UK Music Industry Economists Admit: Music Industry Getting Bigger, Not Smaller

from the about-time! dept

For quite some time, we've been calling out recording industry insiders and their ridiculous stats concerning "losses" from piracy and the like. The most common pattern is to not count where displaced money goes, and if it still benefits the industry. So, for example, many studies would count every downloaded copy as a "lost sale," but would never take into account if that download resulted in the downloader deciding to go to a show and shell out a bunch more cash on merchandise. We're not saying that always happens, but most of the industry studies would only count data that supported their basic premise that the music industry was in trouble and "something must be done." That's highly misleading -- especially when such numbers are then used to make policy.

So consider me a bit surprised to see the following report (thanks Ian) out of the UK, from PRS's economists, Will Page and Chris Carey, where they try to look more closely at the real numbers and conclude that for all the whining and complaining, the UK music industry is actually growing (warning:pdf).

Let me repeat that: despite all of the whining and complaining about the state of the music industry, some of the music industry's own economists are admitting that the market is growing.

Not surprisingly, it found that retail product sales have declined, but the other parts of the industry have grown noticeably more than the decline in retail sales. This growth has come from a few sources. Live show attendance has increased more than retail sales have decreased. Consumers have actually spent more. On top of that, the business to business side of the industry (sponsorships, licensing, advertisements, etc.) has grown as well, opening up new and lucrative means of making money.

Admittedly, there are some facts that could potentially temper the results: including claims of the rather uneven distribution of live revenue (big acts get a lot, others perhaps not as much) and worries that without enough support for smaller acts they won't ever be able to get big enough to make that kind of revenue. So, the fear is that it's all just "legacy acts" that are touring and making money, rather than new acts being encouraged the to get big. This is a charge some others have raised in the past, and it certainly bears watching, though I believe, pretty strongly, that it's an issue that works itself out as various additional business models get developed.

Still, it's quite amazing to see that a music industry study (even one from a non-profit like PRS) actually admits that the overall industry is actually growing.

Filed Under: market size, music industry, uk
Companies: chris carey, prs, will page

Dear EMI: Pretending The Old World Still Exists Won't Get You Into The 21st Century

from the economic-efficiency-anyone? dept

As you may know, over in the UK, the music collection society PRS has been in rather contentious negotiations with various online services over streaming rates. Due to these fights, services like Pandora have shut down in the UK, and YouTube has pulled major label music videos. A couple months ago, PRS tried to compromise by announcing lower rates, which the press hailed as the record labels finally recognizing that their old monopoly rent royalty rates were no longer sustainable. Except... not everyone got the message. Even though these lower rates have been rejected as too high by the various online music streaming services, apparently EMI is arguing in the opposite direction, refusing to license its catalog at the lower rates.

It's difficult to see what EMI gets out of being stubborn here. It's clear that streaming services won't even accept these rates. All EMI is doing is pissing off artists on the label who can't figure out why their fans can't hear their music, making it harder for them, as musicians, to build up the necessary popularity to put in place any number of smart business models (you know, the models that EMI seems incapable of helping them implement).

Filed Under: royalty rates, streaming music, uk
Companies: emi, prs

The Real Problem For The Music Industry Is... Interest Rates?

from the say-what? dept

Cybeardjm points us to a story from Billboard about a claim from the head of PRS in the UK, noting that the real problem with the music industry today is low interest rates. You see, the way collections societies work is they collect money and hang onto it for a while before actually giving it out (if they give it out at all). During that time that they hold it, they hope to earn money on the interest, but with interest rates so low, apparently revenue is expected to be way down. The article points out:

But while overall revenues are being hit by falling CD sales and lower income from music in advertising, Porter said 80% of the decline can be blamed on interest rate cuts.

I'm assuming they just mean on the publishing side of the business, but it's worth noting this stat the next time you hear people complaining about how much songwriters are "hurt" by file sharing. If the impact of fluctuations in interest rates are a much bigger revenue concern, than the impact of file sharing really isn't that big. On top of that, any organization that bases expected revenue on something as variable and out of their direct control as interest rates is going to run into serious trouble pretty quickly.

Filed Under: collections societies, interest rates, music industry
Companies: prs

YouTube's Big Traffic Stick Forces PRS To Slash UK Streaming Royalty Rate

from the who's-got-the-value dept

Back in March, YouTube began blocking music videos for users in the UK after it said the PRS, the country's music licensing body, was charging royalties so high that it was losing money every time a user watched a video. As Mike pointed out at the time, "Google is making the point to PRS: you need us much more than we need you." It looks like that point's been made, as the PRS last week cut its streaming royalty rates by more than half, and is now basically begging YouTube to remove the block, since the site was at one point responsible for 40 percent of PRS' online plays. It looks like maybe the PRS is beginning to understand that without useful distribution (like that provided by YouTube), its members' content loses a lot of value, and that in turn, moves it makes to hamper distribution (like high royalty rates) actually serve to destroy value, not deliver it.

Filed Under: music, rates, uk
Companies: google, prs, youtube

PRS-Backed Study On File Sharing At Pains To Deliver The Wanted Conclusions

from the head-scratching dept

A new study on file sharing has been released by the PRS, the British music licensing body -- you know, the one whose "investigators" are actually sales people -- and its conclusions are a little bizarre, to say the least. In general, the conclusion seems to be that the Long Tail theory doesn't hold, because the most popular music on file-sharing networks is also the most popular music in the charts. Maybe we've been misunderstanding this Long Tail thing all along, but a big part of it is acknowledging the hits. You don't ignore them, rather you also pay attention to the long tail of less popular items. It makes sense that the file-sharing download charts parallel music sales charts, since they're largely tracking the same market; this also reinforces the point that the music industry's claims about the impact of piracy on sales are overblown (after all, if so many people are downloading certain tracks, one wouldn't expect them to sell so well).

The study also says the Long Tail fails because "there is too much choice on file-sharing sites" and it's difficult for people to find new music. Again, this reinforces, rather than undermines the Long Tail, which requires a strong recommendation system to succeed. But the file-sharing services themselves aren't recommendation systems, nor are they intended to be. The recommendation systems are blogs, net radio, word of mouth, and other sources; the file-sharing networks are just the distribution network. It sounds like this study actually does more to assert the validity of the Long Tail than refute it, and it also does very little to help make the case that file-sharing is destroying the music business. But that, of course, wouldn't be the message the PRS wants to deliver -- so it sets up the straw man that if the Long Tail is wrong, then file sharing must be bad. Only problem is it doesn't even do that well.

Filed Under: file sharing, long tail, uk
Companies: prs

PRS Copyright 'Investigators' Actually Sales People

from the no-wonder-they-go-after-horses dept

PRS, the UK's music licensing agency, recently reached out to us after a series of posts we wrote which (to say the least) portrayed their organization negatively. We had a cheerful email exchange that basically left off with us disagreeing on just about everything -- but especially over PRS's tactics, such as demanding a woman running a stable pay for a license because she played music to her horses, just because a few other employees (who didn't listen to the music) occasionally stopped in. Then there's the demands against auto mechanics and police stations because employees were listening to music (in private areas) loud enough that it could be heard in other rooms where the public might visit. Oh, and then there was the demand that a children's charity pay up for singing Christmas carols. And, then there's my personal favorite: calling up small businesses, and if music is heard in the background, demanding the purchase of a license.

If you want to understand the sort of incentives that create such ridiculous and self-defeating PR nightmares, take a look at a recent job posted by PRS (thanks to Kaden for alerting us to this). Officially, the organization is looking for a "copyright investigator," but the actual job is in "sales." These "investigators" have "revenue targets" and can earn a bonus for bringing in excess revenue beyond their targets. That's not creating a situation where these investigators are told to go find violators. It creates a scenario where they're encouraged to find anyway humanly possible to squeeze pretty much anyone for cash.

The PR guy from PRS who contacted us tried to make the case that PRS is just a little non-profit looking out for the best interests of musicians, but when it's setting up its sales people with incentives to come up with any bogus reason to pressure everyone into purchasing a license to listen to music they already legally purchased, something is clearly wrong. This is a group that's effectively been handed a monopoly in the UK and appears to be abusing its power, not as a little harmless non-profit, but as an organization that handles an awful lot of money and has empowered its sales people to threaten small businesses if they don't pay up.

Filed Under: collections societies, copyright, sales, uk
Companies: prs

PRS Threatens Woman For Playing Radio To Her Horses Without Paying A Licensing Fee

from the this-is-called-extortion dept

When I was in the UK recently, I was surprised to hear just how much most folks hate PRS -- the collections society in charge of getting various businesses to pay for playing music. PRS is also the group that has caused music videos to be pulled from YouTube after demanding much more money than was economically feasible. But, where PRS really shines is in threatening tons of small businesses. Over the years, we've had stories on PRS threatening car repair shops, because mechanics in the garage were playing their radios loud enough that customers in the waiting room could hear them. That's a public performance, according to PRS. Then they went after a police station because some cops were listening to radios. Then they went after a children's charity for singing Christmas carols without paying up. The group has even been known to call up small businesses and if they hear music in the background, demand payment, including one case involving a guy working at home with his dog. Apparently, that constitutes a "public performance."

The latest (sent in by a few folks) is that PRS has now threatened a woman who plays classical music to her horses in her stable to keep them calm. She had been turning on the local classical music station, saying that it helped keep the horse calm -- but PRS is demanding £99 if she wants to keep providing such a "public performance." And it's not just a one-off. Apparently a bunch of stables have been receiving such calls.

Obviously, this is not a case of random excessive attempts by PRS to squeeze more money out of people. It's become systematic. The group seems to believe that playing music in almost any situation now constitutes a public performance and requires a licensing fee. You just know they're salivating over the opportunity to go after people playing music in their cars with the windows down.

Filed Under: fees, publicity, radio, recording industry, royalties, taxes, uk
Companies: prs

UK Recording Industry: Investigate Google For Not Giving Us Money

from the logic-is-not-sharkey's-strong-suit dept

Back at Midem, Feargal Sharkey, former singer for the Undertones, and now the head of a lobbying group called UK Music, trashed outsider "utopians" who spout "wild rhetoric and innuendo," when all he really wanted was for others (such as ISPs) to be forced to cough up money to simply hand over to the music industry. That plan has been falling apart, so now he's looking for other targets, to force them to pay -- and it seems like Google is in his sights. Responding to the ongoing fight between PRS and Google/YouTube over paying for music videos, Sharkey has gone on the attack, blaming Google for everything and suggesting that Google needs to be investigated for wielding too much power.

Of course, what he really means is that he's finally realizing that Google actually has the leverage in this fight. They have the value that musicians want: a platform to gain tremendous amounts of attention, that many musicians are using to successfully build an audience. That's the value. Google doesn't need those music videos to make money, so it's fine without them. But, musicians sure could use the boost that YouTube gives them.

But, honestly, Sharkey's response shows how hypocritical he and many in the industry are over these issues. First they scream about how YouTube is copyright infringement and stealing form them... and so now that YouTube takes down their videos... they scream again? Shouldn't that be exactly what they want? If they're not getting paid a reasonable amount for the use of the videos, shouldn't they be thrilled that YouTube took the videos down? After all, we're told over and over again a rather simple mantra by pro-copyright folks: if you don't like the price, don't download the music. Google is living by that exactly. It didn't like the price offered by PRS, so it's blocking the music.

Done deal. What's to be upset about?

At some point, perhaps, it will dawn on Sharkey, Billy Bragg and others in the UK music business that, in their demand to get "paid" tons of money for everything, they've forgotten that the music is only one part of the value proposition -- and the community and platform that YouTube provides is another big part of it. The very fact that they want their videos back up shows they recognize this fact implicitly, even if they're going through massive cognitive dissonance in somehow lashing out at Google for making that point clear.

Sharkey is once again confused. Google isn't abusing any power. It got offered a bad deal by PRS, and it turned it down and blocked all of the videos. If Sharkey really believes what he claims about music business models, this should be exactly what he wants. Rather than allowing such "theft" to continue, it's cleared the playing field so that Sharkey, UK Music and PRS can take those videos to some other site. Or put up their own damn site. The very fact that they're not doing that, and are focusing on YouTube instead, shows they know in their hearts (if not their brains) that Google and YouTube are providing significant value.

Filed Under: feargal sharkey, licensing, uk, uk music, videos
Companies: google, prs, uk music, youtube

Fight Over YouTube Videos Heats Up In The UK; Musician Propaganda Begins

from the you're-about-to-learn-what-leverage-is dept

The decision earlier this week by Google to block music videos in the UK has certainly kicked off quite the firestorm of discussions within the music industry -- and an awful lot of whining about how it's "just not fair." Not surprisingly, the PRS folks have dragged out some musicians to kick and scream about how Google makes sooooooo much money, so why aren't they sharing? It's the same economically clueless argument that the newspapers have been using against Google. However, as Google pointed out, they are looking to share. The offer they made to PRS was to give them a significant portion of whatever ad revenue can be generated on those videos. PRS wants more than that, such that every music play would cost Google significantly more than it made.

It is, perhaps, no surprise at all, that one of the major complainers on the musician side is Billy Bragg -- who's been quick to make these sorts of ridiculous arguments in the past as well, and whose manager, Peter Jenner, is equally unable to understand basic economics. The problem is that they think that the world owes them money after the fact. They both refuse to come up with decent business models, and then complain when others do -- and demand that those other innovators simply have to pay up.

It's the same story we hear over and over again. Folks in the entertainment industry insist that 100% (or perhaps 99%) of the value comes from the content itself -- and refuse to recognize that any of the value comes from the technology, the service or the community of folks using those services. However, their own actions show how wrong that is. If it's true that Google is "underpaying" the artists, shouldn't the artists be HAPPY that Google took down their content? After all, according to what some of these artists and record labels insist, wasn't Google "stealing" from them? So, now that Google has stopped, doesn't that mean they're better off?

No?

The very fact that the musicians are so up in arms shows how much more leverage Google has. It shows that a significant part of the value is in YouTube. YouTube can survive just fine without the music videos. The musicians, on the other hand, are suffering. That's why it's the musicians complaining. But that shows the very point Google is trying to make: Google has the leverage here, not the musicians. And, yet, the musicians still want to pretend it's the other way around.

Filed Under: billy bragg, music, music videos, uk
Companies: google, prs, youtube

YouTube Moves On To Blocking All Music Videos In The UK

from the nice-job,-PRS dept

Following in the footsteps of Warner Music's debacle in overplaying its hand and having all its music removed from YouTube -- leading to a ton of fan and artist resentment pointed at Warner Music, it looks like the UK's Performing Right Society (PRS) is going down the same route. After making demands on Google that would make it so that the company was losing significant money every time a video was watched, Google has simply pulled music videos down in the UK. Basically, Google is making the point to PRS: you need us much more than we need you.

I'm not entirely sure if this is in effect already. I'm in the UK right now and a quick search on YouTube found all of the videos I looked for. However, it seems that Google knows that it's the one with the leverage in these negotiations and is finally letting other parties recognize that. The record labels keep demanding more without any actual reason for it, insisting that 100% of the value comes from the music, rather than the service and the promotions. It's about time that some of the service providers proved they were wrong. Yes, the music is part of the value, but it certainly appears that a much bigger part of the value is the community that Google brings at YouTube.

Filed Under: blocking, music, uk, videos
Companies: google, prs, youtube