Digital Royalties Still Aren’t Enough to Cover PRS Expenses…

Last Thursday, PRS reported their financial results for 2012, and the good news is that it showed revenues were up by 1.7% on the previous year.  The British songwriters’ collection society also trumpeted the 32.2% increase in royalties from online and digital services.  “Royalties from online services now provide a larger income stream for music creators than radio, live or the pub sector,” the group stated.

There are, as always, numerous ways of spinning stats (note the “or” in the previous sentence is not an “and”), so DMN is digging deeper into the numbers to see what they really tell us.  Sure, the increase from digital looks massive, percentage-wise, but it’s still only £51.7m ($79m) – that’s 8% out of the total £641.8m ($979m) PRS collected for its 95,000 members.

It’s also less than the cost of running PRS (which at £73m ($111m) was down 4.6% on 2011).  Considering digital includes all download sales — though the report doesn’t specify how big a slice of digital revenue it accounts for — the future isn’t looking all that rosy.

Matter of fact, songwriters make three times as much from broadcasting royalties when including television, which pulled in more than twice what digital services did, at £106m ($162m). Altogether, broadcast royalties rose by 3.1% in 2012 to £153m ($233m).

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It’s worth noting that international income, which is by far the largest chunk of British songwriter royalties at £180.1m, includes all sources of income, such as public performance and sales.  Britain is one of only four countries in the world whose net income from music export exceeds its music import – the others being the US, Sweden and South Korea.

In reality, international represents an even greater share of British songwriter income.  This is because international monies are 100% for PRS members, while broadcast collections include royalties for members of foreign collection societies.

Yet international income saw a drop of 4.1% on the previous year, due to significant exchange rate losses and the economic climate in many countries.  The reason the drop wasn’t steeper was, according to the PRS, the global chart success of artists such as Mumford & Sons, Adele, Ed Sheeran and Calvin Harris “and other prominent writers seeing their music accompany television and film content worldwide”.

Omitted from the report, however, is income from synchronisation deals such as when music is used in commercials or television and film that is not covered solely by blanket licenses. These deals are on a case by case basis, and made directly between the companies using the music and the songwriters/publishers providing it.

hand-left February 19th, 2013: “Music Supervisor ‘Shocked’ That TV Studios Still Pay Labels to Use Music

The report shows how important the European market’s respect for copyright is to British songwriters, as it represents much more than half of all international revenue at £109.7m. The revenue collected in the other continents corresponds to their lack of copyright enforcement (though the success of British songwriters, or lack thereof, in those territories of course also plays a part): the Americas at £41.7m, Asia/Australasia at £20.3 and Africa/Middle East, which only brought in a paltry £2.2m.

Royalties collected from live music performances fell by 14.2% to £19.3m, as fewer live events occurred in 2012, blamed, by some, on the Olympics. The Games and associated events did however help grow the category “other” in the public performance and live section (worth £154m) of the report to £37m. The “other” category, which pulled in almost twice what live performances did, also includes royalties from licensing in education, transport and health and beauty and holiday centres.

What is perhaps most worrying is that the songwriters’ digital share of income is lagging far behind that of recording artists and record labels.

Last year the British labels’ trade body the BPI reported that digital for the first time had overtaken physical as the biggest source of recorded music revenue, and that it represented 55.5% of UK trade revenues in the first quarter.  For songwriters revenue from physical (including DVDs) remains almost twice that of digital revenue.  Thanks to a 5.3% increase in revenue from CDs, physical sales brought in £102.3m, of which £80m came from CDs.

Though record labels don’t have to take on the cost of making the CDs and returns of unsold records (or, as they used to do back in the day, give the records away to stores that were selected to report to the charts, or even buy them themselves, in order to get them into the top ten), they’ve managed to grab an even larger part of the pot in the digital space. They get nearly seven times what songwriters/publishers get for a download and over twelve times more for a Pandora stream (note that in the UK radio royalties are split 50/50 between the composers and the performers).

 

US label executives have blamed the decline in record sales during the first quarter of 2013 on a lack of hits.  They clearly understand how vital the value of strong songs is – so how come, when it comes to the digital space, they’re squeezing out those who are responsible for creating them?

11 Responses

  1. rikki

    Lets be honest as a dj i have never seen so much utter crap music being made today.

    So artist have no one to blame but themselves for not getting paid…most music are 6 week wonders play them for 6 weeks then toss em, nobody wants to hear them again. Not ever.

    Reply
  2. Grant Goddard

    This is the age-old comparing apples with pears ploy. Revenues from ‘radio’ do not include retail sales. Revenues from ‘live’ do not include retail sales. Revenues from ‘the pub sector’ do not include retail sales. And yet revenues from ‘online services’ do include retail sales (downloads). My guess is that, if you were to include in ‘radio’ a figure for physical retail sales driven by radio, if you were to include in ‘live’ a figure for physical retail sales driven by concerts, or if you were to include in ‘the pub sector’ a figure for physical retail sales driven by music exposure in pubs, each of these would still be greater than total digital revenues. The online figures need to be broken down into streaming and retail royalties so that we can see the extent of the substitution from physical product to virtual product sales. I would also be interested to see the extent to which royalties from online (non-BBC) music streaming are substituting for declining revenues from terrestrial commercial radio. Then we can compare apples with apples, and pears with pears. Transparency – how many times do we read that word in PRS missives?

    Reply
  3. why

    Why does it cost over $100 Million dollars per year to run PRS?

    Their entire budget goes to pay people and rent, right – they don’t have any cost of goods sold.

    So by my math, if you pay an average salary of say $60,000, then gross that up for taxes, benefits, rent per staff, etc to say $80,000, PRS must employ 1,387 people (111MM/90k).

    1,387 staff means 1 staff for every 69 members.

    Let’s assume for a moment that every member is an Artist, songwriter, or other Rights Holder that is due some royalties. This means that each staff at PRS could spend 5.3 days a year dedicated to collecting on behalf of each member – basically one busines week working exclusively for each member on collecting and paying out what that member is owed.

    Do members feel like they are getting an entire work-week from one staffer dedicated to helping them get what they are owed? I’m not asking rhetorically. I’m truly curious.

    Obviously the same math and questions could be applied to BMI, ASCAP, SESAC, GEMBA, SOCAN, etc.

    Reply
    • visitor

      The heads of the PROs easily make tens of millions per year for themselves. Add in the private jets, fancy cars, etc. etc. and you are talking about a good $50-60 million per year just for the lets say, top 10 executives of a typical PRO.

      Reply
      • Insider

        That’s a ludicrous statement. I don’t know of a single PEO executive making “tens of millions” of dollars or who flies on a private jet. Names, please.

        Reply
  4. Alex

    This is why I like using Torch Music because it doesn’t make me feel bad. It uses youtube videos so we know it isn’t stealing it from anywhere. I can still create playlists and share them with my friends! I totally recommend it music.torchbrowser.com

    Reply
  5. Dive Gloves

    Very good written post. It will be valuable to anyone who usess it, as well as me. Keep doing what you are doing – can’r wait to read more posts.
    #$#

    Reply

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