Debate surrounding the value of streaming services has recently generated press, particularly after songwriters like Thom Yorke and David Byrne bared their teeth at Spotify.
Ben McEwen, head of online at PRS for Music, gives his perspective on a constantly evolving digital landscape…
How does PRS for Music decide on which new services to license?
We look to have the right licensing solutions to cover the broadest range of services out there. Inevitably, with the sheer scale of the online market, we focus our resources on where the value is but we also try to offer the right solutions for the smallest services. At the lower end of the market, our Limited Online Music licence (LOML) helps small start ups ‘self serve’ entirely online. Our focus is very much on these new services coming to market and trying to ensure they understand and take account of music rights from the outset.
We try to avoid wasting too much time with illegitimate services that have no business model or intention to be licensed. We have an anti-piracy unit that is tasked with tackling them. We very much see our role as facilitating those services that are setting themselves up to operate legally.
How does the licensing process work?
We begin with initial contact either through a service approaching us or through outbound contact as a result of our monitoring activity. We research them and ensure we understand what they offer. It can be very straightforward if a service fits within one of our many standard licences which have clear established rates. Other times it’s more challenging because a service is trying to offer something genuinely different. Then we need a more bespoke solution.
How long does the licensing process take?
It can be a matter of minutes or months depending on each service. Inevitably newer services often think more about their technology and distribution model than the business model. We often have to remind services: ‘Music has a cost in terms of the creators who wrote it – you need a model that is sustainable for them as well as one which is sustainable for you.’
How has the digital landscape changed in the past 18 months?
Everybody is talking about the growth of streaming as opposed to downloads. Downloads continue to make up the lion’s share of our digital income, although this is changing quickly.
People are now primarily thinking about accessing streaming services via mobile and tablet rather than this being premium or added functionality. You might only ever encounter a service on these devices, so there’s a shift in how services are structuring themselves.
Looking at licensing dynamics, we’ve seen increased fragmentation over the last 18 months with more rights available across multiple territories from more parties. So we focus on building initiatives like IMPEL – a growing number of independent publishers with their rights assigned to PRS for Music on a multi- territory basis. Also on big initiatives such as our efforts with partners to develop multi-territorial licensing Hubs to make it easier for music users by limiting the places users have to go to get rights.
Will royalties from online music offset the decline in physical?
There are many voices of doom and gloom, which is understandable when you look at what’s happened to the physical market. Online is seeing growth but not growth which is sufficient (as yet) to offset that decline.
However, we need to remember that online music is continuing to evolve. While the download market is maturing, the average person hasn’t necessarily tried a music subscription service and we often forget that. The more we move towards mass market streaming, the greater the opportunity for a broad range of new models to offset the physical decline.
I also don’t agree with predictions pronouncing the death of physical product. It won’t happen. It will survive but at a lower level than before. The resurgence of vinyl and the efforts to offer products which combine physical and digital are key to building the future in that market.
Navigating this transition is a big challenge for us as well as publishers and songwriters. Even if online does deliver value, it won’t be in the same way the industry is used to. This is the problem. The industry was built around sales spikes surrounding record releases. If you move to a model where you’re seeing revenue over a longer life span of the song, this value is different and potentially the ‘winners and losers’ are different too.
Should safe harbour legislation be reviewed?
I certainly think this legislation, originally put in to protect Internet Service Providers, is now increasingly being used as a smokescreen for unlicensed activity. We get services set up as music services which brand themselves as such to the consumer. But because of how they source their music, they look to safe harbour as a way of avoiding liability to pay creators for their music. In my view it is profoundly damaging to the development of a legitimate online music market and urgently needs to be reviewed.
What is the key message you want to send to PRS for Music members about online licensing?
To a certain extent, the concern about revenue from these new models is justified but it’s a shame Spotify has been singled out. They are a service which engaged with the industry at an early stage and was licensed prior to launch. So they obviously care about being legitimate. You can’t say the same thing about some of their competitors.
The concerns around the level of remuneration are genuine. But we need to recognise that it’s a constantly evolving picture. As these services develop and reach genuine scale, the scale of payments from them will change. You need to remember there’s always a time lag (though we work hard to minimise it!) and writer payments now coming from these services are likely to be from activity perhaps six or 12 months ago. In online, this can represent a long period of time.
It is about the industry adapting to revenues coming in a different way. It’s not something we should fear. It’s also easy to forget what these streaming services are doing to illegal activity. We’re getting value from downloads and premium subscription streaming packages and converting those who would before have sourced illegal content. If you can build revenues here, then as an industry, we’re in a far better place. There’s real reason for optimism.
Ben McEwen, head of online at PRS for Music, gives his perspective on a constantly evolving digital landscape…
How does PRS for Music decide on which new services to license?
We look to have the right licensing solutions to cover the broadest range of services out there. Inevitably, with the sheer scale of the online market, we focus our resources on where the value is but we also try to offer the right solutions for the smallest services. At the lower end of the market, our Limited Online Music licence (LOML) helps small start ups ‘self serve’ entirely online. Our focus is very much on these new services coming to market and trying to ensure they understand and take account of music rights from the outset.
We try to avoid wasting too much time with illegitimate services that have no business model or intention to be licensed. We have an anti-piracy unit that is tasked with tackling them. We very much see our role as facilitating those services that are setting themselves up to operate legally.
How does the licensing process work?
We begin with initial contact either through a service approaching us or through outbound contact as a result of our monitoring activity. We research them and ensure we understand what they offer. It can be very straightforward if a service fits within one of our many standard licences which have clear established rates. Other times it’s more challenging because a service is trying to offer something genuinely different. Then we need a more bespoke solution.
How long does the licensing process take?
It can be a matter of minutes or months depending on each service. Inevitably newer services often think more about their technology and distribution model than the business model. We often have to remind services: ‘Music has a cost in terms of the creators who wrote it – you need a model that is sustainable for them as well as one which is sustainable for you.’
How has the digital landscape changed in the past 18 months?
Everybody is talking about the growth of streaming as opposed to downloads. Downloads continue to make up the lion’s share of our digital income, although this is changing quickly.
People are now primarily thinking about accessing streaming services via mobile and tablet rather than this being premium or added functionality. You might only ever encounter a service on these devices, so there’s a shift in how services are structuring themselves.
Looking at licensing dynamics, we’ve seen increased fragmentation over the last 18 months with more rights available across multiple territories from more parties. So we focus on building initiatives like IMPEL – a growing number of independent publishers with their rights assigned to PRS for Music on a multi- territory basis. Also on big initiatives such as our efforts with partners to develop multi-territorial licensing Hubs to make it easier for music users by limiting the places users have to go to get rights.
Will royalties from online music offset the decline in physical?
There are many voices of doom and gloom, which is understandable when you look at what’s happened to the physical market. Online is seeing growth but not growth which is sufficient (as yet) to offset that decline.
However, we need to remember that online music is continuing to evolve. While the download market is maturing, the average person hasn’t necessarily tried a music subscription service and we often forget that. The more we move towards mass market streaming, the greater the opportunity for a broad range of new models to offset the physical decline.
I also don’t agree with predictions pronouncing the death of physical product. It won’t happen. It will survive but at a lower level than before. The resurgence of vinyl and the efforts to offer products which combine physical and digital are key to building the future in that market.
Navigating this transition is a big challenge for us as well as publishers and songwriters. Even if online does deliver value, it won’t be in the same way the industry is used to. This is the problem. The industry was built around sales spikes surrounding record releases. If you move to a model where you’re seeing revenue over a longer life span of the song, this value is different and potentially the ‘winners and losers’ are different too.
Should safe harbour legislation be reviewed?
I certainly think this legislation, originally put in to protect Internet Service Providers, is now increasingly being used as a smokescreen for unlicensed activity. We get services set up as music services which brand themselves as such to the consumer. But because of how they source their music, they look to safe harbour as a way of avoiding liability to pay creators for their music. In my view it is profoundly damaging to the development of a legitimate online music market and urgently needs to be reviewed.
What is the key message you want to send to PRS for Music members about online licensing?
To a certain extent, the concern about revenue from these new models is justified but it’s a shame Spotify has been singled out. They are a service which engaged with the industry at an early stage and was licensed prior to launch. So they obviously care about being legitimate. You can’t say the same thing about some of their competitors.
The concerns around the level of remuneration are genuine. But we need to recognise that it’s a constantly evolving picture. As these services develop and reach genuine scale, the scale of payments from them will change. You need to remember there’s always a time lag (though we work hard to minimise it!) and writer payments now coming from these services are likely to be from activity perhaps six or 12 months ago. In online, this can represent a long period of time.
It is about the industry adapting to revenues coming in a different way. It’s not something we should fear. It’s also easy to forget what these streaming services are doing to illegal activity. We’re getting value from downloads and premium subscription streaming packages and converting those who would before have sourced illegal content. If you can build revenues here, then as an industry, we’re in a far better place. There’s real reason for optimism.
