16 May 2015

The Digital Pie Debate

I have been a member of the UK's MPA (Music Publishers Association) for quite a few years. Joining was one of the best things I have done for my business, because being an MPA member has given me access to a lot of information and contacts that I probably would not have had otherwise. I am so impressed and involved with the MPA, that I am standing as a candidate for the Board this year.

I'm not very impressed by comments made by the new interim CEO Jane Dyball as a panelist in "The Digital Pie Debate" at The Great Escape yesterday. You can read about her comments here:

Jane apparently "refuted the concept of a 'digital pie' to be shared out between publishers and labels". I don't get this. There IS a pie to be shared. That pie is 100% of subscriber revenue. It's been generally accepted that the service provider takes 30%. The other 70% of the pie is to be divided between labels and publishers. Whether the current division of that pie is fair is a different matter. The division varies between countries, which makes that a very long topic that I defer to address another time.

Jane continues by stating that "We are still very early into the digital market". I wonder where Jane has been recently, because we have been in the digital market for more than a decade. That does not qualify as "very early".

What annoys me most is this: "[...] we're not yet at the stage where you can easily track money coming out of a digital service and going into a royalties statement". The services, aggregators and labels are all capable of dealing with all of this. Various commercial companies that deal with online mechanicals in the US also manage to deal with it. Those are all companies that are legally and/or contractually obliged to deal with every fraction of a penny, and manage to do so, whilst the PROs and MROs (societies that rightsholders join voluntarily) all suddenly complain about how complex it all is, and do half-baked jobs. Some are better than others, but PRS for Music are among the worst offenders on that front. They generally blame "bad data", which is indeed a problem, but there are a number of other more significant problems in PRSfM's processing of data from digital services. (Another long topic that I may address another time).

She also mentions the animosity between publishers and labels. For Musiqware, close to 100% of our publishing revenue comes from recorded music. There is a tiny slice of money for live performances, but those are usually by an artist who has recorded a particular song, and is thus also related to the recordings. Even our synchronisation revenue comes from recorded music, because we place existing commercially-released tracks into TV, film, adverts, and so on. The labels are the organisations that generate revenue for us publishers. We should treat them as our friends and allies. The only revenue we have that is not related to recorded music, is sheet music. And just how much money do we all make from sheet music these days??

But these comments distract from what may have been her core message: I do agree that ad-funded revenue on its own is not going to sustain the music business. Fortunately, the majority of streaming services are freemium, meaning that they have an ad-funded free tier to atrract new users, whilst most of the income they generate is from premium subscriptions. Notable exceptions here are YouTube and Pandora. The subscription-focussed mixed models of Spotify, Deezer, Rdio, Rhapsody all generate good income for the music industry, including the publishers.

As such, advances from new services could be an option, but I believe that minimum per-stream values are a much better option. The ad-funded tier is a marketing strategy, and we must make sure that the music industry does not pay for such marketing costs. Per-stream minima solve that problem, and the label-side contracts with streaming services do include such minima. I hope the publishing-side contracts also include these.

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