Competition and Markets Authority Decides Against Launching a Music Industry Investigation — “No Evidence of Streaming Services Earning Excess Profits”

London, England. Photo Credit: Benjamin Davies

Last year, following an in-depth government analysis, the UK’s Competition and Markets Authority (CMA) unveiled plans for a “probe into music streaming.” Now, six months following the study’s start, the CMA has revealed that it doesn’t intend to launch a broader market investigation reference into the music industry.

The Competition and Markets Authority just recently detailed the decision not to pursue a full-scale investigation into streaming and the contemporary music industry. In brief, regarding the matter’s background, a British parliamentary committee conducted a much-publicized inquiry of its own between 2020 and 2021.

Said inquiry formally concluded with a final report in July of 2021, and among other things, the 115-page-long document called for a “complete reset” of the streaming space. Predictably, the multifaceted breakdown and its recommendations, along with reform support from high-profile artists, laid the groundwork for the CMA’s initially mentioned music industry probe.

Notwithstanding an investigation push from multiple indie organizations and companies, however, the CMA has opted not to make a market investigation reference into “the supply of music to consumers nor the supply of services connected with the supply of music to consumers,” as disclosed at the outset.

The CMA – which in February approved Sony Music’s AWAL buyout – explained the controversial decision in a “Market Study Update,” which spans a staggering 97 pages even after its authors made a number of redactions from the public version. Moreover, “update” is an important descriptor, for the CMA has signaled that it will roll out a “full report” by January 26th, 2023.

But the verbose “Market Study Update” already covers everything from a top-level look at the industry’s layout (including the role of majors, recorded music versus publishing, and much more) to the nature of agreements with leading streaming platforms.

Of course, the voluminous document identifies several interesting figures, such as the CMA’s estimate, based upon “data from the majors,” that one million monthly streams will deliver an artist a £1,000 (currently $1,202.90) paycheck – or just $0.0012 per play. Notably, the “analysis does not include earnings from overseas or from other sources such as live performance or publishing rights,” per the report.

Similarly, “Google estimated that it pays out around [55-60]% of ad revenues that it earns from music streaming on its YouTube UUC [user-uploaded content] platform, including for commercial and original music, and at times for multiple rights,” the text relays of data provided to the CMA.

Specifically in terms of the reasoning behind the CMA’s decision against spearheading an all-encompassing music industry investigation, though, the government organization stated: “Our current view is that the majors’ activities in publishing are unlikely to increase their bargaining position in a material way.

“At present we have not found evidence of close cooperation or cross-influence on recording and publishing terms within the majors. … These are largely organised as autonomous entities.

“Given the evidence on positive outcomes for consumers, the lack of sustained excess profits of record companies, and the declining share of music streaming revenues paid out to rightsholders, our current view is that the limited competition in the supply of music to music streaming services is not a substantial cause for concern,” the CMA likewise indicated.

Lastly, for the rationale behind the non-investigation, the CMA has “currently found no evidence of streaming services earning excess profits,” and “there is unlikely to be scope to improve outcomes for artists in a material way through greater competition, for example through a less concentrated market structure,” according to the Market Study Update.

The British Phonographic Industry (which quite conspicuously heaped praise upon indie professionals in a report last week) responded positively to the CMA’s “welcome” decision. The Association of Independent Music, for its part, said that the development “underlines the need for organisations across music to work together to secure positive outcomes for the sector.” And Hipgnosis head Merck Mercuriadis described the move as “regrettable.”