Music Publishing Leader Says Revenues Down, Looks to Apple Music for Hope

Pointing his finger at the usual digital radio suspects, David Israelite still finds reason for optimism at his organization's annual confab.

At a time when music is becoming more accessible than ever, the U.S. music publishing industry experienced a drop in revenue, to $2.142 billion in 2014 from the $2.206 billion generated in 2013, a loss of 2.5 percent of the business.

That figure came straight from the source: National Music Publishers Association President David Israelite, who disclosed the dispiriting numbers at the organization's annual meeting, held in New York at the Marriott Marquis Hotel in Times Square.

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Israelite said that the shift to steaming and its attendant digital models is happening faster than anticipated, and that with more access should come growth for the industry, Israelite said. But that's not the case.

Israelite continued by expounding on ways to improve the publishing business' bottom line. First, "we have to redefine the economics of the streaming [and digital] model," he said, pointing to Sirius XM, where 10 percent of revenue goes to the labels and about 4 percent goes to publishers and songwriters. That leaves Sirius with an 86 percent take of total revenue. Put another way, "Sirius thinks that the delivery of the song over their satellite is 21 times more valuable than the song itself," he said. Likewise, Israelite advised NMPA delegates to look at Pandora. In the first quarter of this year, Pandora paid 45 percent of their revenue to the label and 4 percent to music publishers and songwriter, keeping 51 percent for themselves. "Pandora thinks the delivery of your song is more than 11 times more valuable than the song itself," he said.

The second way, of course, involved the debate over freemium and premium streaming. Israelite pointed out that Spotify is 27 percent paid subscribers and 73 percent free subscribers, yet 91 percent of their revenue comes from its paid subscribers, stressing the importance of converting free fans into paying customers.

Today, there are 41 million paid streaming subscribers on Earth. Apple is joining the interactive streaming party with 800 million users on file. "If Apple can get 5 percent of their user accounts to subscribe to their service, [it will] double the paid subscriber base," Israelite said.

"Tomorrow, Apple will make live on their website for its partners a contract, where publishers can opt in," he said. "Whether you think the contract is good or bad is your decision, but I can tell you now, the headline rate will be 13.5 percent. That's a significant increase."