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.

Sony/ATV and Pandora sign second direct licensing deal
Music publisher Sony/ATV has signed a direct licensing deal with online radio service Pandora. Described by both companies as a “win-win,” the deal will see increased performance royalty rates payable by the digital music service to the publisher, while Pandora will benefit from greater rate certainty and the ability to add new flexibility to its product offering over time. The deal is the second direct agreement between the two: The first was signed in 2013 after Sony/ATV withdrew certain digital licensing rights licensing from the US performance rights organizations ASCAP and BMI. However, that deal was declared invalid by a rate court judge, who ruled that authors organizations’ partial withdrawals of licensing rights was not allowed under the consent decree and that blanket licenses offered by ASCAP and BMI music include all repertoire.

Report on Spotify’s revenue-neutral status raises more questions than it answers
A new report published by the European Commission’s Joint Research Centre has examined how the rise of music subscription service Spotify has affected sales of downloads and the popularity of unlicensed online music distribution. The report found that the use of Spotify does impact on download sales and goes some way to displacing music piracy. However, the report notes that losses from displaced sales are roughly outweighed by the gains in streaming revenue, meaning that Spotify is effectively revenue-neutral for the recorded music industry. Although the report’s conclusions are limited, given that Spotify was the only service used to measure the wider impact of streaming, it raises questions over the wider distribution of streaming revenue to the different rights holder groups and why, if streaming is revenue-neutral, are so many artists unhappy with their royalty payments.

Rightscorp and the high costs of copyright enforcement
US-based copyright enforcement company Rightscorp keeps making headlines, mostly for the wrong reasons. The firm may be able to count a handful of leading music publishers on its roster but it has yet to demonstrate that it can make its anti-piracy system work for its bottom line. In addition, Rightscorp has come under fire for alleged harassment of those it considers to be copyright infringers and is fighting a number of lawsuits. It is also in dispute with leading US ISPs Cox Communication and Comcast, the kinds of companies it needs to have on it is side if it is to be a commercial success. In short, Rightscorp seems to be having difficulties making friends right now.

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 profile. The Australian recorded music industry has endured a long period of falling sales. Although consumer interest in music subscriptions is strong, spending on music access services has not been able to offset declines elsewhere. The country looked to have turned the corner in 2012 with record company income from digital sales fully countering the drop in CD album sales. However, trade revenue contracted in 2013 and 2014 and prospects for future growth are not so good. In contrast to the recorded music sector, Australia’s live music industry has registered two years of rising ticket sales and attendance. Authors’ society APRA AMCOS is also experiencing its best years, with strong gains in digital income boosting total collections to record levels.

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Is anyone making any money from streaming?

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.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.