Royalty payments from SoundExchange set a record in 2012, and exceeded the previous year by 58%. Payments to artists for performance made by Internet radio, satellite radio and cable radio services hit $462 million. Payments for performances made by subscription services are not included in these figures.
“SoundExchange’s increasing annual royalty payments are a positive indication of where the industry is heading. As digital radio continues to grow, so should the amount that performing artists and rights owners receive for the use of their content,” said SoundExchange President Michael Huppe. “Our distribution represents another record-breaking year for SoundExchange, but more importantly, it means more money in the pockets of the creators of music. We’re optimistic about the industry’s future, and look forward to maximizing digital performance royalties for the people we serve and finding new ways to propel the music industry forward.”
To be accurate it’s important to understand that not all of this money ends up in the hands of “creators of music.” According to Billboard, first, SoundExchange takes 5.3% off the top for administrative fees. After that, the “net” figure gets divided up as follows: record labels, or owners of the sound recording, get 50%. Performance artists get 45% and session musicians and backup singers get 5%.
Earlier this year it was estimated that Pandora was responsible for 37% of that record breaking number collected by SoundExchange. While SoundExchange doesn’t specifically report the figure they pay for performance royalties, they do report a “content acquisition fee”, which topped $182 million through their Q3 of 2012.
Music sales are up this year, bucking a several year annual decline. Led by strong digital downloads of albums and songs, music sales in the US are up 1.6% through May 8th. That’s according to Nielsen. Physical album sales continue to drop, but the rise in online sales is compensating for the first time. Digital album and track purchases went up 16.8 percent and 9.6 percent respectively.
A contributing factor in this would be the release of the Beatles catalog online which drove catalog album sales to a 5.4% increase. CD sales were down, but only 8% compared to double digit declines for several previous years. And strangely enough, Vinyl album sales were way up – 37% year over year, after growing 14% last year.
So what does all of this mean? Well, the future’s not as bad as it seems. Perhaps precipitous drops in revenue are a thing of the past for the record companies.
Digital music sales grew globally by 6 percent last year to $4.6Billion. That number accounts for 29% of record company revenues around the globe. According to a new report by IFPI, consumer choice for accessing music via digital channels continued to grow in 2010. It’s recently released Digital Music Study makes a very clear case that digital music piracy has stifled and eroded the music industry.
Case studies included in the presentation cite examples such as in France, where government regulation, awareness campaigns, and even subsidized legal downloads have made headway in lowering the amount of piracy and stemmed the loss of revenues, and in Spain where a once flourishing and highly creative music scene has gone the other way, with nearly half the residents using illegal download sites to obtain music and fewer and fewer new artists are emerging.
The study calls for government action in the form of ISP regulation, consumer awareness campaigns and content protection. It’s an interesting read – certainly worthwhile for anyone hoping to do business in the online music marketplace. You can access the summary and download the study here.