MUSIC ONLINE HOW’S THE FUTURE LOOKING? Nick Edwards Online Manager – PRS for Music 15 OCTOBER 2012
January 2009: PRS Template Presentation
1) Intro to PRS 2) State of the Digital Market 3) How PRS licence these services 4) Questions
PRS for Music - Sitting at the heart of the UK Music Industry
Songwriters and music publishers
Music Users ACCESS TO MUSIC
MONEY ÂŁ
Mechanical Copyright Protection Society
Performing Right Society
The two companies formed an operational alliance in 1997 Re-branded as PRS for Music in 2009
Copyright Restricted Acts
Mechanical Right Right to Reproduce the Musical Work Issue Copies to the Public of the Musical Work
Performing Right Public performance Broadcast Communication to the public
Both are mechanical and performing rights are involved in online and mobile exploitation PRS for Music issues joint licences for both rights
State of the Digital Market
A familiar story…
£1,400,000,000 £1,200,000,000 £1,000,000,000 £800,000,000 £600,000,000 £400,000,000 £200,000,000 £0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 PHYSICAL
DIGITAL Source: OCC
Bottoming out? Tentative signs of stability?
BPI Trade Values by Format, 2008 Q1 to 2011 Q4, £000's £450,000
Non-Physical Revenues Physical
£400,000
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
SEC 3 - CONFIDENTIAL
£0 Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Digital revenues continue to grow
Non Physical Trade Revenues, 2008 Q1 to 2011 Q4 (£m) £90,000
Other Digital £80,000
Ad-supported £70,000
Subscriptions £60,000
Mobile £50,000
Digital £40,000
£30,000
£20,000
£10,000
£0
SEC 3 - CONFIDENTIAL Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
UK Digital Revenues – Sources & Shares
Source: BPI / Informa
UK: a leading digital music market IFPI European Digital Revenues per Capita, 2010 UK $6.00 UKDigital Digital $5.68 $5.64 worth $5.51 worth $347m $347m $5.00
$4.14 $4.00 $3.35 $3.21 $3.00 $2.29
$2.16 $2.10 $2.09
$2.00 $1.32 $1.27 $1.00
$0.90 $0.62 $0.58
$0.49 $0.32 $0.24
$-
$0.13 $0.07 $0.07 $0.06 $0.05 $0.05 $0.03
Total Revenues 2011 = ÂŁ630.8m
Online Revenues were up 42% to ÂŁ39.1m
Now responsible for 10% of domestic collections
Licensing Music in the Digital Domain
In the old days life was simple‌
Perhaps it still is …
The way consumers access music …
is now even simpler than before …
Changing Consumption‌
Owning
LP/CD/DVD
45rpm single
Ringtones
Consumption
1900 - 1995
Tethered downloads
Video Shop
Renting
iTunes
Ringbacks
Public Library
iPlayer VOD 1995 - 2011
AYCE Streaming (E.g. Spotify)
Spectating TV/Radio
Live
BSkyB Movie Channel
Scheduled
webcasting On Demand
Delivery
Cloud Services
Digital Timeline 1983
first commercial CDs
1993
MP3 format published
1995
Cerberus Digital Jukebox
1998
MP3.com, 1st digital only single in UK
1999
Napster
2000
Pressplay, first ringtone services
2002
Last.fm
2003
iTunes
2005
YouTube
2006
MySpace
2008
Spotify
2009 2010 2011
Rise in PRS digital > decline in physical Portable device access Cloud/locker services
Ownership
Access
Broadcast
Online
Sales of each item
The long tail?
Physical store inventory of 52,000 tracks, or 4,000 albums
Extra 1.5m items in digital stores
Items in order of sales rank
How do we licence these services? The Online Licensing Framework : Online Music Licences Limited Online Music Licence LOML+ General Entertainment Online Licence Ringtones & Ringbacks Licence
January 2009: PRS Template Presentation
A brief history… 1995 • MCPS granted online licence for Cerberus 1996 to 2000 • ad hoc licences for different types of usage • MCPS licenses first ringtone services 2002 • First Joint (Mechanical and Performing) Online licence launches in the UK, licensees include OD2, Vitaminic and Peoplesound. 2003-2004 • MCPS-PRS continue to operate the Joint Online Licence (JOL) on a annual mandate from members. • iTunes launches in the UK in June 2004 2005 • Early 2005, discussions begin with a number of significant service providers that have issues with our Joint licensing scheme.
Leading to....
Copyright Tribunal
January 2009: PRS Template Presentation
versus
January 2009: PRS Template Presentation
The ‘concept’:
Music Service Provider ‘last link in the chain’
Music Service Provider: • Contracts with the consumer? • Sets and controls the price the consumer pays? • Can fully report on all elements of Gross Revenue, including all relevant advertising revenue? • Can fully report on all elements of music usage or can secure such reporting? • Controls how content is offered and bundled? • Carries out or authorizes, on their instruction, the carrying out of the copyright restricted acts covered by the licence?
The ‘concept’:
Share of value with established minimum value per use, per sale or per subscriber.
The Greater of: Percentage of Gross Revenue defined in licence scheme OR Minimum fee specific to business model
Copyright Tribunal - outcome Service Type
Example
Rate
Minima
On-demand (downloads and on-demand streams)
iTunes, Napster, We7
8%
from 4p to 2p per download, 0.22p per stream
Premium & Interactive Webcasting
Last.fm
6.5%
0.085p per stream
Pure Webcasting
AOL
5.75%
0.055p per stream
January 2009: PRS Template Presentation
Online Music Licence Fees Your service will be charged whichever amounts to the greater sum of money; royalty rate or minimum Licence
Royalty Rate
Minimum Rate
Music Download (Subscription)
8.0%
Number of musical works in bundle 1–7 8 – 12 13 – 17 18 – 29 30 or more
Royalty per musical work downloaded 4.0p 3.5p 3.0p 2.5p 2.0p
Music on Demand
10.5%
0.085p per streamed work
Music on Demand (Sub)
8.0%
Type of access Dual Platform Single Platform Limited Service (<20,000 Tracks)
Interactive Webcasting
8.0%
0.65p per streamed work
Interactive Webcasting (Sub)
6.5%
22p per subscriber per month
Webcast
6.5%
0.05p per streamed work
Webcast (Sub)
5.75%
20p per subscriber per month
Single Artist Webcast
10.5%
0.85p per streamed work
Single Artist Webcast (Sub)
8.0%
Subscription minimum to be negotiated in good faith
Per Subscriber per month 60p 40p 20p
Limited Online Music Licence (LOML) Band A (Per Annum)
Band B (Per Annum)
Band C (Per Annum)
Limited Download/ On Demand Streaming Service
£120 <45,000 streams per annum
£240 <90,000 streams per annum
£600 <225,000 streams per annum
Pure Webcasting Service
£120 <180,000 streams per annum
£240 <360,000 streams per annum
£600 <900,000 streams per annum
£120 <115,000 streams per annum
£240 <230,000 streams per annum
Type of Service
£600 <575,000 streams per annum £600 £120 £240 Permanent Download Service <12,500 streams per <2,500 streams per annum <5,000 streams per annum annum
Premium Interactive Webcasting Service
LOML+ Annual UK Blanket Licence – available July 2012 onwards Table of fees - £2k to £15k UK services generating under £200k per annum Directly follows LOML Based on minima, so full blanket, no opt out Does not require Board approval, some ‘behind the scenes’ liaison with Majors LBL distribution c. 50 - 75 licensees
Joint Ringtones Licence
Realtones > of 12% or 10p per tone Monophonic & Polyphonic Tones > of 15% or 15p per tone
Joint Ringbacks Licence
Ringbacks >15% or 15p per tone >Includes any subscription element
General Entertainment Online Licence (GEOL) This is an interim, non-precedential licence that runs until the end of 2012. General Entertainment Online Licence fees are calculated on an individual basis The factors we look at when agreeing a Royalty fee include: • Music hours consumed • Viewer/subscriber figures • Level of music use
Distribution splits MCPS
PRS
Permanent download
75%
25%
On-demand stream/limited download
50%
50%
Webcasting/Interactive Webcasting
25%
75%
Ringtones
66%
33%
UK Online Market in 2012 General Entertainment Licence (UK)
19
Ringtones / Ringbacks (Major UK)
12
Ringtones / Ringbacks (Smaller UK)
10
Online Music Licence (Major UK only or UK Element of Pan Euro Service)
31
Online Music Licence & LOML+ (Mid Tier UK only >20k on average)
25
Pan European Licence (European add on to UK Service)
20
Limited Licences (UK)
1,600
January 2009: PRS Template Presentation
Challenges we are now facing… § Licensing of Cloud-locker services (E.g. iCloud, Amazon’s CloudDrive, mSpot) § Evolving revenue models: A la carte, subscription, ad-funded & hybrid models (E.g. Comes With Music) § ‘Bundling’ of services with other goods or services (E.g. MP3 players, Mobile tariffs etc.) or to promote other goods or services (E.g. Digital Covermounts) § Continuing impact of unlicensed / pirate services § Shift from ownership to access models § Limiting fragmentation of rights for smaller & national services § Data challenges: quantity (high volume / low value) & quality of data
Multi-Territory Licensing Solutions: What developments are we making in the Pan European licensing of music publishing rights for digital services?
January 2009: PRS Template Presentation
Pan European Licensing
PEL: Option 1 -
UK
GERMANY FRANCE
Keep current system of licensing
PEL: Option 2 -
Competition based on licensees
8%
Central Licensing 5%
6% 3%
4%
PEL: Option 3 -
Competition based on repertoire
• competition for members’ panEuropean mandates • members have choice • pan-European licensing of specific repertoire • degree of complexity for music users
CELAS has been set up to exclusively represent EMI repertoire for online and mobile exploitation in Europe. Based in Germany, CELAS is a joint venture between the MCPS-PRS and GEMA company, with offices in Munich and London. CELAS is the first organisation of its kind to offer panEuropean licences for its repertoire, and it is an exclusive agent for the world's largest music publisher, EMI.
CELAS Registered in Germany; offices in London and Munich
‘PEDL’
PEDL
‘DEAL’
‘PAECOL’
PRS for Music Pan European Licensing
Anglo American Performing Rights
Pan European Rights Table
WHAT DOES ANY OF THAT ACTUALLY MEAN IN PRACTICE?
January 2009: PRS Template Presentation
How does Pan European Licensing Work?
Invoice per territory LESS Pan Euro Rights Holder share
Invoice per territory LESS Pan Euro Rights Holder share
Invoice per territory LESS Pan Euro Rights Holder share
Territorial invoices for non Pan Euro repertoire issued by the local societies
Transactional invoice for PRS (or other) share
Pan-European invoice issued by PRS
How repertoire is licensed by PRS for Music UK
EUROPE
Other Society rights Universal Music Publishing Sony/ATV Music Publishing EMI Music Publishing
PRS Direct Members IMPEL Warner Chappell IMAGEM Peer Music Publishing
RESIDUAL BLANKET LICENCE
REPERTOIRE SPECIFIC LICENCE
covers all repertoire expect that we know we do not have the mandate to collect
covering only the specific repertoire we identify as licensable under our mandate across Europe.
Rights covered by PRS for Music
Rights not covered by PRS for Music
‘Re-Aggregating the Blanket’ • Response to the market • PEL is fragmenting what was a simple process for a provider in a single territory • Primarily for UK only services • Strictly subject to member opt in and approval • Mandates currently being finalised • Positive for smaller services and National Services
PRS for Music Weâ&#x20AC;&#x2122;re here for Music
Nick Edwards T: 0207 306 4260 E: nick.edwards@prsformusic.com W: www.prsformusic.com
January 2009: PRS Template Presentation