The elephant is still in the room: CMA rejects a full investigation of the music streaming market
The Economics of Music Streaming saga continues: last July the UK Competition and Markets Authority (CMA) refused to recommend a full investigation of the music streaming market. For context, a market study is different from a market investigation. In market studies, the functioning of the market is studied and, if flaws in the functioning of the market are found, modifications are recommended. When serious problems are detected, a market investigation is initiated where a full investigation of the market is requested, and more severe measures are then determined. In this case, in view of the decision taken, the study continues but it has been decided not to carry out a full investigation.
It should be recalled that the CMA launched a study focusing -among other issues- on competition concerns in relation to the high market share held by the majors and whether their dominance in both recording rights and composition rights would have an impact on the way royalties from the exploitation of musical works in streaming are shared out.
The introduction of streaming services as we know them today has meant that consumers could access the music they want, when they want, legally for a small fee. This has allowed the music industry to reinvent itself in terms of monetisation in digital services, almost entirely displacing the physical format. However, with 80% of music consumption now taking place on these platforms, it is crucial to analyse whether competition is working freely in the market and whether artists and songwriters are receiving the remuneration they deserve for the exploitation of their music.
The CMA notes in its report that the recorded music sector is highly concentrated, with the three majors having a combined share of over 70% of UK streams, while independent record labels have around 1% of the market share. As a result of this huge market power, songwriters and their representatives suggested that it is economically advantageous for the majors to maximise recording revenues and, as an obvious consequence, decrease the share of songwriting revenues to the detriment of songwriters.
It is important to note that both composition and recording rights are necessary to licence a musical work, so streaming services are obliged to seek licences from both music publishers and record companies. By the very nature of these complementary rights, many music companies -including the 3 majors- have both publishing and recording interests.
However, in relation to the concern raised by the CMA, the report shows that streaming revenues going to composition from 2007 to 2021 appear to have doubled. While it is true that in the most recent period – between 2017 and 2021 – there has been a slight decline in the economic weight of composition, this has mainly been due to an increase in the share retained by music streaming services, rather than an increase in recording revenues over composition.
On the basis of the analysis of this data, the CMA concluded that it seems unlikely that the three dominant majors would pursue a strategy that would undermine the revenues from songwriting over recording, as they would be acting against their own interests. This is mainly because such a strategy would affect their ability to retain existing songwriters, as well as their ability to compete for new and emerging songwriters. If the share of composition rights were to become uncompetitive compared to other publishers, the large multinationals would lose songwriters to other publishers with more favourable conditions.
In conclusion, the CMA has understood that, for the time being, the divergence in artists’ revenues is not due to competition problems. However, the CMA’s conclusion does not imply that there is no inequality in the sharing of the digital “pie”, but simply that this divergence does not stem from a competition problem. A paradigm shift is urgently needed, and this can only be possible with greater transparency in artists’ and songwriters royalty income data, which is currently – as the report points out – scarce. The CMA concludes that only by presenting the information in a simple and transparent way will artists and songwriters understand how they are being paid for the exploitation of their works in digital. As the report points out, it is only through transparency that the best possible contractual conditions for artists and songwriters can be negotiated and subsequently secured.
Legal & Licensing Coordinator at Unison