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    Music 2.0 Business model white paper  dec 2010 Music 2.0 Business model white paper dec 2010 Document Transcript

    • By Chris de PalmerDec 2010Palm Rock SongsMusic Production & Publishinghttp://palmrocksongs.wordpress.com/publications/This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported Attribution NoDerivsLicense. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc- -nd/3.0/ or send aletter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA
    • Table of Contents1 Introduction ................................................................................................................................ 12 Market trends ............................................................................................................................. 2 2.1 Digital music is gaining momentum..................................................................................... 2 2.2 Digital music beyond 2010................................................................................................... 3 2.3 Promising audio streaming services ..................................................................................... 33 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 ...................................................................................................... 164 Conclusions ............................................................................................................................... 175 References & Credits ............................................................................................................... 186 About the author ...................................................................................................................... 197 Definitions ................................................................................................................................. 20
    • Figures and TablesFigure 1: Music Market Revenues Evolution in France ........................................................... 2Figure 2: Growth of Streaming Services in French Market ..................................................... 2Figure 3: Artist/Producer Revenues Typical Split.................................................................... 4Figure 4: Publishing Rights Typical Split for Downloads ....................................................... 5Figure 5: Publishing Rights Typical Split for Streaming ......................................................... 5Figure 6: Revenues split between Digital Music industry players ........................................... 6Figure 7: Digital Music – Overall Revenues Split ................................................................... 8Figure 8: Digital Music – Artists Revenues ............................................................................. 9Figure 9: Downloads & Streams needed for 1 000 euros revenues........................................ 10Figure 10: Audio streaming statistics per true fan per Artist ................................................. 11Figure 11: Evolution of streaming consumption per true fan per artist.................................. 11Figure 12: Top artists audience statistics in November 2010 (last.fm) .................................. 12Figure 13: Top 1 artist audience 5 years statistics (last.fm) ................................................... 12Figure 14: Number of true fans needed for a 1 000 euros revenues ....................................... 13Figure 15: Revenues evolution with LP downloads per true fan ........................................... 14Figure 16: Revenues over 3 years from LP streams per true fan ........................................... 15Figure 17: Downloads vs streaming with 10 000 true fans .................................................... 15
    • 1 INTRODUCTIONMusic 2.0 is about digital music and this study is about the impact of music 2.0 on the revenues ofthe music industry players.A new generation of digital services, which are a audio streaming services, is available today to offerfans an alternative way for enjoying musicWhat are the revenues expectations of the different actors of the value chain as artists, labels anddigital distributors? How can they all expect make money from downloads & audio streamingservices?The objective of this paper is not to study the return on investments (ROI) for labels or heindependent artist. In other words, neither the costs required for production & promotion, n the norprofits 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, allother potential revenues obtained from ring tones, web radios, video streaming services, liveperformances, merchandizing, radio/TV broadcasts, film synchronization, songbooks, … areexcluded. Only revenues from download & audio streaming services are considered. cluded.In the first part of this paper, you’ll see how digital music is gaining momentum compared totraditional physical music. Then, based on pricing levels of downloads & streaming services andon contractual rights defined between players, a business case study will be done. Its goal will beto define the number of downloads or streams needed and the number of true fans required toexpect different levels of revenues for each player and how these revenues will evolve with agrowing fan base.Last but not least, this paper is mostly based on the current rules applicable for the music industryin France. 1
    • 2 MARKET TRENDS2.1 Digital music is gaining momentumWhile physical music revenues based on audio CDs are decreasing for a while, digital musicrevenues are increasing.The USA are the first market of the world for revenues from digital music services. Digital music servicesrepresents 40% of the whole local music market. In South Korea & China, the revenues generatedfrom 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 sicalrevenues decreased by 46 % in 6 years between 2004 & 2009. On the contrary, digital musicrevenues 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 and2009. 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
    • A recent survey performed in France revealed that over 10 million internet users listened musicusing streaming services during 3rd quarter of 2010. Those services are among the 10 firstservices used on the internet (source: Le Point – Nov 2010).2.2 Digital music beyond 2010 beyonIEMR 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 millionin 2014 and the digital music retail revenues will increase by 269% from $1.3 billion in 2009 to $4.8billion in 2014 ($723 million in France) (source: Business wire – Oct 2010).2.3 Promising audio streaming servicesAnd which music 2.0 service will have the highest growth & market share? The answer is likely tobe audio streaming services.Apple, who was so far rejecting this service and favouring music download services with iTunes, isabout to revise its initial strategy by offering audio streaming services (source: Electron Libre – Oct2010).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 becomemore popular than downloading services. Also, flat fees models emphasized in his study areconsidered 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 forthe discovery of new talents.The flat fees model of audio streaming services, generally based on 9.99 euros a month forunlimited 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 nmobile & fixed networks. Listening to a song in premium quality uses a 324 kbps bandwidth: Sucha 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 revenuesgenerated by audio streaming services in particular, hence this paper. th . 3
    • 3 BUSINESS CASE3.1 Music 2.0 business model – Initial parametersBefore assessing the final revenues of each players, it is important to understand the musicindustry, 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 distributors3.1.1 Contractual agreements between music industry playersThe 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 distributorsArtist contractIn the artist contract, the producer typically allocates an average of 8% of his revenues to the artist.This % depends on the nature of the artist, beginner or mature, and can be modulated by potentialsales volumes.For this study, the artist gets 8% of the revenues from the producer for each song or albumdownloaded or streamed (figure 3).3) Revenue typical split between Producers & Artists Artist 8% Producer / Label 92% Figure 3: Artist/Producer Revenues Typical Split 4
    • Publishing contractIn 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 of50% 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 & songwritersare not contractual and are defined by the copyright management company: the split is 1/3 for thepublisher, 1/3 for the author and 1/3 for the music composer, according to the DEP (“Droits composer “Droitsd’Execution Publiques” or “broadcasting rights”) defined by SACEM. ubliques”So publishers will typically get 50% rights for downloads and 33,33% for streaming whilesongwriters 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
    • Distribution contractThe 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 digitalmusic distributors like iTunes, the situation is different for independent producers or DIY (“Do it ntYourself”) artists cumulating the roles of producers, publishers, songwriters & performers the rtists 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 mongthe 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 theindependent producers or DIY (“Do it Yourself”) artists (source: Zimbalam). ntThe 8% allocated for the copyright management company are then distributed between thePublisher and the songwriter according to the conditions defined in the publishing contractdescribed above.We can therefore figure out the revenues split between all players for the music 2.0 businessmodel, either based on downloads or audio streaming services. The following graph summarizesthe 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
    • 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 & producers3.1.2 Applicable VATBefore establishing the final revenues split between all players, the value added tax has to be players,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 Europeansubsidiary, 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 ricingWhen comparing the 2 models, download & streaming, the retail price is different. Whereas anaverage 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 flatfees generally based on 9.99 euros a month for unlimited listening in premium quality on a PC or amobile device like a smartphone.If we want to come-up with a clear split of revenues generated by streaming services, we needed upto figure out the final price of an audio stream. nAccording to the BASCA, a digital streaming service platform like Spotify would “generate anincome of 1p (0.01 GBP) per stream out of which all royalties to rights owners need to be paid”;BASCA adds that “historical models would suggest that 75% of this will go to the recordcompanies, 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 ow -24subscribers, representing 25% of their paid subscribers, listen to the equivalent of 800 songs a ofmonth (source: Electron libre – Nov 2010).What those statistics do not indicate is how many different artists those “true fans” ar listening to reand 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 forrecord companies: the difference between the “virtual” pricing and the 0.009 euros representsaround 30% (28%) which is in line with the digital distributors share for download services. 7
    • The contractual agreements between music industry players being already known and explained playersabove, we will consider this 0.0125 euros pricing level to be appropriate to build-up the business upmodel.This would mean an average music consumption of something around 26 songs a day persubscriber. 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 rtantovertaken.3.3 Digital Music RevenuesWe could assess the revenues for the download of a single song and for the stream of a singlesong 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 SplitThe 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 companyservices 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 bythe same song (figure 8).Note that less streams are needed for a songwriter compared to the performing artist as thepublishing rights are higher for the songwriter with streaming services (see chapter 3.1.1). 3.1.1) 8
    • 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 Revenues3.4 Number of downloads or streams required for 1 000 euros ownloads revenuesDownloads:So how many downloads are required to generate 1 000 euros revenues for each of the industryplayer?Based on the pricing parameters described in the previous chapter, we obtained the followingresults (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 songwriterStreams:And how many streams are required to generate 1 000 euros revenues for each of the industryplayer?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 songwriterTo assess the number of required LPs to reach the 1 000 euros target, those figures can bedivided by 10, as a LP is generally sold 10 times more than a single song, in the downloadservices world. For instance, 212 downloaded LPs or 17 195 streamed LPs would be needed for a 2label. 9
    • 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 revenuesFair 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 listenseveral 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 asong 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. his3.5 Average streams per true fan per artistAccording to Spotify statistics mentioned in chapter 3.2, their 18-24 years old subscribers, which 24represent 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 tely, artist areto and what is the average of songs streamed per artist.For this reason, we had to establish an average per “true fan” and we came-up with around 40 came upstreams 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. % 10
    • 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 ArtistBut 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 yearis the most intense year with the release of the 1st EP (4 songs), followed by a 2nd EP 6 month songs),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 meaningthat over 480 streams will be done by the ‘true fan” with the content of the EPs or LP during the atwhole year.The 2nd year, we assume that the level of streams will be reduced by 50% leading to 240 streams.The 3rd year will generate 75% less streams with a estimated figure of 120. During this 3rd year, an tthe artist will release new EPs & LPs leading to new streams, mostly done for the new songs andpartly 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
    • If we limit our study on a 3 years timeslot, 840 streams can be generated for any songs part of thefirst 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 27plays in November 2010 (figure 12). For instance, the Beatles attracted 449 329 listeners (true 1fans) generating 5 714 619 plays, hence an average of 51 plays per true fan per month. hence 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 fmweekly 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 isconservative and maintained as a key parameter of our business model study. study. 12
    • 3.6 Number of true fans required for 1 000 euros revenue umber revenuesConsidering an average of 23 monthly streams per subscriber per true fan per artist, how manytrue 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 revenues3.7 Revenues expectations from downloads servicesWhat are the expected revenues from download services for each player based on a fixed true fanbase?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 songwriterIn this model, 10 000 « true fans » are required, each of them downloading the equivalent of a oneLP. Once downloaded, the LP belongs to the true fan and will be listened with no limits without anyadditional cost.If the « true fan base is limited to 10 000, those revenues are ultimate. 13
    • 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 fan3.8 Revenues expectations from streaming services xpectationsConcerning the expected revenues from paid streaming services for each player, our analysis urshows the evolution of the revenues with a true fan base listening to an average of 2. LP of the 2.3same 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 orIn 3 years, the revenues will be • 48 153 euros revenues for a label • 56 585 euros revenues for an independent artist • 8 432 euros revenues for a singer/songwriter • 4 438 euros revenues for a songwriterIn this model, each stream will regularly generate revenues, like revenues obtained with radioplays. 14
    • 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 evenuesBy comparing downloads & streaming services with the same true fan base, we come come-upwith the conclusion that the revenues generated are equivalent after 3 years. Figure 17shows 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
    • 3.9 Digital winds of change sThere are ongoing debates in France and probably elsewhere concerning the digital musicrevenue 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 herequesting for more revenues from digital services; a better split between producers and artists services etterwould challenge the artists contracts and artists could benefit between 10% and 15% royalties ouldrates instead of the average of 8%, figure taken into account in our study.Those SACEM & ADAMI recommendations would naturally benefit to publishers, songwriters & ongwritersartists 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 impactthe distributors. 16
    • 4 CONCLUSIONSThe revenues generated by audio streaming paid services are far from being negligible and are areal 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 rulthe same true fan base to come- with similar revenues, comparing both download & audio -upstreaming digital services.10 000 true fans either consuming an average of 23 streams (or plays) a month based on a an0.0125 euros cost per stream or downloading one 9.99 euro LP, will generate in 3 yearsaround • 48 000 euros revenues for a label • 55 000 euros revenues for an independent artist • 7000 / 8 000 euros revenues for a singer/songwriter • 3000 / 4000 euros revenues for a songwriterThose revenues will be obtained in one shot using a download service or will require 3 years ofregular 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 playersThose new policies, real “digital winds of change”, are likely to modify the balance between winddistributors, producers, publishers, artists & songwriters and are still to be defined and finalised. finalisedWe can also foresee a new trend favouring more regular attraction to artists to sustain the monthly artistsplays, 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
    • 5 REFERENCES & CREDITSSNEP: • http://www.disqueenfrance.com/fr/ (french only) • http://disqueenfrance.siteo.com/file/musiqueetnumeriqueonline.25.10.10.pdf (french only) http://disqueenfrance.siteo.com/file/musiqueetnumeriqueonline.25.10.10.pdfBusiness Wire: • http://www.businesswire.com/news/home/20101005005096/en/Research Markets-Global- http://www.businesswire.com/news/home/20101005005096/en/Research-Markets Digital-Music-Forecast-Online Online).Le Point: • http://www.lepoint.fr/chroniqueurs http://www.lepoint.fr/chroniqueurs-du-point/emmanuel-berretta/decollage-de- -la-musique- en-ligne-a-la-demande-09 09-11-2010-1260353_52.php (french only)Don’t believe the hype: • Dec 2010: http://virginieberger.com/2010/12 http://virginieberger.com/2010/12/mais-pourquoi-donc-quitunes-qui qui-ne-paie- dimpots-en-france-beneficie beneficie-de-subventions-gouvernementales/ (french only)Gerd Leonhard • 2008: “Music 2.0” essay: http://www.mediafuturist.com/free-pdfs.htmlZDNET : • Jul 2005 : http://www.zdnet.fr/blogs/digital http://www.zdnet.fr/blogs/digital-jukebox/musique-en-ligne-un-peu peu-de-justice- fiscale-en-perspective-39600174.htm (french only) 39600174.htm • http://www.zdnet.fr/blogs/digital http://www.zdnet.fr/blogs/digital-jukebox/enquete-sur-la-nebuleuse-des-holdin holdings-de- spotify-39756375.htm (french only)Electron Libre • Nov 2010: http://electronlibre.info/Spotify http://electronlibre.info/Spotify-sur-le-point-de-demontrer,00966 (french only) • Oct 2010: http://electronlibre.info/Pourquoi http://electronlibre.info/Pourquoi-Apple-a-raison-d-avoir,00896 (french only) • Nov 2010: http://electronlibre.info/Gestion nlibre.info/Gestion-collective-du-numerique,00942 (french only)Wikipedia: • http://fr.wikipedia.org/wiki/Deezer (french only)Zimbalam: • http://www.zimbalam.fr/faq.php (french only)BASCA: • April 2010: http://www.basca.org.uk/news/basca http://www.basca.org.uk/news/basca-briefing-april-2010Last FM: • http://www.lastfm.fr/bestof/2009/chart/8 (french only)And also: • http://www.informationisbeautiful.net/2010/how http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ online/ • http://digitalaudioinsider.blogspot.com/2007/08/by http://digitalaudioinsider.blogspot.com/2007/08/by-numbers-using-lastfm-statistics statistics-to.html • http://www.themusicvoid.com/2010/04/the http://www.themusicvoid.com/2010/04/the-economics-of-making-money-as-an an-artist-in- the-digital-world%E2%80%A6/ world%E2%80%A6/ • http://www.blogzimbalam.fr/zimbalam http://www.blogzimbalam.fr/zimbalam-la-sacem-et-le-droit-des-autoproduits/ (french only) autoproduits/U2 photo by Christophe Duronn • http://www.nicofo.com/duronphoto/ 18
    • 6 ABOUT THE AUTHORChris de Palmer is a songwriter and SACEM member and is also acting as a Director of Marketingin a multi-national company.Chris has been involved in pre-sales & marketing international activities for more than 20 years salesand directly contributed to industry awards wins in trade show events and multi-million euro millioncontracts wins with customers worldwide. worldwideHe also contributed to increase CO2 emissions by over 200 tons because of his flights and travels emissionsin 60 countries.You can share your ideas with Chris on this paper onhttp://palmrocksongs.wordpress.com/publications/Chris is also on http://www.facebook.com/ 19
    • 7 DEFINITIONSADAMI collective administration of performers’ rights company in FranceADSL http://en.wikipedia.org/wiki/AdslArtist In this paper, the artist is a singer or a bandAudio streaming http://en.wikipedia.org/wiki/Audio_streamingBASCA British Academy of Songwriters, Composers and AuthorsCO2 http://en.wikipedia.org/wiki/Co2Composer Individual who writes the music of a songDeezer Music Streaming serviceDEP “Droits d’Execution Publiques” or “broadcasting rights” defined by SACEMDigital Music http://en.wikipedia.org/wiki/Digital_musicDIY Do it YourselfDownload http://en.wikipedia.org/wiki/Music_downloadDRM “Droits de Reproduction Mécaniques” or “Mechanical Rights” ReproducEDGE http://en.wikipedia.org/wiki/Enhanced_Data_Rates_for_GSM_EvolutionEP http://en.wikipedia.org/wiki/Extended_play Market intelligence and business strategy research and consulting firmIEMR (http://www.iemarketresearch.com)Independentartist Singer/Songwriter or Band ensuring its/his production & promotionkbps http://en.wikipedia.org/wiki/Data_rate_units#Kilobit_per_second http://en.wikipedia.org/wiki/Music_label and alsoLabel http://en.wikipedia.org/wiki/Independent_Artists_and_LabelsLP http://en.wikipedia.org/wiki/LP_recordLyricist Individual who writes the lyrics of a songPhysical music Legacy formats like CDs or VinylsProducer http://en.wikipedia.org/wiki/Record_producerPublishing http://en.wikipedia.org/wiki/Music_publishingROI http://en.wikipedia.org/wiki/Return_on_InvestmentSACEM Copyright management company in France "Syndicat National de lédition Phonographique" or "Music Publishing NationalSNEP Trade Union" in France iSongwriter Individual who writes both the lyrics and music of a songSpotify Music Streaming service Fan of the artist who performs a purchasing act either with a download or aTrue Fan streamVAT Value Added TaxZimbalam Digital music aggregator 20