Streaming music is fair to both consumers and artists, says competition watchdog

Composers and musicians have long argued that streaming music treats them unfairly, with smaller artists earning tiny sums. But a UK competition watchdog has ruled that the streaming music industry is fair to both artists and consumers …

Background

Streaming music services like Spotify and Apple Music reach agreements with record labels for a split in revenues. This is normally done on a percentage basis, split between:

• Music labels
• Composers
• Musicians
• The streaming service

The economics are pretty brutal. When consumers are typically paying around $10 a month for unlimited music, that’s a tiny pie to divide. Add in the fact that the biggest artists account for the vast majority of the take, and that leaves even mid-sized artists earning pennies. The typical artist receives just a fraction of a cent per stream.

The UK competition watchdog the Competition and Markets Authority (CMA) carried out an investigation into whether the streaming music market was fair.

Streaming music is fair, says CMA

The CMA has today published its final report, and concluded that the streaming music industry is fair to both consumers and artists.

Unsurprisingly, it concluded that competition in the market had led to consumers paying less for music.

Consumers have benefited from digitisation and competition between music streaming services. Prices for consumers have fallen by more than 20% in real terms between 2009 and 2021 – with many services also offering music streaming for free with ads. The study found that there were around 39 million monthly listeners in the UK, streaming 138 billion times a year.

The CMA acknowledged the concerns of smaller and mid-range artists.

The CMA also heard concerns from creators – artists and songwriters – about how much they earn from streaming. With an increasing number of artists, tracks and streams, the money from streaming is shared more widely – with those that have the highest number of streams earning the most. The CMA found that over 60% of streams were of music recorded by only the top 0.4% of artists.

However, it said there was no evidence of any party making excess profits, and thus no opportunity for a greater share to be paid to artists.

Streaming music services in particular operate on razor-thin margins. Spotify has consistently struggled to make money, showing a loss almost every quarter since it started. Apple does not disclose the finances of Apple Music, but the company is believed to operate the service to increase the stickiness of the ecosystem, not to make a profit.

The issue is more to do with the split between artists and labels, but here the CMA concludes that things have actually improved in recent years.

Some parts of the streaming market have improved for some creators in recent years, with the CMA finding a greater choice of deals with record labels available. Whilst individual deals can vary considerably, the report highlighted on average royalty rates in major deals with artists have increased steadily from 19.7% in 2012 to 23.3% in 2021. For songwriters, the share of revenues going to publishing rights has increased significantly from 8% in 2008 to 15% in 2021.

9to5Mac’s Take

Disappointing as this will be to composers and artists, it’s hard to argue with the facts. The unequal relationship between labels and artists is nothing new, and the splits seen are not notably different to those which existed when physical media sales dominated. It’s always been the case that the artists at the top of the charts take home almost all of the money.

What has changed is that consumers are paying less for music than ever before. It is this, more than anything else, which has hurt composers and artists. Some have suggested we need a levy on streaming music services, paid by consumers and given directly to artists as an additional source of income. While I personally would support this, it seems unlikely to get the mass support required to make it happen.

Photo: Mark Cruz/Unsplash