The UK's Competition and Markets Authority (CMA) said this morning it would be carrying out a market study into the music streaming industry.
The announcement states that following discussion by the board, the regulator would now "consider and develop the final scope of the market study, before formally launching it as soon as possible."
In a letter to MPs [PDF], chief exec Andrea Coscelli wrote it was agreed that such work "supported a strategic goal of the CMA to foster effective competition in digital markets, ensuring they operate in a way that promotes innovation and the consumer interest."
This "strategic goal" follows a notable shift in the CMA to better regulate tech giants such as Amazon, Apple, and Google – all of which run music streaming services – with the formation of the Digital Markets Unit (DMU) subdivision earlier this year.
The DMU is currently "operating in shadow form pending legislation that will provide it with its full powers," the competition watchdog said, but pointed to ongoing investigations in that vein touching on Google's Privacy Sandbox tool, its duopoly with Apple in the smartphone sphere, and Facebook's use of ad data.
The CMA is also probing Sony's $430m acquisition of artist and label services provider AWAL, which it last month said "could reduce competition in the industry, potentially worsening the deals on the table for many music artists in the UK, and leading to less innovation across the industry" due to Sony's domination of the British industry alongside Universal and Warner.
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As for the streaming market study, which aims to identify and tackle "any competition and consumer issues," Coscelli said: "The UK has a love affair with music and is home to many of the world's most popular artists. We want to do everything we can to ensure that this sector is competitive, thriving and works in the interests of music lovers.
"Over the past decade, the music industry has evolved almost beyond recognition, with streaming now accounting for more than 80 per cent of all music listened to in this country. A market study will help us to understand these radical changes and build a view as to whether competition in this sector is working well or whether further action needs to be taken."
According to Statista, in Q1 2020 Spotify had the greatest market share for music streaming with 30 per cent, followed by Apple Music at 25 per cent, Amazon Music with 12 per cent, YouTube at 9 per cent, and Pandora with 5 per cent. The remaining 19 per cent falls to the "Others" category.
The top three do appear to be driving each other to do better for consumers. Spotify announced its intent to introduce a lossless audio subscription tier back in February, only for Apple to whip out a similar service at no extra cost in May, closely followed by Amazon.
Meanwhile, Spotify HiFi has gone AWOL despite its touted 2021 release. Though it has the largest share of music streaming subscribers, Spotify lacks the advantage of being a small part of a powerful tech megacorp.
However, the CMA noted that market studies merely "examine why particular markets may not be working well for consumers." Based on its findings, the watchdog can either recommend the government changes regulations or public policy; encourage the market to self-regulate; take law enforcement action against companies; move on to more in-depth investigation; or give the market a "clean bill of health."
The authority also hopes to protect "businesses from unfair practices" – presumably including the music producers and musicians as well as consumers. Spotify and many others use a freemium model with ad-supported tiers to grow subscribers, which musicians have long argued suppresses their royalty rates, although Apple Music does not. Both Apple Music and Spotify have still come under fire over royalty distribution: Apple pays around 1 cent a stream, while Spotify pays an average of about 0.33 cents to 0.5 cents per stream. Apple has said it pays 52 per cent of revenue to record labels. By comparison, Spotify pays out about two-thirds of its revenue to labels – presumably because of the ad-supported freemium model.
Although the probe only applies to the UK, the world – and especially the international music industry – will be watching with interest. ®