LONDON — Britain’s competition regulator has said the big labels’ dominance of the streaming business is not holding back artists and the market is “on the whole” doing well for consumers. However, the regulator has warned it will be concerned if the three major labels or music streaming services begin to achieve “sustainable and substantial excess profits” – or if future acquisitions and mergers lead to a substantial lessening of competition.
The Competition and Markets Authority’s (CMA) 97-page interim report on the UK music industry, released on Tuesday, shows that streaming has transformed the industry, enabling more artists than ever to find an audience, but that the market remains difficult for many creators. with only a small minority able to earn substantial incomes.
In 2021, more than 138 billion music tracks were streamed in the UK, but less than 1% of all artists achieve more than 1 million streams per month, according to the CMA. He reports that one million streams will earn an artist around £1,000 ($1,200) after a record label and streaming service take their share of streaming royalties.
In response to its initial findings, the CMA said it was not proposing to launch a full “phase 2” market investigation into the UK streaming business due to competition concerns.
“For many artists, it’s as difficult as it always has been, and many feel they’re not getting fair treatment,” said Sarah Cardel, Acting Director General of the CMA. Cardell said the watchdog’s initial analysis shows that “results for artists are not driven by competitive issues,” but rather by the huge increase in the number of artists releasing music, coupled to the vast catalog of historical titles made available by streaming.
The regulator said the scale of the majors and their global reach means they can offer big moves to attract established artists, making it difficult for independent labels to compete and creating barriers to expansion. Nonetheless, competition to recruit artists remains intense, says the CMA, with traditional record deals increasingly disrupted by alternative distribution models such as artist and label service contracts.
The AMC says research indicates that new artists today are more likely to be offered higher royalty rates and shorter contract terms than in the past due to a competitive market.
“While majors’ profits have risen since piracy lows, current evidence does not suggest that market concentration is enabling majors to achieve sustainable and substantial excess profits,” the report said.
In the UK, the three majors – Universal Music Group, Sony Music Entertainment and Warner Music Group – account for 75% of the recorded music market, with independents accounting for the remaining 25%, according to the Association of Independent Music (AIM). Streaming now accounts for 83% of all music consumption in the UK, according to labels trade body BPI.
The CMA’s interim findings will be welcome reading for UK label executives who have come under sustained pressure from UK authorities, fueled by artists’ dissatisfaction with poor returns from music streaming.
Last July, a nine-month investigation into the streaming music business by the Digital, Media, Culture and Sport (DCMS) commission concluded that the recorded music market was “distorted” by dominant market share. owned by the majors. Since then, a bill requiring the industry to pay musicians and songwriters a greater share of streaming revenue has been debated in parliament but has not received enough support to proceed.
The CMA opened its market study review of the music streaming industry in January, looking at any potential competition concerns related to the dominance of major labels in the industry, as well as the critical role services play streaming companies like Spotify, Apple Music and YouTube in the booming digital music economy – and how those profits are shared with creators.
Just under 50 parties submitted written evidence to CMA officials as part of the study, including the three major labels, Google and independent music companies Believe, Beggars Group and Merlin. Trade groups BPI, the Association for Independent Music and IMPALA also submitted written responses, as did music creators.
These bids have seen major labels defend their market dominance on the grounds that they provide crucial investment in A&R and across the UK music industry, resulting in a healthy competitive market that benefits consumers.
Submissions from independent labels have mostly taken an opposing view, with AIM expressing “significant concern” that streaming success requires economies of scale that the market, as currently structured, does not allow. not up to individual companies to achieve.
Beggars Group went further, asking the CMA to examine how the majors’ market dominance affects streaming platforms. “We suspect that streaming services provide additional benefits to majors in terms of access, playlists, placements and data that they don’t provide to anyone else,” Beggars said. He called on the regulator to force the majors to “divest labels and catalogs” and to ban them from making new acquisitions.
Responding to potential competition concerns arising from licensing agreements between the majors and music streaming services, the CMA said its research had identified a number of clauses “that may have the effect of protecting the position of the majors” that the not usually found in agreements entered into by India.
In some cases, this includes obligations on streaming services to ensure that a significant share of tracks in global playlists globally matches its overall share of streams. However, the CMA said it found no evidence of contract terms “that impinge on streaming services’ ability to decide what music to include in playlists” and that the majors have no insight or input. in streaming service algorithms.
The market researcher also examined songwriters’ claims that major labels were suppressing publishing revenue – thereby driving songwriters’ incomes down – by maximizing revenue paid to the recording side of their businesses.
Noting that publishers’ share of revenue rose from 8% in 2007 to 15% in 2021, the CMA said its preliminary findings did not support the claims. “A strategy aimed at disadvantaging the publishing industry seems unlikely to benefit the entire business of a large company,” the report said.
Following its proposal not to carry out a full market survey of UK streaming activity, CMA officials will now consult with music executives on how to proceed before delivering its market survey. complete early next year (by January 26 at the latest).
“This can and should be challenged over the next six months,” tweeted Tom Graypresident of the artist group Ivors’ Academy and founder of the Broken Record campaign.
In a joint statement, Annabella Coldrickmanaging director of the Music Managers Forum and David Martin, CEO of the Featured Artists Coalition, said the CMA report does not represent the reality for struggling songwriters and artists, “particularly in the context of house profits. records, which are experiencing a double-digit year”. on annual growth.
Merck Mercuriadis, founder and CEO of Hipgnosis Song Management, also said the regulator’s decision not to investigate the UK music industry further was a missed opportunity to address the “pitiful feedback” songwriters are receiving. streaming. He said he would continue to push for “fundamental reform of a broken system”.
Other representatives of the UK music industry welcomed the CMA’s preliminary findings with Geoff Taylorchief executive of UK trade body BPI, said the organization would continue to work with the regulator to ensure the streaming market “works for the benefit of artists, songwriters, record labels and fans”.