The Competition and Markets Authority (CMA) – the UK competition regulator – recently announced its intention to launch a market study on music streaming. In a public letter written to the Department for Digital, Culture, Media and Sport (DCMS) Committee, CMA Chief Executive Andrea Coscelli noted that the music industry has “evolved almost beyond beyond recognition” and that the CMA intends to “do everything [it] can ensure that this sector is competitive, flourishing and works in the interests of music lovers”.
The announcement comes from the CMA’s new Digital Markets Unit (DMU), which has been tasked with overseeing a new “regulatory regime for the most powerful digital companies”. For example, the DMU is also currently investigating other digital activities such as Google’s “privacy sandbox”, Facebook’s use of advertising data and Apple’s AppStore.
AMC’s decision to launch this market study follows DCMS’s investigation into the music streaming economy, which concluded in March 2021. Nearly 300 written evidence was submitted and witnesses covering the industry as a whole were invited to seven oral sessions. The report, which followed the inquiry, called on the government to urgently address “fundamental and structural problems in the recorded music industry” and claimed that “streaming needs a complete reset “.
Therefore, the DCMS made several key recommendations:
1. CMA survey
The report raised concerns about the dominance of the majors (Sony, Warner and Universal Music) which hold a combined total global market share of 68% in recording and 58% in publishing. There is even evidence in the report to suggest that their share of the UK recording industry is in fact more concentrated.
To try to address this imbalance, the DCMS recommended that the government refer a case to the AMC for investigation. They suggested a “comprehensive market study of the economic impact of major label dominance” as “there are lingering concerns about the majors’ position in negotiations, allowing them to benefit at the expense of independent labels and self-liberated artists, especially with regard to playlist”. It was added that there should be no holdback on resources either: “the government must also provide the CMA with the necessary resources and staff to undertake this file to ensure that it can dedicate the necessary resources to this work”.
If the CMA finds that there has been anti-competitive behavior in the market, it has the power to compel companies to sell assets, as well as impose fines of up to 10% of their revenue. global business.
2. Other recommendations
Fair compensation for streaming
Fair compensation (meaning a sum due to artists when their song is played or released to the public) was one of the key points that Tom Gray’s #BrokenRecord social media campaign focused on. Under the Copyright, Design and Patents Act 1998 (CDPA), radio broadcasting in the UK is entitled to equitable remuneration, but not a stream of the same song (because equitable remuneration only takes traditional broadcasting into account).
Unsurprisingly, the majors testified in support of their position that a stream should be treated as a sale, which under the CDPA removes the right to equitable compensation. The DCMS disagrees with this ranking as it “fails to take into account the complexities of streaming that set it apart from other modes of consumption” and instead recommends that extending the right to equitable remuneration to streaming be a solution. simple and efficient. He suggested that an obvious route for the government is to “amend the CDPA 1988 so that the right of making available does not exclude the right to equitable remuneration, using the precedent created by the coexistence of the right of rental and of the Right to Fair Remuneration in the United Kingdom Act”.
This point was discussed in the government’s response. It was concluded that changing the CDPA might not be in everyone’s best interests and he will explore this further through engagement with the Music Industry Contact Group. We can expect an update in spring 2022.
Safe Harbor and YouTube
Services that host user-generated content (UGC), such as YouTube and TikTok, currently have an advantage over other streaming platforms due to copyright “safe harbor” rules (Section 14 of e-commerce directive). These rules essentially exempt the streaming services that host UGC from being responsible for content that infringes copyright, as long as they remove it promptly upon gaining “actual knowledge” of the infringement (i.e. i.e. once notified).
The DCMS recommended that the government introduce legal, but proportionate, obligations to cover licensing agreements for UGC hosting services. These should be able to regulate big players such as YouTube while encouraging new market entrants.
The Government’s response reiterated that the UK will not implement the EU’s Digital Single Market Copyright Directive (DSM Directive), and this recommendation draws direct parallels to the provisions of Article 17 of the directive. The government has instead decided to analyze how EU Member States have implemented Article 17 and the impact it might have on different parts of the music industry, UCG platforms and consumers. An update on this point is expected in the spring of 2022.
Legacy contracts and clawback – the “right of clawback”
The DCMS suggested that the government expand creators’ rights under the CDPA “by introducing a right of recovery of works and a right of contractual adjustment where an artist’s royalties are disproportionately low compared to the success of their music. “. 20 years is offered as a suggested period in order to strike a balance between the career of the artist and the need for labels to make a return on their investments in artists.
Currently, the UK is lagging behind countries like the US, Germany and the Netherlands which already grant these rights to their artists. The DSM Directive also introduced a contract adjustment mechanism which has already been implemented in a number of Member States – you can follow the European implementation of the DSM Directive on our tracker here.
If this legislative reform is put in place, artists would be in a much better position to negotiate with music labels.
However, the government has identified this area as another area requiring further research, particularly in relation to countries that have implemented similar measures. Again, an update on this point is expected in the spring of 2022.
CMA Market Research
Prior to its official launch “as soon as possible”, the CMA will determine the final scope of the market research and publish its “market research notice” and its “scope statement”. Market surveys last for a year and can lead to a variety of outcomes: from recommendations to the government to the initiation of a more detailed “market survey benchmark” (or remedy in lieu of a benchmark). Moreover, these studies can now also serve as a precursor to possible intervention under the new pro-competitive regime planned for digital markets. This regime will allow the CMA to regulate companies designated as having “Strategic Market Status” (SMS) as well as impose other pro-competitive remedies. More details on the new SMS regime can be found here and here.
Given that streaming now accounts for 80.6% of music consumption in the UK, it’s no surprise that artists and songwriting groups have welcomed the CMA’s announcement. Ivors Academy CEO Graham Davies notes that the study will be “an important step on the[e] path” towards a “healthy pipeline of diverse musical talent where fair compensation is given to the creators they listen to”. The Ivors Academy recently launched the Credits Due campaign, which calls for faster and more accurate royalty payments to composers and artists.
Although we have yet to hear the scope of the study and it will be some time before changes (if any) can be enacted, as said Tom Gray, “[t]he future of British music makers is a little brighter today.