UK Government Goes Easy On Major Labels After DCMS Bashing

If you thought the music industry was guilty of wasting time by having meetings about meetings, man, you should get a load of the UK’s Parliament. The global entertainment business had its eyes fixed on Britain’s politicians this morning (September 22), as the country’s government – led by Prime Minister Boris Johnson – officially responded to a report by another group of politicians about the music industry. You may remember that report: Published by a Department of Culture, Media & Sport (DCMS) Committee in July, it called for government action on a number of music industry issues regarding streaming payouts, and rather seemed to revel in beating up the major record companies. The standout recommendation from the DCMS report was that the majors’ dominance of the UK record industry be referred to the UK’s competition watchdog – the Competitions and Markets Authority (CMA)… which has its hands full right now investigating Sony’s acquisition of AWAL. (We’ll pause here to point out what we’ve already pointed out, and will go on pointing out, on this subject: According to the economic evidence, four in every five streams of the average UK artist takes place outside their home nation. The music industry, and British artists with it, is irreversibly globalized. And yet – perhaps puffed up by a post-Brexit world? – some amongst the UK’s political class seem to think that legislative action in a single nation, where just 20% of streams of UK artists actually take place, can somehow meaningfully move the dial for British creators. This might have been true in 1991. It is far less so in 2021.) Clearly, the government and the CMA didn’t see each other’s working before they released joint response statements earlier today. Because the CMA’s statement (bolding MBW’s) read: “The CMA notes the [DCMS] Committee’s recommendation to the government regarding a market study examining the dominance of the major music groups. The CMA is liaising with relevant [governmental] Departments on this issue, and it is expected that this recommendation will be addressed in the government’s response.” But it wasn’t. Because the government’s response actually said: “The Government has directed the Committee’s recommendation for a market study into these issues to the Competition and Markets Authority (CMA). As an independent competition authority, it is for the CMA to decide how best to use its resources to deliver its objectives in making markets work well for consumers and businesses.” In other words: the CMA was waiting for a bit of direction from the UK government’s response. And the UK government response essentially said: Dunno, bit busy, you lot decide! To me. To you. On balance, the major record companies will likely be reasonably relieved about all of this. First of all – and most importantly – the UK government has declined to announce any legislative measures in its response to the major-bashing DCMS report.That same government has also – and crucially – not officially referred the issue of major label-dominance to the CMA. Instead, it’s suggested that the launch of any music biz-related CMA “market study”  – not the same thing as an investigation, a la the Sony/AWAL affair – should be a matter for the CMA to decide upon.

“THIS IS A COMPLEX AREA, SO IT IS VITALLY IMPORTANT THAT ANY ACTION BY THE GOVERNMENT BE LED BY ROBUST EVIDENCE.”

The industry will now wait and see what the CMA makes of the balance of power in the UK record industry, and whether it reckons this matter requires further examination. The UK government wrote in its response today: “‘The Government notes the DCMS Select Committee’s concerns about the possible market dominance of the major music groups and the potential for contractual agreements between the major music companies and streaming services to stifle innovation in the streaming market. “However, it also notes that the digital era has created many new and alternative ways for artists to create and release their music into the market place which were not possible in the physical era, including many independent labels, artists’ service companies, and the possibility for artists to upload their content directly on to streaming platforms such as Spotify. “This is a complex area, so it is vitally important that any action by the Government be led by robust evidence.” Now… time for a quiz! Do you think the global music industry has (a) Too many trade bodies and industry groups arguing with one another – very often at the direct monetary expense of the industry itself?; or (b) Not enough, and that more lobbyists, red tape and bureaucracy is exactly what the business needs? I’ll give you a hint as to where MBW is at on this subject: Today, in response… to the government’s response… to the DCMS’s response… to the economics of the modern music business, we received press release quotes from no less than eight not-for-profit UK trade bodies. The UK government, though, clearly believes its domestic industry needs more meetings. Perhaps, more meetings about meetings. It has newly recommended that there be three new music industry groups created so that stakeholders in the business can argue with one another:

1. A music industry “contact group” featuring senior representatives from across the music industry, which will meet regularly over the next 12 months to examine key issues including equitable remuneration, and the transparency of music biz contracts;
2. Two additional stakeholder “working groups”. The first will agree standards for contract transparency and establish a voluntary code of practice for the UK industry; the second will address data issues and develop minimum data standards for the music industry.

Research and discussion conducted by these groups will ultimately lead to the completion of a review process in autumn 2022, after which the government says it will, once and for all, “consider whether to take forward legislation in any areas”. In its official response today, the UK government added: “The government recognises that transparency in the streaming sector is an issue and that action in this area could be of significant benefit to musicians. The government’s view is that this is an issue that the industry can, and should, seek to fix itself.” Interestingly, the most influential new report from the UK government on the music industry might be completely separate to the DCMS Committee’s inquiry. The UK government is set to release its own report on “Creators’ Earnings in the Digital Age” imminently, which it calls “the most comprehensive study of music creators’ earnings ever completed in the UK”. The paper, commissioned by Intellectual Property Office, apparently “shows that the rise of streaming has brought great benefits to consumers and the music industry”. However, it also concludes that “many more creators are competing for a share of [revenues], and there are many different and strongly-held views about how streaming revenue should be split to ensure fair outcomes”. This is important, because according to the UK Government’s response today: “The evidence generated from the [DCMS] inquiry, the [DCMS] Committee’s report and the independent creators’ earnings research [in the upcoming paper] have provided invaluable insights into the streaming environment. They show that there is still work to be done to understand the problems musicians are facing, and what impacts the various solutions proposed might have on them and the wider music industry. “More targeted research and evidence is needed before the Government can decide what action it should take on some of the issues highlighted by the [DCMS] Committee.”

---