The Global Value of Music Copyright reached a record high of $31.6bn in 2019, up $2.1bn on prior year. Streaming makes up 47%.
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Music needs to know how much it’s worth
When the major music companies publish their quarterly figures, analysts all too often take a blinkered view – exclusively assessing the impact of streaming and duly limiting their focus to revenue from recorded music. This is plain wrong: streaming services pay record labels, but they also pay Collective Management Organisations (CMOs) (known also as authors’ societies and/or PROs) and publishers – who in turn also pay other licensors. Digesting each ‘piece of the pie’ in isolation accentuates the problem: music needs to know how much it's worth and calculating “the global value of music copyright” provides the answer.
In 2019, music copyright was worth $31.6bn, that’s a lot more than is reported in the IFPI Global Music Report. It’s growing fast too, up by 7%, or $2.1bn – the third consecutive year I’ve reported more than $2bn in new monies flowing back to copyright holders. [Past Editions: 2018 | 2017 | 2016 | 2015 | 2014]
Here’s how we got there. Three (partly overlapping) sources of industry analysis are brought under one umbrella: (i) IFPI’s Global Music Report, (ii) CISAC’s annual Global Collections Report, and (iii) Music & Copyright analysis of music publishing. All three posted growth in 2019, albeit at drastically different rates. In USD constant currency, record labels were up 8%, CMOs were up 4% and music publishers were up just 1%. This is a continuation of a ‘hare and tortoise’ trend: labels have gone from boom to bust and are now booming again thanks to streaming revenues, whereas CMOs and publishers who have more diverse income portfolios have never really stopped growing – albeit at more modest rates.
That’s the easy part; then it gets tricky.
Stacking It All Up
To measure the global value which has become such a helpful tool for all music industry stakeholders, we need to remove all double counting, then add back the missing parts. The chart below hops, skips and jumps over all that complexity and gets us to our final figure of $31.6bn, a jump of $2.1bn. What’s striking is how the rate of growth changes after these adjustments: labels are up 9% (as we no longer need to deduct the ‘pass through’ of CD and download mechanical revenue), CMOs – unaffected – still grew by 4%, but licence revenues that publishers collect directly (sync and grand rights) grew by an impressive 10%.
Streaming’s Contribution Nears 50%
Copyright has never been worth so much. Back in 2001, labels were worth only around $21.5bn (the rest being passed through to publishers) and ASCAP’s collections were literally half what they were in 2019. What’s driving these record-breaking copyright valuations is streaming; it’s contribution to labels, publishers and CMOs has gone from 14% in 2015 to almost 47% in 2019. With strong signs that 2020 will be another record-breaking year, we can expect that streaming will make up the majority of copyright’s value – an important watermark.
Fair Division?
Now we’ve stacked up the global value of copyright and plotted streaming’s contribution, we can see who gets what share: labels (and artists) secured 62%, leaving CMOs, publishers (and songwriters) with 38%. When this exercise was first conducted in 2014, the split was more even at 55% labels and 45% publishing, which reinforces the aforementioned hare-and-tortoise analogy. One can look at this two ways: CMOs and publishers might feel aggrieved by labels getting the lion's share of the revenues from streaming, whereas labels may point to 2014 as the lowest-point in their volatile two decades of digital disruption.
Headwinds and Tailwinds
Now that we know the global value of music copyright in 2019, three questions remain. First, what is this work missing? Second, what can we expect when the IFPI publishes their Global Music Report for 2020 tomorrow (23rd March)? Third, given that the world has changed, what can we expect going forward?
On the first question regarding caveats, there are ‘known knowns’ like the thriving Production Library music industry (e.g. Epidemic Sounds) captured in the excellent MIDIA report and ‘known unknowns’ like fitness (e.g. Peloton) where copyright is realising value that might not be fully captured here.
To the second question, we can expect 2020 growth to slow due to two headwinds: (i) performing right income has been adversely affected by the pandemic (i.e. you can’t collect money for the use of music in retail and hospitality if neither is open for business) and (ii) Japan (which in the past made up half of all global CD revenues) has stopped buying CDs. When Japan coughs, the global figures catch a cold.
More people, more of them addressable
Over the longer term, we return to the perennial question of the total addressable market. How much runway is left in the West before we reach saturation, and how long before emerging markets in Africa and Asia make a meaningful monetary contribution? OMDIA, a consultancy, modelled global ‘TAM’ – those with a streaming-enabled smartphone and the means to pay for it – at 3.7bn in 2020. That’s set to rise by a staggering 1.5bn to reach 5.2bn in 2030 with Asia and Africa making up 80 % of the growth.
Hello, ‘Android Fracking’
So while there are clearly tailwinds in the emerging markets in terms of reach, these continents are unlikely to move the global revenue needle. It’s North America and Europe which make up three quarters of all digital revenues, and that’s where the headwinds can be found. This is where my ‘Android Fracking’ theory kicks in, drawing upon the concept of ‘Peak Oil’ – the point where we’ve extracted more oil than there’s left to extract, and what’s left doesn’t come out easily.
In the US, which increasingly dominates global revenues (a thorny subject explored in my forthcoming book Tarzan Economics), OMIDA estimates there are 126m users of paid subscription services and 115m unique adult Android users but 94m unique adult iPhone users. Clearly, all of Apple Music’s subscribers are on Apple smartphones while all other subscription streaming services skew heavily towards iOS as well – as much as three-quarters of their user base are estimated to have an Apple phone in their pocket.
My theory of ‘Android Fracking’ goes like this: iOS was built for commerce and its high price drives self-selection, capturing those smartphone users who are willing to pay for content; Android is more of a mixed bag with many more low-end users who are far less inclined to pay. (A timely reminder of legacy effects – when Android first launched you actually had to install Google Play). To go back to our oil analogy and apply it to the challenge of subscriber acquisition, the iPhone is Saudi Arabia, Android is Southern Siberia – both have oil, but the latter is harder to extract. This means the next decade will be very different from the last… it will be about acquiring (or ‘fracking’) subscribers on Android to get the next cohort of 100m US subscribers paying a recurring fee for music.
That’s not going to be easy, so buckle up.
Applications
The purpose of this work is to help an industry explain how much it’s worth. So how can stakeholders apply this helpful exercise?
Rights Holders can use this work for lobbying purposes (a bigger figure tends to mean bigger influence) as well commercial purposes (rate-setting, tribunals).
Rights Users can stake a claim to the ‘breadwinner’ title as it's the consumer facing streaming services that will bring the majority of the ‘money in’ next year.
Investors can stake a claim to the ‘breadwinner’ title as it's the consumer facing streaming services that will bring the majority of the ‘money in’ next year.
Students struggling to ‘make sense of the spaghetti’ inside the music industry’s value chains can use this as an important building block to straightening it all out.
FAQs
Q1: Why does neither the IFPI, MIDIA nor your work reconcile for 2019?
The IFPI’s $20.2bn includes mechanicals, this report’s $19.6m reallocated them. MIDiA’s impressive report pegs the figure at $21.6bn as it factors in the aforementioned library music.
Q2: Revenue shares, ratios and shares of the rights pool are confusing, can you explain?
Take a £9.99 subscription, remove VAT and you’re left with £8.33. Let’s say the revenue share is 52% to labels (£4.33) and 14% to CMOs and publishers (£1.21). That's a label/publisher ratio of almost 1:0.3 and publishers share of the rights pool is just over a fifth.
Q3: How and when will the pandemic affect the global value of copyright?
Copyright has proved to be remarkably resilient. The most pertinent question is with live music, as all the advances made in live streaming on platforms like Twitch are not going to go away when live music returns. So, how do they co-exist?
Q4: Why is this report issued more than one year in arrears and when will it be updated for 2020?
It is published as soon as the data is compiled. The last data to be received is CISAC’s Global Collections Report which was published in October 2020, providing finalised 2019 data. I’ll aim to update this work before the year end.
Acknowledgements:
Chris Carey (TicketSwap); Adrian Strain and Sylvain Piat (CISAC); John Blewett (IFPI); Simon Dyson and Richard Mahoney (OMDIA); David Safir (Music of Economics); Mark Mulligan (MIDiA); Bill Colitre (Music Rights International), Eddie Christman (Billboard Magazine) and Tom Frederikse (Clintons) and many music industry executives from streaming services, labels, publishers and CMOs who made this possible. Appreciation to Alice Clarke for the design skills.
Japan Image: Adobe Stock/Kamaga