Drums from the hills: The CMA’s market study into the music and streaming market

9 Feb 2022

The UK’s competition watchdog, the Competition and Markets Authority (CMA), began a market study into music and streaming services at the end of January. Are we about to witness major changes to the way the music industry works in this country? In this blog, DRD Senior Analyst, Toby Chapman, takes a look at what this means for the music industry, the CMA and the Government going forward.

Are we about to witness major changes to the way the music industry works in this country? The UK’s competition watchdog, the Competition and Markets Authority (CMA), began a market study into music and streaming services at the end of January.

This move was a long time coming. The regulator announced its intention to undertake a market study back in October 2021, following a recommendation by the House of Commons Digital, Culture, Media and Sport (DCMS) Committee in its September 2021 report into the economics of music streaming. It also fits the theme of intensified regulatory interest in the sector, with an ongoing Phase 2 investigation into Sony Music Entertainment’s acquisition of AWAL, scheduled for completion by the Spring.

The CMA, as well as its international counterparts, have also increasingly signposted a more bullish stance on the need to regulate the Big Tech companies, many of which are involved in music streaming. Concerns have also been raised more widely that music creators are being denied fair compensation for their art and its distribution. A raft of legislative and regulatory reforms is underway, alongside a recruitment drive for digital and tech-savvy newcomers to the CMA’s Digital Markets Unit (DMU).

Scope and potential next steps

The scope of the market study is broad. At a general level, the regulator will want to understand if the music streaming sector is operating in the interests of consumers, whether competition in the market is working well, and how the music value chain operates.

At a more granular level, it intends to examine the extent to which publishing arms of recorded music companies may strengthen the market power of such companies. It also aims to understand any possible barriers to market entry and expansion for smaller music companies and streaming services, and whether any inter-relationships and agreements between these groups may impact upon competition, innovation, and consumer outcomes.

The CMA’s market study is not a direct remedy in response to the DCMS Committee’s request for a “complete reset” of the music streaming industry. Nor is it an antitrust investigation into the conduct of particular companies. The CMA’s chief executive, Andrea Coscelli, is indeed keen to emphasise that the current market study is not a formal investigation. But it could have a big impact – and that is to a degree dependent on the amount of lobbying and noise that picks up around it in the coming months.

A market study can take up to a year to complete. The CMA can then do a number of things with its newly acquired knowledge: it can make recommendations to the Government about regulatory reform (as it did following its market study into digital advertising); it can start a more intrusive market investigation, following which it can impose legally binding remedies to market failures (as it did  following its investigation into the funerals sector); it can launch individual antitrust investigations against specific companies (as it did in the case of Google’s ‘Privacy Sandbox’); and/or it could make use of any new rules and powers which may be granted to the DMU following government proposals.

While the CMA will conduct its study independently of the findings and attitudes laid out in the DCMS Committee report, it is clear that MPs and other public policy stakeholders have already taken a close interest in this topic and will follow the CMA’s actions closely.

Toby Chapman, DRD Senior Analyst

Looking ahead

The statutory deadline for the CMA’s interim report is 26 July 2022 and for the final report 26 January 2023.

While the CMA will conduct its study independently of the findings and attitudes laid out in the DCMS Committee report, it is clear that MPs and other public policy stakeholders have already taken a close interest in this topic and will follow the CMA’s actions closely. Expect interested parties to start to turn up the heat on the issue.

The Committee members and others have emphasised the need for government action in this area to be led by clear supporting evidence, and they encourage transparency from the industry, as well as input from a range of interested parties. This should allow them to understand the complex but essential market intersection with streaming services, including  issues in copyright law, start-up culture, and the media landscape, and how best to align them with effective regulation that encourages competition and innovation.

The CMA is inviting comments on the issues raised in their statement of scope, as well as the areas for exploration proposed therein, and these can be submitted here. The deadline for submissions is soon – 17 February 2022. Stakeholders are however advised to approach the regulatory scrutiny the music and streaming sector is under in the UK holistically. The CMA’s study is likely to give MPs and Government the ammunition they need to propose wide-ranging reforms. Now is the time for considered engagement with politicians, regulators and Government Departments.

DRD is available to assist in this regard. Our team members have a wealth of expertise in competition matters from political, media and public policy perspectives, as well as direct music industry experience at board level.