Written by Tim Ingham — The global music business is generating billions more dollars every year than most people appreciate.
And today MBW, with the help of leading industry economist Will Page, can reveal why and how.
The headline news: across 2014, the worldwide music copyright industry – that’s recorded music income plus publishing and songwriting (‘musical works’) – generated a grand total of $25.28 billion.
That’s $10bn bigger than the $15bn generated by the recorded music industry last year – the IFPI stat by which the music business regularly measures its commercial strength.
Finally, for the first time, the music industry can now rely on an accurate analysis of the entire global value of its copyrights.
Big news.
As he explains in an in-depth Q&A with MBW below, Will Page – Spotify’s Director of Economics – has determined that the global value of musical works last year stood at $11.338bn.
Importantly, that figure includes mechanical copyright royalties passed through to publishers from labels.
To get to our all-important $25.28bn sum, therefore, this number must be removed from the recorded music industry’s $15bn 2014 revenue figure so we’re not ‘double counting’.
The total worth of this mechanical royalty sum last year: $1.072bn.
(Page worked out this mechanical figure by calculating the value of physical music in the IFPI’s essential tome, Recording Industry in Numbers (RIN), then deducting out the publisher’s share. He then did the same for digital downloads in the US, which also produce a mechanical pass-through revenue from labels.)
In other words, after mechanical royalties had been paid out by labels to publishers, the income of recorded music rightsholders in 2014 was not the oft-cited $15bn, but actually $13.9bn.
The publishing/songwriting segment of the worldwide music business in the same 12 months generated $11.338bn.
When you dig further into Page’s analysis, you find plenty of questions about how the music industry sees itself, and how it should be shaped in future.
Before we get there, though, let’s briefly examine how Page has placed a figure on the global annual revenues generated by musical works in 2014 – a real milestone for the worldwide publishing business.
Page has deduced that the publishing/songwriting segment of the worldwide music business generated $11.338bn last year across five separate income streams:
MBW sat down with Will Page to delve deeper into how he came up with such revelatory numbers – using sources for his data including the IFPI, CISAC, Mark Mulligan’s MIDIA, Media Insight Consulting and more…
You’ve managed to put a figure on the global value of musical works. Has this been done before, and why did you set about doing it?
Whereas the IFPI publishes the Recording Industry in Numbers [annual report], the music publishing and songwriter side of the industry has not had a similar document to serve the industry and its analysts.
“I WANTED TO PLUG THE KNOWLEDGE GAP FOR THE PUBLISHING AND SONGWRITER SIDE OF THE INDUSTRY.”I wanted to plug the knowledge gap, as industry analysts and professionals often don’t appreciate the sheer value of musical works that songwriters and publishers create.
What’s more, few folks seemed to know the ‘snakes and ladders’ process of how to calculate it.
What are those snakes and ladders you refer to in arriving at the $11.338bn figure?
The first one is ‘double counting’, which has bugged me for some time.
Songwriter value is captured in the IFPI RIN, as there is a mechanical copyright that is passed-through from the label to the publishers.
This applies to all physical revenues, and in certain markets like the US, digital downloads as well.
This affects how you compare labels and publishers, and also how you compare the value of US downloads to streams.
There are five figures which are used to get to the $11.3bn total, can you take us through each in turn?
The first three steps to our grand total are performing, mechanical and private copying collections.
These three come from the CISAC Global Collections Report, which was compiled by Media Insight Consulting.
The report stated global collections were €7.9bn, up an impressive 2.8%.
I took this Euro figure and convert it into USD at the exchange rate of 1.33 [the same used in the IFPI RIN] to get $10.6bn so it could be compared against the recorded industry.
However, complexity kicks in as not all CISAC collections were related to musical works, so I had to ‘shave off’ the value attributed to other rights at the regional level to get an accurate figure.
“THE SONGWRITING/PUBLISHING SECTOR IS LARGE. AND, MORE IMPORTANTLY, IT’S GROWING.”The next figure was to capture the global value of music publishing, but to restrict this to directly licensed revenues and not those already captured by CISAC.
I worked from the MIDIA Music Publishing at the Cross Roads study. The revenues which were taken towards our total are from MIDIA’s ‘Sync’ and ‘Other’ categories.
The former is self-explanatory, whereas the latter includes grand rights [musicals] and printed music sales.
Finally, we complete the snakes and ladders exercise by adding back the value of mechanicals collected outside of CISAC, such as the Harry Fox Agency in the US.
Recall, when you have ‘pass through’ you have double counting, so you can estimate this figure from the IFPI Recording Industry in Numbers.
Pulling it together you get a impressive total of $11.3bn for 2014.
For readers who were not aware that the songwriting/publishing sector was worth so much, how would you put it into context?
When you step back from the number crunch, three observations can be made:
1. It’s large and more importantly it’s growing! Indeed, collecting societies have been reporting ‘record collections’ throughout much of the past fifteen years, in contrast to the recording industry which has seen its top line halve in size.
2. Based on the MIDIA model, I think that publishers are seeing direct revenues make up an increasing share of their business as they expand their licensing activities in areas like sync. The MIDIA model was global, and credit to Mark Mulligan for attempting to value this sector as few others have tried. I would encourage more publishers to follow the excellent work of the NMPA in adding up the value of their industry.
3. The David and Goliath generalisation that is often used to describe publishing and recording is misleading when you stack up the numbers, as they are actually a lot more even. For instance, some rough math shows the 2014 value of musical works ($11.3bn) far exceeds the value of ‘ownership’ revenues from physical and downloads to the labels ($9.4bn) in the same year. Go back a decade, and all we thought the industry was about was ownership – these new numbers are a sign of the times.
Now we have this $25bn figure, what can the industry do with it?
Lots. I really believe that better tools mean we can do a better job.
Here’s one quick example: take the confusing concepts of the Stream Equivalent Album ratio, or what I like to call ‘Fax Equivalent Emails’.
When a US label sells an album, it will need to pay the publisher, yet when it gets money from streaming, the publisher gets paid separately.
So if the SEA [in the US charts] is currently 1,500:1, you need to either remove the publishing from one side, or add it to the other to compare apples-with-apples and not apples-with-pears (no pun intended).
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