On 26 July the CMA published an Update Paper in its music and streaming market study (launched 27 January).[1]  The Update Paper sets out the CMA’s preliminary findings halfway through its study into how well competition works in music streaming. This comes further to a call from the Department for Culture, Media and Sport (DCMS) for the CMA to look into issues it identified in its Economics of music streaming report.[2]

The Update Paper presents a largely clean bill of health, and the CMA has indicated that it is not minded to open an in-depth market investigation.[3] The CMA states that “the market is delivering good outcomes for consumers”.[4] It explains that consumers have easier, cheaper, and broader access to music than in the era of physical sales. And it finds that the cost to stream music has declined in real terms.

The CMA also comments that competition concerns raised by artists are “unlikely to be significant, and the key drivers for any sub-optimal outcomes are unlikely to be competition based concerns.” Although the CMA has preliminarily found that the recorded music market is concentrated, it finds that “the evidence does not show this is driving the concerns raised by artists.”  Rather the global music companies face disruption from alternative business  models (such as artist and label (A&L) service providers), and there are “more options than ever for artists to get their music to market”. The CMA finds artists’ complaints with low earnings are more likely to be attributable to oversupply of music content than a dearth of competition between labels.

What has the CMA found?

The CMA’s analysis focuses on the following segments: (i) music recording; (ii) music publishing; and (iii) streaming services.

In relation to music recording, the CMA has found that although the market is concentrated, “there is competition for some artists, especially those who are already popular or are likely to be.” It comments that alternative models, such as A&L providers, are challenging the global music companies, resulting in greater bargaining power for artists. As a result, the CMA finds that “new artists today are more likely to be offered higher royalty rates and shorter contract terms than in the past”.

Rather than adopting artists’ complaints that they are not paid enough due to lack of competition between labels, the CMA had found that oversupply is a more credible explanation for perceived low earnings. The CMA states that “vast back catalogues” and a “huge increase” in the number of artists “inevitably reduces the amount that most artists can earn”.

The CMA has also carried out a profitability analysis, and has found that the “current evidence does not suggest that market concentration is allowing the majors to make sustained and substantial excess profits” – i.e. indicating that there is sufficient competition in the market.

In relation to music publishing, the CMA finds that concerns that global music companies are leveraging their strength in music recording to shut out rivals are not supported by evidence. It comments that “the evidence suggests that the majors are not suppressing publishing revenues” and that it “appears unlikely that any strategy of disadvantaging the publishing business would be beneficial to a major’s business as a whole”, because they would likely lose songwriters to other publishers.

In relation to streaming services, the CMA finds that competition between digital streaming providers (DSPs) is “currently working reasonably well” for consumers. The monthly price of music streaming services is either free, or falling in real terms as the price of subscriptions has not kept pace with inflation. It finds that although the market is concentrated (with Spotify, Apple, Amazon, and YouTube taking the majority of consumers’ business), these firms are also not making sustained excess profits. In fact, it observes that “many services have low or negative operating margins”.

The CMA does identify that there are some barriers to switching between DSPs, but it comments that they are “not currently a major problem to the functioning of the market”, given the focus of DSPs for competing for new users. The CMA states that it will keep this under review as the market matures and switching becomes more important.

What are the next steps?

The CMA is consulting on its proposal not to make a market investigation reference until 19 August 2022. It is also taking feedback on the findings in the Update Paper in the same period.[5]

The CMA is due to publish its Final Report by 26 January 2023.

[1] See CMA, Music and streaming – Market study update, 26 July 2022, available at: 220726_Music_and_streaming_-_update_paper.pdf (publishing.service.gov.uk).

[2] See DCMS, Economics of music streaming – Second Report of Session 2021 – 22, available at: https://committees.parliament.uk/publications/6739/documents/72525/default/

[3] Although the CMA has indicated that it is not minded to make a market investigation reference at this stage, this does not preclude it doing so later. For example, in the recent Mobile Ecosystems market study, the CMA’s Interim Report stated that it was not minded to make such a reference, but the CMA reversed its position in the Final Report, and is currently consulting on a proposal to open a market investigation into cloud gaming and browsers.

[4] See CMA, Music and streaming market study – Executive summary, 26 July 2022, available at: Executive summary – GOV.UK (www.gov.uk)

[5] Interested parties can respond to the consultation and/or provide feedback on the Update Paper by emailing musicstreaming@cma.gov.uk.