In January, the Competition and Markets Authority (CMA) published a market study notice in relation to music streaming. Over the six months that followed, they received submissions on the potential scope of the study and also met with key stakeholders to discuss competition issues within the streaming market.
In July however, we reported that the CMA announced that they would not be proceeding with a full investigation.
In a submission to the CMA, the Union raised the following primary concerns in relation to this decision:
- The careers of musicians and songwriters have for years been hampered by the market dominance and power of the three major music companies: Sony, Warners and Universal.
- Google, Apple and Amazon have a suppressing effect on the price of music streaming. Companies such as Spotify, Deezer and Soundcloud, which focus primarily on music streaming, cannot put their prices up because they are competing with these corporations whose profits are derived from other areas of their business and who can therefore afford to run music streaming as a loss leader.
The aim of the #FixStreaming campaign
The CMA report looks at these issues, among others, and they highlight issues which evidence our concerns. However, their focus is on whether the issues are having a negative impact on consumers.
They repeatedly describe competition between the three major labels as weak, and describe their market dominance, but given this doesn’t have an immediate impact on consumers in their view then they don’t see a need to further investigate.
The MU’s aim with the #FixStreaming campaign is to ensure that revenue from broadcast of music – and from making recorded music available online through audio and audio-visual streaming platforms – is shared fairly with musicians and creators and that it plays its part in sustaining their careers. This is currently not the case and the situation stands to worsen over time.
We need to future-proof copyright law and industry practices to ensure that musicians and creators can still maintain careers. Otherwise, the long-term impact on the UK music industry, the UK’s economy and on consumers will be significant. British music can only be at its best and continue to be world-leading if those who make the music can continue to do so.
Top line statistics from the report
Here are some top line statistics from the CMA report that might be interesting or concerning to MU members:
- In 2021, more than 80% of music was listened to through streaming services.
- Streaming has driven an increase in recorded music revenues from the low point of £761 million in 2015 to £1,115 million in 2021
- Catalogue music (over 1 year old), “represents a very high proportion of streams (rising from 76% in 2017 to 86% in 2021).”
- Around 60,000 new tracks are added to Spotify every day.
- The headline price of subscriptions [£9.99] has stayed “remarkably stable over time”.
The CMA report highlights some interesting aspects of the music streaming market and does point to potential competition issues. Crucially, it says that a full market investigation is unlikely to deliver better outcomes for artists.
While there are some potential competition issues, therefore, we may be better to focus our #FixStreaming campaign on solutions delivered by other bodies such as the Government, Intellectual Property Office or through industry negotiations.
I have picked out some important sections of the report. Members who wish to write to the CMA in light of their decision not to carry out a full investigation, may wish to refer to some of the following issues.
The dominance of the majors
The report says that “the 3 majors’ individual and combined market share is persistently high. In terms of their share (by volume) of total UK streams, the majors accounted for over 70% in 2021 – a similar proportion as in 2015. Their music dominates the popular charts. The combination of the rights they hold in recordings along with the rights they hold in publishing, means that in 2021 they collectively had some form of rights in 98% of the top one thousand singles.”
It goes on to say that “smaller labels and providers account for around one quarter of streams, although only 2 have a market share in excess of 1%.” There are more artists in the streaming market now which will obviously affect per-stream rates.
The CMA says:
“The surge in artist participation has also impacted upon remuneration. Prices for music streaming services have been relatively stable for some time and tend to take the form of flat monthly fees. This means that with more artists and more streams being played, the average value of each stream and the average earnings per artist fall.
“Between 2014 and 2020 the top 1% of artists accounted for 78–80% of streams, and the top 10% for 98%.
“While the number of successful artists and tracks are increasing, the proportion of artists achieving more than 1 million streams per month remains small (in 2020, around 0.4%).”
Using data from the major labels, the CMA have estimated the amounts that music recording artists earn from 1 million streams per month. They estimate that this would earn an artist around £12,000 per year.
On this basis then, only 0.4% of artists are making £12,000 or more from streaming annually. The CMA states that “for all but the most popular artists it [streaming] cannot sustain a living."
Radio vs streaming
One of the Union’s biggest concerns in terms of musicians’ earnings is the potential for listeners to move from radio to music streaming over time. While radio attracts guaranteed royalties for all musicians, paid via the collecting society PPL, music streaming does not.
The CMA states that:
“51% of people listen to online music services at least once a week and 18% do so several times a day.
“The proportion of people accessing music in this way has grown – in 2015 it was around 16%, rising to 23% in 2017 and 45% in 2021.
“Despite the growth in streaming, radio remains the form of listening done by the highest proportion of people on a weekly basis. In Ofcom’s 2022 survey, 64% of respondents listened to a radio station (that plays music) at least once a week. However, in contrast to streaming, radio listening is declining over time – weekly reach for listening to live radio on a radio set fell from 83% of adults in 2015 to 63% in 2021, while streamed music rose from 16% to 45%.” This decline is much more apparent in younger listeners and is very concerning from the MU perspective.
The CMA report states that the 3 major label / publishers are able to exercise greater control over how their intellectual property is exploited than independents.
It also points to clauses in the contracts between the major labels and the streaming platforms that could weaken competition between the majors. For example, some clauses state that a major label must get equivalent terms to any other major label.
These clauses are not typically found in agreements between music streaming services and independent labels. The Union would argue that this is because of the independents’ lack of bargaining power.
If the majors control 98% of catalogue on platforms, they are bound to have better bargaining power and this perpetuates if they can muscle independents out of the market.
The CMA report says that the clauses could indicate that the 3 majors “do not intend to compete on price, which may in turn soften price competition.” In this instance, the ‘price’ referred to is the share of streaming revenue the major receives (not the price paid by consumers).
Majors vs independents
The CMA analysis “indicates that there has not been substantial expansion of independent record companies, with this largely being due to the scale advantages of the majors, which puts the majors in the strongest position to sign and retain artists, in particular the most successful artists.”
Outcomes for artists
One of the reasons that the CMA intends not to proceed with a full investigation is that they say “there is unlikely to be scope to improve outcomes for artists in a material way through greater competition.”
Essentially, they do not see a role for them to play in improving the market for artists at this point. From the Union’s perspective, this suggests we should focus our campaigning efforts elsewhere. That said, we will be writing to the CMA to challenge some of the points they’ve made which do appear to highlight competition concerns.
The Union and other creator-representative organisations have argued that it is in the majors’ interests to channel streaming revenue into the record label side of their businesses as opposed to the music publishing arms. This is because labels tend to pay out lower royalties than publishers.
Contrary to this, and without apparently examining this specific issue in much detail, the CMA report states “it appears unlikely that any strategy of disadvantaging the publishing business would be beneficial to a major’s business as a whole.
“If a major were to act contrary to the interests of songwriters by diverting revenues to recording instead of publishing, it would likely impact its ability to retain existing songwriters and compete for songwriting talent. The major’s publishing share would no longer be competitive, compared to other publishers, so the major would likely lose songwriters to other publishers.”
We would strongly refute this last point as the majors largely offer similar terms and have similar access to the streaming market. Songwriters don’t have a choice, not if they want to have the best chance of commercial success.
The CMA’s conclusion
The CMA’s judgement is that a full investigation “is not at this stage the appropriate way forward.”
They state that: “Initial findings have not identified any significant concerns in terms of consumer outcomes relating to music streaming.
“On the contrary, prices for consumers are dropping in real terms, consumers have easy access to large catalogues of music covering a vast array of genres and time periods for a fixed monthly price (or free, but with ads), and overall, consumer satisfaction with music streaming services is high.”
This fails to acknowledge the risks to the consumers in the longer term if artists cannot sustain a living and are lost to the industry. We will be making this point in our submission to the CMA by the deadline of Friday 19 August.
Members who wish to write to the CMA can find some further pointers via our recent news story, whereby we encouraged musicians to have their say and feedback on the decision.