Demystifying Pan-European digital music rights – new report

The number of digital-music services in Europe is growing every year and consumers across the continent are being presented with an array of different ways to listen to music. Digital-music delivery and consumption has undergone a rapid transition. However, such has been the speed of the sector’s evolution, new business models specializing in digital-music delivery across Europe have forced those organizations charged with issuing licenses to rethink the way they operate.

Music publishers and collection-societies in Europe have taken to the task in different ways (see below table for major music publisher initiative details). But, in contrast to a few years ago, when digital-music services were required to negotiate countless licensing deals, agreements between music publishers and collection-societies have reduced the necessity for endless rounds of licensing negotiations.

Filed under: Collection societies, Intellectual property, Music industry, Uncategorized, CELAS, collection society, gema, Music industry, Pan European, performance rights, publishing

Consolidation in the music publishing sector is set to shake up Pan-European licensing

The European Commission (EC) is planning to publish draft legislation proposals early next year that will include new rules for the cross-border licensing of digital music. For several years representatives of the EC have expressed a mixture of mild irritation and outright annoyance over the licensing process for digital-music services in Europe. The number of such services has grown rapidly in the region, but several service providers continue to bemoan the time-consuming process involved in securing rights to operate in several countries. New business models specializing in digital-music delivery have brought change to collection societies, but according to some service providers, rights remain fragmented, and some providers have questioned whether the major publishers’ Pan-European initiatives have simply added a new layer of fragmentation and complexity to the licensing process, with Europe’s largest collection societies the only ones seeing any benefit.

Filed under: Collection societies, Intellectual property, Legal, Music industry, CELAS, collection society, Legal, licensing, Music industry, Pan European, royalties

SoundExchange takes the crown as the world’s biggest performance-rights society

With digital recorded-music sales still several years away from fully compensating for the decline in physical recorded-music sales in almost all developed markets, record companies are continuing to place greater emphasis on revenue streams from other sources. Performance-rights is one of those “other” sources that has seen growth in the majority of countries, even though so many of the music users required to pay performance-rights have suffered because of the aftereffects of the global financial crisis.

In our annual survey of the performance-rights sector, Music & Copyright can reveal that total performance-rights distributions were up 8.9% in 2010, to US$1.59 billion, a big increase on the 0.6% growth in 2009 (see table below).

Filed under: Collection societies, Intellectual property, Music industry, artists, performance rights, performers

Midyear recorded-music sales roundup

Of all the countries that have reported midyear sales figures, it is the US that has provided the most optimism. For the first six months of this year, album-unit sales rose 1% compared with same period of 2010, according to Nielsen SoundScan. This represented the first time that album sales had increased since 2004. Including track-equivalent albums (10 digital tracks equal one album), the growth figure was higher, at 3.7%. Digital-album sales were reported by Nielsen SoundScan to have increased 10% year-on-year, with digital-track sales rising 11%. Recent figures from Nielsen SoundScan, for the year to Aug. 21, published in the trade magazine Billboard, suggest that the situation has improved slightly, with album sales up 2.4% compared with the same period in 2010 and album sales including track equivalents rising 4.8%.

Filed under: Collection societies, download, Music industry

Is NCB the model for future Pan-European licensing?

Last month the Pan-Nordic mechanical-rights-collection society Nordisk Copyright Bureau (NCB) reported a fall in the total amounts collected and distributed to its owner societies for last year. Despite the decline, NCB described 2010 as an important year and one that removed much of the uncertainty over the collection society’s future. Perhaps more important though, is the fact that NCB and its owner societies have shown that collection societies, if left to their own devices, can develop a very workable multiterritory online licensing system.

Filed under: Collection societies, collection society, Legal, licensing, Music industry, Pan European, royalties, STREAMING

MIDEM and the music industry in 2011

MIDEM is now over for another year and representatives from all sectors of the music industry are busy digesting the comings and goings of the event. Some conference themes followed on from where they left off last year, whilst others debated new business models that rose to prominence during 2010. There were numerous cases of the traditional music industry bumping heads with supporters of these new business models. But at a number of conferences and panel sessions, there seemed to be a better understanding of some of the issues and concerns on all sides as well as a greater willingness from most of the participants to go that bit further to get their heads around each other’s issues, which in previous years, had been a source of major division. There were of course still plenty of areas of disagreement but on the whole all parties exchanged handshakes rather than insults.

Filed under: Collection societies, download, Intellectual property, Music industry, Music subscriptions, download, MIDEM, music, Music subscriptions, royalties

Global performance-rights defy the global recession

New research published by Music & Copyright reveals that total distributions of performance-rights collections increased to US$1.46 million last year. However, the volatility of the currency markets greatly affected the year-on-year comparison. Excluding these exchange-rate fluctuations, global performance-rights distributions were up 6.3%.

With much of the focus on how the recorded-music industry has fared from year to year centered on the sale of music, the contribution to both record companies and performers from performance-rights collections is often overlooked. Recent years have seen performance-rights collections rise, in complete contrast to the falls in recorded-music sales.

Music & Copyright has calculated that performance-rights distributions to record producers totaled US$794.6 million, up 2.2% from US$777.4 million in 2008. But at constant currency exchange rates, distributions increased 8.2% last year. For performers, distributions last year stood at US$664.9 million, down 1.2% from US$672.7 million in 2008. At constant currency rates, distributions to performers rose 4.1%.

Europe is the largest region for performance rights. In 2009 it accounted for 64.8% of the global distribution total, down from 70.7% in 2008. Distributions in Europe decreased 7.8%, to US$945.5 million. At constant currency rates, distributions in Europe were flat. Several unconnected factors conspired to exaggerate the decline in European collections. The largest performance-rights society in the world in terms of representation, the UK’s Phonographic Performance (PPL), was hit by a ruling late last year by the UK Copyright Tribunal regarding the rates payable by pubs, bars, restaurants, offices and factories, which meant distributions to performers and producers were down. Problems with the Italian performers’ society IMAIE meant distributions were affected. IMAIE went into liquidation in July last year, and therefore royalties collected for performers have not been paid.

In terms of potential for growth, low collection rates in the less developed regions of the world suggest that countries in Eastern Europe, Latin America and Asia Pacific should be the main targets. However, the US still offers the greatest prospects, particularly in light of the continuing strong performance of digital-performance-rights society SoundExchange.

A resolution to the performance-rights issue in the US still seems a long way off. US copyright legislation exempts AM/FM-radio broadcasters from this type of rights, and the passage of new legislation to change this is making slow progress. The Performance Rights Bill (PRB) has been considered in committee and is awaiting approval in Congress and the Senate. Few estimates exist as to what the potential payments from terrestrial broadcasters could be if the bill is passed. However, SoundExchange has offered a glimpse of the revenues that might be possible. In 2009 it distributed US$155.5 million to producers and performers, up from US$100 million in 2008.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.

Filed under: Collection societies, Intellectual property, Legal, Music industry, Uncategorized, collection society, performance, performance act, performance rights, royalties, soundexchange

GEMA’s voting structure comes under scrutiny, but is it any less democratic than other collection societies’ in Europe?

In a country profile of Germany a few weeks ago, we reported that some members of the German authors’ society GEMA members had raised concerns at the unfairness of GEMA’s voting system at its annual conference. To recap, GEMA oper-ates three levels of membership: associated, extraordinary and ordinary (the highest level). These levels define voting rights at its annual conference. In 2009, there were 54,605 associated members, 6,406 extraordinary members and 3,343 ordinary members. Associated and extraordinary members have no voting rights at the annual conference. But in pre-meeting sessions, these two groups can nominate up to 34 representatives to participate in, and have voting rights during, the annual meeting. A proposal to raise the number of delegates from the associated and extraordinary membership from 34 to 42 was made at last month’s annual conference, but a decision on the proposal was been postponed until next year’s annual meeting.

After the concert promoter Monika Bestle filed a 106,000-signature petition last year, a hearing in May at the German Bundestag concluded that GEMA’s internal voting process was not well balanced. But is GEMA any less democratic than the other collection societies in Europe? Moreover, could members of other collection societies who are not eligible to vote at their annual general meetings cite the unrest at GEMA as reason for change in their national collection society?

PRS for Music in the UK and SACEM in France are two of Europe’s largest collection societies. PRS divides its membership into three tiers: full, associate and provisional. Of the total membership of 63,129, full members, which numbered 4,172 at the beginning of this year, have multiple voting rights; associate members (17,175) have a single vote; and provisional members (41,782) do not vote. The qualifying criteria for admission to each category of membership are based on a member’s earnings in the previous year. If earnings meet the threshold, which is defined as a set percentage of the total amount distributed to PRS members the year before that, the member is promoted to the next category of membership. Full members have a standard 10 votes. They qualify for an additional 10 votes if they have been a member for at least 20 years and during that time have received an aggregate number of distributions from PRS that is at least 10 times the annual qualifying figure for admission to full membership for the previous year or they have been a member for at least two years and during that time have received an aggregate number of distributions from PRS that is at least 20 times the annual qualifying figure for admission to full membership for the previous year.

Like PRS, SACEM has three membership levels for authors, composers and publishers: adherents (members), societaires professionnels (professional members) and societaires definitifs (full members). At the beginning of the year, the total membership of 132,000 was divided among 127,629 adherents, 2,277 societaires professionnels and 2,094 societaires definitifs. At SACEM’s annual general meeting, all members participate in the approval of the society’s accounts and elect the members of the board of directors, which is made up of six authors and two author-directors, six composers and six publishers. All members have a single vote, while societaires professionnels and societaires definitifs each receive 15 additional votes. The board of directors appoints members as societaires professionnels and societaires definitifs.

BUMA and STEMRA in the Netherlands operate as a single company, despite consisting of two separate bodies: Vereniging BUMA (the BUMA Association) and Stichting STEMRA (the STEMRA Foundation). Each has its own members and affiliates and its own board of directors. BUMA’s board consists of 12 members: six composers, three authors and three publishers. Candidates are recommended by the societies of composers, authors and publish¬ers, but members are elected by composers, authors and publishers collectively. STEMRA’s board consists of 12 members: seven composers or authors, four publishers and one member recommended by BUMA. The composer/author members are elected by writer/composer members of BUMA/STEMRA, and publisher members are elected by publisher members only. Voting is on a weighted basis, based on the publisher’s turnover, and any publisher gets a maximum of 10 votes. Once music authors and publishers transfer the commercial exploitation of their music copyright to BUMA/STEMRA, they become members (BUMA) or affiliates (STEMRA) and are eligible to vote. BUMA/STEMRA ended 2009 with about 16,000 members and affiliates.

Italian authors’ society SIAE has author and publisher members from a variety of arts, including the music, literary, drama, opera, visual and audiovisual sectors. It does not categorize members in tiers. Although rights holders can be contractually represented by SIAE, only members are allowed to participate in SIAE’s governing bodies. SIAE’s General Assembly (GA) consists of 64 members, which are elected by all members every four years. The GA, which meets twice a year, nominates the other governing bodies (president, board of directors, section committees, board of auditors, internal audit) every four years. From a total 81,839 “musical” members, 79,154 are authors and 2,485 are publishers.

SGAE of Spain ended 2009 with 96,955 author and publisher members. Its author mem¬bership is divided into the professional categories of music (72,748 members), grand rights (theater, drama, musicals, etc.) (7,371) and audiovisual (8,031). Voting rights are divided between temporary rights and permanent rights, with the number of votes weighted, based on royalty income. For temporary rights, the weighting of votes is dependent on royalty income received in the previous financial year, and for permanent rights the votes are weighted based on royalty income received in the previous five years.

In the latest issue of the newsletter we continue the analysis by looking at SUISA of Switzerland, SABAM of Belgium, AKM of Austria and STIM of Sweden. We also compare European collection societies with those operating in North America and Asia. The conclusion to all this? It would seem that although most collection societies restrict the voting at annual meetings to the most senior or exclusive members, virtually all of them continue to operate with full member support. For the time being at least. As always, comments are gratefully accepted.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.

Filed under: Collection societies, Intellectual property, gema, licensing, Pan European, prs, publishing, royalties

Sony Music makes gains on dominant Universal in 2009

SME was the only music company to record an increase in market share for all sectors tracked by Music & Copyright in 2009. SME’s recorded music division narrowed the gap with the global leader UMG and although Sony/ATV remained the smallest for the four major publishers, it has closed in on third placed Warner Chappell.

UMG maintained its position as the largest recorded music company and music publisher for the fourth consecutive year in 2009, despite losing market share to its rivals. UMG’s share in terms of revenues generated from the sales of both physical and digital recorded music decreased to 27.7% from 28.6% in 2008. In contrast, SME saw its share increase to 23.1%, narrowing the gap with UMG to 4.6 percentage points.

For music publishing, Music & Copyright has calculated that Universal Music Publishing’s (UMPG) share of global publishing revenues decreased to 22.9% in 2009 from 23.2% in 2008. UMPG became the largest music publisher in the world following Vivendi’s purchase of BMG Music Publishing in 2007. Prior to UMPG taking the lead, EMI Music Publishing was the largest publisher in the world. It remained in second place in 2009 with an increased share of 19.3%.

According to Simon Dyson, editor of Music & Copyright, “2009 was a good year for SME with the company increasing its market share for both physical and digital sales, the only one of the four majors to do so. EMI’s publishing division also performed well last year, closing the gap with Universal.”

Totaling all the revenues received by the major music groups (recorded music sales, music publishing and general licensing including neighboring rights etc), Music & Copyright has calculated the figure for 2009 stood at US$22.15 billion, down 6.8% on US$23.77 billion in 2008. UMG was the leader in 2009 with a reduced market share of 27.2%. The overall successful year for SME saw it close the gap on UMG with an increased share of 20.9%.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.

Filed under: Collection societies, download, free, Music industry, Music subscriptions, Uncategorized, download, emi, full track, Internet, market share, music, Music industry, sony music, universal music, warner music

Could blanket licensing for ISPs be the solution to file sharing?

In most developed music markets around the world, associations representing rights holders, music companies and performers are engaged in negotiations and discussions with governments to develop guidelines, and in some cases legislation, to control the level of file sharing across P2P networks. Almost without exception, ISPs have come out against such measures. Whether ISPs have benefitted from illegal file sharing through higher subscription numbers is perhaps an argument for another day. But are ISPs missing an opportunity to cash in on file sharing and at the same time be the solution to a problem they have helped exacerbate?

Several ISPs already offer bundled music services as an extra option on top of their regular subscription price and have reported significant interest. There is also evidence to suggest that bundled services could become popular with consumers. Last year, research from Entertainment Media Research/Wiggin for the 2009 Digital Entertainment Survey revealed that regular downloaders of unauthorized music said they would be willing to pay for legal content if it were bundled with the price of their ISP connection. The problem is, all of these bundled services have concentrated on trying to entice P2P users away from file sharing. Advocates of monetizing file sharing point to the fact that the system has been largely created by consumers, which in the process have formed the largest-ever repository of music. Since music is already a shared medium, why would so much effort be concentrated on changing consumer behavior, particularly since consumers have already given a clear indication of what they want?

Providing a blanket license to an ISP that legitimizes the behavior of file sharers comes with an almost innumerable list of considerations. How payments to rights holders and music companies would be determined and the fairness of imposing a fee for all ISP subscribers regardless of music use are just two of the most obvious. But these are not insurmountable. Applying a fee for a service brings with it issues of quality and service guarantees. If a file shared is substandard – a not-uncommon occurrence in the world of P2P – then whose responsibility is it to rectify the problem? On this issue, perhaps, file sharers would most likely accept this in the knowledge that their actions were not deemed illegal and that rights holders were now receiving a payment for their services, in the same way authors and performers do for use of their content through public performance.

One of the central issues and perhaps the most crucial to the adoption of such a system is price. Establishing a level that is acceptable to Internet subscribers and rights holders is problematic but not impossible. Music & Copyright has crunched several numbers and come up with some simple guidance where the debate surrounding the possible fee level could begin.

Taking France as an example, the trade value of online music sales (excluding streaming) totaled €38.3 million in 2009. That is the equivalent of an average of just over €2 per internet subscriber. To use this figure as a pricing guide is obviously much too simplistic, because it does not take into account physical music purchases or purchases via mobile. It also assumes no shift in music-buying patterns, which would inevitably occur if an ISP fee were added to a broadband subscription. Let’s take the per capita guide to the other extreme, if the total 2009 music-sales figure (online, mobile and physical) were used and all music sales in the year were made via broadband, the per capita trade-value figure for 2009 would be slightly over €31, or €2.60 a month. It’s equally fair to suggest that this guide figure is only slightly less flawed than the previous one, because it does not address the monetization of the considerable amount of music shared via P2P – the whole reason to add a fee in the first place.

Estimating the number of tracks illegally shared online is speculative. At the press launch of the IFPI’s Digital Music Report 2010, published last month, the global trade body estimated that 95% of all downloads are unauthorized. If that figure were accurate for France and the published trade value of online sales were just 5% of possible value, then factoring the 95% into an online-sales-only calculation would put the annual ISP fee at around €40 (€3.40 a month), or €70 (€5.84 a month) if the figure for mobile and physical were included. It should also be noted that these figures are based on trade revenues and do not include author’s/artist royalties or ISP management fees. However, the inclusion of these figures would still result in a surprisingly low figure and one that is comparable with many of the “unlimited” DRM-protected subscription service fees charged by ISPs.

ISPs have resisted any price increases to compensate for file sharing and would most likely see the above as anti-competitive. But if a “P2P monetizing fee” resulted in a reduction in churn, the benefits to an ISP would extend far beyond solving their perceived aiding of file sharing and include the generation of more revenues and lower expenses through greater subscriber retention. Music companies may also have an incentive to pursue such an approach, particularly if the problem of file sharing can be solved without alienating their customers.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.

Filed under: Collection societies, download, free, Music industry, Music subscriptions, Uncategorized, collection society, download, free, full track, Internet, isp, licensing, mp3, Music industry, Music subscriptions, p2p, royalties