If you’d noticed an intriguing whiff around the UK music industry over these past six months, it may well have been a spot of fear.
Specifically, fear amongst major music companies that the UK’s competition watchdog – the Competition and Markets Authority (CMA) – was about to launch a full-scale investigation into alleged power imbalances in the music streaming business.
Such a full-blown investigation could feasibly have led to government-mandated changes to the UK industry that were detrimental to the majors’ operations – or, at the very least, piled a whole heap of admin into their workload for months to come.
Today (July 26), however, that whiff of fear from the majors has swiftly been blown away – by a sigh of relief.
The CMA has confirmed that it has made a preliminary decision not to pursue a full-scale investigation into the music streaming industry in the UK. (Or, at least, it has issued a “proposal” not to do so; its final, final decision will be taken on August 19.)
The background: The CMA has, for the past six months, been conducting a light-touch ‘market study’ into streaming economics in the UK, which would ultimately decide whether a full-blown investigation was required.
Various parties from across the business have been invited to submit their thoughts on what needs to change in the modern music industry to ensure a pro-competitive market can thrive.
To be clear, a full-blown CMA investigation can have a major impact on the commercial interests of businesses – no matter their size.
Witness the story of Facebook/Meta’s acquisition of Giphy, which has been in the CMA’s crosshairs for some time.
Earlier this month, the CMA issued an interim order banning Meta from making Giphy a subsidiary of its business until a final decision on the case is reached. (Last year, the CMA ordered Meta to divest Giphy; Meta then took the case to a Competition Appeal Tribunal.)
In music, though, no such investigation is going to take place.
That’s despite four named participants in the CMA’s ‘market study’ – (i) the Ivors Academy; (ii) the #BrokenRecord Campaign; (iii) The European Composer and Songwriter Alliance (ECSA); and (iv) An anonymous artist management company – overtly calling for said investigation to be launched.
One of the CMA’s key reasons for not launching an anti-competitive investigation is its conclusion that consumers – as in, music listeners – are not suffering (in anti-competition terms) from the current structure of the music industry.
The CMA ‘market study’ also considered the supply of recorded music to music streaming services, and – crucially – the supply of record company services to artists
“We consider that any competition interventions are unlikely to drive significant improvements to artist and consumer outcomes, such as to justify an [full market investigation].”
In its ‘market study’ conclusions, published in a 97-page paper today, the CMA wrote: “Based on our initial findings, as well as the representations made by the parties above, we believe there are reasonable grounds for suspecting that features of [UK music market] could be restricting or distorting competition in the UK.”
However, despite these concerns, the CMA then printed a series of conclusions that it says have steered it away from launching a full investigation into the market.
Those conclusions include:
- “We have considered the representations regarding certain specific features relevant to the supply of publishing services to songwriters. Based on the information received to date and our initial findings, our judgement is that we currently do not have reasonable grounds to suspect those specific features could be restricting or distorting competition in the UK.”
- “While we recognise that it may be desirable to seek improvements to the outcomes for some artists… generally we consider any competition concerns are unlikely to be significant and that the key drivers for any sub-optimal outcomes are unlikely to be competition-based concerns.”
- “Similarly, while we consider contractual clauses in the agreements between certain record labels and music streaming services may contribute to weak competition in the supply of recorded music to music streaming services, our initial findings suggest that competition is unlikely to be significantly more vigorous in the absence of such clauses (either individually or in combination). Instead, at this stage we consider any weak competition in this market is inherent in the full catalogue model observed.”
The CMA added in its summing-up: “We consider that any competition interventions are unlikely to drive significant improvements to artist and consumer outcomes, such as to justify an [full market investigation].”
The body says it now intends to pass its findings to the IPO (Intellectual Property Office), which is undertaking its own research into the UK music market.
One group that is happy with the CMA’s conclusions today is the BPI (British Phonographic Industry), which has successfully lobbied the CMA on behalf of the three major music companies.
Geoff Taylor, Chief Executive BPI, said: “We welcome the CMA’s preliminary findings, which have concluded that the streaming market is competitive, providing artists with more ways to release their music, and fans with more choice and value than ever before.
“We and our many and varied record label members are focused on investing in British artists, building their global fanbases, and sustaining the continued success of British music.
“We will continue to engage with the CMA and government to help ensure that the streaming market works to the benefit of artists, songwriters, record companies and fans.”
In the other corner of things: Merck Mercuriadis, founder and CEO of Hipgnosis Song Management.
Mercuriadis had been hoping to see the CMA raise tough questions over the three major music companies’ ownership of the three largest music publishing companies in the world – and whether or not that ownership structure was detrimental to the income of songwriters.
The Hipgnosis founder expressed disappointment today at what he deemed the “missed opportunity” for the CMA to tackle a perceived industry imbalance.
Said Mercuriadis: “We would like to thank the CMA for acknowledging in its report today the lack of transparency in the music streaming market, and for highlighting the continued dominance of the market by the major labels and recorded music, along with the severely adverse impact this is having on songwriters’ ability to earn a living.
“However, with 70% of all those responding to the CMA consultation calling for reform, it is regrettable that the CMA is not minded to investigate and address the clear failures its study identified.”
Today the CMA has not acted to address the impact on the creative songwriting community… [this] is a disappointment for songwriters who earn pitiful returns from streaming, not because there is not enough to go round, but simply because it is not being shared fairly and equitably.”
Merck Mercuriadis, Hipgnosis Song Management
He added: “The DCMS select committee in its July 2021 report on the economics of music streaming – “Music streaming must modernize. Is anybody listening?” – called for the CMA to address the economic impact of the music majors’ dominance.
“Today the CMA has not acted to address the impact on the creative songwriting community, and this is a missed opportunity to follow up on those concerns raised by MPs on the DCMS select committee. It is a disappointment for songwriters who earn pitiful returns from streaming, not because there is not enough to go round, but simply because it is not being shared fairly and equitably.
“Hipgnosis will continue to call for fundamental reform of a broken system which does not recognise the paramount role of the songwriter in the music ecosystem.
“We have always believed that the ultimate solution lies within the music industry itself and we will continue to advocate on behalf of songwriters with the major recorded music companies to push for a fair and equitable split. There would be no recorded music industry without songwriters.
“Legislative and government authorities have the power to redress the economic imbalance where major recorded music companies that own and control the major publishing companies are purposefully undervaluing the songwriter’s contribution. The IPO has a key role to play in redressing the imbalance and we will continue to support its work and efforts.
“Hipgnosis will continue to campaign for change at the highest levels, using our success to advocate and fight on behalf of the songwriting community and to take the songwriter from the bottom of the economic equation to the top.”
You can read the CMA’s summary and full report on its preliminary market study conclusions through here.Music Business Worldwide