The lead feature in Music & Copyright examines the European Commission’s latest plans to deal with intellectual property rights protection. In a two-pronged approach, the Commission said it will focus its antipiracy efforts in the European Union on commercial-scale infringements, while at the same time promote enhanced copyright protection standards in countries outside Europe to try and limit the trade in illegal goods.
Our second feature details the US Supreme Court ruling that the controversial TV streaming service Aereo infringes broadcasters’ copyrights by retransmitting their programming without authorization. The Court ruled by a majority of six to three that Aereo’s strategy of charging customers a monthly fee to use the over-the-top service must stop. However, the Court noted that its decision would not have an impact on the emergence or use of different kinds of technologies such as cloud computing and remote storage DVRs.
In addition to a review of Austrian authors’ society AKM’s financial results for 2013 and the latest on Sony Music’s legal action against the passenger entertainment service Inflight Audio, the special focus this issue is on the management of music-bundles, their activations, contractual obligations and key performance indicators.
The country report is Russia. For more than 10 years, the two major music-industry sectors, recorded and live, have experienced very different fortunes in Russia. Recorded-music sales are a fraction of what they used to be, but the country’s live sector is in good shape, and big-name acts regularly perform in the country as part of a world tour. However, the launch of Apple’s iTunes sparked interest in legal downloads and early gains from subscription services suggest the recorded-music sector’s dark times may be nearing an end.
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Earlier this week Sweden’s local music trade association Grammofonleverantorernas Forening (GLF) proudly reported that total trade revenues from recorded-music sales increased 5.1% last year, to SEK991.2 million (US$152.2 million), from SEK943.6 million in 2012. The rate of growth was lower than the 13.8% year-on-year increase in 2012, but higher than the 0.5% upswing in 2011. Streaming was the big winner, with record company earnings from services such as Spotify and WiMP rising to SEK705.9 million, from SEK541.6 million in 2012. Based on the latest GLF figures, streaming accounted for slightly more than 71% of total trade revenues in 2013, up from 57.4% in 2012 and just 1.5% in 2008.
In a statement, the GLF CEO Ludvig Werner said three straight years of growth had pushed trade revenues to their highest level since 2004. However, he cautioned that record company earnings are still just 60% of the peak year of 2000.
With all the headlines about Sweden’s streaming boom, it is easy to forget how big the Swedish recorded-music market once was and how far it has fallen. Moreover, there are plenty of questions over how high streaming sales can actually go, particularly given the slowdown in the growth rate of streaming earnings (30.3% in 2013, down from 55.4% in 2012).
In just six years, sales of CDs in Sweden have more than halved, yet there is little published evidence detailing whether those CD buyers have switched to digital or are simply buying less recorded-music. In the early years of digital, falling trade revenues were a clear indicator that consumers were either switching to unauthorized services, or abandoning the recorded-music industry altogether. Download sales have never really taken hold in Sweden and so the big unknown is whether music subscription services have attracted consumers that stopped buying recorded-music, or whether the services are simply causing a redistribution of trade revenues from CDs and downloads.
Rising earnings suggests the growth has come from more than simple cannibalization, but it would be easy to gloss over the possibility that fewer Swedes are spending money on recorded-music, and that those consumers that are spending, are spending more. If that is the case then there will be a limit on how big the streaming boom will take Sweden’s recorded-music sector. No one is expecting streaming sales to keep on rising, but if streaming can’t return record company earnings to 2000 levels, then what can?
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For anyone interested in the recorded-music industry and where it is headed, it is difficult to escape the many articles and reports speculating on how music will be served to consumers in the coming years. For those living in Norway or Sweden the answer is already very clear with music subscription services leading the charge to a growth in sales after countless years of decline. Such has been the rise in music subscriptions in the two countries, streaming now forms part of sales charts published each week. IFPI Norway added streaming to album charts from the beginning of November. Previously, the album chart had only included physical sales and downloads. Sweden added streaming to its national album chart in October. IFPI Norway said by including streaming figures the album and singles charts reflected “the total consumption of music in Norway.” Streaming has been included in the Norwegian singles chart since the spring of 2011.
Adding streaming usage to a sales chart is a natural progression in the collation of music sales and recognition of how accessing recorded-music has changed. Excluding streaming from sales charts, particularly in a country where the majority of trade revenues now come from subscription services, would make those charts incomplete, unrepresentative and irrelevant. Continue reading
In the past few months the publication of detailed national digital-music sales figures has illustrated great differences between countries’ digital-music-buying habits. Published analysis of digital-music sales patterns has drawn a variety of conclusions regarding whether subscription streaming services are cannibalizing download sales. However, as subscribing to music starts to become mainstream and download sales begin leveling off, or falling, more and more people are asking whether streaming is to blame. Continue reading
As the issue of multiterritory licensing comes under the spotlight in Europe, differences in rates charged and rights splits will become more evident. Will an EU directive that breaks down national borders be followed by a bigger push for deeper collection-society harmonization across the region?
With publication of the European Commission’s new multiterritory licensing proposals, Brussels’ efforts to harmonize the EU’s digital-music landscape are looking to build on legislation harmonizing authors’ and publishers’ rights that are managed by collection societies. Continue reading
At the end of last month the music industry once again descended on Cannes for the annual institution that is MIDEM. Opinions from the trade floor and the many conferences and panel sessions left visitors in no doubt that there has been a major shift in opinion from across the music industry that streaming and subscription services have really started to take off. Continue reading
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. Continue reading
In some ways South Korea’s music industry could be considered unique. It is one of a small number of markets that have reported growth in recorded-music sales, and for several years digital sales have exceeded physical. All of this has been achieved through the government’s emphasis on turning South Korea into the most “wired” country in the world. Virtually all households are connected to a high-speed broadband service, and mobile penetration exceeds 100%, with almost all members of the population able to own a mobile now having one. Continue reading
A research project carried out by Informa Telecoms & Media, publisher of Music & Copyright, and the streaming music service Spotify has concluded that large mobile operators could add millions of euros to their bottom line by partnering with a music streaming service.
Rapid smartphone uptake combined with the recent rise of streaming services like Spotify have for the first time enabled music to make a substantial impact on operator’s market share, ARPU and churn. By partnering exclusively with an existing player rather than building their own service, fast-moving operators can realise these gains quickly while shutting out competitors.
The study is based on real data from the Swedish telecoms operator Telia and Spotify, as well as research from Informa Telecoms & Media and other service providers and operators. Using this data, the study estimates that an operator in Western Europe with 20 million customers could generate revenues of €77.7 million in 2011 alone from partnering with a streaming service. If the leading player in each Western European market did so, they would collectively generate €1.1 billion in 2011, the study found.
One of the authors of the study, Giles Cottle, said that the research shows how a large Western European operator could “generate millions of euros of revenue a year by partnering with a third-party music service – significantly more than they would gain from offering their own service. Add in other benefits, such as network efficiency, brand awareness and increased lifetime customer value, and the potential for such a partnership becomes very clear.”
Adrian Blair, Director of European Business Development at Spotify, added “music download stores which operators launched prolifically over the last 5 years are commodities and had little impact on core business metrics. Streaming services, by contrast, have proved an effective way to differentiate from the competition and win new customers. They have also been used to upsell high-ARPU devices and reduce churn. Over half of Spotify/Telia customers said they were more likely to stick with Telia as a result of the Spotify partnership.”
The study says that Telia’s experience has helped illustrate best practice to other operators wishing to emulate their success. Churn reductions and potential gains in market share and ARPU resulting from mobile music streaming will not materialize without a clear strategy and focused execution. A high-quality streaming product and the right offer (for both operator and consumer) needs to be combined with effective marketing, a motivated sales force and deep billing integration. Simply offering a popular free service, with little thought put into the way the offer is packaged and marketed, will not yield the kind of results the operator will be hoping for. Yet if they get it right, the rewards are potentially lucrative.
The joint research paper is available on October 20th exclusively through the Informa Telecoms & Media Analyst Community Group on LinkedIn (www.informatm.com/linkedin).