1. Music 2.0
Business Model
Which revenues are expected from digital music services for
labels & artists?
Music 2.O Business
Model
By Chris de Palmer
Dec 2010
Palm Rock Songs
Music Production & Publishing
http://www.palmrocksongs.com/publications/
com/publications/
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported
Attribution NoDerivs
License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-
-nd/3.0/ or send a
letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA
2. Table of Contents
1 Introduction ................................................................................................................................ 1
2 Market trends ............................................................................................................................. 2
2.1 Digital music is gaining momentum..................................................................................... 2
2.2 Digital music beyond 2010................................................................................................... 3
2.3 Promising audio streaming services ..................................................................................... 3
3 Business case ............................................................................................................................... 4
3.1 Music 2.0 business model – Initial parameters..................................................................... 4
3.1.1 Contractual agreements between music industry players ..................................................... 4
3.1.2 Applicable VAT ................................................................................................................... 7
3.2 Pricing models of digital music distributors ......................................................................... 7
3.3 Digital Music Revenues ....................................................................................................... 8
3.4 Number of downloads or streams required for 1 000 euros revenues .................................. 9
3.5 Average streams per true fan per artist ............................................................................... 10
3.6 Number of true fans required for 1 000 euros revenues ..................................................... 13
3.7 Revenues expectations from downloads services ............................................................... 13
3.8 Revenues expectations from streaming services ................................................................ 14
3.9 Digital winds of change ...................................................................................................... 16
4 Conclusions ............................................................................................................................... 17
5 References & Credits ............................................................................................................... 18
6 About the author ...................................................................................................................... 19
7 Definitions ................................................................................................................................. 20
3. Figures and Tables
Figure 1: Music Market Revenues Evolution in France ........................................................... 2
Figure 2: Growth of Streaming Services in French Market ..................................................... 2
Figure 3: Artist/Producer Revenues Typical Split.................................................................... 4
Figure 4: Publishing Rights Typical Split for Downloads ....................................................... 5
Figure 5: Publishing Rights Typical Split for Streaming ......................................................... 5
Figure 6: Revenues split between Digital Music industry players ........................................... 6
Figure 7: Digital Music – Overall Revenues Split ................................................................... 8
Figure 8: Digital Music – Artists Revenues ............................................................................. 9
Figure 9: Downloads & Streams needed for 1 000 euros revenues........................................ 10
Figure 10: Audio streaming statistics per true fan per Artist ................................................. 11
Figure 11: Evolution of streaming consumption per true fan per artist.................................. 11
Figure 12: Top artists audience statistics in November 2010 (last.fm) .................................. 12
Figure 13: Top 1 artist audience 5 years statistics (last.fm) ................................................... 12
Figure 14: Number of true fans needed for a 1 000 euros revenues ....................................... 13
Figure 15: Revenues evolution with LP downloads per true fan ........................................... 14
Figure 16: Revenues over 3 years from LP streams per true fan ........................................... 15
Figure 17: Downloads vs streaming with 10 000 true fans .................................................... 15
4. 1 INTRODUCTION
Music 2.0 is about digital music and this study is about the impact of music 2.0 on the revenues of
the music industry players.
A new generation of digital services, which are a
audio streaming services, is available today to offer
fans an alternative way for enjoying music
What are the revenues expectations of the different actors of the value chain as artists, labels and
digital distributors? How can they all expect make money from downloads & audio streaming
services?
The objective of this paper is not to study the return on investments (ROI) for labels or
he
independent artist. In other words, neither the costs required for production & promotion, n the
nor
profits by comparing the costs and the revenues are part of this study.
This paper is also limited to the potential revenues generated by audio digital music services, all
other potential revenues obtained from ring tones, web radios, video streaming services, live
performances, merchandizing, radio/TV broadcasts, film synchronization, songbooks, … are
excluded. Only revenues from download & audio streaming services are considered.
In the first part of this paper, you’ll see how digital music is gaining momentum compared to
traditional physical music. Then, based on pricing levels of downloads & streaming services and
on contractual rights defined between players, a business case study will be done. Its goal will be
to define the number of downloads or streams needed and the number of true fans required to
expect different levels of revenues for each player and how these revenues will evolve with a
growing fan base.
Last but not least, this paper is mostly based on the current rules applicable for the music industry
curren
in France.
1
5. 2 MARKET TRENDS
2.1 Digital music is gaining momentum
While physical music revenues based on audio CDs are decreasing for a while, digital music
revenues are increasing.
The USA are the first market of the world for revenues from digital music services. Digital music
services
represents 40% of the whole local music market. In South Korea & China, the revenues generated
from digital music are even higher than those generated by physical sales (source: SNEP)
SNEP).
If we consider the French market, 5th market of the world for music revenues, physical music
revenues decreased by 46 % in 6 years between 2004 & 2009. On the contrary, digital music
revenues increased by 742 % in 6 years between 2004 & 2009 (figure 1 – source: SNEP).
SNEP)
Music Market Revenues Evolution in France
Physical Digital
9 30,7
43,5
50,8
1302 77,2 75,8
1112
953 935,2
819,2
662
530 512
2002 2003 2004 2005 2006 2007 2008 2009
Figure 1: Music Market Revenues Evolution in France
:
In France, the streaming market has got the fastest growth of the 3 flavours of digital music
(downloads, ring tones & audio streaming) with a 144% market share gain between 2008 and
2009. In 2009, its market share was 11.6% ((figure 2 - source: SNEP - June 2010).
Digital Music Revenues
Evolution in France
90 000
80 000
70 000
60 000
50 000 Streaming
40 000 Ring Tones
30 000 Downloads
20 000
10 000
0
2008 2009
Figure 2: Growth of Streaming Services in French Market
2
6. A recent survey performed in France revealed that over 10 million internet users listened music
10
using streaming services during 3rd quarter of 2010. Those services are among the 10 first
2010
services used on the internet (source: Le Point – Nov 2010).
2.2 Digital music beyond 2010
beyon
IEMR is forecasting that global digital music revenues will increase from $7.8 billion in 2009 to
$32.5 billion in 2014 which mean a 316 % growth in 5 years time.
In Western Europe, digital music paid users will increase from 87.4 million in 2009 to 173.2 million
in 2014 and the digital music retail revenues will increase by 269% from $1.3 billion in 2009 to $4.8
billion in 2014 ($723 million in France) (source: Business wire – Oct 2010).
2.3 Promising audio streaming services
And which music 2.0 service will have the highest growth & market share? The answer is likely to
be audio streaming services.
Apple, who was so far rejecting this service and favouring music download services with iTunes, is
about to revise its initial strategy by offering audio streaming services (source: Electron Libre – Oct
2010).
Consider now Gerd Leonhard’s Music 2.0 essay published in 2008 where Gerd indicat that
200 ndicates
"access to music will replace ownership”. In other words, audio streaming services will become
more popular than downloading services. Also, flat fees models emphasized in his study are
considered to be the winning pricing models.
For a « basic user », downloading appears to be too complicated: it implies many actions
(transfers from PC to USB keys or Smartphones or vice versa) and above all the pricing model,
generally based on an average of 0.99 euros per song or 9.99 euros per album, is an obstacle for
the discovery of new talents.
The flat fees model of audio streaming services, generally based on 9.99 euros a month for
unlimited listening anywhere (like “premium” package proposed by Deezer), is on its way to be the
,
winning model.
Of course, the success of audio streaming services will depend on the quality and availability of
n
mobile & fixed networks. Listening to a song in premium quality uses a 324 kbps bandwidth: Such
a bandwidth requires the availability of access networks of at least the following capabilities:
- Wireless Broadband Networks: Wifi or 2.5G mobile networks (with “EDGE” technology)
band
- Fixed broadband networks using at ADSL technology.
Based on this, it was more than necessary to assess the impact on the potential revenues
generated by audio streaming services in particular, hence this paper.
.
3
7. 3 BUSINESS CASE
3.1 Music 2.0 business model – Initial parameters
Before assessing the final revenues of each players, it is important to understand the music
industry, which is complex and involves many players like producers, publishers, songwriters,
artists, managers, ….
To simplify our approach, we consider 2 factors:
• The contractual agreements between music industry players
• The pricing models of digital music distributors
3.1.1 Contractual agreements between music industry players
The revenues distribution is defined by 3 main contracts
• The artist contact established between the artist (singer or band), who will perform the
th
song, and the producer
• The publishing contract established between the publisher and the songwriters
• The distribution contract established between the producer and the distributors
Artist contract
In the artist contract, the producer typically allocates an average of 8% of his revenues to the artist.
ist
This % depends on the nature of the artist, beginner or mature, and can be modulated by potential
sales volumes.
For this study, the artist gets 8% of the revenues from the producer for each song or album
downloaded or streamed (figure 3).3)
Revenue typical split between
Producers & Artists
Artist
8%
Producer /
Label
92%
Figure 3: Artist/Producer Revenues Typical Split
4
8. Publishing contract
In the publishing contract, the typical split defined for original songs is 50% for the publisher, 25%
for the author of the lyrics and 25% for the music composer. A songwriter could get a maximum of
50% when writing both lyrics & music or even 100% when acting as an “independent” songwriter.
In that case, the songwriter would have to ensure himself/herself the promotion of his repertoire.
Note this publishing contract covers the DRM (“Droits de Reproduction Mécaniques” or
cover
“Mechanical Rights”) and is applicable to downloads services.
)
For streaming services, and this is the case in France, the rights between publishers & songwriters
are not contractual and are defined by the copyright management company: the split is 1/3 for the
publisher, 1/3 for the author and 1/3 for the music composer, according to the DEP (“Droits
compos “Droits
d’Execution Publiques” or “broadcasting rights”) defined by SACEM.
ubliques”
So publishers will typically get 50% rights for downloads and 33,33% for streaming while
songwriters will get 50% downloads and 66,67% for streaming (figures 4 & 5).
Publishing Rights Typical Split for
Downloads
Publisher Songwriter
50% 50%
Figure 4: Publishing Rights Typical Split for Downloads
Publishing Rights Typical Split for
Streaming
Publisher
33%
Songwriter
67%
Figure 5: Publishing Rights Typical Split for Streaming
:
5
9. Distribution contract
The distribution contract is established between the producer and the digital music distributors.
While the contractual “link” can be established directly by major producers or labels with digital
music distributors like iTunes, the situation is different for independent producers or DIY (“Do it
nt
Yourself”) artists cumulating the roles of producers, publishers, songwriters & performers the
performers:
access to digital music distributors is only possible using digital music aggregators, like “
aggregators, “Zimbalam”
in France.
The distributor typically takes a 30% commission (source: SNEP), among which 8% is allocated for
mong
the copyright management company (source: Wikipedia - SACEM and Deezer agreement for
(
digital music streaming services in France) and allocates the remaining 70% to the digital music
France),
aggregators. The aggregators take a commission and allocate the final revenues to the producers.
For instance, this commission is 10% with Zimbalam, allocating 90% of their revenues to the
independent producers or DIY (“Do it Yourself”) artists (source: Zimbalam).
nt
The 8% allocated for the copyright management company are then distributed between the
Publisher and the songwriter according to the conditions defined in the publishing contract
described above.
We can therefore figure out the revenues split between all players for the music 2.0 business
model, either based on downloads or audio streaming services. The following graph summarizes
the different revenues streams from the true fan, paying the digital service, to the different players
(see figure 6).
Revenue typical split between
Producers & Artists
Artist
8%
Producer /
Label
92%
Or
Figure 6: Revenues split between Digital Music industry players
s
6
10. All those % are taken into account in our study being understood that different % could be met,
depending on
• digital distributor policies & geographical locations (see chapter 3.2)
• digital distributor agreements with copyright management companies
• agreements between digital distributors and digital aggregators
aggregator
• agreements between digital aggregators & producers
3.1.2 Applicable VAT
Before establishing the final revenues split between all players, the value added tax has to be
explained as it has to be paid by the digital distributors.
In this study, we assume that the digital distributors are based in France and are subject to a VAT
(value added tax) of 19.6%.
The reality is that there are still some debates on this topic. For instance, Apple’s European
subsidiary, iTMS Europe, is located in Luxemburg, where the VAT rate is only 3%. So iTMS
3%
refunds 3% of the revenues generated by every download to the government of Luxemburg
(source: “Don’t believe the hype” – Dec 2010). The consequence is that they benefit from
”
increased revenues.
The situation is equivalent with Spotify (source: Electronlibre – Nov 2010).
3.2 Pricing models of digital music distributors
ricing
When comparing the 2 models, download & streaming, the retail price is different. Whereas an
paring
average of 0.99 euros is generally met for a song download and 9.99 euros for an album download
(LP), the pricing for streaming is either based on free service or subscription packages with flat
fees generally based on 9.99 euros a month for unlimited listening in premium quality on a PC or a
mobile device like a smartphone.
If we want to come-up with a clear split of revenues generated by streaming services, we needed
up
to figure out the final price of an audio stream.
According to the BASCA, a digital streaming service platform like Spotify would “generate an
income of 1p (0.01 GBP) per stream out of which all royalties to rights owners need to be pa
paid”;
BASCA adds that “historical models would suggest that 75% of this will go to the record
companies, with only the remaining 25% going to the writers.”
So we can assume that around 0.009 euros would go for producer/ label.
Now let’s have a look on this interesting information about Spotify statistics: their 18- years old
18-24
subscribers, representing 25% of their paid subscribers, listen to the equivalent of 800 songs a
of
month (source: Electron libre – Nov 2010).
What those statistics do not indicate is how many different artists those “true fans” ar listening to
re
and what the average of songs streamed per artist is.
So with a 800 streams a month for a 10 euros package, we obtain a 0.0125 euros per stream
“virtual” pricing which is quite in line with what BASCA suggests when 0.009 euros would go for
record companies: the difference between the “virtual” pricing and the 0.009 euros represents
around 30% (28%) which is in line with the digital distributors share for download services.
7
11. The contractual agreements between music industry players being already known and explained
nts
above, we will consider this 0.0125 euros pricing level to be appropriate to build-up the business
up
model.
This would mean an average music consumption of something around 26 songs a day per
subscriber. Sure that some subscribers would overreach these statistics while others would not
“rentabilize” their subscription by listening much less music.
But this gives a good starting point for our study and this pre-analysis was important to be
pre rtant
overtaken.
3.3 Digital Music Revenues
We could assess the revenues for the download of a single song and for the stream of a single
song in a paid subscription package for each different industry player (figure 7).
Revenues Split per Song Streamed
0,014
0,012
0,01 Producer / Label / Record
Company
Copyright Management
0,008 Company
Digital Services
Aggregator
0,006 Digital Distribution
Platform
VAT
0,004
0,002
0
Figure 7: Digital Music – Overall Revenues Split
The revenues for the artists & songwriters, distributed by both the producer/label/record company
songwriters,
and the copyright management company, are detailed below. The revenue ratio between the 2
company
services is 1:79. For instance, the artist/performer will earn 0.038 euros with either one song
.
downloaded or 79 streams generated by the same song (figure 8).
A songwriter will earn 0.0318 euros with either one song downloaded or 59 streams generated by
the same song (figure 8).
Note that less streams are needed for a songwriter compared to the performing artist as the
publishing rights are higher for the songwriter with streaming services (see chapter 3.1.1).
3.1.1)
8
12. Revenues Split per Song Downloaded Revenues Split per Song Streamed
0,08 0,0012
0,07
0,001
0,06
0,0008
0,05
Author Author
0,04 Composer 0,0006 Composer
Artist / performer Artist / performer
0,03
0,0004
0,02
0,0002
0,01
0 0
Figure 8: Digital Music – Artists Revenues
3.4 Number of downloads or streams required for 1 000 euros
ownloads
revenues
Downloads:
So how many downloads are required to generate 1 000 euros revenues for each of the industry
player?
Based on the pricing parameters described in the previous chapter, we obtained the following
ing
results (figure 9):
• 2 122 downloaded songs will be required for a label (producer/publisher)
(producer publisher)
• 1 848 for an independent artist ensuring its own production & promotion.
ent
• 14 277 for a singer/songwriter
songwriter
• 31 409 for a songwriter
Streams:
And how many streams are required to generate 1 000 euros revenues for each of the industry
player?
Here are the results (figure 9):
• 171 952 streams for a label (producer/publisher)
(producer
• 146 329 streams for an independent artist ensuring its own production & promotion.
nt
• 981 984 streams for a singer
singer/songwriter
• 1 865 858 streams for a songwriter
To assess the number of required LPs to reach the 1 000 euros target, those figures can be
divided by 10, as a LP is generally sold 10 times more than a single song, in the download
services world. For instance, 212 downloaded LPs or 17 195 streamed LPs would be needed for a
2
label.
9
13. 1 000 Euros Revenues Require
Downloads Streams
1 865 858
981 984
171 952 146 329
2 122 1 848 14 277 31 409
Label Independant artist Singer/Songwriter Songwriter
Figure 9: Downloads & Streams needed for 1 000 euros revenues
Fair enough, but the KEY QUESTION now is to know how many subscribers, or true fans,
subscribers,
are needed to generate 1 000 euros of revenues. Why? Because a subscriber can listen
several times the same song, or the same LP.
Whereas the download of a song or a LP will be unique and done once for all, the listening of a
song or a LP will be done several times by “true fans” who are the subscribers fan of the artist.
Logically, this factor will strongly decrease the number of “true fans” needed.
his
3.5 Average streams per true fan per artist
According to Spotify statistics mentioned in chapter 3.2, their 18-24 years old subscribers, which
24
represent 25% of their paid subscribers, listen to the equivalent of 800 songs a month.
Unfortunately, those stats do not indicate how many different artists those “true fans” a listening
artist are
to and what is the average of songs streamed per artist.
ge
For this reason, we had to establish an average per “true fan” and we came-up with around 40
came up
streams a month (figure 10). For instance, we assumed that 25% of the true fans would listen to
.
one song per week while 5% would listen 1 LP per month.
% l
10
14. Audio Streaming Statistics
per "true fan" per Artist
10 tracks per
5 tracks per day
day (= 1 LP)
10%
5%
1 track per
month
1 track per day 20%
20%
1 track per week
25%
4 tracks per
week (= EP)
20%
Figure 10: Audio streaming statistics per true fan per Artist
But will this level of streams will be constant in the life cycle of the LP of the artist?
Certainly not, because the interest in this LP will decrease: let’s take this assumption; the 1st year
is the most intense year with the release of the 1st EP (4 songs), followed by a 2nd EP 6 month
later and the release of the final LP 12 months after the 1st EP, including the 8 songs, part of the 2
,
EPs + say 4 new songs.
We can assume that 40 streams a month average will stay constant during the 1st year meaning
that over 480 streams will be done by the ‘true fan” with the content of the EPs or LP during the
whole year.
The 2nd year, we assume that the level of streams will be reduced by 50% leading to 240 streams.
the
The 3rd year will generate 75% less streams with an estimated figure of 120. During this 3rd year,
t
the artist will release new EPs & LPs leading to new streams, mostly done for the new songs and
song
partly done for the older materials (figure 11).
(
Evolution of audio streaming consumption
per true fan per artist
700
600
500
400 Streams for 3rd LP
Streams for 2nd LP
300
Streams for 1st LP
200 Downloads
100
0
year 1 year 2 year 3 year 4 year 5 year 6 year 7
Figure 11: Evolution of streaming consumption per true fan per artist
11
15. If we limit our study on a 3 years timeslot, 840 streams can be generated for any songs part of the
first LP of the artist by a single “true fan”, hence an average closer to 23 streams a month per “true
fan”
fan” per artist.
Looking at last.fm statistics, top artists like the Beatles or Coldplay generated between 2 and 51
Coldplay 27
plays in November 2010 (figure 12). For instance, the Beatles attracted 449 329 listeners (true
1
fans) generating 5 714 619 plays, hence an average of 51 plays per true fan per month.
Number of Monthly Plays / True Fan
60
50
40
30
20
10
0
Beatles Radiohead Coldplay Linkin Park Muse
Figure 12: Top artists audience statistics in November 2010 (last.fm)
If we consider last.fm stats since early 2005 for the top 1 artist ranked in November, the average of
fm
weekly plays is 10.1 which mean around 40 plays a month (figure 14).
Number of Weekly Plays / True Fan / Top 1 Artist
16
14
12
10
8
6
4
2
0
Nov 2005 Nov 2006 Nov 2007 Nov 2008 Nov 2009
Figure 13: Top 1 artist audience 5 years statistics (last.fm)
It means for our study that our 23 streams a month average per true fan per artist is
conservative and maintained as a key parameter of our business model study.
study.
12
16. 3.6 Number of true fans required for 1 000 euros revenue
umber revenues
Considering an average of 23 monthly streams per subscriber per true fan per artist, how many
true fans are needed to reach 1 000 euros monthly revenues?
Here are the results (figure 14):
• Label: 2 122 for downloads or 7 476 for streams
ownloads
• Independent artist: 1 848 for downloads or 6 362 for streams
• Singer/songwriter: 14 277 for downloads or 42 695 for streams
• Songwriter: 31 409 for downloads or 81 124 for streams
Number of true fans needed for a 1 000 euros revenues
Downloads True fans (streamings)
81 124
42 695
31 409
14 277
7 476 6 362
2 122 1 848
Label Independent artist Singer/Songwriter Songwriter
Figure 14: Number of true fans needed for a 1 000 euros revenues
3.7 Revenues expectations from downloads services
What are the expected revenues from download services for each player based on a fixed true fan
base?
Our analysis shows the revenue evolution per range of true fans (1 000, 5 000 & 10 000)
downloading a LP (figure 15).
10 000 downloaded LPs, or the equivalent of 100 000 songs, will generate the following revenues
revenues:
• 47 121 euros for a label
• 54 125 euros for an independent artist
• 7 004 euros for a singer/songwriter
• 3 184 euros for a songwriter
In this model, 10 000 « true fans » are required, each of them downloading the equivalent of a one
LP. Once downloaded, the LP belongs to the true fan and will be listened with no limits without any
additional cost.
If the « true fan base is limited to 10 000, those revenues are ultimate.
13
17. Revenues from LP downloads per true fan
60 000
50 000
40 000
Label
30 000 Singer/Songwriter
Independent Artist
20 000 Songwriter
10 000
0
1 000 5 000 10 000
Figure 15: Revenues e
evolution with LP downloads per true fan
3.8 Revenues expectations from streaming services
xpectations
Concerning the expected revenues from paid streaming services for each player, our analysis
ur
shows the evolution of the revenues with a true fan base listening to an average of 2.3 LP of the
same artist each month, or the equivalent of 23 songs (figure 16).
10 000 subscribers, true fans, will generate the following monthly revenues:
• 1 338 euros for a label
• 1 572 euros for an independent artist
• 234 euros for a singer/songwriter
• 123 euros for a songwriter
or
In 3 years, the revenues will be
• 48 153 euros revenues for a label
ues
• 56 585 euros revenues for an independent artist
• 8 432 euros revenues for a singer/songwriter
• 4 438 euros revenues for a songwriter
In this model, each stream will regularly generate revenues, like revenues obtained with radio
plays.
14
18. Revenues in 3 years from LP streams
per true fan
60 000
50 000
40 000
Label
30 000 Singer/Songwriter
Independant Artist
20 000 Songwriter
10 000
0
1 000 5 000 10 000
Figure 16: Revenues over 3 years from LP streams per true fan
evenues
By comparing downloads & streaming services with the same true fan base, we come come-up
with the conclusion that the revenues generated are equivalent after 3 years. Figure 17
shows an example based on a 10 000 true fan base.
Downloads vs 3 years streaming
with 10 000 true fans
60 000
50 000
40 000
30 000 Downloads
3 years streaming
20 000
10 000
0
Label Singer/Songwriter Independant Artist Songwriter
Figure 17: Downloads vs streaming with 10 000 true fans
15
19. 3.9 Digital winds of change
s
There are ongoing debates in France and probably elsewhere concerning the digital music
revenue distribution. Those debates are initiated by the “Zelnik mission” and are unveiled by
.
Electron Libre (Nov 2010):
For streaming services, SACEM is asking for a revision of the current rules and requests to apply a
,
10,5 % rate, instead of the 8%, with a secured minimum of
• 0,005 € per stream in case of advertisement financed only streaming service (ie free
streaming service for the public)
• 0,35 € per month per subscriber in case of fixed access paid package (excluding mobile
service).This amount would be raised by a minimum of 0,005 € per stream beyond 110
his
streams per month consumption.
• 0,70 € per month per subscriber in case of mobile access paid package. This amount
package his
would be raised by a minimum of 0,005 € per stream beyond 220 streams per month
consumption.
On its side, the ADAMI, collective administration of performers’ rights company in France, is
he
requesting for more revenues from digital services; a better split between producers and artists
services etter
would challenge the artists contracts and artists could benefit between 10% and 15% royalties
ould
rates instead of the average of 8%, figure taken into account in our study.
Those SACEM & ADAMI recommendations would naturally benefit to publishers, songwriters &
ongwriters
artists that could increase their revenue levels for music 2.0 services.
This paper also mentioned in chapter 3.1.2 the VAT debate that would also impact the revenues of
impact
the distributors.
16
20. 4 CONCLUSIONS
The revenues generated by audio streaming paid services are far from being negligible and are a
real complementary revenue opportunity offered to the music industry.
In this study, based on the current rules and several assumptions, 3 years would be needed with
the same true fan base to come- with similar revenues, comparing both download & audio
-up
streaming digital services.
10 000 true fans either consuming an average of 23 streams (or plays) a month based on a
an
0.0125 euros cost per stream or downloading one 9.99 euro LP, will generate in 3 years
around
• 48 000 euros revenues for a label
• 55 000 euros revenues for an independent artist
• 7000 / 8 000 euros revenue for a singer/songwriter
revenues
• 3000 / 4000 euros revenues for a songwriter
Those revenues will be obtained in one shot using a download service or will require 3 years of
regular plays using a streaming paid package service.
Of course, 3 key factors will influence the amount of the revenues:
• The pricing policies of the digital distributors offering audio streaming services
• The music usage of the true fans: how many times will they listen to their favourite songs
or LPs?
• The new policies redefining the rules & shares between all players
s
Those new policies, real “digital winds of change”, are likely to modify the balance between
wind
distributors, producers, publishers, artists & songwriters and are still to be defined and finalised.
finalised
We can also foresee a new trend favouring more regular attraction to artists to sustain the monthly
lso
plays, in case of streaming services, with EP strategies offering regular new materials for the fans
services,
thus stimulating their desire to play the artist.
17
22. 6 ABOUT THE AUTHOR
Chris de Palmer is a songwriter and SACEM member and is also acting as a Director of Marketing
in a multi-national company.
Chris has been involved in pre-sales & marketing international activities for more than 20 years
sales
and directly contributed to industry awards wins in trade show events and multi-million euro
million
contracts wins with customers worldwide.
worldwide
He also contributed to increase CO2 emissions by over 200 tons because of his flights and travels
in 60 countries.
You can share your ideas with Chris on this paper on http://www.palmrocksongs.com/publications/
com/publications/
Chris is also on http://www.facebook.com/
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23. 7 DEFINITIONS
ADAMI collective administration of performers’ rights company in France
rights
ADSL http://en.wikipedia.org/wiki/Adsl
Artist In this paper, the artist is a singer or a band
Audio streaming http://en.wikipedia.org/wiki/Audio_streaming
BASCA British Academy of Songwriters, Composers and Authors
CO2 http://en.wikipedia.org/wiki/Co2
Composer Individual who writes the music of a song
Deezer Music Streaming service
DEP “Droits d’Execution Publiques” or “broadcasting rights” defined by SACEM
Digital Music http://en.wikipedia.org/wiki/Digital_music
DIY Do it Yourself
Download http://en.wikipedia.org/wiki/Music_download
DRM “Droits de Reproduction Mécaniques” or “Mechanical Rights”
EDGE http://en.wikipedia.org/wiki/Enhanced_Data_Rates_for_GSM_Evolution
//en.wikipedia.org/wiki/Enhanced_Data_Rates_for_GSM_Evolution
EP http://en.wikipedia.org/wiki/Extended_play
Market intelligence and business strategy research and consulting firm
IEMR (http://www.iemarketresearch.com)
(http://www.i
Independent
artist Singer/Songwriter or Band ensuring its/his production & promotion
kbps http://en.wikipedia.org/wiki/Data_rate_units#Kilobit_per_second
http://en.wikipedia.org/wiki/Music_label and also
Label http://en.wikipedia.org/wiki/Independent_Artists_and_Labels
LP http://en.wikipedia.org/wiki/LP_record
Lyricist Individual who writes the lyrics of a song
Physical music Legacy formats like CDs or Vinyls
Producer http://en.wikipedia.org/wiki/Record_producer
Publishing http://en.wikipedia.org/wiki/Music_publishing
ROI http://en.wikipedia.org/wiki/Return_on_Investment
http://en.wikipedia.org/
SACEM Copyright management company in France
"Syndicat National de l'édition Phonographique" or "Music Publishing National
SNEP Trade Union" in France
Songwriter Individual who writes both the lyrics and music of a song
Spotify Music Streaming service
Fan of the artist who performs a purchasing act either with a download or a
True Fan stream
VAT Value Added Tax
Zimbalam Digital music aggregator
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