Industry News

Asia tests new ways of making music profit

The economic crisis has seen a dramatic downturn in physical sales of music and an increase in illegal downloading. Marcel Fenez of PricewaterhouseCoopers’ entertainment and media practice says that "Consumers are enjoying more hours of music, they just aren’t paying for it". Asia’s physical distribution market fell by 9.3 percent in 2008 – the biggest drop in 5 years. A survey of more than 8,000 young Asians b/w 15 to 24 year olds found only 11% paid for the music they obtained online - Scary statistic, isn't it?

The industry is exploring how it can capitalize on new technology and get paid for music in a completely new way.

Nokia is now offering an "All You Can Eat" music services bundled with its mobile phones. Instead of paying per song, music lovers are allowed to download onto their phone any song they want for a 12 to 18-month period. The cost of the music is factored into the price of the handset.

Another scheme, thought to be previously-unthinkable, that is being tried comes from internet giant Google, in partnership with record labels such as Warner, Sony and EMI. Working with Chinese music site Top100, the project, launched earlier this year, offers Chinese users music that can be legally downloaded for free. It hopes to cash in by attracting more visitors, and then capitalising on that increased traffic through advertising. Doubts remain about whether the venture can lead to real revenues. "We believe that by investing heavily in product innovation, the users will come and then the money will come," said Google China's engineering director Bin Lin at the Hong Kong conference.
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Webcasters and music industry reach royalties agreement

Internet radio reached an agreement on streaming-music royalty rates with SoundExchange, the group that collects royalties on behalf of artists and labels. The two sides announced the deal, which comes after more than two years of negotiations, political maneuvering, and fans pleading with lawmakers to save Webcasting. It should be noted, however, that Webcasters are still at a disadvantage when competing with traditional broadcast radio. Over-the-air stations aren't required to pay royalty rates to artists or labels.

Steve Marks, an executive vice president for the Recording Industry Association of America and one of the people who helped close the deal, said the settlement is proof that the music industry wants to partner with technology firms. "Supporting new business models through innovative licensing agreements is critical to the future of our industry," Marks said. "We are pleased to have found an alternative in the hope of avoiding costly litigation in favor of building partnerships."

The agreement calls for large ad-supported radio services, such as Pandora, to either share 25 percent of revenue with the music industry or pay a per-stream rate of 0.08 cent retroactive to 2006, whichever is greater. That rate will increase until reaching 0.14 cent in 2015. Sites that generate less than $1.25 million in revenue must pay 12 percent to 14 percent of sales for streaming rights.
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Collapse in illegal sharing and boom in streaming music

New research shows that the number of teenagers illegally sharing music has fallen dramatically in the past year. The survey of 1,000 fans also shows that many 14 to 18 year olds are now streaming music regularly online using services such as YouTube and Spotify.

At the same time less than a third of teenagers are now illegally downloading music, the survey suggests. In January this year 26% of 14 to 18 year olds admitted filesharing at least once a month compared with 42% in December 2007. The research revealed that many teenagers (65%) are streaming music regularly, with more 14 to 18 year olds (31%) listening to streamed music on their computer every day compared with music fans overall (18%).

Paul Brindley, CEO of Music Ally, which carried out the survey with media and technology research company, The Leading Question, said: "These figures challenge the idea that filesharing will just continue to grow. While we don't think for a second that it shows the war against piracy is won, it does at least suggest that there is encouraging news for the music industry." Music fan Dominique Wakefield, 24, said "While I was at uni I started listening to streamed music using MySpace. Bands would be friends with other bands and it was a great way of discovering new music. I don't really feel the need to own all that music, I know it's always there. I still buy the occasional CD, and sometimes use iTunes. If I find myself loving a whole album and listening to it again and again, then I will buy it. But it has to be quite special."

Legal digital sales are also seeing an unprecedented boom, although sales are far from making up from the shortfall created by the collapse of the physical market. Digital singles were up 41.5% in 2008, while physical singles sales plunged 43.5%, according to the BPI. Last year three albums – Coldplay's Viva La Vida, Kings of Leon's Only By Night and Duffy's Rockferry – sold more than 100,000 digital copies, and the impact of digital is nowhere more apparent than in the UK singles top 40, where Michael Jackson has 12 posthumous entries in the current chart.
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