Streaming market study update aims to keep harmony in UK music industry

The Competition and Markets Authority (CMA) has published (26 July 2022)  an update paper on its music streaming market study  and is consulting on its proposal not to make a market investigation reference (MIR) at the end of the market study. It has also sought views on the evidence and emerging thinking set out in the update paper, with responses invited by 19 August 2022.

Dominance of 'the majors' 

The CMA instigated the study following a recommendation by Parliament's Digital, Culture, Media and Sport Committee, which determined that the music streaming market in the UK is dominated by "the majors" – Universal Music Group, Sony Music Entertainment and Warner Music Group – particularly in the recorded music sector.

The majors' recording arms collectively hold a market share of over 70% of UK streams. This market concentration has persisted for some time, with concerns over the capacity of the independent music sector to compete with the majors for artist deals, and possible problems with the functioning of the market for streaming services, such as low publishing revenues from music streaming (relative to the recorded music sector).

Market broadly working

The most notable part of this update is that the UK regulator does not propose to make an MIR. Its view is that the streaming market is broadly working well and that the challenges facing artists and music companies are not necessarily driven by market concentration.

The CMA has determined that outcomes for artists (or, rather, the prospects of success for artists on streaming platforms) are being driven by other factors such as the number of artists sharing their music and the vast back catalogue available on streaming services.

It also rejects the view that the majors are suppressing publishing revenues from music streaming (in order to drive up recording revenues) by engaging in the cross-influence between their recording and publishing arms in their negotiations with the streaming services.

In regard to market concentration between the leading streaming services (such as Spotify, Apple Music and Amazon), the CMA found that it was currently "driving good outcomes for consumers", since the wide availability of content across all services meant that competition was centred around offering the best experience to consumers (through initiatives such as a pricing plans, personalised playlists and high-quality audio content). 

Future improvement

However, the update notes that the functioning of the streaming market could be improved and that the situation could deteriorate in the future. As a result, the CMA proposes to revisit its proposal not to make a MIR based on consultation responses and further analysis carried out during the remainder of its market study. Sarah Cardell, interim CEO of the CMA, stated that the regulator is "keen to hear views on our initial findings which will help guide our thinking and inform our final report". 

The CMA has listed some factors that may give rise to concerns in the future, which are mostly potential changes in the market that could harm consumer interests. These include if businesses within the streaming industry start making sustained and substantial excess profits, mergers and acquisitions within the music streaming sector and their potential effect on the relative bargaining power of music companies and music streaming services, and changes in the way that streaming services are accessed.

Two examples of changes in access to streaming services are the impact that the increasing use of streaming services on smart speakers has on consumer listening habits and the use of algorithms to create playlists which direct consumers to certain types of content. If the implementation of these technologies is not transparent, there is the potential that they will disadvantage music streaming services, artists and, crucially for the CMA, consumers.

Osborne Clarke comment

In line with its statutory deadline, the CMA has committed to publishing its final report by 26 January 2023. Businesses and individuals within the music streaming value chain should remain aware of this development and ensure they are aware of the publication of the final report. There is the possibility of further changes being made and a market investigation, if one takes place, may result in the recommendation of structural changes to the streaming market and its businesses.

The CMA recently consulted on its proposal not to make an MIR. Responses were invited by 19 August 2022. Those within the music-streaming value  chain, including music creators, music companies, music-streaming service providers , industry bodies, regulators and consumer groups, should remain aware of the outcome of this consultation and any further development in this market study.

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