Performance-rights collections paid to record companies (producers) and performers are often seen as the poor relation to authors’ rights, with global receipts from performance rights traditionally much lower than the equivalent authors’-rights total. Yet for the past couple of years the growth in performance-rights collections has outshone authors’-rights collections. Moreover, the revenue stream is growing in importance as the recorded-music industry continues to battle falling sales. Continue reading
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.
There seems to be a considerable debate at the moment about whether or not artists and rights holders are earning significant revenues from streaming. The debate was started by an analysis by Billboard magazine on the worth of online streaming to artists. It described the earnings by the top artists from on-demand and non-interactive streams as being “shockingly low”. One notable finding was that only 10 out of the 100 artists analyzed earned above US$2,000 from non-interactive streams last year. Beyonce was top with just US$5,000. Billboard concluded by saying that it was understandable that artists and music companies were nervous when it comes to supporting streaming as the future of the music industry.
Earlier this week the Billboard findings were picked apart by the Radio and Internet Newsletter (RAIN). It contacted US digital-recording-rights-collection body SoundExchange to try and verify the Billboard analysis. SoundExchange gave a very different view to Billboard, with its spokesperson describing some of the findings as being “wildly off the mark”. SoundExchange was also quoted as saying that “more than a thousand artists received more than US$2,000 from SoundExchange for non-interactive webcasting only”. In addition to this revenue source, SoundExchange also collects royalties from other non-interactive streaming services via satellite and cable. One other interesting statistic provided to RAIN by SoundExchange was that the top earner from Internet radio made a six figure sum.
One figure Music & Copyright can add to the pot is that the online radio service Pandora made a payment to SoundExchange last year of around US$30 million. We have calculated that Pandora accounts for about 1% of all US Internet radio, so although the total sum paid is still small, it would be wrong to dismiss it altogether.
RAIN was quite right to conclude that Internet radio “benefits artists in many ways beyond simply the royalties it pays”. It also suggested that it should not be judged simply by its worth “on the royalty revenue it generates for artists”. There seems to be a clamor at the moment for digital music services to make large sums of money for artists and music companies quickly. Such demands are, on one hand, understandable, with music companies having lost so much through online file sharing. But to decry a new service as not worth supporting just as it is becoming established, and at a time when large numbers of consumers are still downloading music through P2P with artists and music companies receiving no returns, is surely a mistake.
Comparing the Billboard/RAIN findings with other countries around the world is difficult. Most European collection societies publish online revenues as one figure. In the UK, for example, total online revenues increased by 81% between 2007 and 2008. However, it should be noted that this was from a low base (£9.7 million to £17.6 million). No details are available for the different online revenue streams. But, although it is safe to conclude that no one is going to become super rich on streaming alone, the important thing at this stage is that services are being licensed and are contributing to the legal mix.