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Despite growth, music labels warn: ‘We should never be complacent’


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Four consistent years of global growth is something to swell the record industry’s heart, and the 9.7% rise in 2018 means it is approaching double-digit growth – a big change from the double-digit decline that defined the first decade of this millennium.

There’s an increasing focus on the role that emerging markets – or ‘high-potential markets’ as the IFPI now calls them – may play for the industry in the coming years. But that’s tied in to other issues that labels are still keen to address.

The spectre of the value gap hung over the IFPI’s Global Music Report and press conference this morning, as it has done for the past few years, but the name ‘YouTube’ was not mentioned directly. Instead, it was the elephant in the room.

IFPI boss Frances Moore (pictured above) and senior executives from the major labels talked about Latin America and India as key to the next stage of growth, yet it’s also true that YouTube is hugely popular in both territories.

(Indeed, in India, it accounts for 40% of digital-music revenues, according to one recent report, which suggested that around 250 million people in India watch music on YouTube.)

YouTube may be something that music rightsholders are keen to bring to heel in western markets, but isn’t the story much more complex in the high-potential markets? As labels see it, the fundamentals of the ‘value gap’ debate aren’t so different.

“The value gap is a global problem,” was the blunt assessment of Stu Bondell, EVP of business and legal affairs, international, at Sony Music Entertainment when asked by Music Ally after the IFPI’s press conference about the value gap in general, rather than in relation to any specific platforms. “Wherever music is being used to create value [rightsowners should be paid]. But fair compensation to creators is a global issue and is not limited to the Western territories.”

Stu Bergen, CEO of international and global commercial services at Warner Music Group (pictured below), agreed, in relation to India. “You want to get the market correct and to tap into the population of 1.3bn people. We are not just looking at what exists today but also at what it can be. We want to make sure the structure is correct and to allow the market to be everything that it can be for music,” he said.

Stu Bergen

IFPI boss Moore also sees the ‘value gap’ debate spreading beyond western markets to the new territories that the music industry is so excited about.

“We started [addressing it] in Europe because we are opportunistic and there was a possibility of doing something in Europe,” she said. “That is going very well. Is the value gap purely a European issue? No. We are going to have this issue everywhere – from China and India onwards. We will be arguing as an industry to close the value gap in those territories as well.”

YouTube has undoubtedly played a significant role in helping some Latin American artists explode globally though. Witness what happened with ‘Despacito’, which now has 6.1bn views on YouTube. How can labels and their representative body be sure that cracking down on user-uploaded content services doesn’t snuff out the potential for this kind of phenomenon on YouTube?

“This isn’t about one particular service,” said Moore. “What we are arguing is that if you are making available music, you need a licence. The industry has got to be paid fairly and the artists have got to be paid fairly. Good on YouTube that it is taking music around the world et cetera et cetera. But it still has to take a licence and it still has to pay fairly. There isn’t a contradiction here as such.”

The IFPI’s own charts of the most popular artists in 2018 still point to the biggest stars being Anglo-American. BTS ranked second in the IFPI’s top 10 artists from last year, but Drake, Ed Sheeran, Post Malone, Eminem, Queen, Imagine Dragons, Ariana Grande, Lady Gaga and Bruno Mars made up the rest of the chart. However, the appearance of Luis Fonsi and Tia Ray in the top 10 singles of 2018 point to the future.

For Bondell, the US and UK may be preeminent now, but a change is coming. “Look at the success of ‘Despacito’, for example,” he said. “Or an artist like Ozuna and Maluma – Latin artists that are creating global hits. In the streaming world, we are much more open to non-English language repertoire and we are going to see the top tracks become much more diverse over the coming years. Absolutely.”

For Bergen, it is partly still because “English is still the language that carries to the furthest parts of the world” that the US and the UK have a natural advantage. Warner, however, is using collaborations to introduce acts from other markets into the global pop mainstream.

“We have a track at the moment from a Mexican artist called Sofia Reyes who teamed up with Anitta from Brazil and Rita Ora from the UK. [‘R.I.P.’ was released on 14th March and currently has 29m views on YouTube and 24.8m streams on Spotify.] This was a cross-cultural collaboration. Some of that will continue to proliferate. I think we will see more Asian artists in the charts in the coming years,” said Bergen.

The IFPI numbers cover revenue from streaming, sales, performance rights and synchronisation income – but this is only part of how labels, especially the majors, make money today. There is distribution and investment/equity in technology companies as well as a share in some artists’ non-recorded music income.

As such, the IFPI numbers only show part of the record labels’ business, which risks starting to feel like an archaic yardstick. Will the body move to include those other revenue streams in its reporting?

“You really have to speak to the IFPI for that,” is how Bondell (pictured below) responded when the question was put to him. “But certainly what we call the traditional recorded music business – physical, to a much lesser extent, and digital – is still accounting for the lion’s share of revenue and that is going to be the case for a very long time. You would have to check with Frances whether there is a move to try to track some of these ancillary income streams that you mentioned.”

Stu Bondell

Music Ally did just that, and Moore suggested that labels will be the IFPI’s guide when it comes to this decision. When will it broaden its reporting net? “When our members ask us to, to be quite honest,” she said.

“At the moment we represent the recorded side of the business. When our members want us to go further they will let us know and we will be ready to do so. At present we haven’t been asked by the companies to get into those other areas. When they do ask, we are there and ready to do it.”

This June, it will be 20 years since the emergence of file-sharing software Napster, and the subsequent decline in recorded-music revenues. As such, it feels like a useful time to be asking what the industry learned from that experience.

“I can’t speak for the entire industry – but the record industry was one of the first industries to be hit with digital disruption and we went through all the classic phases when faced with something like that,” said Bondell.

“First there was denial, then maybe thinking we could do something with it and then fully embracing it. Music is probably further ahead than any other media industry in having embraced digital. Hopefully the lesson we learned on that is to try and look a little bit around the corner at what is happening in the market and to try to see the signs of what is happening and react to them as early and effectively as we can.”

Bergen struck a similar note. “I hope [we learned] a lot. But I don’t think we should focus only on the Napster experience. But we should never be complacent and think that happy days are here to stay. You should always be looking to evolve, to anticipate the needs of the market and the changes in the market and to serve your audience and serve your fans,” he said.

Is that why Warner recently poached Scott Cohen from The Orchard/Sony to become its new chief innovation officer?

“If he can assist us seeing trouble down the road that will be helpful,” said Bergen. “We are reinvested back into the business – both in our artists and in other companies that can help provide services to our artists and connect them with their fans. We are trying to continue to evolve to meet the next challenge.”

Moore used the question to return to the ‘value gap’ debate. “The most important thing we have learned is that if you make music available without any value – if you take away the value of music – then there is no reinvestment in the industry and there are no new artists who appear,” she said.

“I think what we have learned is the importance of music being properly licensed and fairly paid for – and that allows the reinvestment in the industry and the development into the future. The lesson from Napster is that that system doesn’t work because there is no reinvestment in the industry.”

Four years in to its revival, what is the industry doing to ensure it’s not turned on its head again, in such a violent way?

“There is always another round of disruption coming around the corner and it is our business to try and spot that as early as possible and deal with it,” said Bondell. “Hopefully we are in better position to do that now than we were in the past.”

Bergen summed up how labels see their role. “I think it is our collective job to make sure that the business continues to grow. That is what we are dedicated to.”

Eamonn Forde

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