This is a guest post by Phil Bird, head of sales, rights and royalties, (media) at Vistex. He looks ahead to what may happen in with regards to rights and income for rights holders in 2023. Phil wonders when music streaming business maturity could happen, and argues that it’s already arrived for rightsholders – plus, he sees the return of big catalogue purchases, albeit for more moderate sums.
It was announced on 3rd January 2023 that De La Soul will finally appear on streaming services this year. You’ll forgive my raised eyebrows as I thought they were already on most services. After all, most successful chart acts have now fully embraced the streaming model. If it’s good enough for The Beatles, then surely it’s good enough for everyone. However, in the case of De La Soul it wasn’t due to a lack of trust in the streaming model that kept them away – rather it was the thorny area of copyright issues: in their case, ensuring that all the samples cleared for the original physical release were also cleared for digital.
A recent change of catalogue ownership to Reservoir helped to break that deadlock, which is good news for fans of this seminal hip hop group, who will soon be able to stream The Magic Number to their hearts content, but it does raise an interesting point.
Still seeking permission
We now live in a world where we assume scarcity in music recordings has been eradicated – and so with it, the streaming platforms have finally achieved some form of ‘maturity’. It’s a given that they will be here during 2023, and so to talk about them is perceived as yesterday’s news when discussing the future developments of the music industry.
However, whilst the use of AI is moving incredibly fast within music, ventures which ultimately depend on licensing still move slowly. This is down to the fact that the streaming business model is ultimately based on seeking permissions, whether that be for the actual recordings, or new territories or new rights – no different to De La Soul.
Come what may, companies like Spotify must continually ask permission.
When will streaming hit maturity?
It has been seven years since the Beatles granted permission to Spotify to stream their music, a full nine years after Spotify launched. Sixteen years later, you would be excused for assuming a successful tech company like Spotify has now finally hit maturity – i.e., be profitable.
However, mainly due to licensing constraints, it is far from this. Even recent diversification into podcasts and audiobooks – which has so far cost the company $1 billion, and only pulled in $215million as of 2021 – is yet to make a meaningful impact.
Furthermore, the macro environment of 2023 is already proving challenging for tech companies loaded with debt – and whilst Spotify won’t go bust, they still won’t be profitable in 2023. In other words, they seem to be in perennial start up mode.
Compare this with copyright holders. We know the three big beasts – Universal, Sony and Warner have enjoyed huge profits – primarily due to streaming. But it has also created a favourable environment for investor-led companies, like Hipgnosis, Primary Wave, Round Hill and Reservoir.
These companies are betting on a profitable future for their investors due to the perceived stable and regularity of streaming revenue. If the last few years of catalogue dealmaking were the ‘early stage’ then we are certainly entering a ‘mature stage’ where all royalty bearing income streams are now up for grabs.
Financialisation and more nuanced purchases
Note the more modest deal that Steve Lillywhite – producer of artists like U2 – struck with Round Hill Music of less than €20m for his producer points. Expect more of these types of deals in 2023. But it is not just the deals themselves that are creating returns for investors.
There is now a financial ecosystem of service and tech companies to help maximise royalties revenue, through monitoring, auditing, reporting, etc. A key outcome of streaming has been the ever-increasing move to financialisation of the music industry.
2023 will no doubt see continued catalogue purchases albeit at a more measured price but possible greater frequency – provided of course those economic headwinds do not bury the golden goose of streaming.
So, whilst streaming music maturity is here for copyright holders in 2023 it is still a distant dream for the actual streaming services like Spotify. A game-changer may be Spotify’s move into AI. If it can harness AI music for free on its platform, then it could improve its margins. Copyright holders should not view this as dilution but rather maturation.
It is surely in everyone’s interests for both content and distribution to grow up together – so that we can all hit The Magic Number of profitability.
