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The UK is one step closer to a full-blown market study of the major labels’ impact on the music industry.

In response to the recommendations of the recent UK parliamentary inquiry into music streaming economics, the British government has referred the matter of such a market study to regulator the Competition and Markets Authority (CMA).

We say ‘one step closer’ because the CMA is an independent body: the government can’t order it to examine a particular sector or company, it can only make referrals to it. The CMA will now decide whether to launch a probe into “the economic impact of dominance by the major music groups”.

It is already in the second phase of an investigation of Sony Music’s acquisition of AWAL, having concluded in the first phase that the deal raised competition concerns.

We covered the report from the Digital, Culture, Media and Sport (DCMS) committee that held the recent inquiry in July: you can read our analysis of its recommendations here, and if you’re really keen, you can read our free ebook gathering our coverage of the entire inquiry and the wider debates about artists and streaming.

More discussions required

A CMA referral was just one of the recommendations, so what is the government planning to do about the others? In short: lots of talking over the next 6-12 months.

It is creating a “music industry contact group with senior representatives from across the music industry” that will meet regularly over the next year to discuss “the key issues” raised by the inquiry.

Those include whether radio-style equitable remuneration (ER) should be introduced for streaming; how to make music industry contracts more transparent; and whether the UK should have an equivalent of the EU’s recently introduced ‘platform liability’ rules covering YouTube and other user-generated content services.

“Broader welfare issues, such as bullying, harassment and discrimination” will also be matters for this group to talk about. The government also says it will launch a new research programme and create two “technical stakeholder working groups”.

One will “work to agree standards for contract transparency and establish a code of practice for the music sector” and the other to “address data issues and develop minimum data standards for the industry”.

In six months, the government will review all this and decide whether to introduce legislation – a review process that will then be repeated in the autumn of 2022.

One key decision for the government will be who to include in that music industry contact group, with many companies, industry bodies and activists to choose from.

Having sparked the original inquiry with his Broken Record campaign, will Tom Gray be invited, for example? Or someone like musician Rebecca Ferguson for the group’s planned discussion of welfare issues, given her work on those issues?

Creator earnings study

There is more news from the government’s response to the inquiry tonight. It plans to “shortly” publish the findings of the ‘Creators’ Earnings in the Digital Age’ study commissioned by the UK’s Intellectual Property Office (IPO).

Watch out for this. The government describes the survey as “the most comprehensive study of music creators’ earnings ever completed in the UK”, but the research has sparked rows behind the scenes about what questions it was allowed to ask, and the level of cooperation it received from labels and streaming services.

(We say ‘behind the scenes’, but in the inquiry’s final session the IPO’s boss was put on the spot about the latter question, but swerved it by claiming that since the study was being conducted independently, he was “not directly involved” in the details.)

Today’s announcement does trail a few of the research’s findings, with the government saying it “highlights the complexity of artists’ remuneration, which is compounded by a lack of transparency” and “shows that earnings from streaming are distributed unevenly, with the largest share going to recording rightsholders, and the most popular artists receiving a much greater share of streaming revenue than lesser-known artists”.

The research will also conclude that “a sustained achievement of around 1 million UK streams per month may be a minimum threshold for making a sustainable living out of music (alongside other sources of income)” according to today’s announcement. Expect that suggestion to spark plenty of debate.

Black boxes left alone

Elsewhere in its response to the inquiry’s report, the government explained which recommendations it will not be taking forward.

For example it will not be requiring all publishers and collecting societies to publish ‘royalty chain information’ as the committee had suggested. “It [the government] questions whether this approach is feasible or practical: these parties are unlikely to have oversight of the entire chain, so will not be in a position to publish all of this information”.

The government won’t be poking its nose into any black boxes of streaming revenues either, despite the DCMS committee suggesting that this would bring “greater clarity as to what is genuinely impossible to allocate and what is mis- or un-allocated due to a lack of will”.

Sad news for fans of dirty laundry being aired in public: the government says that existing UK copyright law already covers this, and anyone cross about black boxes (we’re paraphrasing, of course) should complain to the IPO, which has powers to take action.

What about the streaming services? Here’s something that may slip under the radar now, but could be bigger news in the future.

The government agrees with the DCMS committee that the streaming services’ recommendation algorithms might benefit from a good prodding and poking. It’s going to ask another government body, the Centre for Data Ethics and Innovation (CDEI) to take a lead on any such research.

One entirely unsurprising aspect of today’s response: the government has not changed its tune on the European Copyright Directive and its Article 17 rules on platform liability. Having exited the EU, it will not be implementing the legislation in the UK.

Instead, it’s going to analyse the impact of those rules in Europe, including talking to the music industry about whether they have “improved the position of rightsholders entering into licensing negotiations with user-generated content platforms”.

With a number of EU countries yet to even implement the legislation, don’t expect any news on this front in the near future. But perhaps later in 2022.

Passing the YouTube buck

What about YouTube specifically? The DCMS committee had recommended that the service be considered for ‘strategic market status’. In the UK, that’s a status that enables stronger regulation of specific digital services.

Again, no immediate developments here: the government says that deciding who gets strategic market status (SMS) will be up to a new arm of the CMA called the Digital Markets Unit (DMU – hope you’re enjoying this, acronym fans!).

That system hasn’t even been set up yet, but in its response to the inquiry report today, the CMA seemingly kicks the ball right back to the government.

“Our understanding of the evidence presented to the Committee is that the concerns relating to the advantages which YouTube may derive from the ‘safe harbour’ regime are not primarily market power concerns but relate to market distortions and the music streaming ‘value gap’ under the current copyright regime,” said the CMA.

“These may potentially be better addressed by revising the copyright obligations which apply to user-generated content, something which the Committee itself has recommended.”

Finally, the campaign to secure tax breaks for British music companies akin to those for the games, animation and other creative sectors seems to have hit its own buck-passing roadblock for now.

“Tax policy is the responsibility of the Chancellor of the Exchequer and HM Treasury,” was the government’s response to that.

With the British economy currently being buffeted by the impact of Covid-19, the after-effects of Brexit AND now an energy crisis, the music industry may be frustrated in its attempts to secure a tax break in the short term.

The responses to the response

The DCMS committee’s chair, Julian Knight MP, made quite the impact during the inquiry, from giving a piece of his mind to UMG’s UK boss and Google’s senior policy executive, to out-of-the-blue Harry Potter references. No surprises, then, that his response to the government’s response today is feisty.

On the CMA referral: “Our report laid bare the unassailable position these companies have achieved. We provided evidence of deep concern that their dominance was distorting the market.”

And on the upcoming publication of the IPO’s creator earnings report: “Within days we expect to see the government’s own research published into the pitiful earning of creators in this digital age and hope it will corroborate what artists and musicians told us. We will be monitoring the outcome and what tangible steps the government pledges to take to redress this unfairness and reward the talent behind the music.”

British labels body the BPI has also issued a statement, which addresses the prospect of a competition investigation while suggesting that the government’s focus on industry talks rather than immediate legislation is to its liking.

“Competition in the UK music industry is fierce. As the Government observes, streaming has provided more routes to market for artists and creators. We note the Government’s response that the CMA is an independent regulator and any decision to conduct a market study rests with them. Should the CMA conduct a study, we look forward to detailing labels’ role in supercharging the careers of British talent within a complex and dynamic ecosystem,” said its spokesperson.

“At a time when much of the UK music sector has come under pressure as a result of the pandemic, recorded music has returned to growth and continued to invest, benefitting the wider music community when most needed. We welcome Government’s recognition of the need for a better understanding of the complexity of the music streaming market, and that industry action to address issues of concern is preferable to legislative intervention that may negatively impact performers, jeopardising the hard won return to growth after years of decline – and harming music creators and UK music’s global competitiveness.”

We will update this story with official statements from industry bodies and others over the course of the next day.

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