income is broadly stable, many smaller artists are finding it harder to make sufficient money from streaming of their music. For one million streams per month, the CMA estimates that an artist would earn around £12,000 a year. For high profile and heritage artists this may be less of an issue, as they continue to earn more revenue through listeners accessing a greater number of back catalogue streams and more well publicised streams.
- Major record labels: the major record labels continue to play key roles in the recorded music industry. The major labels generated 73% of the revenue from UK music streams – down from 78% in 2017. The CMA felt however, that this concentrated activity is not causing any harm to consumers or driving the main concerns of artists. The CMA also feels that neither labels nor streaming services appear to be making sustained excess profits which would raise competition concerns.
- Contracting in the industry: in relation to legal contracts in the industry, the CMA does suggest that labels could give artists more information on streaming and how their earnings are calculated but clarified that this a concern better addressed by the UK's IPO.
The CMA concluded that the recorded music industry is delivering good consumer outcomes on balance, however it will be keeping on close eye on whether innovation is stalled and whether there are any shifting power balances.
The record labels, music publishers and steaming services speak out
The biggest players in the music industry welcomed these findings, citing that accessibility to music and the growth of the music community has given fans more choice than ever. Many executives feel this study is a positive outcome fostering greater collaboration and would help ensure that the "UK music remains world leading."
The Digital Entertainment and Retail Association (which represents retail and wholesale providers of music streaming services), commented that the report vindicated their view that music streaming platforms have been overwhelmingly positive for consumers as well as for the music industry. In their view streaming services have "rescued a sector that had been shrinking rapidly due to piracy and have delivered over £5 billion of new revenue in the UK alone.”
Artists and song writer perspectives
Several music makers and managers however have commented that the report has undelivered in their eyes, and that the power balance in the broader music sector has been left unchecked. Newer artists, benefitting from the digital wave may have more choice of business partners, however older pre-digital artists may be locked into more restrictive legacy deals. The CEO of the Music Managers Forum and Featured Artists coalition noted that the CMA report does not represent realistic assessments of record label profits and ignores the complex issue raised by artists in the context of weak contractual negotiation positions.
Hipgnosis founder Merck Mercuradis, called the latest developments, "a missed opportunity," that leaves songwriters to continue earning "pitiful returns from streaming," because things are not being shared fairly and equitably.
What can we expect next?
The IPO's work is ongoing, and though its findings may be influenced by the CMA's most recent report, creatives in the music sector could still see some of their concerns addressed. We have also not heard the last from the CMA on this matter, with further consultations and feedback scheduled till 19 August and a final reporting setting out its findings of 26 January 2023.
The CMA is also planning to collect more evidence to understand what the ‘value gap’ might be between what user-uploaded content platforms pay the music industry, and what other streaming services do. It will share that data with the DCMS and the IPO, as well as with the Centre for Data Ethics and Innovation to help inform their work examining whether artists' rights can be strengthened for music streaming.
For now, consumers can stream on.
Interested in reading more? The link to the CMA's market study update entitled "Music and streaming" is available here.