Business News Labels & Publishers

Song right societies saw collections grow 8.4% in 2019, but fear a 35% drop in 2020 due to COVID

By | Published on Wednesday 28 October 2020


In normal times global collecting society grouping CISAC would today be bigging up the 8.4% growth in music revenues collected by its members in 2019, with total income nearly reaching nine billion euros. However, these are not normal times. And instead, the headline-grabbing figure in the new CISAC Global Collections Report is that COVID-19 could cause a 35% drop in collections in 2020, equating to 3.5 billion euros of lost income.

In amongst the doom and gloom, the latest CISAC stats pack – aggregating figures from song right collecting societies across the world – shows that 2019 was a good year for music rights. The ongoing streaming boom meant that digital royalties collected by the societies that represent songwriters and music publishers were up 27.2% to just over two billion euros.

Meanwhile, revenues collected from broadcasters, the live sector and businesses that play recorded music in public were up too. TV and radio income was up 4.5% to 3.3 billion euros, while royalties paid for live and public performance were up 5.6% to 2.6 billion euros. Good times. But then COVID struck.

Now, one narrative that we have seen in the last six months is that, while the COVID shutdown has brought the live industry pretty much to a standstill, the recorded music business has been much more immune to the impact of the pandemic.

Yes, physical product sales initially took a hit when the high street closed, and sync, broadcast and public performance royalties have all been negatively affected. However, streaming service subscriptions continue to rise, and the royalties paid by user-upload and video-sharing platforms are going up too. And given that digital is more than half of the recorded music business today anyway, the digital increases are generally compensating for those revenues that have had a COVID wobble.

However, the song rights business – while not affected to the same catastrophic level as the live industry – is much more impacted by COVID than the record industry. There are various factors behind that trend.

Mainly for reasons of history, and because of upfront investments in new music, there are some music right revenue streams where the majority of any money generated goes to the recording rights – controlled by labels and artists – with only a minority going to the song rights – controlled by publishers and songwriters.

Then there are those revenue streams where money is split more or less equally between the rights. And then there are those revenue streams where recorded music isn’t actually used, so all the royalties go to the song rights. COVID has hit most those revenue streams where things skew towards the song rights.

For starters, songwriters and publishers earn whenever songs are performed live – whereas, with no recorded music being used in those live performances, labels and artists do not. That’s a significant revenue stream for songwriters and publishers, even though only a single figure percentage of ticket money is usually taken to cover the public performance of copyright-protected songs. And, needless to say, that’s a significant revenue stream that pretty much stopped as the live sector went into shutdown.

Then there are the monies paid by broadcasters and businesses that play recorded music in public. That revenue stream hasn’t stopped entirely as a result of COVID. But where broadcasters pay a royalty linked to their ad sale revenues, the impact of COVID on the advertising industry comes into play. With background music, many licensees have been closed at various points during shutdown.

This affects labels too. But whereas broadcast and public performance accounts for 12.6% of recorded music revenues each year, it’s around half of the monies collected by the song right collecting societies.

Meanwhile, the revenue stream that is most COVID immune – streaming – is a revenue stream where much more income goes to the recording rights. Every streaming deal is different, but recording rights will commonly earn about four times more per stream than the song rights. Hence in 2019 digital was 63.3% of recorded music revenues, but only 22.8% of CISAC collections.

Therefore, while digital income will continue to grow in 2020, that growth won’t be sufficient to overcome the drop in live performance, broadcast and public performance revenues on the songs side.

As a quick aside, it’s always worth remembering that the CISAC figures do not include all the digital income that goes to songwriters and publishers. With a lot of Anglo-American repertoire, some of the money goes directly to the publishers and is therefore not included in the CISAC figures. So digital is always a bigger deal for songwriters and publishers than the top line CISAC figures suggest.

However, even accounting for that, the songs business is still going to feel the burn from COVID much more than the recorded music business.

In addition to compiling 2019 figures from all its member societies, CISAC has also been consulting those societies about what has been happening in 2020, what revenue streams have immediately slumped, and what long term impact those societies are anticipating from the ever-extending COVID-19 shutdown.

Those societies report that they expect live income to slump 60-80% in 2020, with total revenues down 20-35%. That, and other affected revenues, will likely take total collections down to 2015 levels.

Money can take some time to pass through the collective licensing system, especially on a global basis. That has both upsides and downsides. It means that the immediate impact of the COVID-19 shutdown on songwriters and publishers has been softened, but at the same time it also means that impact will be felt well into 2021, and probably 2022 as well.

The CISAC report also summarises some of the initiatives set up by collecting societies around the world to support their members during the COVID crisis, while also using the pandemic and its negative impact to put the spotlight back on various copyright reforms that the music industry would like, not least safe harbour reform.

The latter is underway in Europe as a result of last year’s European Copyright Directive, of course, though quite how those reforms get implemented remains to be seen. And the music industry would like to see similar changes to the copyright safe harbour elsewhere in the world too.

In his introduction to the report, CISAC President Björn Ulvaeus writes: “We were the first industry to be impacted and we will be the last to return to health. Creators are innovative, entrepreneurial, and resilient, but to build a long path out of this crisis, we have to turn to governments”.

“This is not just for emergency funds, however welcome those have been”, he goes on. “Policymakers also need to tackle the problems in front of them: the deep flaws that have skewed the playing field for creators for many years. COVID-19 did not create this skewed level playing field. But it has sure aggravated and exacerbated it. This is the time for governments to show they take creative industries seriously. It is time for policymakers to wake up and act”.

Meanwhile, CISAC Director General Gadi Oron writes in his foreword: “Looking ahead, this report reflects extraordinary resilience across our sector, but not yet recovery. Things will get worse for creators before they get better, with loss of collections in 2020 translating into reduced distributions in 2021. In this crisis, CISAC’s member societies have acted to defend their creators with all means available. While the current crisis is exposing the deep fragility of the collective management system, it is at the same time showing the vital importance of its work for creators”.

And finally, the chair of CISAC’s board, Marcelo Castello Branco, also CEO of Brazilian society UBC, says: “This year, we have all been caught in a perfect storm. The coronavirus pandemic has thrown into reverse our global growth, and its effects will be felt throughout 2021 and 2022. This troublesome period is clearly not over – but it is fair to say we are all building bridges to whatever comes next while staying positive and alert to future opportunities and challenges. We must now battle to stay in the game and be ready to support, represent and pay our right holders what they deserve and expect from all of us”.