The Tables Have Turned: Artists - Not Record Labels - Cashing In On Digital Revolution

Tables Have Turned – Artists – Not Record Labels – Cashing In On Digital Revolution

Ahead Of World Music Day, IBISWorld Reports On Downloads,

Digital Music And The Changing Face Of The Music Industry

Los Angeles (June, 19 2008) – According to IBISWorld, Inc., (www.ibisworld.com), one of the nation’s most respected independent publishers of business intelligence research, while many recording artists are embracing the digital revolution that is sweeping the music industry, their record labels are looking at tough times ahead with poor profits and no sure strategy to counter the rising popularity of downloads and ring-tones over the humble CD.

“While consumers are slowly shifting from piracy to making legitimate music purchases online,” IBISWorld Senior Analyst Mr. George Van Horn, “Digital downloads are still robbing the music industry of valuable revenue.”

“The tables, or should I say ‘turn-tables’ have changed, on a global scale, with digital music sales now generating around $2 billion in revenue, with tracks available through 500 online services located in 40 countries, representing around 10 percent of the total global music market,” said Mr. Van Horn. “And we expect that will rise to 25 percent market share within three years.”

One of the major trends in the industry over the next five years will be growth in legitimate downloads outpacing growth of the illegal variety.

“We expect illegal downloads will reach a tipping point, beyond which, further growth will be difficult. Around the world in 2006, an estimated five billion songs, equating to 38,000 years in music were swapped on peer-to-peer websites, while 509 million were purchased online,” said Mr. Van Horn. “And while the piracy numbers are overwhelming, it points to the fact that some users are gorging on illegal music rather than listening to it. As online music becomes more readily available, and more affordable, we’ll see an increasing number of music fans indulging in legitimate downloading, attracted by a legal, quality, guaranteed product.”

“There is always a price people will be willing to pay to access something legally, even when a free illegal option is available. In addition, ongoing prosecution of illegal sites is slowly turning the tide and driving more listeners towards legal downloads,” said Mr. Van Horn. “As the industry evolves, it is record labels that are out of step with the latest technology trends and it’s hurting their bottom line in a major way.”

“Having initially fought downloading, rather than looking at ways of legally exploiting and profiting from it, record labels are now finding themselves playing catch up,” said Mr. Van Horn.

Digital Technology Helped Artist Go Straight To Market With Their Music

“Many artists however, have embraced the new digital environment and are successfully promoting their work online, reaching new and potentially lucrative audiences,” he said. “Digital technology makes it easier for artists to dispense with record labels and publishers, to retain the rights to their own music, and distribute it themselves, and this is particularly true for unsigned and alternative acts – the very acts that come out of nowhere,” added Mr. Van Horn. “The fact that performers make most of their money from merchandise sales and touring, rather than solely CD sales, also helps protect them somewhat, compared to the record companies which are suffering some serious losses.”

“America’s music industry is entering a particularly challenging phase, with revenue contracting by 4.6 percent this year to $3.67 billion as the sector struggles to adapt to the new digital marketplace,” said Mr. Van Horn. IBISWorld believes digitally transferring music online presents both positive and negative possibilities for the industry. One the one hand, despite falling revenue from CD and online sales in recent years, overall demand for music may actually increase as more fans access music by artists they were previously unaware of – creating opportunities and possibly increasing the value of assets held by the industry.

But Mr. Van Horn warned that as more bands and singers attempt to operate independently of record companies, performance royalties would increasingly find their way directly to the artists, rather than their publishers.

“The larger players are suffering, as new artists are less inclined to seek a recording deal, but merely a distribution deal, by which the label will assist in getting the music to be heard,” said Mr. Van Horn. “And since illegal downloads are not publicized, a new challenge for record companies lies in identifying which music is popular, discouraging companies from investing too heavily in music as a promotional tool.”

While revenues have been negatively affected by the loss of royalties from physical recordings, such as CDs and DVDs, and as a result of CD piracy, digital downloads and file sharing; major players are benefiting from additional sources of income via the digital exploitation of music in the form or mobile phone ring-tones.

The American mobile ring-tone market has grown to around 30 percent of the total of U.S.'s digital music sales. Currently digital sales represent around 18 percent of the U.S. market (10 percent worldwide), with IBISWorld predicting this to grow beyond 30 percent within five years.

“In fact, by 2013, ring-tone licensing could be one of the industry’s largest revenue streams, as CD sales plummet and downloading revenue remains below that which CDs once achieved,” said Mr. Van Horn. “We expect music publishers will gain an increasing proportion of their revenue from new opportunities, many of which will be linked to mobile phones.”

But still, the industry’s financial future looks bleak. “Potential growth markets are continually usurped by free services, diminishing the industry's means of generating future income.

“One notable example is the industry’s earlier expectation of deriving royalty income from streaming music online, however, websites such as MySpace allow bands to maintain their own sites and stream a selection of music with no need to pay royalties to anyone,” explained Mr. Van Horn.

Though the record industry is working around the clock to devise strategies to claw back some of its lost revenue, IBISWorld believes many of its plans to counter the digital format are destined to fail.

“Ideas either mooted or trialed by the industry have included attaching ring-tones to CDs, and offering ad-based services, where songs are downloaded from official label sites with pre or post-track advertising and other online marketing tools,” said Mr. Van Horn. “Attaching ring-tones hasn’t halted the decline in CD sales and ad-based services will struggle to succeed since people will still be able to download music illegally, and without charge, without ads.”

Mobility is another challenge for record companies, as concepts such as streaming songs from websites, with ads on the page, ignore the fact that today’s consumers want their music to be portable – they want it on their iPod.

Social networking sites such as Facebook may offer an opportunity for record labels, although they will struggle to provide substantial revenue. So-called ‘360 deals’, such as Madonna’s groundbreaking arrangement with LiveNation – enabling labels to take a cut of revenue from all activities, including performance and merchandise in return for greater support and development – may become more common, but will only really succeed for partnerships with really big-name stars.

AFM of the US and Canada endorses the principles of the copyright reforms tabled in Parliament

Toronto (June 12, 2008)

AFM Canada, the Toronto-based national office of the American Federation of Musicians of the United States and Canada has today endorsed the principles reflected in the copyright reforms tabled in Parliament today.

The American Federation of Musicians is the largest organization in the world representing the interests of professional musicians. With more than 15,000 members in Canada alone, AFM is also certified under Federal Status of the Artists as the representative of all musicians in this country.

“It’s about time we caught up with the protection offered creators in the UK, Europe, the United States and many other countries around the world, some of which we consider inferior to us in many areas,” stated Alan Willaert, International Representative and Electronic Media supervisor at AFM Canada.

“After a cursory view of the major provisions, we believe that this legislation, while far from perfect, is a step forward.”

“Many of our higher-profile members have expressed concerns about legislation that would entail suing their fans for illegal file sharing. While no one wants to see this happen, there still have to be rules and boundaries clearly established, and with that, consequences.”

Willaert went on to say, “One of the most promising aspects is the stiffer penalties for those who upload illegally acquired materials, as opposed to those who download it.”

AFM is also positive regarding the penalties for circumventing digital locks and TPMs. “Whether its songs or software, or the front door of your house, folks have to understand that it’s somebody’s property and that makes it theft.”

Canadian artists release their platform on copyright reform

C.C.C.: Creators' Copyright Coalition

http://www.creatorscopyright.ca/

COPYRIGHT REFORM KEY PROTECTION FOR CANADA'S ARTISTS

FOR IMMEDIATE RELEASE

January 21, 2008

TORONTO: Canadian artists have released their platform on copyright reform in anticipation of the Canadian government's expected new copyright legislation. You will find it attached.

The result of months of research and study, the Creators' Copyright Coalition position paper outlines the reforms that creator groups would ideally like to see in Canadian law.

Members of the CCC believe that the making of art and contemporary Canadian culture is a vital part of life, and an essential ingredient of the information economy. If the new copyright reforms enhance and protect the rights of creators, then it will encourage art, contribute to our culture and enrich the lives of all Canadians.

"Without protection for performers and creators, we risk more than harming our international reputation, we risk damaging our industry at large. It's in the public interest that artists and their work be protected so they can earn a living wage and contribute to our culture and economy," said Stephen Waddell, ACTRA National Executive Director.

John Degen, novelist and Executive Director of the Professional Writers Association of Canada: "I believe Canada can have a strong copyright law protecting the work and careers of all professional creators, while fairly and reasonably addressing the concerns of both corporations and consumers. The CCC statement is meant as a step in that direction."

Stan Meissner, songwriter, past president of the Songwriters Association of Canada: "While the digital age has offered music creators wonderful opportunities, it is clear that the rampant unpaid online consumption of music and other content has had a devastating effect. We need up-to-date copyright legislation that will protect the value of our rights, ensuring us a future where creators will be compensated for the use and enjoyment of our work."

Bill Freeman, the chair of the CCC, said: "Creators have been waiting far too long for copyright reform. It is time to protect the rights of all authors and performers in the Internet age."

The Creators Copyright Coalition (CCC) is an alliance of 16 professional associations of individual creators and performers and copyright collective societies active in the theatre, the visual arts, the applied arts, literature, music, recording and audiovisual (radio, television, film and commercials). Together these 16 associations and collectives represent more than 100,000 creators (authors and performers) who are copyright owners.

Contact: Bill Freeman, Chair, CCC, 416 203-2956

John Degen, PWAC: 416- 504-1645