New issue of Music & Copyright with Indonesia country report

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

Creativity survives as COVID-19 hits the music sector hard
The COVID-19 pandemic has slammed the music industry, with the live music and physical retail segments the hardest hit. Around the world, there has been a swathe of live performance cancelations and postponements, with many, many more to come. This is hitting large live entertainment providers like Live Nation, and is threatening the futures of independent venues, while also impacting the livelihoods of those working in the sector. With city shutdowns already in place or imminent, music retailers will really suffer in the short- to medium-term at best. Also, music streaming providers might not be as secure as they seem at first glance with the global economy set to crater. The best we can say to those hit by the COVID-19 is be creative, and above all, stick together.

California judge overturns Katy Perry plagiarism ruling but leaves door open to an appeal
US performer Katy Perry, her coauthors, and music companies behind the 2013-released hit single Dark Horse are not liable for damages following a ruling at the US District Court for the Central District of California. The court decided that the Perry single did not plagiarize the Marcus Gray-created track Joyful Noise. Perry and her coauthors, associated record companies, and publishers had been hit with a sizable damages ruling following a trial last July, but the latest decision means they are off the hook. The case centered on an eight-note ostinato – a short musical phrase or rhythmic pattern repeated in a musical composition. Gray had argued that the ostinato in his track had been used by Perry and her coauthors. Although the two eight-note sections sounded similar, the California court ultimately decided that the ostinato did not qualify for protection. Gray is, however, able to appeal the decision, so the case is not yet closed.

Four straight years of revenue growth for UK recorded-music sector
UK music trade association the BPI has published trade sales for last year, with streaming gains and increased sales of vinyl, along with higher revenue from performance rights and synchronization more than offsetting declines in CD album sales and downloads. In a repeat of 2018, the big success story last year was subscriptions, with revenue from the likes of Apple Music and Spotify registering another strong year. The BPI figures show that income from subscription services accounted for more than half of the trade total for the first time. Advertising revenue from audio on-demand services also grew last year, along with video streaming income and sales of vinyl albums. UK trade sales have now risen for four consecutive years and are the highest for 13 years, but remain below the post-millennium peak year of 2001.

Indonesia country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Indonesia music industry report. Indonesia is the fourth most populous country in the world, behind China, India, and the US: the country ended 2019 with 269.1 million inhabitants. Despite its large population, Indonesia has always underperformed as a recorded-music market with the legal sector struggling to gain a foothold because of high piracy rates. However, the success around the world of music streaming is starting to be felt in Indonesia with a mixture of services now available offering access to several million local and international recordings. The collection of royalties is undergoing change with the government and the different collective management organizations agreeing on one-stop-shop administration with a single agency given the authority to collect and distribute royalties from commercial music users. The live sector is facing a tough year with the spread of COVID-19. This year’s Java Jazz Festival went ahead at the end of February and beginning of March, but others are set to be cancelled or rescheduled.

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New issue of Music & Copyright with Australia country report

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

Subscription services face the challenge of maintaining user growth
Music company revenue from music subscriptions is set to rise this year, as take-up of the likes of Apple Music, Deezer, and Spotify shows little sign of abating. The number of users of subscription services is growing annually, with markets previously lost to piracy starting to come on board. It is, however, inevitable that revenue from subscriptions will slow and services will need to look at new ways to tempt current users to pay more, or to attract streaming holdouts to pay something. Mixed in with these considerations is the issue of price. The cost of an entry-level subscription has remained unchanged in the leading markets, meaning that in real terms, access is gradually getting cheaper. Leading service Spotify has signaled that it is willing to experiment with pricing in Northern European markets, but with music companies at the heart of pricing, a multimarket price increase must be getting nearer.

Congress tries again to force radio broadcasters in the US to pay to play
New legislation aimed at forcing AM/FM radio broadcasters in the US to pay performance royalties to producers and performers has been introduced in Congress. The Ask Musicians for Music (AM-FM) Act would line up terrestrial broadcasters alongside noninteractive online services that do pay a performance right. The US is unique in the industrialized world for not having a radio broadcast performance right for producers and performers. However, despite the anomaly, the US is the biggest country for performance rights, with distributions from collective management organization SoundExchange last year exceeding $950m. Previous efforts at legislating on the matter have failed, and the strength of the radio lobby, along with US politicians’ unwillingness to upset station owners, means the proponents of the latest attempt face an uphill battle.

Evolution of music piracy raises challenges for industry groups
Illicit file-sharing activity continues to trouble the recorded music sector, but stream-ripping has emerged as the leading means of obtaining copyright-infringing music content online. Record companies have little option but to seek legal remedy against perpetrators, to strong-arm third party enablers such as Google and ISPs, and to lobby government to regulate against pirates in efforts to ameliorate the problem. However, new and innovative pirating services will continue to appear and will require responses. It might well be time to take a look at core legislation that has served to protect online platforms from liability for the past two decades.

Australia 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. The Australian economy is suffering from a period of slow economic growth. Retail sales are depressed despite three interest rate cuts, which have reduced the rate to a record low of 0.75%. Moreover, GDP was up just 1.4% in the year to end-June, the slowest rate since the global financial crash 10 years ago. In contrast to the economic gloom, recorded-music sales are on the up, with rising consumer interest in subscriptions boosting trade sales to four straight years of growth. UMG enhanced its sizable market share lead last year at the expense of SME. The latest figures published by APRA AMCOS show royalty collections in Australia are continuing to rise, with digital the biggest collection source, generating more than public performance and TV broadcasting combined. Revenue from ticket sales to live events last year topped A$2bn ($1.6bn) for the first time.

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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.

China set to enter the top five as recorded music sales are forecast to continue rising
Ovum has updated its forecasts for retail sales of recorded music. In line with last year’s main conclusion, the recorded-music sector is firmly a growth market, and Ovum expects sales to rise in each of the years up to and including 2024. By the end of the forecast period, retail sales will have increased for 10 consecutive years and have topped the record high set in the late 1990s. Virtually all developed markets are benefiting from rising consumer interest in subscriptions and streaming, and, perhaps most importantly for the sector, many of the much-vaunted and piracy-dominated emerging markets are starting to show their worth. Subscriptions are the biggest recorded-music category and are set to account for two-thirds of total revenue in 2024. Ovum is still 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. But overall spending on subscriptions has been revised upward, and the rate of decline for physical sales has been eased.

USPTO begins consultation about rights protection for artificial intelligence innovation
The US Patent and Trademark Office (USPTO) has started a process to determine whether a piece of music that has been produced by artificial intelligence (AI) with limited involvement of a person qualifies as a work of authorship as defined by US copyright law. The USPTO has published a series of questions on AI and rights ownership for public comment at a time when the technology is starting to make waves in the music industry. The use of AI in creating music remains a niche concept, with recordings still labeled as experimental. But as the technology backing AI becomes more sophisticated and the use of AI widens, questions about rights ownership are becoming more pressing, particularly given that AI is able to create works with minimal input from human inventors.

Localized content has been key to streamer Joox’s success
Chinese streamer Joox Music has carved out a strong position for itself in Southeast Asia, becoming the leading provider of streamed audio in a number of markets in the region. The company has leaned heavily on its marketing savvy to build national businesses and has aligned itself closely with K-pop, a hugely popular genre among Southeast Asia’s younger demographic. Joox’s emphasis on customizing its content to suit local tastes has also paid off, making it the go-to provider for audiences. The company is in a good position to profit from forecast music streaming in Southeast Asia and may well expand in the region. However, given its presence in South Africa and links to a regional partner, sub-Saharan Africa might offer better prospects.

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 sustained period of growth. As in most developed markets in Europe, record company earnings in the Netherlands were hit by the effects of online piracy as a result of the shift from physical formats to digital. However, for the last four years, trade revenue has been on the rise, and further growth is expected for this year and beyond. Dutch authors’ societies BUMA and STEMRA registered a seventh consecutive year of growth in joint collections, after three straight annual falls. Combined income for the two collection societies edged up last year, with gains for BUMA offsetting the decline for STEMRA. A rise in domestic and international collections for producers’ and performers’ society SENA boosted total receipts for the second year in a row. The live industry experienced a positive 2018, with increases in both the number of visitors to events and revenue from ticket sales.

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New issue of Music & Copyright with France country report

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

Global royalty collections see positive year, with growth at reported and constant currency rates
The world’s 20 biggest collective management organizations (CMOs) registered an increase in collections last year at both reported and constant currency exchange rates. The listing, which includes just those CMOs that have published collection results, shows that five of the 20 registered a fall in collections compared with 2016. As always, currency fluctuations affected some CMOs more than others, and overall, the growth rate last year of the combined 20 was higher at reported rates than constant. SACEM remained the leader in terms of total revenue, but BMI and ASCAP took the second and third spots, with a decline in GEMA collections relegating the German society to fourth. The performance of BMI and ASCAP meant the US is the clear leader in terms of collections at country level. Europe is the top region, accounting for close to 60% of the combined top-20 collection total.

Africa faces challenges on its way to becoming a recorded-music contributor
Africa might well be home to a sizable share of the world’s population, but in terms of recorded-music returns, the region is massively underperforming. Aside from South Africa, which has established music distribution and rights administration infrastructure, most countries in Africa have been decimated by high levels of piracy and infighting among collection societies. Ever the optimists, the three major record companies have all made recent moves to reverse the African status quo. The growth of access services in the rest of the world and their positive effects on unlicensed music consumption have given hope to those who believe Africa is an untapped treasure trove. Plenty of local activity and a rapid transformation of digital communications suggest that the time could well be right to move into the region. Few are holding their breath for a turnaround in the short-to-medium term, but longer-term prospects are certainly improving.

Streaming’s winners need to adapt if they want to keep on thriving
Spotify and Netflix are two highly successful children of the streaming revolution and have built market-leading positions with their attractive services. But times are set to become a little tougher for both of them. While the audio- and video-streaming markets will continue to grow, the sectors are becoming more challenging. Spotify’s IPO went smoothly enough, but its public listing means its inability to make a profit is under constant scrutiny, and its streaming business may not be able to deliver on that front; pressure is on the company’s non-core activities to do the job. Netflix faces a new era of tough competition from powerful adversaries and is sure to lose market share; from here on in, it’s all about the content.

France country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed France music industry report. France is the seventh-biggest economy in the world and the third-biggest in Europe, behind Germany and the UK. For recorded-music sales, France is the smallest of the three European countries. However, trade sales have risen for three consecutive years and look likely to rise again this year, with subscription service gains more than offsetting declines in sales of physical formats and music downloads. Digital sales overtook physical and accounted for more than half the combined digital physical total for the first time. UMG enhanced its position last year as the biggest music distributor, with an increase in market share. Authors’ society SACEM registered a fourth consecutive annual growth in collections, with income topping the previous year’s record thanks to a big jump in digital receipts.

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New issue of Music & Copyright with South Korea country report

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

Rollout of 5G networks offers a whole new dimension of music collaboration and connection
With the distribution of recorded music now an access-dominated business, the means by which music fans engage in listening has come sharply into focus. No longer do consumers have to visit a record store to purchase recorded music – almost every track ever released is available at the touch of a button. However, the uptake of access services is slowing in developed markets, and so forward planners are looking to new experiences to keep the growth momentum going. 5G offers music companies just that opportunity. Commercial rollouts of 5G networks are under way, although consumer uptake will take a while to gather pace. But already experiments and trials have shown how the music industry may be able to harness and monetize this new high-speed distribution network.

Digital gains boosts SACEM collections to new record
French collection society SACEM has reported a fourth consecutive annual growth in collections, with income topping the previous year’s record. Domestic and foreign receipts were up year on year, while revenue from mandates edged down. The differing fortunes of general rights and broadcasting saw the former overtake the latter to become the biggest collection source for SACEM. Background music income was boosted by higher average user fees and a rise in the customer base. Broadcasting income was hit by a drop in advertising sales. Digital registered the highest growth rate of the main collection sectors, with revenue more than doubling. New contracts provided the biggest boost to the digital total, although greater consumer interest in streaming added to the total. A higher growth in collections than costs meant the authors’ society’s net operating cost as a share of collections edged down.

Regulation is just the ticket for the live music sector
Regulators and lawmakers are starting to turn their attention to long-standing abuses in the ticketing business, with the lack of transparency over fees and hugely inflated resale prices in their sights. New rules and legislation have already been introduced or are in the pipeline in a number of countries, but all participants in the live music sector have the duty to do more to better protect consumers. Current alliances aimed at tackling bad actors and bad practices need to be strengthened. And there is certainly a role for technological solutions that will make it that much more difficult for scalpers to ply their trade.

South Korea country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed South Korea music industry report. South Korea’s recorded-music industry is arguably the most advanced in the world. Since the turn of the century, the sector has been through a massive transformation, from being almost overrun by piracy to becoming a multifaceted market where both physical and digital formats and services flourish. Surprisingly for a developed market, CD album sales are still healthy despite the rise of digital access. Although spending on digital music accounted for the majority of music sales last year (see Figure 1), a third consecutive year of growth in spending on physical formats has narrowed the gap. Locally produced music is popular worldwide, with the K-pop genre benefiting from the so-called Korean Wave, which began in the late 1990s and continues to boost the popularity of South Korean popular culture through online services and social media. Local music groups dominate recorded-music distribution, with the major labels accounting for a low market share.

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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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Record companies the biggest winners in forecast consumer shift from ownership to access

Retail sales of recorded music will see little variation in total spending levels in the years to 2020 despite the rising interest in streaming, according to global analyst firm Ovum’s latest forecasts. Spending on digital formats and services will overtake physical formats this year and go on to account for almost three-quarters of all sales in just six years.

According to Ovum’s latest research, the retail value of all recorded music sales is expected to contract this year and next before edging up 0.1% in 2017. However, the slight return to growth is forecast to be short-lived and spending will fall in each of the three years to 2020. Music Practice Leader for Ovum, Simon Dyson and author of the report said “2015 is a big year for the music industry with global retail sales of recorded music crossing the digital tipping point.” Dyson added that “For the first time, digital spending will top physical sales, amounting to US$11.7bn this year (compared with US$10.3bn for physical) and reach US$15.7bn in 2020.” Music subscriptions will lead the digital charge and will dominate retail spending for the foreseeable future.

Global recorded music retail sales, 2010–20
Global-Music image
Source: Ovum

For each of the six years forecast, Ovum has estimated that the overall annual difference in the global retail sales figure will not change by more the one percentage point either way. The biggest annual movement is expected in 2020, with a year-on-year dip of 1%.

No anticipated growth in overall consumer spending on recorded music will make difficult reading for the record companies. Moreover, the estimated value of recorded music spending in 2020 is expected to be US$3bn lower than it was in 2010. But there is some comfort in the figures. According to Dyson, “the shift from ownership to access has meant manufacturing and distribution costs have been reduced and, with consumers steadily spending more on access services and less on downloads, costs are going to continue to shrink.”

Dyson says that “the gross income record companies expect to make from physical format sales this year is around US$5.2bn and this will fall to just under US$3bn in 2020. EBITDA is also forecast to decrease, from US$520m to US$300m.”

In contrast, for downloads there are no manufacturing costs and only minimal distribution expenses. The gross record company income from downloads is estimated at US$2.6bn in 2015 and US$1.4bn in 2020, while EBITDA in those years will be US$790m and US$420m, respectively.

The EBITDA share for subscriptions and advertising downloads will be slightly higher than downloads because of lower sales and marketing expenses. Gross record company receipts from subscriptions/streaming are estimated at US$2.4bn in 2015, rising to US$5.4bn in 2020, while EBITDA from subscriptions/streaming is forecast to grow, from US$820m to US$1.9bn.

Taken altogether, gross receipts for record companies from the combined sales of physical formats, downloads, and income from access services are forecast to slip, from US$10.2bn this year, to US$9.8bn in 2020. However, as consumer spending on subscriptions rises, EBITDA will grow, from US$2.1bn to US$2.6bn.

Streaming is riding close to the crest of the recorded music wave at the moment with a good number of trade associations reporting high growth figures and rising subscriber numbers. In some countries, access services are more than offsetting declines in sales of physical formats and music downloads. But, given that physical formats – and to a lesser extent single tracks and digital albums – still account for a sizable share of music retail sales, the streaming sector will be hard pushed to make up for the forecast declines in the buy-to-own formats. “Assuming consumers don’t make a sudden rush to access services, no decline in total sales in the coming years may well be the best result the recorded music industry can hope for,” concluded Dyson.