A blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
Posts Tagged ‘YouTube’
The Guardian explained why publishers, songwriters and labels may be headed for a big battle over royalty rates. Also, major industry player Irving Azoff shared his predictions for the future of the music business. And an indie music licensing company called YouTube out on its low payout rates.
Publishers, Record Labels Battling it out over Royalties
Publishers and record labels could be headed for a major battle regarding disparate royalty rates on streaming services, reported The Guardian. Publishers and songwriters have begun questioning why record labels get five, to 12 times as much as writers when a track is streamed via Spotify, Pandora or another platform.
The debate centers on the importance of songwriting to an artist’s success. Record labels continue to insist that the amount they get for songs is fair, since they have to invest significant money into PR, marketing, recording costs and tour support.
But songwriters and publishers say that because of 360-degree deals they make with artists, labels can get a share of merchandising, concert tickets and brand partnerships, whereas songwriters attached to labels can only really earn from their recordings. And the latter add that labels do not have to pay for pressing records and physically delivering them to stores because of digital sales, so there are no returned or unsold records for labels to buy out. This means songwriters should get even more back from digital music services. Pandora and YouTube both give songwriters approximately $90 per one millions streams. On YouTube, a label can make anywhere from $1,000, to $4,000 per one million streams.
According to an unnamed publisher, head of Universal Music Group Lucian Grainge said in 2006 at the PRS (the UK’s performance rights organization) copyright tribunal between labels and songwriters that songwriting was a part of the recording process and thus did not deserve a separate royalty.
At Abba’s 40th anniversary of the group winning Eurovision celebration, the group’s Björn Ulvaeus said he doubted they would’ve seen the same success in today’s climate: “We broke through during the golden age of copyright.” He said that he and co-writer Benny Andersson focused more on writing songs than on touring, but did not start out as hit songwriters, coming into their own only after years of trial and error and studying their craft. After they found success, they still had to put in full workdays writing and would only end up with 12 finished songs each year.
Ulvaeus said that if Spotify becomes artists’ main income source (it is already responsible for 70% of revenue from Sweden’s recorded music industry), they will have to put much more effort into touring in order to earn a living.
Many songwriters have admitted they feel even more undervalued than ever before by music streaming services and record labels alike. Instead of supporting songwriters as they try to negotiate fair rates with YouTube and other services, labels have been putting pressure on PROs to accept the lowest rates offered.
Pandora recently won a court case against ASCAP. The company claimed it was financially unable to pay more than 1.85% of its revenue, since it is already paying 49% out to labels.
The PRS and Sweden’s performance rights society Stim both accepted low royalty rates from Spotify to help get it up and running, while the major labels acquired shares in the service and large upfront advances that ended up far exceeding what they would have earned from using Spotify. When Spotify issues its IPO later this year, labels and venture capitalists behind the service will be able to cash in, whereas songwriters and artists will be left in the same spot as they are currently.
In the U.S., songwriters and artists cannot do anything to change royalty rates. They are not allowed to refuse the use of their music. However, in Europe, songwriters and creators can actually organize and stand up to low rates, refusing to make their music available.
One publisher said, “When you have nothing to lose, you have everything to gain. What we get paid by these streaming services is so insignificant that losing it won’t make a difference.”
Irving Azoff Hoping Technology Services Will Gain Respect for Artists
Music business mogul Irving Azoff spoke at a panel at the Milken Institute Global Conference on April 29 about the evolution of the music industry. According to The Hollywood Reporter, he admitted that while he is optimistic about the future, he still feels there is a “lack of respect” for artists from a lot of technology services.
Azoff was joined by manager Scooter Braun, Universal Music Group CEO Lucian Grainge, CAA head of music Rob Light, Clear Channel CEO Robert Pittman and Insomniac Events CEO Pasquale Rotella. They all discussed topics including streaming music and the popularity of electronic dance music.
Azoff observed, “One thing that’s a common theme is that all the sectors are more cooperative … Everyone is really working hand-in-hand, and I think everyone is making more money.”
Braun noted that the current music business is particularly unique, because thriving is no longer just about music, it is also about mastering elements of technology.
And Rotella, who has seen the live event industry thrive largely due to the explosive success of his EDM concerts, including Electronic Daisy Carnival added, “It’s not just about the artist, not at our events anyway. It’s the whole package.”
And EDM artists have started to see major payouts, proving there are some opportunities for artists to start earning a real living and more: “Some of these guys are getting paid as much as $1 million for one gig. They don’t split that with anyone except an agent and manager … These guys are making more money than I ever thought.”
Azoff and other panelists mostly agreed that the future of music is in streaming services. However, Light and Pittman debated how the rise of streaming has affected radio. The Clear Channel head was adamant about the role radio would play for future generations of consumers: “[R]adio will be even more relevant in the streaming era.”
Indie Music Licensing Body Criticizing YouTube
YouTube has paid out over $1 billion to music copyright holders in the past few years, but the company is still being questioned by the music industry. The Guardian said, Charles Caldas, chief executive of independent music licensing company Merlin has recently jumped on board to point a finger at the online video site in a keynote speech at the Music Connected conference in London.
Caldas stated, “If we look at our partners like Spotify, Beats and Rdio, and the high-value versus low-value companies in the food chain, those companies are at the top of the food chain: they’re paying what we consider to be the top rates … The ironic thing is that the service that pays the least is the service that’s the most well-funded and run by the biggest company in the world.” He noted that their payouts are by far the worst, whether measured on a per-stream or per-user basis.
While Caldas did not directly name YouTube, he made his indictment clear by quoting from an interview with Billy Bragg from early 2014, in which the musician responded to people’s criticism of Spotify: “If we’re pissed off at Spotify, we should be marching to YouTube central with flaming pitchforks.”
Caldas declared, “I can’t say Billy’s right, but I can’t say he’s wrong.”
YouTube has been negotiating with labels in preparation for the launch of its Spotify-like music subscription service, expected in late 2014. Merlin represents over 20,000 indie labels, so it would have to be a key player in the new service.
Caldas has previously been vocal about the lack of respect he feels streaming services have for independent music. He had a public fight with Myspace in 2008 after the site launched Myspace Music without licensing indie catalogues.
Caldas mentioned that Myspace’s decline was due to its unwillingness to work fairly with artists and should be a warning to other companies that try to do the same: “Companies that act like Myspace and have acted like Myspace are the ones that have disappeared without trace.They were constructed to keep the major labels happy, they never kept the consumers happy… and they didn’t survive.”
Merlin has regularly defended Spotify and holds a stake on behalf of its member labels. Caldas was clear that Spotify has been largely good for raising the profile of indie music: “We’re not hidden at the back of the store any more. We’re not fighting for the space. We’re there, and the evidence is starting to show … There’s this global dynamic happening where this consumption of independent music at the streaming level is starting to filter out into the mainstream level… This market is good for the labels.”
Caldas also criticized major labels for negotiating large advance payments from streaming launches in an attempt to counteract the fair share indie labels are finally getting.
Many other industry players have been criticizing Google’s business tactics lately. Music is huge on YouTube, as, according to a recent study, 38.4% of all views on the service are of music videos. And the company revealed it has paid out $1 billion to musicians, songwriters and labels in February at the Midem music industry conference.
At Music Connected, indie labels were talking about using YouTube in a positive way to promote their artists. One panel involved explaining how labels could break a new artist digitally for under £1,000, and YouTube was listed as a main priority.
Sophie Hall, of dance label MTA records said, “These days, especially with YouTube there’s so many creative things you can do with video content.” She added that if she was starting completely “from scratch” with a new, unknown artist, YouTube and SoundCloud would be her first two go-to services.
Twitter revealed all the details about its music data to help a new music startup track artists. And indie record label heads questioned whether YouTube is beneficial to small labels and artists. Also, SoundExchange announced it paid out $590 million to artists in 2013.
Twitter Partnering with Music Startup, Tracking Emerging Artists
Twitter signed a deal with startup entertainment company 300 that would allow the startup to have access to data about new and emerging artists. The deal was “non-monetary” and announced by 300 founder Lyor Cohen, former chairman and CEO of the North American arm of recorded music for Warner Music Group, reported Entrepreneur.
According to the agreement, 300 will get “full access” to data from Twitter about who is tweeting about which artists and where these users are located. Cohen’s company will then collect the data and share it with Twitter, allowing the social media platform to sell it to record companies, brands or other entities.
Having access to this music data will give 300 the ability to see how many people are tweeting about a new artist in a specific part of the world during a certain time period. Twitter’s and 300’s hope is that this will help the music industry find “the next big star” – a new artist that might otherwise remain undiscovered. This practice could also make Twitter a more useful marketing and career-building platform for artists than it has previously been.
Twitter’s head of music, Bob Moczydlowsky said, “Music is the largest topic of conversation on Twitter … so we’re really invested in building a win-win environment for fans, artsts, labels, promoters and music services. This partnership is a great example because it is about helping artists and labels find each other.”
Twitter also recently said it will be inking a similar partnership with CNN and Dataminr, a news startup, in order to create “Dataminr for News.” This product will help journalists search through around 500 million tweets about daily breaking news stories in order to get the most valuable information from around the world and potentially identify possible sources.
This latest Twitter venture comes after the lackluster launch of the Twitter #Music app, which tracks users’ activity to determine popular songs and new artists.
YouTube: Beneficial or Detrimental to Small Labels and Artists?
YouTube announced it has paid out $1 billion to the music industry and is “all-in on music” at the recent Midem conference in Cannes, but small labels and indie artists expressed concern over whether or not the social media site and other Google resources actually benefit them, stated The Guardian.
Research compiled by VideoInk and video analytics firm Tubular Labs said that music videos represent 38.4% of total views on YouTube, thus proving the Google-owned platform is the largest streaming music service in the world. At a Midem panel session last week, vice president of YouTube content Tom Pickett declared, “We’ve paid out to the music industry over the last several years over a billion dollars … we are all-in on music.”
There was a great deal of unrest about the true benefits of YouTube and other Google resources among indie labels and other industry entities at Midem this year. Picket was actually heckled during his session, and many speakers at other panels and events spoke out openly against Google.
Colin Daniels of Inertia, an independent music firm that broke big solo artist Passenger in 2013 admitted, “Google are not music people, and that scares me.”
And Horst Weidenmueller of the indie firm !K7 agreed: “I am concerned with YouTube entering the market because for YouTube everything is about dominance, and dominance is connected to destruction … I would rather prefer perhaps Google not being in music.”
Google has had a rocky relationship with the music industry for some time, despite the company and the industry working together regularly to solve licensing and copyright issues, with YouTube helping labels call out user-generated videos that use their tracks and make money from them through the Google Play music subscription service.
British music industry body the BPI has often criticized Google because it continues to rank piracy sites high on its search engine. But the body launched its own YouTube channel called Transmitter to help promote music by British artists, proving that Google can be helpful to artists when it comes to distribution, but harmful to them when it comes to copyright-related issues.
At Midem, members of the music industry brought into question YouTube’s real motives when it comes to music and why the platform has not paid out even more money to labels and publishers than it has. BPI chief executive Geoff Taylor shared the stage with Pickett and compared YouTube in a negative way to streaming services like Deezer and Spotify, which mix ad-heavy free streaming with premium subscription offerings: “I think YouTube has lacked that, and that has been a problem for the industry … When I look at the billions of streams there were in music videos, and the pounds and pence coming into the music industry from that, it was a very small number.”
Streaming service leaders are also calling YouTube into question. Deezer’s chief executive Axel Dauchez said YouTube is “the most important legal pirate” during his Midem panel session. Spotify recently compared its own average $6,000 – $8,400 per million streams to the $3,000 per million streams paid out by YouTube.
YouTube fans also had a voice at Midem. Tom Silverman from Tommy Boy said, “It’s a top-five revenue source now at most of the labels, and it’s going up. It’s not perfect, but they’re moving in the right direction.”
Some multi-channel networks (MCNs) that are helping artists get more revenue from YouTube agreed that increasing payouts will mean making better use of Google’s services instead of just forcing the company to offer higher per-stream rates. Brandon Martinez of MCN INDMusic said, “It’s no longer an album cycle, it’s a 12-month content cycle. For every piece of content you release, there should be 6-8 other pieces of content to support that.”
Jordan Berliant of The Collective Music Group also said labels and artists need to take more responsibility for their activity on YouTube and learn how to more efficiently use it, “It’s not a place to make money right now, but it’s not primarily because of YouTube or Google in my mind, it’s because the people representing the content primarily don’t understand the marketplace.”
Many concerns about YouTube revolve around Google’s copyright policies. One audience member wanted to know what YouTube is doing about “stream-ripping” services that allow people to turn videos into MP3 downloads. BPI seconded the question: “We’ve been asking YouTube to deal with these stream-ripping applications for many years. YouTube is supposed to be an ad-funded streaming service, not a free download service … We can’t understand why it’s taken so long for Google and YouTube to do something about this.”
$590 Million Paid Out to Artists and Labels in 2013
SoundExchange stated its total digital radio royalty distributions in 2013 hit $590.4 million. Digital News added the music industry leader also paid a record-breaking $170.4 million to artists and labels in the fourth quarter of last year.
SoundExchange royalties are paid by over 2,000 Internet radio, satellite radio and cable radio services that use the sound recordings. The royalties are then given directly to the recording artists and record labels by SoundExchange, which continues to have one of the lowest administrative rates in the industry at 4.9 percent.
The organization’s president and CEO Michael Huppe said, “I’m pleased to report a strong finish to an amazing year for SoundExchange, and for digital radio. We processed tens of billions of digital performances in 2013 reported by thousands of music services every month. This is further proof that consumers are streaming digital radio now more than ever … We are ensuring that digital radio listening is being converted into a reliable revenue stream for music creators. We look forward to continuing our mission to support, protect and propel the music industry forward in 2014.”
A new study revealed search engines do not significantly impact music piracy rates. Also, The National Music Publishers Association (NMPA) redirected a copyright lawsuit against a popular YouTube channel. And Presskit.to released the first-ever EPK-creating Facebook app.
Search Engines Fail to Drive Piracy
A recent study conducted by the Computer & Communications Industry Association (CCIA) contradict the RIAA’s regular claims that search engines are fueling music piracy, reported Billboard. The CCIA discovered that just 15-percent of traffic to websites with illegal content came from Internet searches. Only 8-percent of traffic came directly from search results for The Pirate Bay and other torrent sites.
The paper “The Search Fixation: Infringement, Search Results and Online Content” was compiled by CCIA’s VP of law and policy Matt Schruers. However, many in the music industry are taking the claims with a grain of salt, since the CCIA is a non-profit backed by Google (as well as by Pandora, Microsoft, Facebook and others). Many feel all this suggests is that people know where to go to download songs illegally and thus do not need to search for it. But several other non-Google-affiliated technology companies support the CCIA’s findings.
The CCIA decided to put together the paper after a report was released in February by the RIAA that looked closely at Google’s plan to punish sites’ search ranks based on how many removal requests were sent by owners. The RIAA’s report discovered that many sites with removal requests were going unpunished: “[The sites did not] appear to have been demoted by Google’s demotion signal in any meaningful way.
The RIAA has filed 7,770 requests for 27.4 million different URLs in just the last month. And in the same time period, the BPI has filed 34,200 requests related to 24 million URLs.
However, “The Search Fixation” does not prove without a doubt that search engines do not contribute at all to piracy rates. It actually indicates that search engines are not the #1 driver of traffic to illegal sites.
As an example, the paper shows that Internet searches for individual artist names are greater than searches for individual song titles. Searches for Rihanna outnumber searches for the song “Diamonds,” with or without “MP3” or “download.” Google Trends also revealed differences between terms used in the paper: Search frequency for “Diamonds” made up only 23-percent of searches for “Rihanna.” And “download” and “MP3” were more popular, 75-to-2 and 75-to-1.
Regardless of specific examples used, the RIAA found that the CCIA’s report only supports its own findings: “Every day, there are millions of popular searches, using the basic terms cited in our analysis, that produce results prominently featuring rogue websites that have received millions of piracy notices.”
There is still debate about exactly how much traffic to illegal websites is directed by Internet searches. The CCIA paper quoted Techdirt, which said that 15-percent of traffic to the MPAA’s list of 24+ illegal sites came from search. And the RIAA claims that of the two “worst of the worst” sites mentioned in its own report (mp3skull.com and mp3juices.com” get more than 25-percnt of their traffic from Web searches, a majority from Google.
The CCIA points out that removing illegal sites from search results is “unlikely to mitigate online infringement.” The organization argues that labels and artists should use search optimization in order to promote their own websites in results and bury illegitimate sites.
NMPA Suing YouTube Channel Giant
The National Music Publishers Association (NMPA) filed a copyright infringement lawsuit on August 6 against well-known YouTube channel Fullscreen this week. Redirecting blame away from YouTube and making individual channels responsible for illegal content could mark a change in the way publishers are attacking pirates, said ITNews.
Fullscreeen produces, promotes and markets music videos and other videos on YouTube. The company operates over 15,000 YouTube channels with over 200 million subscribers and makes money directly from ad revenue earned by unlicensed music videos on its channels. But the NMPA claims Fullscreen does not give songwriters or music publishers any of the profits.
Cases between the music industry and YouTube like Viacom’s $1 billion copyright lawsuit against the site have typically gone after individual unlicensed music creators. However, the most recent case is broader and focuses on cover-song videos.
Eric Goldman, director of the High Tech Law Institute at the Santa Clara University School of Law agreed it sounds more all-encompassing than past copyright infringement lawsuits: “I don’t recall a similar case involving a major YouTube channel or implicating lots of cover song videos in one case.”
And this lawsuit could indicate that publishers are figuring out how to succeed at bringing down unlicensed music content on the Internet and are learning from past verdicts. A judge ruled against Viacom in the recent case because of the “safe harbor” clause of the Digital Millenium Copyright Act, which protected YouTube. The idea was that YouTube cannot possibly monitor every piece of illegal music and video content it houses, so the task of licensing should fall on content creators and copyright holders.
“This is a substantial advancement from the Viacom versus YouTube case, where the copyright owners are still trying to hold YouTube responsible for the conduct of its individual publishers … It appears the NMPA is tacitly accepting that YouTube is a platform that enables good and bad conduct, but YouTube is not the infringer itself,” Goldman added. He also said the case shows that publishers are becoming more “enlightened” about the way they try to get justice.
The focus on cover songs also makes the NMPA’s case the first of its kind. Creators can get statutory licenses to record cover songs, but the license does not necessarily include performing it in a video released on YouTube.
Staff attorney at the Electronic Frontier Foundation Mitch Stoltz admitted he has never seen a case like the one NMPA has opened up before, but that it does not come as a surprise. He likened it to prior suits filed by the American Society of Composers, Authors and Publishers or Broadcast Music, Inc. against restaurants and bars for playing unlicensed music.
However, Stoltz said the case against Fullscreen will be challenging, because the court will have to figure out how involved the company is in content curation: “Can anyone post, or does Fullscreen select the videos? That makes a difference.”
Presskit.to Launching First EPK-Creating App
EPK offering Presskit.to released the first EPK app for Facebook pages, according to the Presskit.to blog. Facebook previously did not offer an EPK-creating app, making this new app the first of its kind.
The Presskit.to app can be installed in a couple clicks from within a user’s Presskit dashboard and allows others to access artists’ EPK content without leaving Facebook. Artists can read more about installation and design on the company’s blog.
A new study revealed that the music business has an impact of nearly $9.7 billion in the Nashville region. And another long-existing BitTorrent site was shut down in Europe. Also, YouTube added royalty-free music options and other new perks for creators.
Nashville Fueled by Music
The Nashville Area Chamber of Commerce offered up a new study last week showing the profound financial impact of music on the Tennessee capitol, reported The Tennessean.
A 2006 study stated that 19,000 jobs in Nashville and surrounding areas were tied directly to the music industry, whereas the new, more detailed study found that the number is actually 27,000, with 29,000 more jobs indirectly related. In total, these jobs are worth $9.65 billion.
The combined markets of major music centers L.A., New York City and Austin do not create the same number of music business jobs. According to analysts, these figures show that Nashville is a hub of creativity with its eye on the Digital Age, which has changed how fans listen to music, how artists make music and how that music is bought and sold.
And experts say Nashville’s songwriting culture has allowed it to thrive despite record label implosions and the loss of major music festivals. Plus, the city has been attracting a young, mobile, tech-savvy workforce.
And the government continues to promote the mid-Tennessee region as an affordable place for DIY and indie artists as well as small music business owners and entrepreneurs to thrive, with a relatively low cost of living and music-related positions available.
BitTorrent Site isoHunt Going Down
The European music industry blocked long-standing site isoHunt as it faces lawsuits filed by the film industry in the U.S. The Federation of the Italian Music Industry (FIMI) secured a court order this past week ordering ISPs to block access to the search engine, and the site has already been disabled in Italy, said TorrentFreak.
BitTorrent site blocking is becoming more popular as the anti-piracy war continues in film and music. Top sites such as The Pirate Bay and others have now been blocked in a few European countries. Italy and the United Kingdom have become the easiest two countries in which to block illegal websites at the ISP level. In fact, Italy blocked two additional sites this past week, which the Censorship Observatory lists as dendi86download and lascena.net.
isoHunt is run by Canadian national Gary Fung and is currently embroiled in a long lawsuit with the American MPAA. FIMI alleged that isoHunt is responsible for stealing millions of euros from the Italian music industry. A Court of Milan judge ordered all ISPs to block the isoHunt.com domain going forward.
Marco d’Itri, head of a website that offers information about Italian Web censorship stated that the ruling is not public, because a trial is pending, even though no case has ever been able to get to that point: “It’ s just a handy shortcut used by the content owners to censor a domain, because usually the victims do not appeal.”
However, in early 2013, a file-hosting site Rapidgator managed to overturn an ISP blockade ruling. And sports streaming site Rojadirecta is currently using the same legal team as Rapidgator to fight a court-ordered block implemented in July.
Local ISPs found out about the order against isoHunt on July 29 and immediately blocked it across most of Italy. Legal action in the U.S. could cost the website as much as $750 million, and experts predict it will also be shut down in the United Kingdom by the end of this year.
YouTube Beefing up Subscription Service, Adding Royalty Free Music
YouTube will continue to make its site more user friendly for content creators by opening up its paid subscription to include more video channels. The video service will also offer tools to allow creators to see more details about their audiences and communicate with them directly, announced Billboard.
YouTube will also give away over 100 royalty-free instrumental tracks to those that want to add music to their videos, preventing the need for them to get licenses or write their own soundtrack in order to appropriately compensate music labels and publishers. This program is still in development, but it will be called the YouTube Audio Library.
The announcement of YouTube’s new features was made at the 2013 VidCon convention in Anaheim, California. The conference is organized and attended by 11,000 people, among them professional YouTube creators that earn a living from/run businesses largely dependent upon the platform.
YouTube spokespeople said they are hopeful that the new YouTube feature will help creators get more views, reach more viewers and engage more personally with users. To this same end, the company introduced a paid subscription arm in early 2013, allowing a small group of channels to participate in the beta version. On August 1, YouTube said it will roll out this option in the fall to any channel that has more than 10,000 subscribers.
YouTube announced the Top Fans feature at the recent conference, which will give creators with 5,000 subscribers or more the option to use a dashboard displaying their most frequent viewers, what they are watching and which other channels they subscribe to. Video creators will also be able to reach their fans through Google+.
Shiva Rajamaran, director of product management explained, “From there, you can message them, send them a t-shirt, send them a discount … We wanted to give creators a way to beter engage with their top fans.”
The company also has plans to open up a YouTube Space based in New York City with production resources. Similar facilities already exist in Los Angeles, London and Tokyo. The new space will open at the end of 2014 in Chelsea and be usable by a small group of creators to film, record and edit videos with professional equipment.
Despite its steady move towards an improved user experience, YouTube has admitted it still has faced challenges satisfying creators that depend on YouTube for income. Musician Jack Conte, whose YouTube channel enjoys over 159,000 subscribers confirmed, “YouTube has a hard job … They’re trying to please a billion people.”
Music industry experts analyzed six significant changes in the mobile music industry market. And music royalties from online services surpassed royalties from radio in the UK. Additionally, YouTube and Universal Music Publishing Group signed a deal that will expand content in over one hundred countries in Europe, Asia and Africa.
Six Signs of Growth in the Mobile Music Industry
Music industry analysts continue to predict explosive growth and change within the digital music arena, as established streaming companies like Spotify and Pandora take hold and enhance their services, and new players enter the marketplace. And as smartphones continue to become a tool for music consumption for more and more fans, music businesses across the board are looking to mobile for opportunities to expand their offerings. An article in Fierce Mobile Content on Wednesday explored six major issues that are affecting mobile music and how they will influence its on-going growth.
Issue #1: Will Google’s size make success in the mobile and streaming market impossible? Google Music already lets music lovers upload 20,000 songs from their music libraries and stream on their smartphones for free. And it has confirmed that it is developing a subscription streaming music service, which, according to consumer analyst at Ovum Mark Little will launch this fall and compete with both Spotify and iTunes.
But Little said Google will hit some road blocks, including concerns over consumer privacy and resistance from labels against licensing their catalogs, thus likely delaying its entry into subscription streaming: “They won’t want another Apple with significant market power and negotiating advantage.”
Issue #2: Will consumers really prefer streaming services over radio? Despite Spotify’s rise during the past few years, Pandora is still the leader in the mobile music space. And director of industry analysis at the NPD Group Ben Arnold said its large music offering plus its highly-popular app are what continue to give it 39 percent of usage among Americans between the ages of 13 and 35.
But Arnold said he thinks Spotify’s subscription model will overtake Pandora eventually, because music fans no longer feel they need to own their music: “The model has gone from own to rent.” He added that Internet radio is dissatisfying, because consumers want to hear entire albums, not just “hit singles.”
Michael Bebel, head of music at Nokia, did not agree with Arnold based on research. Nokia Music concentrates on curated playlists because, “the highest use case out there was in radio.”
Still, which streaming model will ultimately take over remains up for grabs and will depend on where pricing settles and whether users are willing to pay higher subscription fees for high-fidelity music than for lo-fi music.
Issue #3: What will happen with social media? Patrick McMullen, Senior Analyst at social media analysis company Fizziology said that Facebook has significantly contributed to the rise of Spotify. The user experience is enhanced because Facebook users can share the music they are listening to in real time with friends on the social media platform. Rdio offered the same integration into Facebook, but the social aspects of Rdio have not been as high quality as Spotify’s, which could hurt Rdio in the long run. Experts agree that any music company that hopes to attract customers going forward will have to consider social media.
Issue #4: Are preinstalled music apps the next big thing? Spotify and Pandora have downloadable apps, but other companies have been working with mobile service providers to get their services preinstalled onto devices. Apple’s proposed streaming music service could come already installed on iPhones and iPads with a simple software update. And Amazon, with Kindle and a sizable music catalog, might also make streaming music an option on its own platform.
However, Apple and Amazon would have to have a really solid product rather than just relying on their popularity and reputations.
Issue #5: Will competing companies become partners? Research analyst with HIS Screen Digest’s Mobile Intelligence Group Abel Nevarez stated that music services and platform/device manufacturers may forge partnerships in order to ease their entry into the mobile marketplace. And this could help companies better compete with giants like Google. Partnerships have already emerged, like Microsoft Windows Phone and Pandora and Samsung and Universal Music. Even Spotify has partnered with Deutsche Telekom to get its Premium service bundled into users’ monthly phone bills.
Other mobile carriers are launching their own streaming music services to distinguish themselves from the competition, like Leap Wireless’ Muve Music, which currently has over one million subscribers.
Issue #6: What will be the outcome of Apple’s price negotiations? Reports have indicated that Apple is negotiating with labels to license music for a potential ad-based streaming service. And Apple is asking for permission to implement a bargain-basement price of six cents per 100 songs streamed – half of Pandora’s rate. Spotify reportedly pays 35 cents per 100 songs.
Apple’s ad-based service would already have a willing customer base comprised of the hordes of users that have iOS devices and use iTunes desktop application. And Apple users would be more likely than others to download a song on iTunes after listening to it on an ad-based streaming service run by the same company. However, experts continue to agree that Apple could be pushed out of its own game if it continues to pursue licensing rates and terms that are undesirable for artists and labels.
Online Music Royalties Surpassing Radio Royalties in the UK
Royalties coming from digital music services like iTunes and Spotify officially surpassed those earned from royalties in the UK this past week, according to The Inquirer. This growth provides yet another indication that streaming music companies and online music retailers are bringing in significant revenue for the music industry.
An analysis conducted by PRS for Music showed that music royalty revenue rose by 32.2 percent last year, from 2011. Additionally, the study revealed that the increase in royalty revenues from online services was higher than in any other area. Radio only grew 3.1 percent in 2012.
CEO of PRS for Music Robert Ashcroft said that online music services are definitely growing into a huge money maker for the industry overall and are helping in the fight against piracy: “Copyright remains fundamental to the continued success of our members both at home and abroad, while the ever-increasing importance of licensed online services such as iTunes and Spotify underlines the value of music to the Internet economy.”
PRS for Music did, however find that, despite overtaking radio, royalties from online music sources are still below those coming from all broadcast media.
YouTube, Universal Music Expanding Video Offerings to 127 Countries
YouTube and the Universal Music Publishing Group (UMPG) struck up a deal that will expand the offering of Anglo-American content to 127 countries in Europe, Asia and Africa. The deal includes all videos that feature music, plus user-generated content, said Billboard Biz.
The deal was enabled by UMPG’s pan-European licensing agreement with the Society of Authors, Composers and Publishers of Music (SACEM). It is to be called the “Direct Administration and Licensing (DEAL). Songwriters and composers attached to European societies other than UMPG will have to follow their own licensing agreements.
Spokespeople for DEAL said the new agreement will help with transparency, coordination and data sharing between YouTube and UMPG and give artists and rights holders a fairer share of YouTube revenues.
Zach Horowitz, UMPG chairman and CEO stated, “The digital market can only flourish if creators receive fair remuneration delivered through efficient and innovative licensing solutions.”
SACEM CEO Jean- Noël Tronc added, “SACEM is proud to be the first authors’ society in the world to have signed an agreement of this scale with YouTube, the world’s leading digital platform of music videos … This contract bears witness to our commitment to increasing both the visibility of works and the remuneration of our members with a major partner, YouTube, the number one vector for discovering works on the Internet.”
Major labels continued to take issue with Apple’s appeals to start a streaming music service. And YouTube spokespeople officially confirmed the channel would be launching a subscription music service later this year. Also, ASCAP released payout details and other financial information for 2012.
Major Labels Continuing to Resist Apple’s Streaming Music Service
Apple, Inc. has reopened talks with record labels in order to secure rights to start its previously-attempted streaming music service, according to a March 7 exclusive in the New York Post. But labels are continuing to push back due to an incredibly low royalties proposal. Apple, initially tried to license music for this new streaming service in time to release it alongside the iPhone 5, but the industry’s largest publisher, Sony/ATV, ultimately killed the plan by refusing to negotiate.
Sources said Apple initially made an offer to Sony of 6 cents per 100 songs stream, which is half the 12 cents per 100 songs paid by Pandora, the leading online radio service and the company Apple has identified as its major competitor in this corner of the digital marketplace.
Labels have agreed that Apple’s music service could potentially offer them a new revenue stream. But they are reluctant to agree to such a low price in the midst of highly-publicized music industry fights against Pandora’s proposal to lower its current royalty rate. Because Apple also currently has $137 billion in cash, many also believe the company should have to pay at least the rate set by the Copyright Royalty Board, which is 21 cents per 100 songs streamed and applies to companies without established broadcast stations.
Terrestrial radio-run online services like iHeart Radio pay 22 cents per 100 songs streamed, whereas subscription service Spotify pays 35 cents per 100 songs streamed – the highest rate among digital music services.
Apple has been further motivated to get into streaming radio because it has seen 50 percent of its iTunes revenue come from mobile devices, with Pandora being one of the top apps in the App Store.
Apple is also looking to its proposed iRadio to help it take better advantage of its iAds advertising platform. Sources said that record labels are asking for an up-front fee and a percentage of ad revenue along with the streaming fees.
Apple’s chief music negotiator, Eddy Cue, caused problems when he tried to pull in Sony/ATV in order to roll iRadio into the iPhone 5 Launch. When Sony/ATV declined, he was forced to approach Universal, Sony and Warner reps, who have yet to be satisfied with a deal from Apple. An unnamed music industry source close to the situation revealed that everyone at labels is still preparing counter offers after a string of initial meetings.
Rich Greenfield, a media anlyst with BTIG said that there could be a real opportunity for a service like iRadio in the marketplace: “People spend two hours a day listening to radio. Google, Apple and Amazon are fascinated by the opportunity to get into music in a bigger way. Pandora doesn’t make any real money … Everyone is trying to figure out a better structure.”
YouTube Entering the Subscription Music Service Sector
Streaming media giant YouTube will officially launch a subscription music service in late 2013, said Fortune. After on-going media speculation, the service has announced it has its own negotiating team in place and an operating unit, but will have some elements that overlap and complement new features that could be part of Google Play, Google’s Android music platform.
The two new streaming services are different but part of Google’s efforts to grow its presence in the creative digital marketplace. Google Play is a digital locker for music that allows users to buy, store and sort their tracks. But YouTube’s service will allow users to listen to tracks for free. Both will likely have subscription fees that will provide additional perks for users, including, in the case of the YouTube service, ad-free access.
The news of YouTube’s new service was released by sources in the music industry and at Google: “While we don’t comment on rumor or speculation, there are some content creators that think they would benefit from a subscription revenue stream in addition to ads, so we’re looking at that.”
YouTube has remained free up to this point, despite being one of the world’s most heavily-trafficked music services. It currently sells ads against its music videos, giving a cut of revenue back to record labels.
Fewer people subscribe to streaming music services, and of those that do, spending per month is lower than in other sectors. However, major music labels have still managed to make money through streaming services. The Warner Music Group earned about 25% of its digital revenue from streaming in 2012. However, labels still have not reached an agreement about how much of their content they should give away and are still working on the details of providing a better user experience on YouTube’s upcoming service, particularly within the ever-growing mobile space. Both representatives of music companies and YouTube are concerned that if they go with a “freemium” business model, listeners might once again get used to not paying for music, once again putting all the pressure on ad sales to subsidize free content.
Still, the subscription-based model is not necessarily more lucrative than relying on advertising. Free attracts more customers, but when there is a subscription fee attached, the customers have to actively pay for music, which brings in much-needed money to an industry that has been struggling for over a decade and just this year saw its first increase in sales in 13 years.
YouTube may already be creating features to complement Google’s future music service: The site started embedding click-to-buy links on user-uploaded songs that lead back to Google Play, Amazon MP3 and iTunes. Many experts speculate a user’s “collection” of music, purchases and listening histories might eventually be visible between the two platforms.
YouTube and Google will release more details in the coming months as the services develop.
ASCAP: $827 Million in Royalties in 2012
The American Society of Composers, Authors and Publishers (ASCAP) announced that it distributed more than $827 million in royalties to songwriters, composers and publishers in 2012, up from 2011. Last year was also the fifth consecutive year ASCAP passed the $800-million distribution mark. Annual revenues for the organization were $941 million – the third highest revenues in history – but still 4.5-percent lower than in 2011.
Cable revenues were up 20 percent, and foreign revenues made up for the decline in revenue earned from radio and background music. ASCAP also saw growth innew media and general licensing for bars and grills, hotels and live pop shows.
ASCAP President/Chairman Paul Williams said, “Our goal in 2012 was to ensure a healthy, steady stream of royalties to our members who depend on ASCAP’s advocacy and collective licensing to pay the rent and put food on the table. The music of our members is more popular than ever all around the world, especially through the proliferation of online and wireless services. We are navigating in a complex, rapidly changing environment in which huge, cash-rich technology companies are developing business models that fly fast and free with our copyrights. Only a thriving community of songwriters and composers – who can make a decent living from their work – can ensure a vibrant music eco-system going forward.”
ASCAP CEO John LoFrumento added, “Looking forward to 2013 and beyond, the news is good. We are poised to return to year-over-year growth in our domestic revenues … With foreign revenues remaining consistently high, we are looking forward to a bright future for our members in the coming years.”
ASCAP added brand-new features to its online tools in 2012, such as ASCAP OnStage, ASCAP Play Music and a new-and-improved mobile app that allows members to access the PRO’s tools on their mobile devices.
More details about 2012 financials can be seen on the ASCAP website.
Global music sales were up in 2012, thanks to continued digital innovation, while digital piracy rates dropped significantly. And Google started discussing licensing with labels in preparation to launch a new streaming music service to complement Google Play.
Positive Sales Could Mean Official Music Industry Recovery
The International Federation of the Phonographic Industry (IFPI) released a report in London declaring worldwide music sales had increased by .3 percent in 2012. Released on February 26, the report reveals the first official growth spurt since 1999, which could signify that the official recovery of the business is finally in progress, according to The New York Times. And analysts believe this growth is largely due to continued music technology innovation.
Total music revenue last year was $16.5 billion – significantly less than the $38 billion taken in when the industry was at its peak in the late ‘90s. However, the news is still heartening. Frances Moore, chief executive of the IFPI said, “It’s clear that 2012 saw the global recording industry moving into the road to recovery … There’s a palpable buzz in the air that I haven’t felt for a long time.”
The music industry has been in decline for years, as record labels and other companies that long followed old-school business models have resisted or struggled to adapt to new technology and come up with viable digital business plans that lure music fans away from acts of online piracy. But the fact that digital sales and other new revenue sources grew enough to offset the loss of physical CD sales in 2012 could mean that more businesses are finally embracing the digital revolution.
Edgar Berger, chief executive of the international branch of Sony Music Entertainment said, “At the beginning of the digital revolution it was common to say that digital was killing music … [But now it could be said] that digital is saving music.”
Digital revenue comes from diverse sources, including downloaded singles and albums from platforms like iTunes and Amazon, which have continued to rise in spite of the introduction of explosively-popular subscription streaming services. Spotify, Rhapsody and Muve Music attracted 44 percent more subscribers in 2012, bringing the total number of streaming music subscribers to 20 million. And there will likely be new services from Apple and Google in the coming months, as royalties from musical performances and marketing music uses also grow.
Despite increased revenue overall, there is still a disparity between the music economies of different countries. Eight of the 20 largest music markets grew last year, but in Russia, China and other countries that still have “emerging” markets, piracy is still a major problem that suppresses the success of legal digital services.
And some formerly thriving markets like Britain have experienced troubling decline. The bankruptcy of retail music chains like HMV have many experts concerned that CD sales will decline too rapidly for the digital marketplace to pick up the slack.
Sales slipped in the U.S. in 2012. But London-based research firm Enders Analysis released a separate report last week, which predicted that the U.S. market would rebound in 2013, going from $5.32 billion to $5.35 billion.
Enders Analysis Senior analyst Alice Enders said the reported growth is “huge” and a “milestone,” but that growth might be slow in 2013, because CD sales would likely experience a major fallout. She added that the music industry might not ever return to its previous size, but it could still become healthy and profitable again, particularly since switching to digital delivery of music has significantly lowered operation costs for record companies.
Labels, fearful of online piracy, notoriously resisted digital distribution. While they initially did not see the opportunities for profit it presented, they started to embrace the models they rejected, like free, ad-supported music services.
The IFPI report indicated that the industry earned 34 percent of revenue from digital sources last year, more than other media outlets. In the U.S., India, Norway and Sweden, digital sales already account for 50 percent of total sales.
Some analysts believe that if music executives had taken a progressive stance in 1999, growth would not have taken over a decade. Paul Brindley, chief executive of the consulting firm Music Ally stated, “If there is a lesson to take away, it is probably that the earlier you can embrace new business models and services, the better.”
Piracy Rates Down in 2012
Illegal downloading and file sharing was down in 2012, a report conducted by research firm NPD Group found. CNet reported that NPD’s Annual Music Study 2012 found that of the music fans surveyed, 40 percent of those that downloaded music via P2P services in 2011 admitted they had decreased this practice or stopped it altogether in 2012. The year 2005 was the high point of P2P file sharing network use, with 33 million people using them. In 2012, the use of P2P services overall decreased to 21 million.
A decrease in piracy was also seen in other areas. Songs burned from CDs owned by friends and family was also down by 44 percent. And the number of songs grabbed from digital lockers was down 28 percent.
NPD said there were three reasons for lower piracy rates. First, free music streaming services that gave music lovers a robust listening experience attracted former illegal downloaders. Half of the people surveyed said they had cut back on illegal downloads or stopped completely because of increased options afforded by free, legal streaming.
Secondly, the music industry’s legal actions have driven a lot of P2P sites out of business. For example, former P2P giant Limewire shut down almost two years ago after being found guilty of violating copyright.
Third of all, many P2P sites have made users susceptible to viruses and spyware, which prove to be too high a price to pay for free music. Of those P2P users surveyed, 20 percent said they curbed their downloading behavior because a favorite site went offline or infected them with a virus.
Russ Crupnick, NPD’s senior vice president of industry analysis confirmed, “In recent years, we’ve seen less P2P activity, because the music industry has successfully used litigation to shut down Limewire and other services … Many of those who continued to use P2P services reported poor experiences, due to rampant spyware and viruses on illegal P2P sites.”
Google Approaching Labels to License New Streaming Service
Google, Inc.’s Android division is in negotiation with music companies to support launching a new subscription music-streaming service like Spotify, revealed insiders. The Wall Street Journal. These negotiations are happening alongside YouTube’s push to get licenses from music labels to start a paid music video subscription service.
If Google can cut deals with labels and publishers, the new streaming service would be an added feature of Google Music, which currently allows music lovers to share music from their legally-purchased catalogs online and buy new songs. Google Music users can stream songs through their PCs or mobile devices. The service has the best functionality on devices that use Google’s Android mobile operating system.
The music streaming market continues to grow, as more companies diversify their offerings. Apple is also having discussions in order to license music for a Pandora-like radio service.
Details have not emerged about how Google’s new YouTube-based video subscription service would operate, but representatives have been talking to online video creators about including their videos. The implications of this potential venture for Vevo, LLC – which has a partnership with YouTube to show most of the major music labels’ videos – are also unclear. Vevo gets 4 billion video views per month and has paid out over $200 million in royalties in the past three years.
The RIAA issued a report accusing Google of failing to make good on its promises to punish pirate websites. And a survey showed continued sales growth in the musical instruments and equipment industry. Also, Billboard announced it will start incorporating YouTube plays into its Hot 100 chart formulas.
Google Breaking Anti-Piracy Promises
Google has not been making an effort to hide pirate sites, even though it promised the music industry six months ago to downgrade the sites in search results, according to a report filed by the Recording Industry of America on Thursday. In August, 2012, Google made an announcement saying it would look at the number of valid copyright removal notices for each site and create a new search algorithm that would make sites with many copyright complaints appear lower in search results.
The RIAA’s report last week stated it sees no proof that the new policy has actually penalized music piracy sites, and during the past six months, Google has received tens of millions of copyright removal requests. Steven M. Marks, RIAA’s general counsel said, “Searches for popular music continue to yield results that emphasize illegal sites at the expense of legitimate services, which are often relegated to later pages. And Google’s auto-complete function continues to lead users to many of those same illicit sites.”
Ben Sisario of The New York Times said the problems outlined in the RIAA report point to the two-faced company Google has built. One Google features an array of entertainment services that have licensing agreements with major labels, music publishers, movie studios and other media companies, such as YouTube and Google Play. And these features are becoming an integral part of the entertainment industry.
Google’s other side is its search engine, which has become “the road map to the Internet” people follow to find all content. Some of its methods are heralded by the entertainment industry, but a lot of them are not.
Google responded to the RIAA’s claims in a statement, saying that the company is making a serious investment in anti-piracy measures and will continue to work with the entertainment industry to offer more valuable content: “We have invested heavily in copyright tools for content owners and process takedown notices faster than ever. In the last month we received more than 14 million copyright removal requests for Google Search, quickly removing more than 97 percent from search results … In addition, Google’s growing partnerships and distribution deals with the content industry benefit both creators and users, and generate hundreds of millions of dollars for the industry each year.”
Musical Instruments and Equipment Sales Increasing in 2013
Consumer demand is increasing for musical instruments and accessories, said a January survey conducted by the top financing provider for music dealers GE Capital, Commercial Distribution Finance (CDF).
The survey revealed that 38 percent of its respondents are expecting an increase of five, to ten percent in sales this year, and 43 percent expect their sales to increase more than ten percent. The results showed that fretted instruments, keyboards, percussion and amplifiers will likely be the big sellers, representing 44 percent of revenue. And professional audio equipment will come in second at 37 percent.
Many brick-and-mortar retailers also seem to be growing their online presence, as 27 percent of respondents stated online sales will be between 15 and 45 percent of their business in 2013. Still, 36 percent said that online sales make up 15 percent or less of their business, and 17 percent have still not opened up shop online.
As more consumers head to the Internet to buy instruments and musical equipment, many retailers reluctant to create an online presence are concerned, with 40 percent saying they believe that online retailer and auction site purchases will affect the music industry significantly in 2013. And 19 percent are worried that reduced budgets for school music programs will affect their sales.
Most said they are no longer concerned about overall consumer demand for their products. Dave Wilson, commercial leader of CDF’s diversified products group said, “Like others in the industry, we’re optimistic about consumer demand this year … Although wholesale purchases were soft heading into 2013, we think that will turn around now that we’re seeing positive signs in the U.S. economy. Unemployment rates are declining, consumer confidence is improving and home sales are increasing, all of which are good news for sales of instruments and related products.”
In an attempt to help grow music education in U.S. public schools, CDF has been supporting Little Kids Rock, a program begun in 2008 that offers free instruments and lessons to students in schools without music programs across the country.
GE Capital’s survey included 104 retailers, manufacturers and distributors.
YouTube Will Factor into Billboard’s Hot 100 Chart
Billboard magazine’s 55-year-old Hot 100 singles chart will not incorporate YouTube plays into its formula, The New York Times said. Baauer’s viral video song “Harlem Shake” will debut at No. 1 this week as a result of the change.
“Harlem Shake” got little attention when it was offered up as a free download in May. But by last week, over 4,000 videos featuring fans dancing along to the song were being put up on YouTube every day.
And download sales and Spotify streams of the track also exploded. While Billboard had been planning to include YouTube in its charts for two years, it was the popularity of “Harlem Shake” that pushed it to update its policies immediately, according to editorial director Bill Werde: “The notion that a song has to sell in order to be a hit feels a little two or three years ago to me … The music business today – much to its credit – has started to learn that there are lots of different ways a song can be a hit, and lots of different ways the business can benefit from it being a hit.”
Billboard has also been making other moves to modernize the Hot 100. Aside from sales and airplay, it now includes data from streaming services like Spotify. In recent years, YouTube has been critical to making songs wildly popular many months before they get picked up by radio. Songs like Psy’s “Gangnam Style” and Carly Rae Jepsen’s “Call Me Maybe” provide solid examples. And so does Gotye’s Grammy-winning hit “Somebody That I Used to Know.”
“Harlem Shake” only had 18,000 downloads since its release in May. Once the tens of thousands of YouTube videos began to go up last week, it sold 262,000 downloads.
Billboard’s charts are based on data from Nielsen SoundScan, a company that has also been trying to update. When it first started in 1991, it offered up third-party sales data that changed the way record labels, retailers and others marketed and sold their products. Now Nielson also looks at radio plays and major streaming services. Senior analyst David Bakula said, “We want to measure how much consumption is going on, in whatever form a consumer chooses to consume something.”