Global music publishing revenue grew slower in 2018 than expected, rising 1.8% to 8.49 billion euros ($10.02 billion) from the 8.34 billion euros ($9.4 billion) in 2017, but that was due to a combination of softer advertising revenue from television and radio as well as unfavorable exchange rates.
On a constant currency basis, revenue collections grew 4.4% according to CISAC, the International Confederation of Societies of Authors and Composers, an umbrella trade group that collects data from 239 collective management in 122 countries around the globe and produces an annual report on the economics of music publishing. In the prior year to-year comparison, the music publishing industry grew 6% in 2017 from 2016’s 7.863 billion euros ($8.87 billion).
In 2018, however, television and radio performance revenue fell 3.1% to 3.294 billion euros ($3.89 billion) globally from 2.542 billion euros ($3.81 billion). (This story uses average exchange rates of one euro to $1.1801 dollar for 2018 and one euro to $1.123 for 2017.) Still, TV and radio remains the largest music publishing royalty payment sector, supplying 38.8% of total global publishing revenue, but that’s down from accounting for 40.8% of global collections in 2017.
Meanwhile, royalties from the next largest user channel—concerts and background music at stores, clubs, bars, hotels, and other general licensing users—grew 1% to 2.568 billion euros ($3.03 billion) from 2.542 billion euro ($2.85 billion). But as a percentage of collections, fell slightly and now accounts for 30.2% of revenue versus 2017 when it was 30.5% of total collections.
But the digital channel spent 2018 busting a move, growing a whopping 29.6% to 1.618 billion euros ($1.91 billion) from 2017s total collections of 1.25 billion euros ($1.4 billion). As a percentage of revenue, digital now accounts for 19.1%, versus the 15% share it garnered in 2017.
What’s really significant, according to CISAC Director-General Gadi Oron, is that in a few countries digital is approaching the 50% of total publishing royalties. He cited Mexico, where its nearly 49% of publishing collections; and Sweden where its almost 43% of collections, while also pointing out that countries like China and India had huge jumps in digital royalties.
CISAC president Jean-Michel Jarre echoed that sentiment, in a statement in the report he said, “these digital champions are a snapshot of future potential.” But he warned there is a dark side to digital, as its still less than one-fifth of global music publishing revenues due to a fundamental flaw in the in the legal environment to devalue creators and their works.
He is referring to the safe-harbor legislation from the last century that protected digital services from their users putting up creative works without proper licensing. In Europe, the EU issued a directive in which Article 17 "provides the crucial confirmation that user-generated content services such as YouTube and Facebook are covered under copyright rules and must be licensed by creators, just as other digital platforms are (from Spotify and Amazon to Apple and Netflix),” according to the CISAC annual report. But the devil is in the details and now that directive must be rolled out and actually implemented by the EU’s member states.
Due to safe-harbor provisions, digital services like YouTube and Facebook previously could call all the shots in negotiations but now if they face a licensing mandate, then it becomes a two-way dialogue that hopefully will produce fairer rates, many rights holders hope.
Getting back to the numbers in the CISAC Global Collections Report 2019, physical medium like CDs, videos and, presumably, vinyl fell 4.9% to 658 million euros ($776.4 million) from 692 million euros ($777 million) tallied in 2017. As a percentage of revenue it now comprises 7.8%, versus 8.3% in 2017.
Finishing up, private copying royalties fell 24.6% to 258 million euros ($304 million) from 342 million euros ($386 million), and now accounts for 3% of revenue versus 4.1% in the year earlier period; while all other, i.e. synch, rental, sheet music, garnered 93 million euros ($109.7 million) in collections, versus the 114 million euros ($128 million) recorded for the prior year, which represents a drop of 18.4%. It comprised just 1% of collections for 2018.
The revenue cited above doesn’t include all global publishing revenue as it doesn’t count money paid directly to music publishers as a result of direct licensing deals with music users where the publishers are paid directly, instead of through a collection society.
Breakout revenue by license instead of user, in 2018 performance rights brought in royalty collections of 6.785 billion euros ($8 billion); and that represented a 2.7% increase over the prior year when performance royalty collections totaled 6.61 billion euros ($7.42 billion). Overall, performance held steady accounting for nearly 80% of global music publishing collections.
Meanwhile, mechanicals rights, probably fueled by streaming that pays out both a performance and mechanical royalty, grew 5.7% to nearly 1.4 billion euros, from 2017 1.323 billion. It now accounts for 16.5% of collections, up from 15.9% in 2017.
Closing out the pie, other royalties totaled 307 million euros ($362 million) a big 24.2% drop from 405 million euros ($455 million) in 2017. With that those licenses now accounts for 3.6% of collections versus nearly 5% in 2017.
Finally, looking at revenue by the five regions that Europe is by far the largest collector of music publishing revenue, accounting for more than half of all collections with 4.457 billion euros ($5.26 billion), or 52.5% of total collections for 2017. That represented 2.5% growth over the 4.35 billion euros ($4.9 billion) garnered in 2017.
At a tinge less than half the size of Europe—25.6% of revenue to be exact—North America collection societies pulled in collections of 2.173 billion euros ($2.56 billion) for 2018, a 2.4% increase from the prior year when collections tallied 2.123 billion euros ($2.4 billion).
The Asia-Pacific region produced the most growth, 6% to 1.33 billion euros $1.57 billion) from 1.26 billion euros ($1.4 billion) and now accounting for 15.7% revenue, as compared with 15.1% in 2017.
Meanwhile, Latin America, which had been on an upward spiral in recent years, fell 14.8% to 458.5 million euros ($541 million) from 538 million euros ($607 million) posted in 2017; while Africa also fell slightly by 1.6% to nearly 68 million euros ($80 million) from 69 million euros ($78 million). The latter two continents account for 5.4% and 0.8% of total collections respectively for 2018, as compared with 6.5% in 0.8% in 2017.
Looking at the top 10 countries by collections, the U.S. societies collected 1.93 billion euros ($2.28 billion), a 2.5% increase over the 1.88 billion euros $2.12 billion) collected in 2017, while France was the next largest with collections of slightly over 1 billion euros ($1.19 billion), versus 886 million euros ($995 million). But that 13% increase represented the largest jump among the 10 countries that collected the most publishing royalties.
German societies collected 758 million euros ($894 million), a 6% drop from the 806 million euros ($905 million) they tallied in 2017; Japan grew 2.5% to 819 million euros ($966.4 million) from 799 million euros ($897.05 million); and the U.K.’s collections fell 1% to 671 million euros ($792 million) from 678 million euros ($761 million).
Rounding out the second half of the top 10, Italy publishing royalties totaled 450 million euros ($531 million), a 1.7% drop from the 458 million euros ($514 million) gathered in the prior year; Brazil fell a whopping 23% to 194 million euros ($229 million) from 252 million euros ($283 million); and Canada garnered 238 million euros ($289 million), down slightly from 239 million euros ($268.3 million).
Finishing off the top 10, Australia’s music publishing royalties increased 2.7% to 232 million euros ($274 million) from 226 million euros ($254 million); and Spain with 237 million euros ($280 million) displaced the Netherlands for the No. 10 spot.
While things are still moving up, Oron warned in his opening statement to the report that “more than ever, societies are working in a landscape of fragmenting income sources. This calls for more versatility: protecting the large traditional collections streams of live, background and broadcast, while striking new deals to monetize creators’ works on YouTube, Facebook and other digital platforms. The role of authors societies in generating monetary value for millions of creators has never been more vital. Leveraging our strength in collective effort matters even more in the digital market place.”
In an interview with Billboard, Oron added that “the goal is to increase the pie.” And exporting the EU directive to other parts of the globe hopefully through helping similar legislation or regulations occur in many countries around the world will “create a level playing field and fix the imbalance,” which some have referred to as the value gap.