UK’S COMPETITION AND MARKETS AUTHORITY CONCLUDES THAT DIGITAL MUSIC MARKET IS A WELL-FUNCTIONING MARKET

UK’S COMPETITION AND MARKETS AUTHORITY CONCLUDES THAT
DIGITAL MUSIC MARKET IS A WELL-FUNCTIONING MARKET

On November 29th 2022, the UK’s Competition and Markets Authority (CMA), published its final report on the economics of music streaming and the sector’s commercial practices. These are their most important findings:

• Highly competitive environment for artists* – “Reduced barriers to entry and more choice on how to distribute music has meant there are more artists than ever and, therefore, creators face more artists and songs to compete with for streaming revenues. Not only that, but the convenience of streaming means that older music is enjoying a resurgence of popularity, meaning that today’s artists need to work harder than ever to grab listeners’ attention.”

• Artist choice – “There is now more choice for artists about which type of deal they would like to agree, from DIY distribution, artist and label (A&L) services, or more traditional record deals. Some new artists have greater leverage when negotiating a record deal with a label if they have already built a strong fanbase and online presence”

• No excess profits from major record companies – “Whilst majors’ profits have been increasing since the lows of piracy, our profitability analysis has not found evidence of substantial and sustained excess profits by the majors. This is consistent with our overall finding that there is unlikely to be scope to improve outcomes for artists substantially through increased competition.”

• Analysis of contracts shows improving situation - “Analysis of new contracts signed by the majors with new artists for multi-track deals (meaning, albums or extended play (EP) records) shows that, between 2012 and 2021:

• • the average gross royalty rate has increased from 19.7% to 23.3%
  • the proportion of contracts where labels own copyright of recordings in perpetuity has reduced from 66% to 26.4%
  • the average number of minimum commitment periods (where a period is defined by a commitment to produce a multi-track output such as an album) has fallen from 3.8 to 3"

• No market investigation – “The costs, risks and uncertainty created by a market investigation (which could run for 2 years) would be imposed on the industry and borne, ultimately, by consumers. We have therefore decided to not undertake a market investigation.”