Why does it matter?
Services such as Spotify, Rdio, Rhapsody and Xbox Music will have to contend with another company trying to forge a space in the subscription sector. With Apple set to launch its iRadio service later this year, the streaming sector – in the US at least – is starting to get crowded. According to the latest RIAA figures, revenues from subscription and streaming services last year totaled US$570.8 million, up 58.9% from US$359.2 million in 2011. Included in these figures are retail revenues for paid services and wholesale revenues from advertising-supported services. The number of digital subscribers to paid on-demand services totaled 3.4 million at end-2012.

Although the growth rate is impressive, the number of subscribers is not high enough to support all of the services operating in the US in the longer term. Most analysts are expecting some sort of shakeout in the music-subscription sector, where only those services with lots of subscribers or deep pockets will survive. Google certainly has enough funding for the long haul, but the question is whether it can attract enough users.

Why now?
In most countries, music-subscription services are only just breaking out of niche status. There are exceptions to this rule: Scandinavian consumers have gone crazy over music subscriptions, and revenues from the sector have exploded in the region in the last couple of years. Although this is good news for the music industry, what isn’t so welcome is the impact that subscriptions are having on download sales. Take Finland, for example: Although not the biggest music market in the world, the country has seen a big rise in trade revenues from subscription services. In the first three months of this year, subscription sales rose sharply compared with the same period in 2012. But downloads? Well, trade revenues from singles sales fell 15.5%, and full-album downloads were down 4.1%.
Why does this matter? If consumers are going to choose subscriptions over downloads in the longer term, any company wanting to make it big in digital music will need to offer subscription services. The US has not seen the same explosion in subscription numbers as Northern Europe, but that is not to suggest that it won’t happen. Even Apple, the biggest critic of music-subscription services, is set to enter the fray later this year. Google might have beaten Apple to the starting line, but it will need to come up with something very special if it is to win the race.

Chances of success?
One feature of most subscription services is that they are particularly successful in their home markets. Spotify hails from Sweden, WiMP is operated by Norwegian streaming-media company Aspiro, Deezer is a French company, and Melon and Mnet are based in South Korea. In each of these countries, the popularity of local services far outweighs interest in any other offering. Although Google is a US company, its reach is global, meaning that the company doesn’t have a home market as such.

Some might cite Apple’s global success with iTunes as proof that success is possible anywhere: Even though it is a US company, it is the dominant download service in most of the countries where it operates. However, Apple entered digital music when the sector was on its knees. The company created the best media player, with a built-in store, more than 10 years ago and is still reaping the rewards today. Google might be able to rival Apple in terms of financial backing, but that doesn’t guarantee success. Microsoft is the perfect example of a company that has thrown millions of dollars at the music industry and has largely failed to break down the doors.

Google does have an advantage over its rivals in that it has a massive number of Android-powered devices in the market, and the key to its success might be tied to how many Android users it can convince to pay out for a music subscription.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

The past 18 months have seen massive changes take place in the ownership structure of the recorded-music and music-publishing sectors. The sales of EMI’s record and publishing divisions were confirmed at the end of 2011, with UMG taking the bulk of the recorded-music spoils and a consortium of companies led by Sony taking the majority of the publishing assets.

According to Music & Copyright, UMG had a 31.7% share of combined physical and digital recorded-music trade revenues last year, up from 27.9% in 2011. Because UMG completed the acquisition of the EMI assets at the end of 3Q12, UMG’s market share includes all of the trade revenues formerly associated with EMI for 4Q12. This also means that the market share for EMI is for trade revenues in the first three quarters of 2012 only.

Global record company (physical/digital sales) market shares, 2011 and 2012 (%)

Source: Music & Copyright

According to Simon Dyson, editor of Music & Copyright, “the full impact of UMG’s acquisition of the EMI record companies will only be seen in the market-share figures for this year. Based on this year’s share figures and including only UMG’s retained companies, UMG’s share of total recorded-music trade revenues may rise a further three to four percentage points.”

A new publishing leader
Similar to the way that Music & Copyright determines recorded-music market shares, music-publishing market shares are also based on revenues received by each company. Music & Copyright has calculated that global music-publishing revenues were almost unchanged for the second year running in 2012, at US$3.9 billion.

In contrast to the recorded-music shares, Music & Copyright has produced full-year shares for EMI Music Publishing (EMI MP) and Sony/ATV. Although Sony and a consortium of companies* now own EMI MP, with Sony/ATV managing the publisher on behalf of the investor group, Sony/ATV and EMI MP are still separate companies. Music & Copyright has included in EMI MP’s publishing share the revenues from all the assets forming part of the acquisition, and not just the retained companies. This means the full impact on market shares of the publishing divestments required to seal the deal will only be apparent with the publication of 2013 market shares.

Keeping EMI MP and Sony/ATV separate means UMPG was the largest publishing company last year, with a 22.5% share, up from 22.2% in 2011. However, Sony (including the investor group) is the publishing leader in terms of corporate ownership. The combined share of EMI MP and Sony/ATV in 2012 was 31.2%, though this share will be lower next year, after the EMI MP asset sales.

Global market shares of the leading music publishers, 2011 and 2012 (%)

Source: Music & Copyright

*The consortium is made up of the estate of Michael Jackson, Mubadala Development PJSC, Jynwel Capital, the Blackstone Group’s GSO Capital Partners and David Geffen

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

Copyright is a complex business and the debate over the rights and wrongs of making music available without permission is something that evokes very different opinions. Some countries have come down hard on Internet users making music available without permission, whereas others have taken a less tough approach. Either way, the copyrights contained in a piece of music are the same worldwide.

Justin’s back
This week has seen massive publicity over the success of US singer Justin Timberlake’s new album The 20/20 Experience, which sold close to one million copies in its debut release week. President of the US National Association of Recording Merchandisers (NARM), Jim Donio, said on the sales feat that Timberlake “is giving the industry quite a bit to be excited about.” Donio added that it was “great to have him back.”

The NARM president is not alone in his praise of Timberlake and no doubt plaudits for the artist will continue unabated as the album tops charts around the world and his world tour takes to the road later this year. However, rewind a couple of months and the self same singer was being accused of promoting an online music service that exploited artists and used their music without permission.

In 2011, media giant News Corp sold the social networking site Myspace to the online advertising firm Specific Media. Part of the deal saw Specific Media give an unspecified equity stake to Justin Timberlake who is now the figurehead of the service and is working to promote the site. At the time the sale was announced, Timberlake said he was “excited to help revitalize Myspace by using its social media platform to bring artists and fans together in one community.”

Artist exploitation
In January a number of reports picked up on concerns expressed by the independent artist community over the unauthorized use of their music on MySpace. Independent rights agency Merlin said tracks by more than 100 Merlin member companies were available to stream on the site without permission. Merlin had an agreement with MySpace before it was bought by Specific Media, but that deal has expired. According to a report in The New York Times, MySpace decided not to renew the licensing deal with Merlin, and therefore if any Merlin-member tracks appear on the site they will have been uploaded by MySpace users. MySpace confirmed that the tracks would be removed, but only after the receipt of a take-down notice from the owner label.

Although Timberlake will most likely be unaware of the licensing problems with Merlin, the widespread publicity surrounding his first week album success must rankle with the artists that see their music available on MySpace without permission. Also, the fact that MySpace will not remove their music unless asked to do so smacks of corporate exploitation. Specific Media will certainly welcome the publicity surrounding Timberlake and his link to MySpace, but ignoring small artists that simply do not have the wherewithal to defend themselves is wrong, regardless of whether Specific Media is legally required to do so or not.

In a statement after Specific Media bought MySpace, Timberlake said “there’s a need for a place where fans can go to interact with their favorite entertainers, listen to music, watch videos, share and discover cool stuff and just connect. Myspace has the potential to be that place.” Timberlake added that “art is inspired by people and vice versa, so there’s a natural social component to entertainment.”

Timberlake will be rewarded handsomely for his role in MySpace. Selling one million albums in a week will also have boosted his coffers. But actively drawing fans to an online site that does not reward every single artist on show makes Timberlake party to Specific Media’s exploitation. Ignorance to the exploitation is no defense. Has his links with MySpace affected his album sales? Of course not. But does that mean he should turn a blind eye to the wrongdoing? Timberlake may well be right to suggest that art is inspired by people, but the music industry will only survive if artists of all sizes are rewarded for that inspiration.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

The IFPI cautioned against getting too carried away with the result, and digging into the different national-trade-association results suggests it was right to do so. Moreover, although a 9% rise in digital sales was the driving force behind the return to overall growth, the differences in the performance and transformation of the leading markets effectively make any evaluation of the global recorded-music industry almost irrelevant.

The big market influencer
Any assessment of recorded-music sales at a global level is heavily affected by what happens in the US and Japan. In 2011 the two countries accounted for about half of global trade revenues (including performance-rights and synchronization income), and this share will probably be unchanged when the IFPI publishes its full global report in April.

In Japan, for example, the combination of the production value of physical formats and the trade value of digital music suggests that total trade sales in Japan were up about 3% last year. Concerning for the local industry is that all the growth came from a rise in sales of physical formats. Moreover, CD sales last year benefited from the practice by some popular groups of combining album releases with fan services and live ticket sales, inflating those groups’ album sales and, subsequently, the Japanese total.

Few in Japan expect physical-format sales to keep rising, and so the country’s music industry will need digital to make up the forthcoming shortfall. But digital sales in Japan are experiencing massive turmoil. In 2012 alone the trade value from digital-music sales fell 25%, or US$183 million. Even though online sales are rising, Japanese consumers have fallen out of love with mobile music formats, the trade value of which slumped a staggering 40% last year. Should digital sales not recover in time to head off the expected physical drop, then Japan may drag down any future global sales figures, even though the number of countries reporting a return to growth is rising.

Different countries, different growth drivers
Another way of emphasizing the importance of Japan on a global scale is to measure some of the often-championed Scandinavian countries’ performances last year against the digital losses in Japan. For example, the total trade value of recorded-music sales in Sweden in 2012 stood at SEK943.6 million (US$139.5 million), almost US$43 million lower than the difference between Japanese digital sales in 2012 and 2011. Similarly, in Norway, trade revenues last year totaled NOK545.3 million (US$93.8 million), equivalent to just half of last year’s Japanese digital drop.

Clearly what happens in Japan, and the US, has a big impact on the wider global performance. But is the return to global growth, welcome as it is, just symbolic? In 1999, the last time global recorded-music sales increased, there were simply more CDs sold than in 1998. But such is the complexity of today’s recorded-music industry that determining why global sales were up last year requires analysis at a much more granular level.

An examination of the results of those countries that have published retail sales or trade figures for 2012 shows big differences between one country and the next. While one digital-music business model has transformed the fortunes in one country, that same business model had little to do with the return to growth in another.

The big gains Sweden and Norway experienced in the take-up of subscriptions in 2012 more than offset falling sales of other formats. But in Brazil, trade revenues from subscriptions were down last year compared with 2011. Australia also experienced growth in trade revenues in 2012. However, digital sales in the country have followed the same sales pattern evident in the world’s biggest music markets, with downloads contributing most to the overall growth and new business models yet to spark consumer demand.

Why the difference?
Precisely why subscription services have experienced rapid growth over the past couple of years in some countries but not others is difficult to determine, given their short history of success. Per-capita spending on recorded music has little to do with reluctance to change spending habits: Japan has the highest per-capita rate in the world, and consumer spending on music subscriptions is minimal, but the second-highest-ranked country in per-capita terms is Norway.

One possible explanation for the difference is the fact that subscription services are most successful in their home markets. Spotify hails from Sweden, WiMP is operated by Norwegian streaming-media company Aspiro, Deezer is a French company and South Korea is home to local services Melon and Mnet. In each case, interest in the local service by far outweighs that of any other.

In addition to some of the developed countries, subscription services are also making their mark in countries suffering from high levels of unauthorized recorded-music distribution. For example, in Russia, which is suffering more than most from high piracy rates, streaming is becoming more popular. The most successful service is Yandex Muzyka, a division of Russia’s biggest search engine, Yandex. India, too, has seen rising consumer interest in streaming services, including Dhingana, Gaana and Saavn.

Russia and India might not be top-10 music markets, but any turnaround in the two countries’ recorded-music fortunes is arguably more important at the moment than global growth. Moreover, the positive results in some of the world’s smaller markets might not have much of an impact at a global level, but they clearly show that the days of recorded-music gloom really are coming to an end. Depending on what happens in the US and Japan this year, the IFPI might be reporting a return to global contraction 12 months from now, but the real news will be found beneath any superfluous global figure and in the many countries that have had little say at a global level for as long as global sales have been falling.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

What the directive will not do is interfere with the way music publishers administer their rights. All of the major publishers and a number of independents have withdrawn the rights to certain repertoire for licensing on a multiterritorial basis. Some see these moves as a step towards the creation of a new form of fragmentation, one based on repertoire, rather than national borders. Publishers have long claimed that withdrawing certain repertoire rights streamlines the licensing process. However, music ownership can involve multiple publishers and therefore digital services that want to provide an all-encompassing offering still need to sign more licensing deals than the number of countries they operate in.

For example, publisher ownership of the Take That track “The Flood” involves four publishers (see chart) and so if a digital-music service wanted to offer the track then that service would have to agree a licensing deal with either the publisher of the publishers’ licensing representatives.

At a national level, digital-music licensing presents few problems. A single collection society can provide a license that includes not only its own managed repertoire but also the repertoire administered by other national collection societies. Despite the withdrawal of certain repertoire by a number of publishers, rights have been reaggregated back to national societies, and as a result the process of national service licensing normally involves just the one national collection society.

In Europe, subscription service Simfy is available in Austria, Germany and Switzerland. However, Simfy told Music & Copyright that it deals with six collection societies or licensing hubs. For each country’s national repertoire, the service has secured licensing agreements with each of the three national collection societies. Although Warner Chappell and UMPG withdrew the licensing of their Anglo-American repertoire from national collection societies, reaggregation and collection-society agreements has meant the national collection societies can still issue national licenses for the two major publishers’ content. However, to include Anglo-American repertoire from Sony/ATV, EMI Music Publishing and BMG, Simfy was required to sign licensing deals with the three publishers’ multiterritory administrators.

With digital-music services increasingly looking to operate in more than one country, dealing with multiple collection-societies is a very tiresome process and the Commission is making strides to break through the national roadblocks. But with publishers placing the administration of their repertoire in a number of different hands, the danger is they have created more fragmentation at a critical time in the European evolution of digital-music.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

The newsletter’s 20-year anniversary came and went in September, but thanks to a long-standing subscriber, copies of the first 24 issues published have been found and make for interesting reading. Despite containing names that have either long since left the music industry or been swallowed up as part of industry consolidation, the headlines for a number of news stories resonate closely with happenings today. For example, the first issue, published Sept. 12, 1992, contains an article describing how Apple Corps sued Sony Music for copyright infringement over the rights to release a Beatles live album. Apple Corps has tightly controlled the sale of Beatles recordings, and only in 2010 were they made available in digital form.

Private copying and the European Commission
The first 12 months of Music & Copyright coincided with the CD becoming the dominant hard format. According to the IFPI, audiocassette album sales stood at 1.48 billion in 1992, with CD album sales at 1.19 billion. In 2003, CD sales had increased to 1.42 billion, with audiocassette sales down, to 1.38 billion.

The issue contained a report on how the UK government had blocked a move by the European Commission to introduce a Europewide private-copying-remuneration system for audiocassettes and audiocassette hardware. Although successive UK governments have avoided legislating on private copying, late last year the UK Intellectual Property Office unveiled changes to the copyright law, with a private-copying exception included for the first time.

The involvement of the Commission in rights-holder interests – typified by the headline “Music industry strategy depends on European Community unity” from issue 002 – is something that most involved in the music industry would rather consign to history. However, attempts to help the industry at the European level haven’t always succeeded. The article in question detailed the ratification of the Maastricht Treaty, which was behind the creation of the European Union (EU) in November 1993. The article describes the proposals put forward by the Commission for Pan-European legislation to develop common trading conditions throughout the EU. The proposals covered issues such as rental, private copying and the duration of copyright protection. However, notable by its absence was any proposal on piracy. Although the rental and duration documents contained some measures to tighten antipiracy initiatives, no separate antipiracy proposal was drafted.

In the past 20 years the Commission has certainly played a part in coordinating antipiracy activities across the region and has put pressure on countries in Eastern Europe that are now EU members to improve copyright protection. But deciding what to do about copyright protection across the EU is an issue that greatly divides countries. France has taken the toughest action with the HADOPI three-strikes system. The UK and Ireland have edged toward sending warning notices, but others, notably Spain, have targeted offending websites rather than individual Internet users. The Commission has always backed enforcing intellectual-property rights but has left the decisions about direct antipiracy activity to national governments.

The dream of copyright harmonization
A key area of the Commission’s reforms that have affected the music industry is copyright harmonization. An article in issue 003 details the Commission’s aim of reforming copyright legislation for the then-European Community’s 12 members. The Berne and Rome Conventions were shaping the Commission’s thinking, but looking back it seems inconceivable that just 20 years ago countries such as Belgium and the Netherlands, which had not yet signed up to the Rome Convention, had no neighboring-rights legislation, meaning performers and record companies in those countries were without copyright protection.

But perhaps the most interesting and eye-opening analysis in the first few issues related to Pan-European licensing agreements. Issue 005 detailed what it described as “the end of a century-old system of national collection-societies and its replacement by a competitive system involving new Pan-European organizations.” The article detailed central-licensing agreements by which the larger record companies paid mechanical royalties for recorded-music sales in all of Europe to one national authors’ society. At the time, BMG and Warner had a central licensing agreement with GEMA, while PolyGram and Sony had an agreement with STEMRA.

However, publishers were highly critical of the agreements and complained that royalties were taking too long to be paid and costs were up because of higher commission charges. The article went on to describe how GEMA, SACEM and STEMRA were jointly planning to create a “European mechanism” to collect mechanical royalties. The announcement of the joint initiative was thought to be a rallying cry for opposition to the newly created European Music Rights Organization (EMRO), which was intended to be a collection-organization alternative to national authors’ societies. EMRO was set up by the UK Music Publishers Association, which at the time owned the Mechanical Copyright Protection Society (MCPS). Although music publishers and rights holders were asked to withdraw their mandates from the collection societies and sign up to EMRO, the major publishers and record companies decided against doing so, and the EMRO strategy was abandoned.

Lessons learned?
Coordinating rights collections across Europe is a subject that has been the focus of Music & Copyright throughout its 20-year history and will continue to be so for the foreseeable future. Despite numerous initiatives, proposals and agreements at all levels, few issues have caused as much dissension among those involved. In 1992 national boundaries were much less of an issue than they are today, but there were, and have continually been, moves to deal with certain rights administration on a regional basis rather than by country.

The advent of digital distribution opened a can of worms across Europe that exacerbated the problem, and solutions have been slow in coming. Digital-music services have long complained about cumbersome licensing negotiations, and the withdrawal by the major publishers and some independents of certain repertoire from national authors’ societies and the subsequent establishment of licensing hubs have not satisfied all.

Many more issues, of course, have a happier history of repetition. For example, 20 years ago Music & Copyright profiled Sweden. The relatively new CD format experienced retail unit sales growth of 47% in 1991, overtaking the vinyl LP to become the biggest album format. Earlier this year Swedish trade association Grammofonleverantorernas Forening published trade figures that showed streaming is now the biggest source of recorded-music trade revenues. The same issue also contained a seemingly prophetic headline, which asked whether electronic delivery would be “music’s digital future.” However, there was one article that most in the music industry can only dream of repeating: “China extends copyright protection as sales boom.”

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

Digital-music sales in most developed countries still do not fully compensate for the decline in physical-format sales. In fact, the majority of the world’s countries where digital is dominant are in Asia and are not considered developed. Rather than digital growth, the decimation of the physical-format sector by piracy is the main reason for Asian-country digital dominance. However, in a number of these countries, digital sales have shown promise, and therefore establishing a foothold at this early stage of development makes good business sense.

China and India are the standout “emerging markets,” with both already having bigger digital sectors than physical. Moreover, forecast economic growth in the two countries will result in a rapid rise in consumer spending power. According to the Organization for Economic Co-operation and Development (OECD), China’s economy is projected to surpass the euro-currency area in a year or so and the US soon after to become the largest economy in the world. India is forecast to surpass Japan in the next year or two and the euro area in about 20 years. The OECD has forecast that the combined GDP of China and India will be larger than the GDP of the entire OECD area (34 countries) before 2060. Currently, China and India combined are equal to about one-third of the combined GDP of the 34 OECD members.

But other countries in Asia are also showing promise. Aside from South Korea, which is arguably the digital leader in the region, Indonesia is one example of a market ripe for digital exploitation. Digital sales in Indonesia actually fell slightly in 2011, but that was largely because of the big dependency on ring tones, with mobile accounting for 84% of digital trade revenues in 2011, and the lack of any compelling download or subscription services.

Although Indonesia has a big imbalance of wealth, in the past 10 years personal wealth has risen sharply. According to a report by financial-services company Credit Suisse, Indonesia’s wealth level per adult was similar to that of India in 2000, but the figure for Indonesia is now more than double India’s. Credit Suisse also said that just 2% of the population in Indonesia had wealth above US$100,000. However, that share is close to 5 million people, equal to the population of Ireland and just behind the population of Denmark and Finland, all of which have thriving digital-music markets.

Testing the waters in sub-Saharan Africa
One part of the world that has always been a recorded-music-industry wasteland is sub-Saharan Africa. Piracy levels are high, and few reliable sales statistics are available. Establishing a digital presence in the region is especially difficult, because of the lack of formal channels for tracking down and licensing content. Moreover, the ethnic diversity found in each country adds complexity to building a local digital-music offering with mass-market appeal. Adding to the problems is the lack of record companies and well-established collection societies. Some countries seem beyond even the most optimistic digital-music retailer, but iTunes is now operating in several countries in the region, including Bahrain, Israel, Qatar and the UAE. All of these markets will be a good test for iTunes and downloads in general because of the high broadband-penetration levels, high income levels and the lack of any download competition.

Few are expecting any of these markets to suddenly burst into life, but the latest international rollouts give underserved consumers who want to buy digital music or subscribe to digital-music services the opportunity to do so.

Although not the ideal comparison, the growth of the digital-TV sector in sub-Saharan Africa is possibly one positive indicator of consumers’ willingness to pay for entertainment. According to research published by Music & Copyright publisher Informa Telecoms & Media late last year, the Middle East and Africa is undergoing significant political change, and the youthful demographic skew in many countries has lowered barriers to the acceptance of new technologies.

Monetizing subscription-led TV content has proved difficult for pay-TV providers, largely because of the wide availability of satellite-delivered free-to-air channels, exacerbated by the problem of generating steady revenue in a region with an abundance of piracy across most platforms. However, the TV industry overall is seeing a period of exceptional growth, drawn from an increase in the number of both TV households and viewers, and coupled with generally favorable economic conditions. Across the entire Middle East and Africa, Multichoice is the leading pay-TV operator. Turkish service Digiturk is the largest pay-TV operator in the Middle East and North Africa, ahead of D-Smart.

Although the TV and recorded-music industries have very different dynamics, there are some clear similarities. Understanding local market dynamics and setting realistic prices to tempt consumers away from free has seen pay-TV-subscription numbers rise, and there is no reason why digital-music services cannot do the same. Few of these emerging markets will take a place in the IFPI’s top 20 anytime soon, but given time they could start generating significant revenues, and rolling out international digital-music services in markets that have contributed little to record companies’ bottom lines just might be a better business decision than some had first thought.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

Ogilvy was asking for artists to submit original songs that could be used in one of “several upcoming advertising campaigns.” Although the headline on the competition website said “win a chance to have your music featured in a Dove Men+ Care ad campaign!,” the actual winner, should the submissions be considered good enough, could be used in a number of advertising campaigns handled by Ogilvy. According to the brand promoter, the competition was as much about raising awareness with artists of how their music could be used in advertising as it was to find music for a specific advertising campaign.

No specific terms and conditions were provided for any possible sync deal as part of the competition’s entry process. The only terms were provided by Sonicbids, which created the competition website, and were applicable only to the website. However, Ogilvy told Music & Copyright that if a piece of music was selected, the author/artist would receive a sync fee for its use. The artist/author would also retain all rights to the music submitted.

Few could doubt the boost received by artists used in high profile advertising campaigns such as those screened by Apple for its iPod portable music player. The Canadian singer songwriter Leslie Feist received a massive sales boost in 2007 for her album The Reminder and single 1234 after the track was used to promote the iPod nano. The track went on to win several awards with Time magazine ranking the song at number 2 in its “10 Best Songs of 2007.”

Some competitions though do insist that an artist hands over publishing and performance-rights as part of the terms of entry. Although competitions such as these offer unsigned artists the opportunity to put their music in front of a big audience, there is a price to pay. In finding out how many artists would be willing to pay that price, the poll drew a number of comments that questioned such competitions’ real value. A collection of comments are posted below. Music & Copyright would like to thank all those that voted and took the time to express their views.

Every so often some of my clients will do “freebies” in exchange for getting credited. Sometimes it can be a good career move. If you decide to do something like that, I usually suggest trying to include a provision in the contract that provides that “the other side” is obligated to give you credit.
Paul Ungar

It’s a great question to ask [and] in most cases I would say no and that’s what I voted. But let’s say the music [was] for the next Bond film. They can have it, it’s in the post.
William Butler

Years ago… maybe 20 or so, I used to agree that this would be a good idea. But no longer. There are too many ways to beat the labels and producers in this game and make a good living doing what you love.
Scott Smith

This “opportunity” amounts to a kiss on one cheek and a slap on the other, and underscores the problem with the dilution and lacking respect anymore toward the value of music.
Bobby Francavillo

I have a very simple rule in situations such as this… If all parties involved are donating time, talent and no one is getting paid… we will consider the program. If the program is a good deal for everyone… then it is a good deal!
Rod Harris

Depends on the situation the artist is in. “Anticipation” Heinz ketchup,…think Carly Simon regrets that?
Brian Jaccoma

My limited experience with exposure of this nature is that most groups are not equipped to leverage it. You’d need to run a campaign towards supervisors, plus audiences in the countries in which it is running and ideally some PR. So it requires good contacts and some money to really reap the benefits (apart from the passive benefits of people managing to find out who you are).
Michael Leahy

No artist should ever give up a penny in exchange for exposure. I have been in this biz 40 years and…I have never heard of any artist giving away their love for exposure. Utter insanity.
Rich Unger

This is a personal choice, the discussion on the value of exposure is circular, so just pick the argument you believe in. There is no compelling data supporting either side. Personally, I believe that if you think your music isn’t worth anything, give it away. If it has value, then charge for it.
Stephen Hart

I think a big part of how you would feel about this is based on your career as an artist. If you are successful and lucky enough to make your living from writing music then I agree that giving it away seems a step too far. However if you are an aspiring musician recording songs in their bedrooms or doing loads of pub gigs and going nowhere what’s the harm.
Neil Dew-Gosling

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

UK authors’ society PRS for Music recently published figures showing that revenues earned from the use of British music overseas have doubled since 2002. UK songwriters and composers earned £187.7 million (US$300.4 million) globally last year, up 10.6% from £169.6 million in 2010. In 2002, overseas collections stood at £85 million. PRS said the rise came partly from improved licensing and efficiency of distribution around the world.

Royalties from international live concerts have jumped almost 1,000% in the past 10 years. Although revenues from the use of music on TV have risen 100%, largely because of the availability of more channels and the greater use of UK authors’ music in TV programming, some have questioned why the disparity between the two growth rates is so large.

Smaller artists missing out
David Elkabas, co-director of international music-management company MN2S, told Music & Copyright recently that there is a difference between the accuracy of reporting the use of music in live performances and music used by broadcasters, as well as music used on commercial premises. He also thinks that because of problems of accuracy, many smaller artists that are already struggling to make an adequate return on their music are missing out on royalties.

Elkabas says that in the UK, whether an artist plays live in front of thousands of people at a concert or at a smaller venue, the music is accurately reported and royalty fees are distributed directly to the music-rights holders. But such accuracy of reporting is not being applied to a variety of license-paying users, such as night clubs and smaller radio stations. This means that even though artists make a fair return from live performance, there are big holes in the level of royalties they earn from the use of recorded music.

PRS for Music does not receive detailed reporting from smaller radio stations or most night clubs on what music was broadcast minute-by-minute. Unlike the larger TV and radio broadcasters and live concert events, smaller radio stations are only obligated to submit sample playlists. Royalty fees distributed are based on the anticipated number of times a song could have been played according to its exposure, popularity and position in the music charts at that time.

The distribution of licensing fees for music played in dance clubs and other smaller premises, such as hairdressers, restaurants, stores and pubs, is based on various analogies, formulas and sample comparisons that estimate which songs were most likely broadcast and how often. This system means that money derived from these venues is more likely to be paid to authors of more commercial songs that have been broadcast on mainstream radio or featured in published charts. Creators of experimental and more-underground music, which are played at dance clubs week in and week out, might well be missing out on their share of these royalties.

Elkabas considers such inaccuracies to be clear evidence that the current reporting system is out of date and is not a fair representation of the music played across venues, especially in clubs. He says that an inconsistent music-reporting system is more beneficial for copyright holders with national exposure.

Fair comment?
PRS told Music & Copyright that increases in total collections by the authors’ society have, in part, come from the better tracking of music use and data transfer, as well as improved cooperation from its society partners. PRS says it is “always trying to improve” the tracking of music use. Where it is economic to do so, PRS receives accurate reporting. However, the authors’ society acknowledges that it will never receive totally accurate reporting from its small blanket licenses for community radio stations or stores and offices. In the UK, 95% of radio and TV is on a pay-per-play basis. Although the aim is for 100%, the license value for small community radio stations is low, and therefore any improvements in measuring music use must be balanced between costs and benefit.

Other collection societies face problems similar to those faced by PRS. For example, Dutch authors’ society BUMA/STEMRA told Music & Copyright that it does not have minute-by-minute information from local radio stations either. BUMA/STEMRA’s research showed that what local radio stations play is 98% the same as the repertoire of the larger radio stations. To get this 2% totally accurate would “cost far more than it would benefit.”

For small venues, hospitality services and retail outlets in the Netherlands, a number of companies provide tailored music. For example, local service Alcaz offers the DDJ music system, in which music users select the music they want to play in their establishments. BUMA/STEMRA has deals with these companies and can use the information they provide to make sure the correct authors receive their fair share of royalty payments.

Acceptable losses
Online service offerings by collection societies have gone a long way toward improving the accuracy of music-use reporting. In Germany, for example, GEMA has teamed up with performers and producers society GVL to produce a new electronic report format for radio and TV that generates the broadcasting report for the licensee using metadata. GEMA also offers an online service for live music, whereby concert organizers, music directors and performers can file performance details.

But there are some instances of music use in which accuracy of reporting will always be patchy. Although mobile-music-recognition software and basic digital mobile devices can easily identify music, these applications have their limitations, especially since the volume of music use to be identified is immense. However, critics such as Elkabas suggest that the way in which royalties are reported, calculated and distributed has failed to keep up with technology changes. Setting the right balance between implementing change to increase accuracy of reporting and settling on acceptable levels of nonreporting is not easy. There will always be a small percentage of music use that is not accounted for. But what is concerning is that it seems that smaller artists, who are already struggling to earn a living from music, might just be the ones suffering the most.

David Elkabas is co-Director of MN2S, an independent, International music management and talent booking agency. David has 17 years experience in the music business, representing an international roster of DJs, producers and live artists across a diverse spectrum of musical genres.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.

For most developed countries around the world, it would be safe to assume that the sales trend in the recorded-music industry is one of falling physical-format sales and rising revenues from a growing number of digital-music formats and delivery means. No country has avoided an overall contraction from the physical-to-digital transition, but some have managed to turn things around faster than others. One or two have already seen digital sales overtake physical and have returned to the days of rising annual sales with good prospects for a healthy future. Others remain stubbornly unmoved and continue to record annual sales contractions. And then there is Japan, where physical sales are going up and digital sales are falling.

According to the RIAJ, total unit sales and the value of digital-music trade revenues fell sharply between January and September this year compared with the same nine months of last year. Digital-music unit sales dropped 27%, from 284.7 million to 209.1 million, while the trade value slumped 26%, from ¥55.5 billion to ¥41.2 billion.

Mobile-music sales fell a staggering 36% in unit terms, to 152.9 million, and 39% in value, to ¥27.9 billion. For the same nine-month period in 2011, mobile music sales were down 20% year-on-year in both unit terms and value, meaning unit sales and the trade value of mobile music sales in Japan have more than halved in just two years.

In contrast to mobile, Internet sales performed well in the first nine months of 2012. Total online unit sales increased 23%, to 54.7 million, with the trade value of those units up 34%, to ¥12.3 billion. This year’s growth followed a 22% year-on-year rise in both unit sales and value in the first nine months of 2011. Single tracks accounted for 67.1% of the online trade value this year, up from 61.6% in the same nine-month period of 2011.

Japan continued selling digital music with DRM copy-protection long after it was deemed not consumer-friendly elsewhere. Mobile operators maintained that the use of DRM limited piracy and prevented the illegal distribution of downloaded content. Tying content to handsets also acted as a way to reduce subscriber churn to other mobile networks. But the use of DRM is now slowly being lifted, meaning consumers have greater flexibility in what they can do with a download.

The Japanese government has also introduced tough measures to deal with the unauthorized distribution of digital music. In June, Japan’s parliament passed a bill amending the country’s copyright law and the level of punishment for illegal downloading. Internet users who download music and video knowingly from an illegal source can face up to two years in prison and a fine of ¥2 million. Making music and video available without authorization was already illegal in Japan, with maximum punishments for doing so set at 10 years in jail and a fine of up to ¥10 million.

Short-term gain, but uncertainty remains
Since the dropping of DRM and the introduction of stiff penalties are recent initiatives, their effects on recorded-music sales have been limited. To a certain extent, the two initiatives go hand-in-hand in that digital music without DRM will be easier to share and therefore stiffer penalties for sharing make sense. But the removal of DRM has played no part in the rise of physical-format sales. Between January and September, the production of physical recorded-music units (audio and video) was up 11% year-on-year, to 203.9 million units. The production value of those units increased 7%, to ¥214.5 billion. Physical audio production in the nine-month period was up 9% in unit terms and 5% in value. Music-video production had an equally good nine months, with the production of music videos up 18% in unit terms and 15% in value.

Despite the massive demise of all mobile formats this year, the positive performance of physical formats and Internet sales just may have stopped what has become an annual recorded-music sales decline. It should be noted that production details for physical sales published by the RIAJ differ from trade figures, but loosely based on the RIAJ’s physical and digital figures for the first nine months of this year, revenues are almost identical compared with the same period of 2011. Should a similar sales pattern continue for physical and digital recorded-music formats in the final three months of this year, trade revenues might well shown an increase. In the short term, this will be welcome news for Japan’s recorded-music industry, which has seen trade revenues fall each year since 2008. But with few people expecting physical sales to maintain their revival, uncertainty about the performance of Japan’s recorded-music sector will remain for the foreseeable future.

Music & Copyright
If you like this blog then Music & Copyright might be just what you are looking for. It is a fortnightly research service covering global copyright and legal issues affecting the music industry. It is unrivalled in its coverage of this complex and fascinating area of the music industry. It is also why our extensive client list includes companies and organizations from all sectors of the music industry operating all around the world. But don’t take our word for it, please get in touch and we will send you the latest issue.

Music & Copyright is published by Informa Telecoms & Media.