音樂和流媒體報告 Music and streaming Final report 20221129

Musicand

streaming

Finalreport

29November2022

TheCompetitionandMarketsAuthorityhasexcludedfromthispublishedversion

ofthemarketstudyreportinformationwhichitconsidersshouldbeexcluded

havingregardtothethreeconsiderationssetoutinsection244oftheEnterprise

Act2002(specifiedinformation:considerationsrelevanttodisclosure).The

omissionsareindicatedby[].[Somenumbershavebeenreplacedbyarange.

Theseareshowninsquarebrackets.][Non-sensitivewordingisalsoindicatedin

squarebrackets.]

4

Contents

1.Introduction 6

Context 7

StatementofScope,UpdatePaperandourconsultations 8

Background 11

Theimpactofdigitisationandstreaming 11

Themarkettoday 15

2.ValueChain 22

Overview 22

Musicrights 24

Musiccompanies 26

Themajors 26

Recordedmusic 29

Musicpublishing 37

Creators 41

Artists 41

Songwriters 52

MusicstreamingservicesandUUCplatforms 53

Musicstreamingservices 53

UUCplatforms 58

Themusicconsumer 60

Howdifferentpartsofthevaluechaininteract 63

3.Agreementsbetweenrecordcompaniesandstreamingservices 66

Rights,paymenttermsandothercommonclauses 66

Functionalityclauses 67

MostFavouredNationclauses(MFNs)onprices(PriceMFNs) 68

OtherMFNs,non-discriminationclauses,andplaylistingclauses 69

Mustcarryclauses 70

Changeofbusinessmodel 70

Confidentiality/NDAs 71

4.Analysisonhowwellcompetitionisworkingforconsumers 73

Thesupplyofrecordedmusictomusicstreamingservices 73

Thenatureandstrengthofcompetition 73

Bargainingpositionofmusicstreamingserviceswithrecordcompanies 75

Impactofcontractualclausesinlicensingagreementsoncompetitionbetween

recordcompanies 77

Majors’combinedactivitiesinlicensingrecordingandpublishingrights 81

Conclusions 82

Thesupplyofmusicstreamingservicestoconsumers 83

Natureandstrengthofcompetition 83

Barrierstoentryandexpansion 86

Barrierstoswitching 89

Barrierstoinnovation 91

Impactandtransparencyofplaylists 93

Conclusions 95

Futurecompetitivedynamics 97

5.Analysisonhowwellcompetitionisworkingforcreators 100

Artists 100

Marketconcentration 100

Howcompetitiontosignartistshasevolvedinthestreamingera 101

Barrierstoexpansioninrecordedmusic 102

5

Impactoftermsinmajors’contractswithmusicstreamingservices 103

Bargainingpositionandoutcomesforartists 112

Informationasymmetry,artistrepresentationandtransparency 117

Conclusion-artists 122

Futuredynamicsincompetitiontosignartists 123

Songwriters 124

Publishingshareofrevenues 126

Integrationofrecordingandpublishingbusinesses 132

Extenttowhichcompetitiontosignsongwritersisincreasingthepublishing

share 134

Tacitcollusion 139

Majors’influenceonCMOs 140

Otherconcernsraisedbysongwriters 142

Conclusion-songwriters 144

6.UserUploadedContent(UUC)platforms 148

TherelativebargainingpowerofUUCplatformsandrightsholders 149

ValuegapinwhatYouTubepaysformusiccomparedtoad-fundedmusic

streamingservices 152

YouTube’simpactonmusicstreamingservices 154

ScopeforincrementalrevenuesfromUUCplatforms 158

TheUUCpolicyframework 159

ContentmanagementsystemsandEUCopyrightDirective 160

OurfindingsonpotentialforUUCplatformstogrowmusicrevenues 161

Possibleissuestoconsideroncopyrightlegislation 162

7.Conclusion 163

6

1.Introduction

1.1On27January2022theCMAlaunchedamarketstudyintomusicand

streaming.

1

TheCMAconsultedonaStatementofScope.

2

Responsestothisconsultationwerepublishedon12April2022.

1.2On26July2022,theCMApublishedanUpdatePaper

3

settingoutitsearly

findingsfromthestudyanditsproposalnottomakeamarketinvestigationreference.TheCMAconsultedonthisproposalandresponsestotheconsultationwerepublishedon21September2022.Wehaveconsideredtheseresponsesandundertakenfurtherassessmentofthemarket.

1.3ThisFinalReportconcludesourmarketstudy,settingouttheconclusionswe

havereachedonthestateofcompetitioninthemarketswithinourscope.OurcoreconclusionisthattheCMAshouldnotmakeareferencetoamarketinvestigation–alengthyprocessthatwouldinvolveallstakeholdersinalongandcostlyproceeding.Wedonotseeaplausiblepathtoanyinterventionthatwouldproducebenefitsforconsumersorcreatorsthatwouldmeritareference.

1.4Wefirstdescribethecontextforthestudyandthebackgroundtothesector.

Weexplainhowthemarketswithinourscopefunction,includingthelicensingandcontractualarrangements.Wethenassesshowcompetitionisworkinginthedifferentmarketsandconsidertheimpactofuser-uploadedcontent(UUC)platformsonmusicindustryrevenues.Finally,wesetouttherationaleforourdecisionnottomakeareference.

1.5Themusicindustrycontinuestochange,inlightofnewtechnologyand

changesinthewaymusicisproduced,distributedandenjoyed.Ourmarketstudyhasconsideredonespecificelement–thefunctioningofthemarket.Therearewiderpublicpolicyconsiderationsthataffecthowthemusicindustryoperates,includingtheoverallbalancingoftheinterestsofmusiciansandtheiraudiences,thatareoutsidethescopeofourstudybutthatremainactivelyunderconsideration.Aswellasexplainingourdecisionandassessment,ourfindingsmayassisttoinformandsupportGovernmentandpolicymakers’considerationofthesewiderquestions.

1TheMarketStudyNoticeispublishedontheCMA’scasepage.

2TheStatementofScopeispublishedontheCMA’scasepage.

3TheUpdatePaperispublishedontheCMA’scasepage.

7

Context

1.6Aswellasitswiderculturalandsocialrole,musicisanimportantcreative

sectorfortheUKeconomy,in2021contributing￡4billiontotheUKeconomyand￡2.5billioninexports.

4

1.7However,thesectorhas–likemanyothers–beenhardhitbythecoronavirus

pandemic.Thefiguresaboverepresenta31%and15%decreaserespectivelyfrom2019,despiterepresentinganincreasefrom2020.

5

Livemusicinparticularwasheavilyimpacted,hurtingmusiccreatorsforwhomthishaspreviouslyrepresentedasignificantrevenuestream.Artistsweremuchmoredependentonotherrevenuesincludingthosefromstreaming.

1.8AninquiryintotheeconomicsofmusicstreamingbytheDCMSSelect

Committee,publishedinJuly2021,identifiedconcernsthatmusiccreatorswerenotgettingafairshareofstreamingrevenues.TheDCMSCommitteealsoraisedconcernsabouttheroleofthethreelargestglobalmusiccompanies,referredtoasthe‘majors’(SonyMusicGroup(Sony),UniversalMusicGroup(UniversalorUMG)andWarnerMusicGroup(WarnerorWMG)),recommendingthattheGovernmentrequestaCMAmarketstudyintowhattheCommitteecalled‘theeconomicimpactofthemajors’dominance’.

6

1.9Totakeforwardtheissuesitidentified,theDCMSCommitteemadeaseries

ofrecommendationsforbothlegislativereformandpolicyandregulatoryintervention.Inresponse,

7

theGovernmentsetoutarangeofactionstoconsidertheCommittee’srecommendationsandbetterunderstandtheissues.TheseincludetheestablishmentofaMusicContactGroupwithseniorrepresentativesfromacrosstheindustry;andthecreationoftechnicalindustryworkinggroupstoimprovecontracttransparencyandtackledataissuessuchastheprovisionofmetadataidentifyingcopyrights.

8

Alongsidethis,theGovernmenthascommittedtoaresearchprogramme,includingby:

4UKMusic,ThisisMusic2022,p11.

5UKMusic,ThisisMusic2022,p11.

6TheDCMSCommitteealsorecommendedthattheCMAconsiderexploringdesignatingYouTube’sstreamingservicesashaving‘StrategicMarketStatus’(SMS)undertheproposednewpro-competitionregimefordigitalmarkets.TheQueen'sspeechcommittedtopublishadraftBilltocreatenewcompetitionrulesforthelargestdigitalfirmswhichwouldbeoverseenbytheDigitalMarketsUnit.TheGovernment’sproposalsforsucharegimearesetouthere:Anewpro-competitionregimefordigitalmarkets-governmentresponsetoconsultation.Untilthatnewregimeisinforce,theCMAhasnopowertodesignatefirmswithSMSandthisrecommendationisthereforeoutsidethescopeofthismarketstudy.

7HouseofCommonsDigital,Culture,MediaandSportCommittee(2021),Economicsofmusicstreaming:GovernmentandCompetitionandMarketsAuthorityResponsestoCommittee’sSecondReport.

8Metadataisthedataassociatedwithtrackswhichprovidesinformationontheartist(s)andsongwriter(s),aswellasotherfeaturessuchaslength,genre,etc.

8

(a)theIntellectualPropertyOffice(IPO),on

(i)potentialoptionstostrengthencreatorrights(forexamplebyintroducingarighttoequitableremuneration

9

whenmusicisconsumedbydigitalmeans,arightforartiststorecapturetherightstotheirworksafteraperiodoftimeandtherighttocontractadjustmentiftheirworksaresuccessfulbeyondtheremunerationtheyreceive);

(ii)theliabilityofuser-generatedcontent-hostingplatformsforcopyright

infringementswithinsuchcontent;and

(b)theCentreforDataEthicsandInnovation(CDEI),ontheimpactrecommendationalgorithmsusedbystreamingservicesarehavingonmusicconsumption.

1.10TheGovernmentwrotetotheDCMSCommitteeon18May2022settingout

itsprogresstodateandaforwardlookforitsprogrammeofwork.

10

1.11TheGovernmentalsowrotetotheCMA,requestingitsconsiderationofa

marketstudy.FollowingconsiderationbytheCMA’sBoard,theCMAlaunchedamarketstudyintomusicandstreamingon27January2022.

StatementofScope,UpdatePaperandourconsultations

1.12AssetoutintheCMA’sStatementofScopepublishedon27January2022,

ourstudyconsidersthemarketforthesupplyofmusic,fromthecreatorsofmusicthroughtotheconsumer,inparticularviamusicstreamingservices.

11

1.13Inthiscontext‘creators’coversallthemanycontributorsinvolvedinthe

makingofmusic,butinthisdocument,unlessotherwisespecified,willtendtoreferparticularlytosongwriters(bywhichwemeanbothcomposersandlyricists)andartists(bywhichwegenerallymeanfeaturedartists

12

unlessstatedotherwise).

1.14TheCMA’smarketstudycoverstwokeylevelsofthemusicstreamingvalue

chain:

(a)Theproductsandservicesofferedbymusiccompanies,includinginrecordedmusicandmusicpublishing.WenotedinourStatementof

9Equitableremuneration,whichcurrentlyappliesintheUKinrespectofradioandTVbroadcastsandpublic

performances(eginpubs,clubs,shops,etc.),providesanautomatic,unalienable,non-transferablestatutoryrightforperformerstoshareinrecordingrevenues.

10Thisletterispublishedhere.

11SeetheCMANoticeof27January2022forthismarketstudy.

12Featuredartistsarethemainartistsfeaturedonarecording.Otherartistsandmusiciansmayalsocontributetotherecordingandarereferredtoasnon-featuredartists.

9

Scopethatmostofthepossibleconcernswithakeycompetitionorconsumerelementlinkbacktopossibleissuesinrecordedmusic.

13

Whileourinitialproposalwastothereforefocusonrecordedmusic,inlightofrepresentationsreceivedfromstakeholderswehavealsoconsideredmusicpublishinginmoredetail.Withinmusicpublishing,ourworkhasfocusedinparticularonwhethercompetitionissuesmaybedistortingtheshareofstreamingrevenuesthatispaidoutforpublishingrights.Aspartofourassessmentofthemarketwehaveexaminedthenatureofcompetitionandoutcomesforartistsandsongwriters.

(b)Theprovisionofmusicstreamingservicestoconsumers.Consumeroutcomesareanimportantfactorinourassessmentofthemarketasitisourstatutorydutytoconsiderwhetherthemarketisworkingintheinterestsofconsumers.Marketoutcomesforcreatorsareanintegralaspectofthis–consumersvaluecreativityalongsidethequalityandrangeofmusicsupplied–andareconsideredwithin(a)above.

1.15Inthecourseofourmarketstudy,awiderangeofconcernshavebeenraised,

manyofwhichrelatetohowthemarketfulfilsitswidersocialandculturalfunctionsandrewardsthebroadspectrumofthosewhocontributetomusic-making.Ourfocus,asaconsumerandcompetitionauthority,inthisreportisnecessarilylimitedtoaspectsofthemarketthatmaydistort,orarisefromadistortionto,competition.Ourcompetitionassessmentisonlypartofawiderpolicyandcopyrightframeworkaimedatensuringthatintellectualpropertyrightsareproperlyprotectedandrewarded,andthatthesupplyofmusicissafeguardedasthewayconsumerslistentomusiccontinuestoevolve.

1.16Wehaveconsultedalargenumberofpartiesthroughoutthismarketstudy

andgatheredabroadrangeofevidence.ThishasinvolvedahighvolumeofsubmissionsfrompartiesinresponsetoourStatementofScopeandUpdatePaper,numerousmeetingsanddiscussions,andourformalrequestsforinformationtomarketparticipants.Theseinformationrequestsenabledustointerrogatekeyinternaldocuments,includingcontracts,strategypapers,researchandfinancialdata.Wearegratefultoallthosepartieswhohaveengagedwithus,eitherpubliclyorinconfidence,andinformedourmarketstudy.

1.17InresponsetoourStatementofScopewereceivedcallstoconductamarket

investigationfromfourrespondentsacrossthefollowingfourmarkets:(a)Thesupplyofrecordedmusictomusicstreamingservices;

13Seeparagraph85oftheCMA’sStatementofScope.

10

(b)Thesupplyofmusicstreamingservicestoconsumers;

(c)Thesupplyofrecordcompanyservicestoartists;and

(d)Thesupplyofpublishingservicestosongwriters.

14

1.18TheCMAhasthepowertomakeamarketinvestigationreferencewhenthe

findingsofamarketstudygiverisetoreasonablegroundsforsuspectingthatafeatureorcombinationoffeaturesofamarketormarketsintheUKprevents,restrictsordistortscompetitioninconnectionwiththesupplyoracquisitionofanygoodsorservicesintheUKorpartoftheUK(the‘reasonablesuspicion’test).

15

16

1.19AdecisionwhethertomakeareferenceismadebytheCMA’sBoard,in

considerationoftheorganisation’sfullrangeofprioritiesandobjectivesandtakingintoaccounttheCMA’spublishedguidance.

17

Inthiscase,akeyquestioniswhetherthereareimpactsoncompetition(sometimestermed‘marketfailures’)thatwouldbestbeaddressedinamarketinvestigation.

1.20WepublishedourUpdatePaperon26July2022.IntheUpdatePaperwe

consultedonourinitialviewthatthereasonablesuspiciontesthadbeenmetinrelationtothefirstthreemarketssetoutinparagraph

1.17

above,butnotinrelationtothefourthmarket(thesupplyofpublishingservicestosongwriters).Wesaidinrelationtothemarketswherethereasonablesuspiciontesthadbeenmetthatwedidnotconsiderthatareferencewouldbeappropriatetakingintoaccount,inparticular,thescaleofthesuspectedproblemsandwhetherareferencewouldbethebestmechanismtodeliverbetteroutcomes.

18

WesaidwewouldrevisitourprovisionalconclusionsintheUpdatePaperinlightoftheconsultationresponsesthatwereceivedandourfurtheranalysisduringtheremainderofthemarketstudy.

1.21Wereceived75responsestoourUpdatePaperconsultation.Ofthose

responses,wereceived:

(a)5responses(allcomingfromorganisations,includingallthreemajors)thatsupportedourproposalnottomakeareference;

14SeethesubmissionsofTheIvorsAcademy,#BrokenRecordCampaign,theEuropeanComposerandSongwriterAllianceandfromanartistmanagementcompanyonourcasepage.

15Section131oftheEnterpriseAct2002.

16SeeAirwaveSolutionsvCMA[2022]CAT4,paragraphs8to12.

17OFT511,paragraph2.1,containsalistofrelevantcriteriawhichmustbemetfortheCMAtoproposemakingareference.Evenifthesecriteriaaremet,theCMAretainsadiscretiontodecidewhetheritisappropriatetomakeareference.

18Seeparagraphs6.14to6.21oftheUpdatePaper.

11

(b)50responses(comingfrom7organisationsandacademics,andfrom43individuals)thatopposedourproposalnottomakeareference;

(c)11responses(includingthosefrom6individuals)thatweresilentontheissueofareference;and

(d)afurther9responseswheretherespondent’sstanceonourproposalnottomakeareferencewasunclear.

1.22Theresponsessupportingourproposalnottomakeareferencedidnot

discussthereferenceissueatlength.Onerespondent(UMG)wentfurtherthantheothers,arguingthatthereasonablesuspiciontestwasnotmetastheconcernsidentifiedweredeminimis.ForthereasonssetoutinChapters4and5below,wedisagreewiththisrepresentation.

1.23Themajorityoftheresponsesinfavourofareferencefocussedonissues

relatingtopublishingrightsand/ortheinterestsofcreators(artistsand/orsongwriters)ratherthanthoseofconsumers.AnumberofthemarguedthattheCMAshouldfindthatthereasonablesuspiciontestwasmetinrespectofthemarketforthesupplyofpublishingservicestosongwriters.SomesuggestedfurtherareasfortheCMAtoinvestigate.

1.24OurdetailedconsiderationoftheserepresentationsissetoutinChapters4

and5below.Forthereasonselaboratedoninthosechapters,weconsiderthatthe‘reasonablesuspicion’testhasbeenmetinrelationtoallfourmarkets

setoutatparagraph

1.17

above.

1.25AssetoutinmoredetailinChapter7,wehavedecidednottomakeamarket

investigationreferenceonthebasisofacombinationoftwomainfactors:

(a)thescaleofthesuspectedproblemisnotsogreatthatareferencewouldbeanappropriateresponse;and

(b)areferenceisnotlikelytobethemostappropriatemechanismforassessingtheissuesanddeliveringbetteroutcomes.

Background

Theimpactofdigitisationandstreaming

1.26Digitisationandtechnologicalchangehavehadaprofoundimpactonthe

musicsectoroverthelasttwentyorsoyears.Inparticular,theabilitytolistentomusicthroughdigitalaudiofilestransformedconsumerbehaviourandexpectationstowhichthesectorhadtorespond.Itisnolongernecessaryto

12

visita‘bricksandmortar’shoptopurchaseaphysicalCDorrecordinordertohaveaccesstothemusicyouwant.

1.27Thegrowthoftheinternetenabledaudiofilestobesharedandgave

consumersaccesstovastlibrariesofmusicattheclickofabutton.

1.28However,digitisationinitiallyledtoanincreaseinillegalfilesharing.Thishad

aprofoundeffectontheindustry.SalesofCDs,bothsinglesandalbums,fellconsiderablyand,significantly,musicindustryrevenuesdroppeddramatically.Between2001and2015,UKrecordedmusicrevenuesdroppedaround60%

from￡1,868millionto￡761million(see

Figure1.1

).

1.29Inresponsetothisriseinpiracy,newmodelsforlisteningtomusicemerged.

InitiallythiswasintheformoflegaldownloadsofmusicsuchasthroughApple’siTunesstore.Consumerswereabletopurchaseindividualtracksoralbumsthattheyownedandcouldlistentowhentheyliked.Thishadsomelimitedsuccessinreversingtherevenuedecline.

1.30Musicstreamingserviceschangedthispictureagain.Thefirstoftheseinthe

UKwasSpotifyin2008.Incontrasttothe‘download’model,streamingservicesgiveconsumersongoing,legalaccesstovastcataloguesofmusicaspartofasubscriptionorforfreeiftheyarewillingtolistentoadvertisements.ThishasnowbecomethedominantmeansofconsumingmusicintheUK–in2020,morethan80%ofmusicsaleswerethroughstreamingservices.

19

1.31Importantlyforthemusicindustry,streaminghasdrivenanincreasein

recordedmusicrevenuesfromthelowpointof￡761millionin2015to￡1,115millionin2021(see

Figure1.1

).StreamingnowaccountsforaroundthreequartersofUKrecordedmusicrevenues.Whilerevenuesareincreasing,recordedmusicrevenuesinrealtermsremainsignificantlybelowtheirpeakin

2001.

19BPI(2021),BPIpublishesitsyearbook“AllAbouttheMusic2021”.

13

Figure1.1:UKinflation-adjustedrecordedmusicrevenuesbetween2000and2021byformattype

Source:CMAanalysisofdatafromtheBPI.

Notes:InflationadjustmentusingtheONSCPIIndex22June2022,2021priceyear

1.32Thepredominantmodelforstreamingservicesis‘allyoucaneat’–thereare

noadditionalchargesforlisteningtolotsofmusic.Aswediscussbelow,thishasimplicationsforcompetitionandthevaluechain.InDecember2021,therewere39millionmonthlyactiveusersofmusicstreamingservicesintheUK.

20

Intotal,trackswerestreamedmorethan138billiontimes

21

in2021.

22

Figure1.2:TotalnumberofmonthlyactiveusersandstreamsintheUK,2021

Source:CMA

Notes:WhenpresentingthenumberofstreamsreportedbyOfficialCharts,theCMAcaveatsthatsomestreamsandtracksareexcludedfromtheOfficialCharts’reporting.OfficialChartsexcludestrackswithlessthan100streamsonanygivenmusic

20CMAanalysisofdatafrommusicstreamingservices.Monthlyactiveusersarethenumberofuniqueuserswhostreamontheplatforminagivenmonth.Ifthesameuserstreamsonmultiplestreamingservicestheywouldbeconsideredamonthlyactiveuseroneach.

21Thisincludesofficialad-fundedmusicstreamsonYouTube.See

Table2.11

.

22CMAanalysisofdatafromOfficialCharts.OfficialChartsisajointventureoperationownedbytheBPI(representingtheBritishrecordedmusicindustry)andtheEntertainmentRetailersAssociation(representingentertainmentretailersanddigitalservicesfromHMV,supermarketsandindiestoresthroughtoAmazonMP3,SpotifyandNetflix).Theroleofthecompanyistocommission,market,distributeandmanagetheUK'sofficialmusicandvideocharts.SalesdataiscurrentlycollectedonOfficialCharts’behalfbythemarketresearchcompanyKantar.SeeOfficialChartswebsite.

14

streamingserviceandusergeneratedcontent.Itonlyincludesstreamswheretheuserstreamsforover30secondsand,forsomemusicstreamingservices,only'toptracks'arecollected.Asaresult,thedatamayrepresentaslightunderestimationofthetotalnumberofstreamsinthemarketandaffectsthenumberofstreamsreportedonsomemusicstreamingservicesmorethanothers.

1.33Allthemostpopularstreamingservicesoffera‘fullcatalogue’ofmusic.

23

A

singlesubscriptionoraccountallowsconsumerstolistentoalmostalltherecordedmusictheyknowandlove.Itisnotnecessarytohaveadifferentsubscriptionoraccountfordifferentgenresofmusicorformusicownedbydifferentmusiccompanies.Mostmajorstreamingservicesoffercatalogueswithmorethan75milliontracks.

1.34Streamingservicesalsoofferarangeoffeaturesthat