New issue of Music & Copyright with China country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Spotify’s direct listing in New York sheds light on the company’s inner workings
After months of speculation, global on-demand audio streaming leader Spotify has finally filed all the necessary documentation with the US Securities and Exchange Commission (SEC) confirming its move to go public. The company will list on the New York Stock Exchange (NYSE) in the next month or so under the symbol SPOT. Rather than go down the more common IPO route, Spotify decided on a direct listing and is not issuing new shares. Instead, existing shareholders will be free to sell their shares through brokerage transactions. As is the case with all listings, documents filed with the SEC lift the lid on previously unseen financial and operating metrics. This research note picks out some of the more interesting insights surrounding the financial standing of the service, its popularity, and what the details tell us about the wider music streaming market.

Musicautor celebrates 25th year with return to collections growth
Bulgarian authors’ society Musicautor has marked a quarter of a century of operations by recording a rise in collections. The three biggest sources of income – TV, radio, and general licensing – all registered growth last year, more than offsetting a drop in collections from retransmission, digital, and live concerts. In its business report, Musicautor noted difficulties associated with the administration of digital music rights and its inability to process reports from several of the major music services. Although the withdrawal of Anglo-American repertoire administration a few years ago by music publishers as part of their move to create pan-European licensing hubs hit digital collections, the lack of technical ability to process reports from the international digital platforms is a major challenge. General licensing revenue returned to growth after a decline the previous year, and mechanical collections grew sharply following the completion of a deal with the local producers’ association.

Brands get to grips with social change initiatives through live music
Brands have long supported live music events, but simply stumping up cash to sponsor a stage, festival tent, or bar has quickly became something of yesteryear with the onset of social media and more intimate B2C communications. However, racking up substantial online metrics only goes so far, and a number of brands are now looking to do good in the community and engage in social change initiatives through live music. This is a riskier strategy than simply hanging a banner over a stage, and brands need to make sure they choose their partners and social issues carefully.

China country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed China music industry report. China is the world’s most populous country, with close to 1.4 billion people. It is also home to the second-biggest economy. Last year saw the country’s economy grew 6.9%, the first time in seven years that annual growth has accelerated. The increase was also higher than the Chinese government’s forecast of 6.5%. In line with the optimism surrounding the economy, certain sections of China’s music industry are starting to show signs that it is living up to its long-held potential. In the past, there have been several false starts. More recently, though, glimmers of optimism look set to turn into real sales. The latest IFPI figures showed trade revenue registered healthy growth in 2016, after a big jump in earnings in the previous year. Aside from slight increases in minor digital formats, all the growth in the last few years has come from streaming. Ovum has estimated that growth continued last year, and more is set to come.

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New issue of Music & Copyright with India country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Slowdown in streaming growth rates casts doubt on a return to the glory years
Later this year, global trade body the IFPI is set to report the most positive year for recorded-music sales this century. Audio subscriptions will undoubtedly be the star of the show, and the combination of subscription payments and advertising income will boost streaming to the top of the earnings pile. The continuing vinyl revival will soften the rate of decline in physical format revenue, but it’s a safe bet that audio subscriptions will have become the single biggest revenue source. The rise of the paid subscription from a niche revenue source just a few years ago is impressive, and the year-end record-company results have illustrated the importance of access services to the companies’ bottom lines. There are, however, signs that the big gains in streaming revenue are slowing. While it is certainly much too early to suggest that the access service bubble is anywhere near close to bursting, its rate of inflation is slowing down and could well become a cause for concern in the next year or so.

Positive year-end for Pandora as subscription gains drive revenue growth
Online radio and music subscription service Pandora has reported a positive end to its 2017 financial year. Revenue beat expectations, with higher subscriber earnings more than compensating for a flat year for advertising. Net losses for Pandora more than halved in the final quarter, although there was sizable growth in net losses for the full year. Although listener hours and the number of active listeners in the final quarter fell year on year, the number of paid subscribers increased. During the earnings call, Pandora’s senior executives commented that the proportion of its audience listening through voice-activated devices was growing sharply. Moreover, the company confirmed that plans were well on the way to expand beyond recorded music, with podcasts set to be added to its current range of audio content.

French recorded-music sales see second consecutive year of growth
French music trade association SNEP has reported a second straight year of growth for trade earnings from recorded-music sales. The rise marked only the third time in the last 10 years that trade sales have registered an uptick. Subscriptions and ad-supported streaming were the two growth sectors with sales of single track and album downloads falling sharply. In a repeat of 2016, the overall performance was buoyed by a modest dip in trade earnings from physical format sales with digital more than offsetting the physical losses. However, physical formats still accounted for the majority of trade revenue, and despite the streaming gains, concerns remain over the medium-term prospects for the French recorded-music sector should the rate of decline in CD album sales begin to accelerate.

India country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed India music industry report. India is one of a small number of countries often tagged as an emerging market with great potential to become a major market of the future. With the population ending last year at more than 1.3 billion and an economy that is growing steadily, tapping into what is a market ripe for exploitation is always high on the recorded-music industry’s list of priorities. However, despite the promise, India has so far failed to live up to its emerging tag, with positive results one year followed by poor sales the next. The biggest problem for the country is piracy. Retailers have always struggled to compete in a market flooded with illegal copies. Moreover, rising internet penetration brought with it increased access to unauthorized music distribution sites and services. Developments in the last year or so have suggested that streaming may be the way out of the piracy problem, but the road to prolonged higher sales and meaningful returns is likely to be a long one.

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New issue of Music & Copyright

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

EC backs blockchain with the rollout of Observatory and Forum
The European Commission (EC) has created the EU Blockchain Observatory and Forum (BOF) to highlight key developments in blockchain technology and promote European stakeholders actively involved in blockchain activities. The BOF is set to work alongside established funding projects and research programs. Blockchain technology, on which cryptocurrency Bitcoin is built, is being held up by reformers in the music industry as a means of creating a fairer distribution system for content creators. Proponents say it could bring transparency to rights metadata, instant remuneration to artists, and new forms of monetization to music.

Appeals court orders new trial in Cox–BMG copyright infringement case
US ISP Cox Communications and music rights management company BMG must face each other again in a copyright dispute, following a decision by a Fourth Circuit panel of judges to remand for a new trial. Cox was sued for copyright infringement by music companies BMG and Round Hill Music in 2014. Round Hill was removed from the case on the grounds that the publisher had not proved exclusive ownership of the rights to the music cited as being infringed. A Virginia district court ruled at the end of 2015 that Cox was guilty of willful contributory copyright infringement and awarded BMG $25m in damages. The ISP appealed the decision, but the district court dismissed the claim. Cox subsequently filed an appeal with the Fourth Circuit. That court has now upheld the district court’s decision that the ISP is not entitled to the safe harbor protection defense, but ruled that a new trial must be held because of certain errors in jury instructions.

New York court rules no copyright infringement in U2 plagiarism claim
A New York federal judge has ruled that U2 did not copy any part of English songwriter and performer Paul Rose’s track Nae Slappin for the creation of the band’s hit song The Fly. Rose had claimed that U2 had infringed his copyright by willfully copying fragments from his track to create a guitar solo for The Fly. However, the judge found that Rose did not plead a plausible claim of infringement and that his claims were too vague. The judge also said that no reasonable juror listening to the entirety of the two songs could find that they were similar. Most music plagiarism cases rarely reach court given the difficulties for authors in establishing whether another author has copied their work. Equally problematic is the cost of bringing cases to court, particularly given that an accused will often have significant resources with which to defend any claim.

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New issue of Music & Copyright with Canada country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Apple betting on the HomePod to close the gap with Spotify
Apple has finally confirmed the rollout date for its HomePod smart speaker. The US, UK, and Australia will be the first countries to receive the device when it goes on sale February, followed by France and Germany in a couple of months. Marketing for the HomePod is focusing heavily on the device’s music capabilities and audio quality, and Apple is hoping that sales will boost subscriber numbers to its music subscription offering and close the gap on the leader Spotify. The price of the HomePod is significantly higher than that of the smart speakers currently on the market, but Apple is probably hoping that it will be able to repeat its success in the portable music and smartphone sectors and turn what looks like a late entry to market into an advantage.

Rights-owning Facebook looks to make music much more social
Having recently signed a series of music industry agreements, Facebook is beginning to show real intent in music, while at the same time ramping up the pressure on YouTube. The driving force behind this is the social network’s belief that it can make its platforms more engaging with video. And the experience of its new Watch video hub suggests it might well be right. However, with the new rights deals in its back pocket, Facebook now needs to develop new products that will deliver immersive “social music” experiences to its users – and Asia’s Tencent may well already be showing the way forward.

Japan set for a full-year fall in recorded-music sales
New figures published by Japanese recorded-music trade association the RIAJ show that the total production value of physical formats and the number of units produced were down last year compared with 2016. Both audio and video formats suffered a production dip, although, in a repeat of 2016, the rate of decline was fairly modest compared with some of the sizeable falls experienced in a number of other developed markets. Full-year figures for digital trade earnings are set for publication in February, but based on digital revenue in the first nine months of the year, the world’s second-biggest recorded-music market looks set to register an overall decline.

Canada country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Canada music industry report. Canada is one of the world’s larger music markets. For recorded music, it sits just outside of the top five, behind France. However, last year saw recorded-music consumption increase at more than double the rate of the previous year. Growth in on-demand audio streaming easily offset declines in download and CD album sales, while the vinyl revival continued with sales of the age-old format rising for the seventh consecutive year.

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New issue of Music & Copyright with US country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Smaller streamers look for an edge in a big-player market
The music-streaming sector’s leading lights made serious moves at the tail-end of last year, and the battle to dominate the subscription segment is set to sharpen in 2018. Amazon, Google, Apple, and Spotify are all looking to gain extra edge in a competitive market, making it difficult for the smaller services to remain relevant and play a leading part in the rapidly evolving sector. However, Pandora, Deezer, and Tidal haven’t given up the fight and are looking to carve out their own segments, largely with the help of bigger partners.

UK ISPs ordered to block access to illegal streaming service servers
Last year, the UK High Court issued its first order to block access to unlicensed streaming service servers. The handing out of blocking orders to an ISP by a court is quite common, and rights holders for several years have applied to courts to force ISPs to prevent their subscribers from accessing websites or torrent trackers that host or provide access to unlicensed music and media content. Given the shift in the way recorded music is accessed now, rather than owned, unlicensed streaming services are growing in number, and so blocking internet users from visiting certain websites is no longer the answer to the problem. At the end of last year, the High Court issued a new blocking order. Like the previous order, the block was to prevent internet users from viewing live soccer matches. The High Court action could have implications for the recorded-music industry’s attempts to prevent internet users from accessing unlicensed content.

Publisher Wixen files copyright infringement lawsuit against Spotify
Spotify has been hit with new legal action accusing it of willful copyright infringement. The lawsuit, filed by Wixen Music Publishing at the US District Court for the Central District of California, Western Division, claims that Spotify has reproduced and streamed music penned by its songwriters without permission. The lawsuit, which is requesting the maximum statutory damages for each infringement, described a previous settlement between Spotify and a class action group concerning similar claims as inadequate. It accused the service of building a multibillion-dollar business without ensuring that the music available had been properly licensed. The timing of the lawsuit’s filing was prompted by the introduction of the Music Modernization Act into the House of Representatives which aims at overhauling the US mechanical royalty system. The bill includes a clause preventing rights holders from filing similar mechanical rights–based copyright claims after the end of 2017.

US country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed US music industry report. The US is the biggest music market in the world. Not only does it account for around one-third of global recorded-music sales, it is home to the world’s largest live music sector and the single biggest live music promoter, Live Nation Entertainment. The US also has two of the leading authors’ rights organizations, ASCAP and BMI, and has quickly become the biggest performance rights market for record companies and performers, despite the fact the country’s collection agency, SoundExchange, only collects royalties from digital music services.

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New issue of Music & Copyright with Netherlands country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Flurry of deals and service announcements end a busy year for digital music
The battle for digital music supremacy took on new urgency in December, with a flurry of activity by several of the music streaming sector’s main players. The rumored rollout of a new all-encompassing service from YouTube was quickly followed by Amazon’s extension of its Music Unlimited service footprint. Not to be outdone, Apple then confirmed press reports that it had acquired song-recognition service Shazam. Spotify also confirmed reports that it would be exchanging minority equity stakes with Tencent Music Entertainment Group. Although Spotify has ended this year as the clear music subscription leader, the moves by the big names in the chasing pack suggest that there will be no letup in the push toward subscription service dominance.

Vinyl revival continues under the music streaming radar
Sales of vinyl in many of the world’s developed markets are on something of a roll at the moment. Although the vast majority of the recorded-music headlines are devoted to the business of music streaming, sales of the age-old vinyl LP continue are continuing to rise. New manufacturing plants are coming on line to meet the newfound demand for the format, and the likelihood is that vinyl will remain a part of the rapidly evolving recorded-music sector. Despite the high growth rates, vinyl still accounts for a small share of the physical-format sector. Moreover, the collectable status of the format means album prices are much higher than their CD equivalent. So the big question is: How long will the revival last for, and will consumers continue to be attracted by vinyl, or does the slowdown in global shipments mean the end of the vinyl road is already in sight?

IPRS receives reregistration notice, but collections fall for the third straight year
Indian authors’ society IPRS has reported a drop in collections for the financial year ending March 2016. With the exception of domestic radio broadcasting, all revenue streams suffered a fall. IPRS commented that unfavorable court rulings and litigation as well as issues concerning its registration as a copyright society and other enforcement matters were the main reasons for the collection reduction. Following a government investigation into the running of IPRS, the collection society has adopted a new set of articles of association. Moreover, elections resulted in the appointment of a new board of directors and governing council. In May, IPRS submitted to the commerce ministry an application for reregistration as an official collection society, and this status was granted in November.

Netherlands country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Netherlands music industry report. After more than a decade of falling trade revenue from recorded-music sales, the Netherlands is experiencing a major bounce back. Like most European music markets, the country suffered because of online piracy, as the shift from physical formats to digital resulted in big losses for record companies. However, for the last two years, trade revenue has risen sharply and continues to do so. Dutch authors’ societies BUMA and STEMRA reported a fifth consecutive year of annual growth in joint collections after three consecutive annual falls. Combined income for the two collection societies edged up last year with gains in performance collections just offsetting lower mechanical rights. Producers’ and performers’ collection society SENA suffered a fall in total licensing income for 2016. Although domestic receipts were up year on year, lower income from the US meant international collections were down sharply. The live industry experienced a positive 2016 and the sector’s good performance looks to have continued this year.

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New issue of Music & Copyright with Spain country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Recorded music now firmly a growth industry, but for how long?
Ovum has published new forecasts for retail sales of recorded music which suggest that recorded music is now firmly a growth market. The value is expected to increase this year for the third year in a row and by 2022 retail sales will be at their highest level for almost 20 years. Virtually all developed markets are benefitting from rising consumer interest in subscriptions and streaming, and perhaps most importantly for record companies, emerging markets are beginning to show interest in these services too. Subscriptions will become the single biggest recorded-music category this year and will account for more than half the retail sales in 2019 and almost two-thirds of the total three years later. Ovum is also expecting the growth rate for recorded-music sales to slow over the next five years as the music subscription sector in most developed markets reaches maturity.

Live music sector set to maintain annual ticket sales growth
Measuring the annual performance of the live music sector on a global level is a speculative process. In contrast to recorded music, which is highly organized under the auspices of the IFPI, the live industry has no global trade association. Moreover, despite the recent emergence of a small number of corporate promoters, the live industry is not controlled by a few players, unlike the recorded-music sector, which is dominated by the three majors and music publishing groups. However, as in previous years, Ovum has taken guidance from the results of the corporate live leaders. Based on their financial details for the first nine months of last year, the live music industry is likely to have registered a positive 2017. Although the individual performance of each company differed, the combined earnings for the featured promoters showed positive overall growth, with combined revenue for the six set to top $11bn.

Control of in-car music slips toward the tech giants
Investments in the connected car continue apace as vehicle manufacturers keep on cutting technology deals. However, while until recently the in-car space looked to be the car manufacturer’s domain when it came to entertainment and information services, the auto industry is now set to be usurped in large part by tech giants Apple and Google. That’s because car makers saw little threat in letting smartphones get comfortably close to the dashboard, failing to realize that their customers’ intimate knowledge and everyday usage of mobile devices made bypassing often clunky in-car systems a frictionless way to enjoy their music on the road.

Spain country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Australia music industry report. After a long difficult period for the recorded-music sector in Spain, trade sales have risen for three consecutive years and are likely to rise again when full-year results are published in early 2018. Similarly, Spain’s live sector has reversed a lengthy period of decline and registered three straight years of growth. Royalty collections in the country have been fairly flat for the last four years with annual changes in the low-single-digit percentages. Spain’s positive music industry figures come at a time when the Spanish economy is continuing to register real signs of improvement. However, in spite of the rising industry tide, the music sector, particularly recorded music, has a long way to go before it returns to the boom years of 20 or so years ago.

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