With its $750m buyout of the Michael Jackson estate’s 50% stake in the company, 2016 has been a big year for Sony/ATV. It has also consolidated its position in the publishing market, with subscription streaming revenues comfortably making up for declining income from CD and download sales.
However, the ‘value gap’ of ad-supported streaming in general (and YouTube in particular) as well as potential changes to the US consent decrees are issues CEO Martin Bandier wants to fix in 2017.
Music Ally speaks to him the day that YouTube announces that it has paid out $1bn to the music industry from ad revenues alone in the last year. Bandier is less than impressed with the online-video service’s latest charm offensive.
“I think YouTube is one of the biggest issues the industry has – not just music publishers. It’s affecting record companies as well,” he says.
“It is difficult in terms of monetising our songs and getting proper payments. They paid out $1bn but, you know what, we should have been paid $5bn. It’s the largest music service in the world and it’s an exceedingly difficult service for all of us to deal with.”
He adds: “They are owned by a very aggressive digital company – Google – that has lots of power and lots of money. That is one of the primary goals for the entire industry – to straighten out the YouTube problem. How do you deal with the other paid services if you have a free service like YouTube which is ad-supported, but you are not being paid at the appropriate rates?”
Bandier is pleased that German collecting society GEMA has ended its seven-year standoff with YouTube, but warns that the deal does not necessarily offer a template for other countries. “It doesn’t do anything about the issues we currently have,” he says.
Recent months have seen speculation that at least one major label may be preparing to pull its catalogue from YouTube rather than renew its licensing deal. Could Bandier ever see Sony/ATV making such a move on the publishing side?
“Before we enter into a new deal with YouTube, we are going to consider all aspects of the deal and how meaningful it is to us,” he says. “If we thought that entering into a deal with YouTube would adversely impact every other music service, we might say, ‘We just can’t do that unless YouTube is in line with all of the other paid services.’”
YouTube might not pay music rightsholders the royalties they would like, but it does pay something. How, then, does a company like Sony/ATV feel about Facebook, which is moving aggressively into native video, but does not yet have royalty-bearing licensing deals with the industry? Will that be a big issue in 2017?
“It will be,” says Bandier, bluntly. “Facebook is on everyone’s agenda. What they are doing in America, they are doing within the rights that they have. Believe me, they are clearly on the agenda of all music publishers, all record companies and all of the trade associations.”
Facebook and YouTube are just two (admittedly huge) digital platforms among many for publishers. Bandier says that subscription streaming really came into its own this year and he is confident there is greater growth to come.
“For the first time our streaming revenue was higher than the combined revenue from the sale of physical and digital downloads,” he says of this change. “It mainly came from subscription services. The growth of subscription services seems to be at a rapid pace – and not slowing down; meanwhile the decline in physical and downloads is also at a rapid pace and not really slowing down.”
Even so, the nature of consumption is changing, with single tracks to the fore rather than full albums. That brings challenges for publishers.
“The rate that we receive on physical sales is certainly a lot better as we are dealing a lot with albums. This year the album was dissipated and, with rare exceptions with someone like Adele, it was very much being driven by singles,” says Bandier.
“The revenue from singles is not as meaningful as those from albums. But then you look at streaming services and the number of streams on a global basis is enormous.”
Bandier also thinks 2016 has set up an important fight in 2017 over the US consent decrees, after the Department of Justice’s controversial decision to push for ‘100% licensing’ – meaning songs can be licensed with the approval of just one of their publishing rights-owners.
“We were not happy with the manner in which the Department Of Justice has ruled with regard to licensing; plus, the fact that a judge told them they were wrong and they are now appealing it, says Bandier. “There are years from a business point of view that are difficult and 2016 was one of them; a year that had a lot of those events, mostly related to digital.”
What, in an ideal world, were publishers hoping for here?
“About three years ago we went to the DOJ with the goal of trying to get them alter the consent decree to allow the partial withdrawal of rights so that we could effectively license the digital services ourselves,” Bandier says.
“From an administrative standpoint, it made all of the sense in the world. From an economic standpoint, it would be terrific for songwriters because it would effectively take the music away from the consent decree which keeps rates at a very low place.”
“We thought we were going to be successful. At the end of the three-year study, they came out with a ruling that made no sense at all, because no one asked them to address the issue of 100% licensing.”
Publishers have taken note of the election of Donald Trump as US president, and see the incoming administration as a chance to revisit the decision.
“We are all waiting for the new administration in the US to take hold which would mean a new DoJ,” says Bandier. “We think that DoJ, on reflection, would probably look to try to resolve instead of litigate the issue of 100% licensing. I think it will open areas of discussion.”
“They took three years to come up with something that is totally inappropriate! We think the new administration – like a new broom – sweeps clean. Once that is in place, I think there will be opportunities to resolve the 100% licensing issue. It is not the issue that we went to the DoJ with and so maybe there is an opportunity for dealing with partial withdrawal. It is totally unknown, but we are optimistic.”
Finally, Bandier addresses Sony/ATV’s buyout of the Michael Jackson estate, suggesting that it was a very specific deal rather than a harbinger of greater consolidation in the publishing sector ahead.
“I think it was just a natural occurrence. 50% of the company was owned by an estate and Sony saw it as the natural thing for them to buy out the estate’s interests,” he says. “I don’t think the buying out of Sony/ATV signifies anything other than Sony’s belief in music publishing and Michael Jackson’s estate’s belief about what would be best for their beneficiaries.”
Bandier thinks that 2017, regardless of consumption habits and monetisation models, must be a year when the major publishers are measured not on their business deals, but on their hits.
“The reason I got into this business, as opposed to being a lawyer, is that I love music,” he says. “For us, having a huge number of hits is the thing that puts a smile on my face.”
He adds that, at the time of speaking to Music Ally, Sony/ATV writers have had songs at number 1 in the UK for 37 consecutive weeks, with the publisher dominating the top end of the charts for most of this year.
“That’s an incredible accomplishment,” he says. “Those are the things that excite me. Not the DoJ and consent decree, 100% licensing or YouTube.”