On 27 January 2022, the Competition and Markets Authority (the CMA) formally launched a market study into music streaming services.
The market study will look at whether competition in the music streaming value chain is operating in the interest of consumers, and whether competition is working well. It will focus on three key areas: competition between music companies; competition between music streaming services; and the impact on competition of relationships between music companies and music streaming services.
The CMA is currently seeking industry stakeholders’ views on the proposed scope of the market study. The consultation is open until 17 February 2022.
What is a market study?
Market studies are conducted under the CMA’s general review function pursuant to the Enterprise Act 2002 (as amended by the Enterprise and Regulatory Reform Act 2013). They are examinations into the causes of why particular markets may not be working well, taking an overview of regulatory and other economic drivers of consumer and business behaviour.
The CMA gathers the required information during the market study by issuing information requests. Where necessary, the CMA will use its statutory investigatory powers to ensure that the information requests are answered completely and in a timely manner. The CMA may use its powers to require any person to attend a specified place to give evidence; require any person to produce specified documents or categories of documents; and require any person carrying on business to supply specified forecasts, estimates, returns or other information. Importantly, the CMA has the power to impose penalties for failure to comply. Penalties may be imposed in the form of a fixed amount, by reference to a daily rate, or using a combination of the two. Maximum penalty amounts are £30,000 (in the case of a fixed amount) and £15,000 (in the case of a daily penalty).
Why was the market study launched?
Streaming has transformed the music industry landscape. It has helped to restore growth in the sector and made it easier for new artists to share their music. However, while this shift in how music is accessed has had some clear benefits, some stakeholders have voiced concerns that the streaming market may not be working as well as it ought to. In particular, last year’s publication of the House of Commons Digital, Culture, Media and Sports Committee’s (the Committee) report on the economics of music streaming highlighted that the main issues in the market relate to remuneration, contractual structures, lack of transparency, and competition.
The Committee made a number of recommendations for both legislative reform and policy and regulatory intervention, including:
- recommendations relating to creator remuneration and music rights – such as a right to equitable remuneration; a right for artists to recapture the rights to their works after a period of time and a right to contract adjustment if their works are successful beyond the remuneration they receive; improving contract transparency; and tackling data issues, such as the provision of metadata identifying copyrights;
- recommendations relating to music streaming services – such as research on the impact of streaming services’ algorithms; ensuring transparency regarding payments for playlists; greater licensing obligations on services hosting user-generated content; and the clarification and enforcement of copyrights applying to livestreaming; and
- recommendations relating to competition – a market study by the CMA into the economic impact of the major music groups’ (Sony Music Group, Universal Music Group and Warner Group) dominance in the market; and regulation of competition issues caused by vertical integration and leveraging through the government’s proposed pro-competition regime for digital markets.
After the publication of the report, the government launched a consultation on the proposed pro-competitive regime for organisations active in digital markets overseen by the Digital Markets Unit (the DMU) within the CMA. The DMU will be given extensive enforcement and investigative powers, including to impose significant financial penalties. The consultation closed in October 2021 and the government is currently analysing feedback. More detail on the proposed new regime can be found on reedsmith.com.
The government also noted the Committee’s concerns that the possible market dominance of the major music groups and the potential for agreements between them and streaming services can stifle innovation. However, it expressed the view that the digital era has also created many new opportunities for artists to create and release their music without the involvement of those groups. Therefore, any action by the government would necessarily be led by extensive evidence. The government has written to the CMA, which responded in October 2021 by indicating its intention to launch a market study.