How important are performance royalties to the industry’s overall revenue mix? As sales and mechanical revenues decline, performance royalties take on greater importance. Consider these numbers to get a sense of its recent growth:
— Performance rights revenue for recorded music rose 7.6% to $729 million in 2009, according to the IFPI’s “Recording Industry in Numbers 2010” report. Performance rights’ share of global recorded music revenue has increased from 2% in 2005 to 5% in 2009. Total revenue has fallen, making performance royalties more important in the overall revenue mix.
— There are continued efforts to improve the infrastructure that supports performance royalties. From the IFPI’s report: “There is still potential for growth in performance rights revenues, and initiatives are in place, such as improving and sharing best practice across all music licensing companies, continued development of tariffs and market penetration, and establishing music licensing companies in new territories.”
— ASCAP, one of the three performing rights organizations in the US, paid out $863 million to its songwriters and composers in 2009. That was up 5% from $820 million in 2008 and 28.5% from 2007. The collection society generates revenue from a variety of sources – concert venues, public establishments, satellite radio, streaming web sites, terrestrial radio, jukeboxes and many others.
— In the UK, PRS For Music reported a 4.7% increase in revenue and a 51% increase in digital collections in 2008.
— Pandora, the king of personalized Internet radio stations in the US, is a good example of growth in performance revenue. The company took in $50 million in revenue in 2009 and paid out about $30 million to content owners. Pandora surpassed 50 million registered users in March. Before the company launched its iPhone app in July 2008, it had about ten million registered users. That growth is symbolic of the change in how people experience music and how content owners get paid. Just six years ago, according to the IFPI, there were fewer than 50 licensed music services around the world. By the trade group’s count, there were over 400 at the end of 2009. Some of those sites, especially streaming sites like YouTube and Vevo, represent a shift away from purchasing-based activity.
— The growing importance of performance royalties can also be seen in efforts to get the Performance Rights Act passed in Congress. The legislation would for the first time create a royalty based on the use of a sound recording on terrestrial radio. Satellite and Internet radio already pay for the use of sound recordings. “We’re very hopeful” legislation will be passed, said Warner Music Group Chairman and CEO Edgar Bronfman Jr. during the company’s fiscal second quarter earnings call.
— Finally, embedded within the access-versus-ownership debate is the direction of royalties. Ownership means mechanical royalties, access means performance royalties. Although ownership still dominates, it doesn’t pay what is used to pay. That puts additional pressure on other revenue streams. It explains the emergence and propensity of the “360-degree” multi-rights contract. And it explains the greater attention given to performance royalties as well.
