Music industry

Streaming market research update aims to maintain harmony in UK music industry – Osborne Clarke

Music streaming companies and individuals should stay abreast of developments ahead of the final report in 2023

The Competition and Markets Authority (CMA) has published (July 26, 2022) an update document for its market study on music streaming and consults on its proposal not to make a market investigation referral (MIR) following the market study. It also solicited opinions on the evidence and emerging thinking presented in the update document, with responses invited by August 19, 2022.

Domination of the “majors”

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

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

The market works well

The most notable part of this update is that the UK regulator is not offering to create a MIR. His view is that the streaming market is functioning well overall 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 artists’ prospects for success on streaming platforms) are determined by other factors such as the number of artists sharing their music and the vast catalog available on the services. streaming.

It also rejects the idea of ​​majors removing publishing revenue from music streaming (in order to increase recording revenue) by engaging in cross-influence between their recording and publishing branches in their negotiations with streaming services.

Regarding market concentration between major streaming services (such as Spotify, Apple Music and Amazon), the CMA found that it is currently “generate good results for consumers“, as the wide availability of content across all services meant that competition was centered on providing the best experience to consumers (through initiatives such as price plans, personalized playlists and audio content High quality).

Future improvement

However, the update notes that the functioning of the streaming market could be improved and the situation could deteriorate in the future. Therefore, the AMC proposes to revise its proposal not to do RIM based on the responses to the consultation and further analysis carried out during the remainder of its market research. CMA acting CEO Sarah Cardell said the regulator is “eager to hear opinions on our initial findings that will help guide our thinking and inform our final report”.

The AMC has listed some factors that may cause concern in the future, which are mainly potential changes in the market that could harm the interests of consumers. These include whether companies in the streaming industry begin to achieve sustained and substantial excess profits, mergers and acquisitions in the music streaming industry and their potential effect on the relative bargaining power of music companies and services. music streaming, and changes in the way streaming services are accessed.

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

Commentary by Osborne Clarke

In line with its statutory deadline, the CMA has committed to publishing its final report by January 26, 2023. Companies and individuals within the music streaming value chain should remain aware of this development and ensure that they are informed of the publication of the final report. It is possible that further changes will be made and that a market investigation, if conducted, may result in the recommendation of structural changes to the streaming market and its business.

AMC recently consulted on its proposal not to do RIM. Responses were invited by August 19, 2022. Players in the music streaming value chain, including music creators, music companies, music streaming service providers, industry, regulators and consumer groups should be kept informed of the outcome of this consultation and of any further developments in this market research.

If you would like to discuss this article further, please do not hesitate to contact one of our experts, or your usual Osborne Clarke contact.