As per a report published by MIDiA, music publishing has seen an accelerated rate of growth in the past 3 years, with an increase of 12% in 2018 totalling $7 billion in revenue. With questions arising about the markets potential to grow further in the next decade, I will be analysing the challenges and opportunities for music publishers and rightsholders as we enter the 2020’s.
Global Music Markets:
A key thing to note as we talk about growth both within music publishing and the wider music industry is the globality of it all. Emerging markets such as China, India and into the continent of Africa are presenting new opportunities for the music industry to expand, particularly in regards to music publishing and rightsholders where the infrastructure of publishing and collection societies isn’t as advanced as our western markets.
To begin, we must understand the current state of the markets in terms of revenue in these countries. As detailed in Musically’s 2019 Goals Report, the paying ratio for streaming services across these emerging markets is low. For example, out of the 644 million monthly active Tencent Music users (a Chinese streaming provider), only 3.6% had a paying subscription. Similarly, they have estimated that only 1% (approximately 1 million) of Indian audio-streamers are paying for their usage, compared with Spotify who had a paying ratio of 45.5% at the end of September 2018.
The angle in which we can view this negative as an opportunity however is by looking at the pure scale of these countries. If subscription services in these emerging markets were able to reach the heights of Spotify’s subscription success, there would be 293 million paying subscribers in China alone, boosting the market by $4.5 billion dollars annually. This isn’t an unrealistic outlook, as other entertainment markets in China such as mobile gaming has seen a shift to paying for content. Therefore, by promoting premium models of streaming services and perhaps limiting access to free music, we will see a shift to paid subscriptions, contributing to a growth of music revenue.
“Currently the reporting of publishing rights and royalties collection is pretty incoherent.” Abiola Oke, CEO OkayAfrica & OkayPlayer
The African market is another that poses huge opportunities across the music industry, from rightsholders, to major labels, publishers, and into the live sector. In June 2018, Midem formed the African Forum Thinktank to debate the continents musical prospects and a key conclusion made was that education (or a lack thereof) of rightsholders and government bodies about copyright was holding back the industry. It is the first step needed in canvassing opportunity and developing an infrastructure that can support a well-established music industry.
Alison Wenham, CEO of the Worldwide Independent Network, a trade body for independent music communities, believes that the key is to working on the ground, providing specific advice to individual networks such as about the contractual arrangements in copyright, digital distribution, and the value of rights. If rightsholders are able to appreciate and value the importance of rights, and see registering their music as a vital component within the music-making process, it will apply pressure to the government and collection societies to develop towards a way that mirrors the western world. Education of governments is therefore also key, and informing them about the economic value of the creative industry, and the potential return investment into the industry could bring is part of the solution.
However, as referred to in the above quote by Abiola Oke, there is little infrastructure in place, allowing artists on the continent to collect the royalties owed for their music; a result of the underdeveloped technology, legislation and lack of communication needed to support copyrighting.
“The industry has a responsibility to the musician’s piece of music to make sure it is registered and is properly coded at metadata level.” Alison Wenham
A key figure in understanding the existing bodies, and identifying the issues surrounding them is Rob Cowling, General Manager of South-African publishing group, Gallo Music.
Firstly, a lack of communication means that existing collection societies are running inefficiently such as the Nigerian Copyright Commsion (NCC), Copyright Society of Nigeria (COSON), Music Copyright Society of Kenya (MSEK) and Pan African Composers’ and Songwriters Alliance (PACSA.) Highlighted issues within these bodies include unpaid royalties/ a reluctance to pay, incorrectly reported revenues, and uncollected royalties, resulting in rightsholders not being compensated for their work and revenue both for the rightsholders and the industry ultimately being lost.
It must also be noted that it is only in a handful of African countries that collection is enforceable by law, therefore large amounts of revenue is being lost by private-copying levy’s. Private-copying levies are essentially an added special tax or ‘levy’, charged on purchases of recorded media. The levy is then received by a private body such as collection societies to be distributed fairly between creators, performers, publishers and producers. To understand the benefits of the private-copying levy we can look to France who say that:
- Over 200,00 artists benefit from the private copy levy.
- Over 500 cultural events and initiatives are supported each year.
- Of every €100 collected for private copying payable to authors, performers and producers, €25 go to funding cultural initiatives.
Therefore, if countries across Africa were to enforce such legislation, it would not only drive revenue into the creative industry, which creator ambassador Lokua Kanza is championing alongside PACSA, but support cultural initiatives such as within the live industry which I think it is important to touch upon. The recording industry and live industry come hand-in-hand, and through investment into publishing and rights collection we are able to also improve the systems within the live industry as there will be an increased demand for a live music market. Technological advancements made within the wider African music industry through the drive in revenue, will also make it easier for venues and agents to operate and collect revenue.
Thus, bringing together all the thoughts discussed as we enter 2020, there is clear opportunity in developing music markets globally by increasing creative revenues through premium models and/or streaming, and investing into collection societies across continents to ensure that such revenues are fairly distributed and reinvested.
A major threat to both music publishers as well as rightsholders is piracy, a concept that has existed across the media industry for decades. It can take many different forms such as, creating a limitless copy for personal use, counterfeiting media which involves replicating media and reselling it without permission of the rights owners, home-taping of visual and audio media, or bootlegging, the recording of a performance made without the performers permission.
As per an article, published by the European Journal of Crime Criminal Law and Criminal Justice, ‘titled The Music Industry on the Line? Surviving Music Piracy in a digital age’, the ‘vulnerabilities’ of the physical music industry have created a breeding ground for piracy, as a lack of law enforcement, ease of accessing illegal consumption (pirated CD’s), and unaffordability of music produced caused ‘several windows of opportunity left open for organised crime networks.’ (Janssens, Vander Beken, Van Daele, 2009).
As the music business went digital, the physical pirates were only replaced by online, more sophisticated illegal distributors who threatened the industry further with higher quality audio copies, and fewer restrictions for consumers to access. While the industry adapted to try and tackle the demand for free music downloads by reducing the cost of legal consumption, (e.g. through ITunes which launched in 2003 offering a large catalogue of music for low prices), it didn’t compensate for the loss from the growing file-sharing industry and decline in physical sales.
In 2007 a solution was found; offering music as a service, or in simpler terms, music streaming. In 2005, Youtube and Pandora offered a more basic model of the streaming we know today by offering music through a freemium service. The concept was to make accessing music legally, easier than doing so illegally. In the past 13 years, companies such as Spotify, Apple Music, and Tidal have built on this model improving the playback quality, catalogue selection, and visual integration to give consumers a one-stop-legal-shop for all their music needs.
However, streaming hasn’t combatted piracy in its entirety, and as we enter 2020, the most prominent threat of piracy is stream-ripping. Stream ripping is creating/obtaining a permanent copy of media found on an online streaming platform, with the intent of using it offline or sharing it. For example, YouTube conversion sites that enable you to extract audio from videos, download this mp3 file, then use this copy repeatedly, or share it between your devices. The issue in doing this however, is that on a standard streaming site, each time you listen to this song, the artist/rightsholder is compensated in royalties, by stream-ripping the artist doesn’t benefit from you using their work. At first thought, downloading a song from a YouTube video and listening to it in your bedroom seems innocent and trivial, however once we look at the magnitude of stream-ripping it gives a wider understanding on why it is such a threat.
In 2018, there was reportedly 189 billion visits internationally to piracy sites according to piracy monitor company MUSO. Similarly, in a study by Kantar Media, they found that in the UK 57% of adults were aware of stream-ripping with 15% admitting to using such a service. Long-term, the participation of stream-ripping threatens professional music artists, as mass copyright infringement will reduce revenues for both record labels and artists, particularly if the music is then used to accompany footage, such as background music for a YouTube Video, as the artist will not gain any royalties from this.
While it is a huge threat to the industry, I think it is important to understand the reasons for stream-ripping, in order to establish the most effective way of combatting the problem.
Below is a visual chart, representing the reasons that were given for stream-ripping in a survey conducted by Kantar.
With ‘Couldn’t afford to pay’ and ‘official content overpriced’ totalling 41% of the overall results, this could indicate a demand for streaming platforms to reduce their premium subscription cost, or increase the features available within their free models. This poses a further threat to rightsholders as with no legislation in place to stop them, a reduction in profits made by the platforms through subscriptions, will result in them reducing the price that the artist gets per stream.
PRS for music, is one company pioneering the effort to tackle piracy in the UK. Since it launched its Member Anti-Piracy System in 2016 (MAPS), it has identified approximately 5 million infringing URL’s and shut down 80% of these links. In the US, great strides have also been taken to shut down the big players in the illegal file sharing network, for example in 2009 Pirate Bay were convicted of copyright theft and shut down, LimeWire was discontinued in 2010 with a settlement of $105 million to repay and in 2015, the parent company of Grooveshark, Escape Media, agreed to close the site after facing $736 million in damages for not obtaining licenses for the music on their service. The WNS seconds the need for shutting down illegal sites, calling for stronger legislation, new technologies to trace illegal distributors and a cleansing operation to eliminate online sources of piracy.
However, they also suggest that a redesign of the Music Business Model is needed to eliminate piracy, and suggest that labels rethink their primary revenue streams focusing instead on the live industry, to pick up the fall of recorded music. For example, in 2007 Radiohead released the album ‘In Rainbows’, introducing a pay-what-you-want download system. While the majority of consumers chose to pay nothing for the album, it entered both the US and UK Chart at number one, and their following tour was the biggest ever selling 1.2 million tickets. This was mirrored by U2 who in 2014 partnered with Apple to give away their album ‘Songs of Innocence’ to all iTunes customers for free. This deal saw U2 receive a blanket fee from Apple for exclusivity, a marketing campaign worth up to 100 million and a successful subsequent tour. If the music business was to reshape in 2020 to follow a similar model to that described by the WNS, could the elimination of valuing music in monetary form, instead offering it free to consumers and using secondary avenues of revenue to make profit be the solution to the threat of piracy?
One of the revenue streams that could be viewed as a big opportunity for rightsholders and music publishers is the rise of Sync and Licensing deals. Synchronisation, also known as sync is the action of using music to accompany moving images. This ranges from music in TV and film, to the use of music in video games and advertising campaigns. When a company wants to use a piece of music they must obtain a sync license, granting them permission by the owner of the work to use the music. This is a growing market, with synchronisation up by 5.2% in 2018 and generating an estimated £25 million per year for UK labels alone.
While some of the other opportunities arising in the music industry may be focused on the ‘big players’, synchronisation is something that has the ability to catapult unknown or emerging artists into success. A great example of this is Tom Walker, who in a university assignment was tasked with writing a track to Sony advert, a few years later and his song was chosen to feature in their 2018 advert, becoming a 2x platinum selling single and was nominated for Best British Single at the 2019 Brit Awards. Despite its recent growth, the market is complex and largely untapped and therefore presents a great opportunity for rightsholders to educate themselves on the market and capitalise on it.
Director of Vice Media, Charlotte Von Kotze says, “There’s an overwhelming quantity of music available online, which gives the opportunity to select up-and-coming, international, local and indie artists that have yet to be discovered.”
A huge sync opportunity as we head into 2020 is the video game industry. Whilst, not an emerging partnership as games such as Guitar Hero and Just Dance have licensed popular music since the millennium, the way video games are integrating music is changing and presents huge opportunities for artists of any magnitude.
FIFA by EA Sports is just one game which has embraced up-and-coming artists in the last decade, and more often than not propelled them to chart success.
“Any given song in FIFA 19 – whether it’s a new track by an established act or the debut of an unknown artist – will be heard around the world nearly 1bn times. Clearly, no medium in the history of recorded music can deliver such massive and instantaneous global exposure.”
Steve Schnur, President of Music at EA.
Since its early days artists such as The Script, The Hoosiers, Bastille, and Kasabian have benefitted from the exposure that their soundtrack placement has brought to further their careers. More recently, small indie artists have seen their name feature alongside big names such as DAVE, Billie Eilish, and Chilish Gambino, enabling independent music a platform to showcase with popular music. The importance of this sync opportunity is highlighted in an interview with FIFA 20 artist Yizzy.
“I like to think my song being chosen means that although I might not have as much experience as the bigger artists, I can be stood and recognised alongside them.”
Television is another medium that is presenting growing sync opportunities, with applications such as Shazam making it easier for consumers to engage with the music being used on-screen. To give an idea of the impact having your track played on a large scale show could have, in April this year Florence and The Machine’s performance of ‘Jenny of Oldstones’ became the most Shazam’d track in 24 hours after appearing in the closing credits of a Game of Thrones episode. Similarly, the rise of on-demand services such as Netflix and Amazon Prime have also been great supporters of the sync market, using music as a key component in lots of their original releases.
Talking about the opportunities that these originals bring for songwriters and composers, Tony Scudellari, senior vice-president of TV music for Sony Pictures says, ‘“Music budgets tend to be a bit better, so you have a bit more creative freedom. Having to create a unique musical voice provides more opportunities for new artists or for placement of deep cuts. There is also more of an opportunity for creation of original songs for in the body of a show”
The online sync market as a whole, is one that we anticipate to continue to grow as we enter 2020 but a development in micro-licensing could be an area of exploration to encourage this growth further.
YouTube is a platform that has continued to grow and grow in the last decade, and now a microcosm of uploads are beginning to mirror traditional TV in style. For example, content creator Shane Dawson who with over 23 million subscribers has evolved into creating mini-series, with hour long episodes for his viewers. In his most recent series documenting the making of his new makeup collection, Dawson uses the song ‘Time of the Season’ by Ben Taylor band as the soundtrack for his opening credits. This song (a 2003 release) now has over 1.1 million streams on Spotify, compared to the bands other releases which all have under 30,000. Whilst Shane undoubtably got the correct permissions for the use of these songs, smaller content creators may face difficulties and opt to uploading without gaining licenses or using royalty-free music. Facebook and YouTube already have systems in place to identify and delete copyrighted music from uploads, however if a technological solution such as micro-licensing was to be found that could instead allow copyrighted music to be synced to video uploads and artists still get compensated, this would expand the sync market into a whole new territory.
Data Value Networks
A final threat to music publishers and rightsholders as we enter 2020 is simply data value networks and the perception that the current music network is flawed and causing artists to be undervalued and undercompensated.
Whilst we have already discussed the opportunities arising from the growth in streaming, there are still conflicting views around its legal structure and valuation of artists. Unlike physical sales of music where when you buy an album, a percentage of the cost goes directly to the artist, with streaming your subscription cost goes into a big pool of money and a percentage is distributed to each artist based on the number of streams they have received. Therefore, despite you playing your favourite indie artist on repeat for the month, the majority of your payment will be going to the big-hitters In a report published by the UK Intellectual Property Office, they call this a ‘winner takes all’ approach. A user-centric approach is one that most people favour, and hope will be adopted as we enter 2020. This is the idea that if you listen to your favourite band 30% of the time, they will receive 30% of your subscription cost.
Similarly, there is further inequality between the partnerships streaming services have with artists as it is only featured artists who are able to negotiate their royalty rate, with non-featured/ niche artists having very little ability to negotiate their rate and often receive no payment from interactive streaming of their music.
A word that it going to become ever-more prominent as we enter 2020 and a possible solution to this issue is blockchain. As described on the Mycelia webpage, (a new research and development hub championing the use of blockchain for creatives), blockchain would enable artists to self-release their music and have greater control over the contracts, profits, and prices.
It suggests that music streaming should operate similar to Flickr; ‘those using an artist’s music for non-commercial purposes could get hold of it for free, while those wanting to use it on, say, an advert, would have to pay a fixed amount.’
Imogen Heap is one artist who is already exploring the possibilities of releasing through blockchain and believes that one way it would benefit artists is giving them control of their pricing, for example through flash sales, tiered pricing for different age groups, or directing a tracks profits elsewhere (e.g. to a charity.) She also wants to see a level of data being fed back into releases and able to be accessed by consumers and artists. Think back to when you used to buy CDs or Vinyl’s and a slip would accompany them detailing all the contributors to the album, lyrics, publishing information, and acknowledgements. Heap wants to reintroduce this to consumers, allowing them to access the makeup of the track/album they are streaming with one simple click. The extra data will also be reflected on the artists side, allowing them to access information about the numbers of plays, the location of listeners and even who is listening which is currently guarded by the distributors/labels who hold this data.
Therefore, by opening up the data value network by increasing the control that artists/rightsholders have over their work, we can in the 2020’s operate on a system that benefits player across the industry.
In conclusion, in order for publishers and rightsholders to prosper in the next decade it is important to rethink the current business models and adapt them to build a new infrastructure which will bring areas across the music industry onto a level playing field. For example, it is important for us to eliminate piracy in order for streaming to grow in emerging markets such as China, India and Africa. A possible method of eliminating piracy could be increase the features available to regular consumers in a freemium model, and operate under the method suggested by Mycelia in which artists have control of their pricing, perhaps making it free for personal use and adding tariffs for its use in sync. This would create an alternative consumer market, by which commercial companies can purchase and use music easily and legally and publishers and rightsholder would increase revenue for their work.
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