This month’s CLIP is an article on Competition Policy International relating to competition in music streaming. The BPI has estimated that streaming now accounts for some 80% of UK music consumption and it has undoubtedly become an important way for artists to reach their fans.
The article notes that vigorous competition exists between the various streaming platforms such as Spotify, Apple Music and Deezer. It briefly highlights a number of concerns expressed by various parties around matters such as revenue payments to artists and commission fees charged by Apple and Alphabet. (We have previously written about Spotify’s complaint to the European Commission about Apple’s fees in the context of the Epic Games v Apple dispute, see here.)
However, the focus of the article is on whether competition concerns arise in relation to:
- the pro rata royalty allocation method adopted by the streaming platforms; and
- the role played by playlists in driving streams and the way content is selected for those playlists.
The pro rata model typically used by platforms distributes revenue on the basis of total listens by all users. This means that even if an individual user never listens to the most popular artists, in effect a percentage of that user’s subscription payments are still distributed to those artists instead of the less well known artists that the user actually listened to. The article advocates a “user-centric payment system” through which royalties generated by an individual user’s subscription are split between the artists that each individual actually listens to. The authors suggest this would prevent harm to competition, variety, innovation and diversity in music creation, although there is no discussion of how expensive it might be to introduce such a system.
The authors note that playlists are an invaluable means of introducing listeners to new music and an extremely important source of streams on music platforms. Although some playlists are user created and some are created by third parties such as record labels, a significant number are proprietary playlists created by the music platforms themselves, often through the use of algorithms to curate the songs based on user preferences. The authors suggest that music platforms might be incentivised to include songs from major record labels in such playlists due to factors such as contracts with record labels including minimum payment guarantees. The authors also query whether the data that music platforms hold on listeners’ streaming choices should be made available in order to enable third parties to develop personalised playlists, and to create a competitive market for such playlists.
The article contains a number of interesting stats which the authors use to support their call for greater transparency and auditability of playlists. While not everyone will agree with their conclusions, there has been increasing regulator activity in this sector. Both the Commission and CMA have recently proposed and consulted on new measures to ensure effective competition in digital markets (see e.g. here and here), and it’s worth watching out for the potential impact these proposals might have on the music streaming industry.