1) Rights owners and performance rights organizations can benefit from an innovative approach to selling a packaged music subscription service and PRO licenses.
2) A streaming subscription bundled with PRO fees has five times the cost of a Spotify subscription and returns far greater royalties to all parties.
3) Rights owners need solutions to effectively segment the market for subscription services. One price does not fit all.
The Warner renewal follows a deal with Universal Music Group secured in August, and now Soundtrack Your Brand has launched an on-demand service priced at $40 to $50-per-month, depending on the market. In total, the company has “around 10,000 direct deals” with labels and publishers, says CEO Ola Sars, who founded Soundtrack Your Brand in 2013 as a joint venture with Spotify. For a $50 fee, record labels receive about $25, and $6 or more (depending on the publisher license) is shared by publishers and PROs. A typical, $10 subscription fee returns $7 to $7.50 to rights holders; the payout varies because services also sell discounted rates and higher-priced family plans.
The business model is simple on the surface but complex in detail. In a single credit card charge — monthly or annually — a retail business gets a music subscription service bundled with fees they are legally required to pay PROs to perform musical works in their repertoire. Putting the bundle together is the difficult part: Soundtrack Your Brand must negotiate licensing agreements with rights owners and take on work traditionally performed by PROs.
On paper, this is a win-win-win for the music business. Soundtrack Your Brand’s two-in-one bundle attracts retailers who might not otherwise pay for a business-to-business (known as B2B) service, pay PROs or both. What’s more, retailers, restaurants and bars of any size pay a flat fee even though PROs charge on a sliding scale; the bigger the retailers, the bigger the savings. PROs, meanwhile, get incremental licensing fees if Soundtrack Your Brand signs up more retailers than otherwise would pay fees. Plus, the market already exists: curated playlists for particular moods and environments have been proven successful through decades of B2B music services such as Muzak — now Mood Media, which filed for Chapter 11 bankruptcy in July — and a cottage industry of music consultants to boutique hotels and restaurants.
Rights holders stand to benefit because such subscriptions pay them more than consumer subscriptions. Also, as is standard with licensing agreements, the on-demand service will pay higher royalties than Soundtrack Your Brand’s original non-interactive, playlist-only service.
In effect, Soundtrack Your Brand has taken on the small business licensing duties for ASCAP, BMI and other PROs. (SESAC and Global Music Rights in the U.S. are not covered by the subscription.) The relationship makes sense during a global recession; the PROs’ resources are freed up to tackle more lucrative accounts that actively use music, like live venues, karaoke bars and fitness studios (for music played in group classes). By turning to a smaller, agile and incentivized company to generate more licensing fees on their behalf, PROs could get enough new payees to make up for discounts Soundtrack Your Brand claims can run from 21% to 90%.
Soundtrack Your Brand pitches a convenient bundle to small retailers who may not have paid PROs, or have paid separately for a single subscription service and PROs. The prize is an addressable market that Nielsen estimated in 2018 -- before the pandemic caused many retailers to close -- was 18.2 million “micro-businesses” in seven key markets and 29.4 million globally -- 21.3 million of them playing music without the correct licensing. Of course, that addressable market is the full totality of eligible businesses, not what is likely to be reached.
A B2B streaming subscription like Soundtrack Your Brand solves another problem in the music subscription business: how to charge more than the standard $10/€10/£10 monthly fee? Spotify, Apple Music and similar services have seen their average revenue per user decrease from free and reduced-cost trial periods, telecom bundling, student discounts and family plans. Some consumer-oriented services -- from Qobuz, Amazon Music HD, Tidal -- offer high-definition audio options for $15 per month but are niche products. But Soundtrack Your Brand has a convincing approach to give rights owners a significant average revenue per user boost.