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UK Competition Regulator Launches Probe of Streaming Business

The CMA will review the music streaming business, looking at competition concerns resulting from major labels and digital platforms' dominance.

LONDON – The U.K. competition regulator has formally launched a review of the music streaming business, looking at any possible competition concerns related to the major labels’ dominance of the industry, as well as the integral role that streaming services like Spotify, Apple Music and YouTube play in the booming digital music economy – and how those spoils are shared with creators.

The market study was provisionally announced by the Competition and Markets Authority (CMA) in October. It follows a damning report by a Parliament committee, published last July, that recommended a “complete reset” of the streaming business, arguing it was unsustainable in its current form.

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Over the past three months, the CMA has been conducting a preliminary review of the British music business to define the exact scope of its inquiry. On Thursday (Jan. 27), the regulator, which exists independently to the U.K. government, announced that its focus will be on how well the streaming market is working for consumers, “paying particular attention to the roles played by record labels and music streaming services.”

As part of its assessment, the CMA said it will examine whether any music companies hold excessive power and whether a lack of competition has a negative impact on musicians, singers and songwriters. The regulator now has 12 months (up to Jan. 26 2023) to carry out its market study and deliver its findings, including any action it decides to take.

A key part of that process will require record companies, streaming services and music creators to submit a range of data to the CMA, potentially including confidential artist contract details and how revenues generated by music streaming are being shared between platforms, rightsholders and artists. Private meetings are also likely to be conducted between CMA officials and label and streaming service bosses, as well as other interested parties, like consumer and industry groups.

Failure to provide evidence or intentionally obstruct the CMA’s inquiry can result in financial penalties. It is a criminal offence for a person to intentionally alter, suppress or destroy any document which they have been required by the regulator to produce.

Possible outcomes from the 12-month market study include recommendations to the government to change regulations, or consumer or competition law enforcement action. A market study could also lead the CMA to encourage businesses to self-regulate or to launch a full-market investigation lasting up to 18 months. The outcome label bosses will most want is to receive is a “clean bill of health,” which requires no further scrutiny.

In the U.K., the three majors — Universal Music Group, Sony Music Entertainment and Warner Music Group — make up 75% of the recorded music market, with independents accounting for the remaining 25%, according to the Association of Independent Music (AIM). Streaming now accounts for 83% of all music consumption in the U.K., according to labels trade body BPI.

“A vibrant and competitive music streaming market not only serves the interests of fans and creators but helps support a diverse and dynamic sector,” said CMA chief executive Andrea Coscelli in a statement. “As we examine this complex market, our thinking and conclusions will be guided by the evidence we receive.”

The start of the CMA’s probe is the latest development in a long-running and high-profile assessment of the record business by U.K. authorities, fueled by artist discontent over low returns from music streaming.

For over a year, the United Kingdom, the world’s second-biggest exporter of music after the United States, has been leading a global charge to deliver fairer terms to creators, attracting support from stars like Paul McCartney, The Rolling Stones and Coldplay frontman Chris Martin, and winning the backing of several backbench politicians.

That led to a nine-month probe of the streaming music business by the Digital, Media, Culture and Sport (DCMS) Committee, which wrapped in July and concluded that the recorded music market is “being distorted” by the dominant market share enjoyed by the major labels.

In December, a proposed statute, the Copyright (Rights and Remuneration of Musicians) Bill, requiring the industry to pay musicians and songwriters a bigger slice of streaming revenue, was debated in Parliament, but failed to win enough support to progress.

Several government-led working groups with industry stakeholders are now taking place to examine some of the issues – and possible solutions – raised by the DCMS Committee, including the potential impact of bringing streaming in line with U.K. TV and radio broadcasts by obligating record companies to pay performers “equitable remuneration” on streamed music.

A separate “in-depth” phase two investigation by CMA into Sony’s $430 million acquisition of Kobalt Music Group’s independent distribution and label division AWAL is due to publish its provisional findings early next month.

“Streaming has led to an explosion of choice for music fans and creators in the U.K.,” said a spokesperson for labels trade body BPI on Thursday. They said the BPI would be engaging closely with the CMA “to help it understand the changes that streaming has brought to the music market.”