Posts filed under ‘Royalties’
Digital Song Sales and Streaming Performances Were Up in 2011
For the first time, digital music sales are larger than physical sales; accounting for 50.3% of all music purchases in 2011. Digital track sales set a new record with 1.27 billion sales in 2011; an increase of 100 million sales (8.4%) over 2010. Total digital album growth was 20% in 2011 as well, according to Nielsen Soundscan.
Adele had the top selling digital song, but Lady Gaga was the most streamed artist with more than 135 million streams while “Super Bass” by Nicki Minaj was the most streamed songs with nearly 85 million streams (according to Nielsen BDS).
Meanwhile SoundExchange reported that they distributed a record amount of money to artists during the 4th quarter of last year - $89.5 million with more than 18,000 payments, bringing year-end estimated royalty payments to $292 million (up 17 percent from the prior year). The royalties are paid by Internet radio, satellite radio and cable TV music-only channels for their use of sound recordings, and are distributed by SoundExchange to recording artists, record labels, and a non-featured artist fund.
The upward trends in both digital song and album sales and in streaming consumption and compensation are all evidence of a healthy online listening marketplace, something we can all be happy about.
Cha-ching! Pandora’s Payments Are 23% of Sound Exchange’s Total Revenues
Image via Wikipedia
Roughly 23% of Sound Exchange’s total revenues in 2010 came from Pandora, based on publicly reported info and some quick math by Live365 Attorney Angus MacDonald.
According to SoundExchange‘s Annual Report for 2010, the collections agency for the RIAA collected statutory royalties from all statutory classes of services in the amount of $263,593,310. That number includes royalties from services other than webcasters, such as satellite, cable services and subscription services.
According to Pandora’s recent SEC filing (dated 5/26/11), Pandora’s revenues were $137,764,000 for its last fiscal year, which ended Jan. 31, 2011. MacDonald notes that his comparison uses Sound Exchange’s calendar year reporting and Pandora’s fiscal year reporting which is February 2010 through January 2011, so it’s not entirely accurate, but very close.
MacDonald uses a factor of 45% as the percentage of Pandora’s overall revenues that the service pays to SoundExchange because that was the percentage that the service paid in their fiscal 2010 year. However, MacDonald also notes that with the newest quarterly report, Pandora’s percentage of revenues owed to Sound Exchange has increased to 53%.
Says MacDonald, “Using the lower figure – i.e., 45% – means that Pandora paid $61,993,800 ($137,764,000 * 0.45) to SX in the 12 months that ended Jan. 31, 2011. That $62 million is 23.52% of SX’s total revenues ($263.6M) collected in CY2010.” He adds that this is 23.5% of Sound Exchange’s overall revenues, the percentage of revenues the agency sees from Internet radio alone would be much higher.
RIAA Performance Royalties Up 60% in 2010
Image via Wikipedia
According to 2010 year end shipment statistics reported by the RIAA, digital formats now comprise 47% of all music shipments in the US. That’s a large share, especially compared to the 9% share digital music held in 2005. Overall, the total digital music market in 2010 was $3.2 billion, a 3% increase over last year.
According to 2010 year end shipment statistics reported by the RIAA, revenue from downloaded tracks and albums increased 12% and 8.6% year over year. Sales from physical units were down 10.9%. Music video sales and ringtone sales slipped as well. Subscriptions grew in number, but revenues were down, meaning more subscribers paid less for those services.
Performance royalties are becoming a major source of revenue for the labels. Payments grew from $155 million in 2009 to $249 million in 2010 – a 60% increase in just one year. That’s on top of 55% growth the year before that. At the current pace, that number will top a billion in just a few more years…
Clear Channel Hearts Big Machine Records
Clear Channel’s iHeartradio has a new channel dedicated entirely to the music of popular record label Big Machine. Big Machine Radio is a commercial-free, digital station that features exclusive content from Big Machine Label Group’s recording artists, including Taylor Swift, Rascal Flatts, Martina McBride, Jewel and Justin Moore. The dedicated channel will play songs by the label’s artists, as well as feature artist interviews, acoustic and live versions of popular songs and other content.
To kick things off this week, Big Machine Radio will offer listeners a preview of Justin Moore’s sophomore album OUTLAWS LIKE ME – available in stores on June 21. Tuesday, April 26 at 10 a.m. ET, Justin will provide insight to Big Machine Radio listeners about his new project and songs included on the album. More special programming will premiere on Thursday, April 28, at 3:00 p.m. ET, spotlighting Jewel’s 2010 album premiere radio special for her acclaimed SWEET AND WILD release.
This innovative programming is an excellent example of the ways that streaming channels can offer added value to listeners, artists and stations. It gives the label a chance to showcase their music and connect with listeners. iHeartradio gets to extend their brand too by offering unique content that listeners can’t get elsewhere.
I’m wondering if there is a deal that waives performance royalties for this channel. It’s possible that Big Machine, in doing a deal with Clear Channel for this new channel, has decided to waive royalties or reduce them in some fashion. According to legal expert David Oxenford, there’s nothing stopping either of them from doing such a deal. Sure, Big Machine Radio would benefit from the promotion of a streaming channel dedicated to its artists. And while Clear Channel benefits as well, I doubt they created this channel for free. Whether the upside is a cash payment from the label to them or a reduction of royalties, my guess is there’s an incentive that acknowledges the promotional value of the streaming channel.
You can check out the stream here.
Amazon Launches Music in the Cloud
Amazon has launched a cloud based music service that allows users to store their own music in music lockers and then listen to it on computers and other streaming devices. It’s been rumored that both Google and Apple are readying similar services, so this move by Amazon puts them ahead of the pack. They’re hardly the first – services like MP3Tunes have been offering a similar service for over a year.
But moving early gave them the nifty name – they’re calling it Amazon Cloud, making it difficult for Apple or Google to use the word Cloud in their branding. I’m sure part of their thinking in launching early is to capture the word Cloud and associate it with their product.
Perhaps the most interesting thing about this new service is the legal stand that Amazon took in launching it. While rumors of Apple and Google’s cloud based music streaming platforms have been brewing, supposedly delayed by tedious negotiations with the record labels, Amazon just went ahead and did it, taking the position that the music loaded in the lockers is owned by the user and no further licensing is needed.
Michael Robertson, Founder of MP3Tunes, has been in a legal battle over such issues with the record companies. His post about Amazon’s new service on his blog cheers Amazon’s entry into the space. “I must admit, it’s great to have a giant corporate ally in the battle against the record labels that are fighting against user’s storing their personal music libraries online.”
Amazon Cloud is definitely intended to increase sales from the AmazonMP3 store. Songs purchased through the store are automatically loaded into your personal music locker in Amazon Cloud. The service is well integrated with Android, and not integrated with iPhone. It does sync with iTunes. Several reviews point out that it seems to be pretty basic, look for further developments and improvements.
Robertson’s Daring Service Makes Broadcast Streams Interactive
Michael Robertson is one of the most active entrepreneurs in the digital audio space. He’s started, funded and sold several online companies, including digital music company mp3.com to Vivendi/Universal, and VOIP/telecom Gizmo5 to Google. He’s the founder and CEO of mp3Tunes, a cloud based music storage and streaming service.
Now Robertson has launched a new business aimed at listeners who want to timeshift online listening. DAR.fm is a service that allows listeners to store audio from their favorite Internet radio streams via its Digital Audio Recorder, and then stream it back on demand. Users can schedule using just a web browser and then listen from a PC, iPhones, Android, internet radios and other devices. There is currently a list of 600 stations to choose from, no doubt this will expand as the service gains traction.
“Radio hasn’t changed much in 100 years and young people are listening to radio less.” says Robertson. “My hope is that DAR.fm modernizes radio by making it on demand, interactive and available on more than just your am/fm devices.” He adds that this is an “alpha” service that may “stop working or behave oddly” while they are fine-tuning the service.
Robertson is right – making traditional radio more flexible for listening could have a revolutionary impact on radio listening. A tool like this could essentially give listeners some of the control that online only stations have been able to build into their platforms. Broadcasters in particular could benefit – since their streams are often simple retransmissions of their over the air broadcasts and don’t offer listeners any interactive options, adding the ability to skip, playback and pause the recorded material.
There is one twist – while the service itself is legal, there’s a part of the DMCA that prevents streaming stations that use the webcasting compulsory license from promoting the recording of their streams. This was probably adopted, as were many of the other DMCA restrictions on streaming, to make it harder to slice up the streams into song segments – to prevent digital piracy (though, these days, there sure are easier ways to pirate songs if one is so inclined). It shouldn ‘t mean that Robertson and DAR.fm can’t operate or listeners can’t use the service, but it could impede stations from promoting it. Which would be a shame since it’s an interesting tool that could grow audience. On the other hand, perhaps the record labels will understand this and let it be…
Digital Radio Fuels Growth
credit: Flickr alexkerhead
HD Radio units sold, currently at 3 million, will reach 4 million units by the end of this year, according to ABI Research. That number pales in comparison to the 13.5 million DAB radio receivers sold in Great Britain and Europe, but it’s a healthy increase of more than 25% this year. Digital radio technologies, including satellite radio and Internet radio, are expected to reverse trends of decreasing listenership to radio.
You got that right.
TWICE, a consumer electronics magazine recently produced a special print issue focusing on the changing nature of radio listening as well, citing satellite radio, digital radio and Internet radio as the fuel for future radio listening growth. Summarized in Radio World – an online industry publication, the article notes that the meaning of the word radio has changed to encompass all these various listening platforms.
“Like it or not, our industry consists of more (than) AM and FM over-the-air signals. If we don’t change our own thinking about that along with the market, we unnecessarily limit ourselves; we exclude radio’s businesses and our own careers from potentially exciting growth.”
The broadcast radio industry is at a crossroads. The choice…view themselves as audio content businesses and proceed to foster, develop and expand as many new listening technologies as they can, or remain focused on AM/FM over the air signals, sacrificing other channels.
The demands that FM receiver chips be mandatory in cellphones as part of a deal broadcasters are striking with record labels is a wrong turn for broadcasters. Heavyweight industry associations are lining up against it – Consumer Electronics Association president Gary Shapiro is incandescent with rage. “Rather than adapt to the digital marketplace, NAB and RIAA act like buggy-whip industries that refuse to innovate and seek to impose penalties on those that do.”
Ineffective Online Radio
Various news sources are reporting that the radio industry, under pressure to pay performance royalties for over the air song plays, has come up with a proposal to pay – along with a list of demands. It’s a very telling list that exposes the radio broadcasting industry’s desperate desire to turn back the dial and ignore the growing popularity of online streaming and other digital platforms with listeners.
Realizing that they’re going to have to pay performance royalties, the radio broadcasters have come up with a proposal that offers a (1) tiered rate of 1% or less. In exchange for that they want the (2) Copyright Royalty Board’s jurisdiction forever removed from their rates, (3) lower streaming royalty rates, (4) inclusion of FM chips in cellphones, and (5) “AFTRA issues” resolved for streaming broadcast ads.
I get the relationship between #1, #2, and #3. They’re negotiating with the same folks, and they want to use their negotiations to improve and simplify their overall deal, including streaming. The CRB has been unfriendly in this regard, so they would like to take them out of the equation.
But what does all of this have to do with FM chips in cellphones? Nothing. Or AFTRA issues? Not much – performance royalties are paid to musicians, AFTRA monies are owed to actors and voice talent employed by advertisers and agencies to record commercials. These are pretty arbitrary demands.
So what’s so telling about this? It’s a list that is all about going backwards. Cellphones are already radio enabled – for streaming that is. Smartphones have proven to be enormously popular mobile streaming devices. Why fight a battle that’s already won?
As far as the whole AFTRA thing….I’ve gone on and on about this one, you can read some of my opinions here. Simulcasting over-the-air radio commercials on a streaming station is a BAD IDEA. It discourages advertisers and broadcasters from developing ads that have an online/interactive call to action. It encourages broadcasters to view their streams as simulcasts of their broadcasts. WHICH THEY ARE NOT. It’s the fast lazy train to ineffective online radio…
MP3tunes Sets Your Music Free
Michael Robertson thinks people should be able to listen to their digital music anywhere on any device. That’s exactly what MP3tunes sets out to do.
Robertson, the founder of MP3tunes, is a huge advocate of cloud based music services. He’s no stranger to the vengeance that record labels have when it comes to protecting digital song copyright law (as they define it.) In fact, he’s actually taken it on the chin before against the record companies – in the late 90′s he founded MP3.com, which he eventually sold to CNET after losing an expensive legal battle with Universal. His new service MP3tunes is currently involved in a lawsuit with EMI over copyright infringement issues.
“I think ownership is critical important in the digital age and worth fighting for.” said Robertson. “I think consumers should be able to choose where they want to use their digital property as they can with their physical property. I don’t want a corporation to be able revoke or limit access – as we’ve seen happening with Apple and Amazon.”
MP3tunes currently has over 500,000 registered users who upload their entire music collection to servers and access it from wherever they want. MP3tunes works on multiple smartphones platforms: Android, iPhone/iTouch, (iPad version waiting for approval) and many Internet radio devices (it’s compatible with devices that use vTuner and Reciva firmware.) This week they’ll introduce a deal with Roku that will enable access to music lockers on televisions.
Currently, the business model is a freemium model that offers listeners smaller sized lockers for free and charge a subscription fee for more storage space. But additional revenue sources like e-commerce and advertising may be in the cards as well.
Understanding Digital Music Licensing
Navigating the rules of using music in a digital media platform is complicated. Whether you’re a streaming music service, offering podcasts, downloads, videos with music from your site, or simply creating ads for advertisers, chances are you’re creating a public performance when you’re doing that, which in the digital world means you have to have a license and pay a fee. In many cases, statutory or blanket licenses already exist. Which means all you have to do is figure out which ones apply to you…
To make that much easier, my friend David Oxenford of the law firm Davis Wright Tremaine has created an excellent resource. Guide to the Basics of Music Licensing is essential reading for anyone in the digital audio space. (It’s free!)
Oxenford is the most knowledgeable guy I know in areas related to copyright issues and digital audio. He has represented webcasters in lots of royalty negotiations including the settlement last summer between pureplay webcasters and SoundExchange. He’s also a busy FCC attorney for lots of broadcasters. He’ll be speaking at RAIN Summit West on April 12th as well.
In the meantime, checkout the Guide. You might even want to bookmark it on Delicious..
