At the tail end of 2020, amid end-of-year roundups and everything else that was happening, a global market report from the Independent Music Publishers International Forum (IMPF) got a little drowned out by the noise. Which is a shame as there is a lot to take stock of in its pages. To help (at least slightly) rectify that oversight, we have decided to return to it and pull out its main findings.
The full report can be downloaded for free from the IMPF’s site.
Here are our 10 takeaways from it.
(The focus is obviously on independent music publishers – and is designed to marshal the indies around their collective efforts and strength – but many of the themes and insights equally apply to publishers of all sizes. The report defines independent publishers as companies who hold a global market share of 5% or less.)
1. Indies were seeing remarkable growth pre-Covid, taking a quarter share of €5bn globally in 2019 (and almost two-thirds in Japan)
The numbers the report draws on are from 2018 and 2019, but are unavoidably forced under the shadow of Covid and the economic implications of it in 2020. The report pegs the value of the music publishing market in 2019 at €5bn (up from €4.63bn in 2018), of which the independents took a 27% share. This is a global average, but indies in some markets far exceed this, most notably in Japan where, collectively, they hold 63% of the market.
2. Digital is still a small part of publishers’ income – and that needs to change…
The report exposed the massive disparity between record labels and publishers in terms of the percentage digital makes up of their respective revenues. Labels, of course, found themselves at the sharpest end of changing consumer habits as physical sales – once the bulk of their income – gave way to, first, downloads and, subsequently, streaming. In 2018, digital made up 80% of labels’ global revenues, but for publishers digital accounted for just 19.1%. “Independent music publishers are well aware of this discrepancy and it is something that requires further reflection and action,” says the report. It adds that 80% of record label growth between 2017 and 2018 came from digital (primarily streaming), but publishing growth in that same period came mainly from performance royalties, with mechanicals from on-demand streaming and sales tailing that.
In 2018, digital made up 80% of labels’ global revenues, but for publishers digital accounted for just 19.1%.
3. … but digital is over-indexing in some markets
While that 19.1% is a global average, some markets are seeing digital account for the lion’s share of publishers’ income. In Sweden it is 43% while in Mexico is it just shy (49%) of half of the market. “China and India have also seen huge jumps in digital royalties,” notes the report, but does not break that down into exact percentages. While every market will be different, this shows that publishers can shift digital up to be at the heart of their revenue potential.
4. Consolidation is a clear and present danger for independent publishers
As in the recorded music and live music businesses, a process of accelerated consolidation in the past two decades has meant that the publishing market is controlled by a handful of major players. The report estimates they collectively control 73% of the global market and, breaking that down further, just three companies – Sony/ATV Music Publishing, Universal Music Publishing and Warner/Chappell Music – between them hold 55% of the market. These huge players are slowly scooping up smaller publishers to bulk up their individual market shares – none of which is good for the indies that are left. “Mergers and acquisitions mean fewer companies, which weakens the bargaining position of independent music publishers,” as the report puts it.
“Mergers and acquisitions mean fewer companies, which weakens the bargaining position of independent music publishers.”
5. Europe outperforms at the global level
“There is clear EU dominance in copyright collection, followed by North America, the Asia-Pacific region, Latin America and Africa,” says the report of 2018’s numbers. Indeed, Europe had just over half (52.5%) of the global share, which was just over double the share of the next biggest region (North America with 25.6%). It, in turn, was almost twice the size of the next biggest region (Asia Pacific with 15.1%) which was three times the size of Latin America (5.4%). Africa made up the remainder – just 0.8%. Although it has its own specific issues (see below).
6. Brazil fully embraces its local writers and genres
Brazil might be relatively small within the global context – its royalty collections in 2019 were just €183.15m – but it is almost exclusively focused around domestic writers and local hits. John Telfer, the CEO of Rocking Gorillas and IMPF Board member, says the country behaves very differently to the rest of Latin America and language is key to that – where people there speak Portuguese as opposed to Spanish which is dominant across the rest of South America. Telfer says that a staggering 98% of hits in Brazil are local repertoire, mainly coming from the músicasertanejo genre which developed initially in the Brazilian countryside in the 1920s. “Outside of the major cities this is what people listen to,” says Telfer. “It’s not even really part of the music industry, it’s Sertanejo. International hits would only get into the Top50, not even the Top10. The real interest is in local Brazilian music.”
7. Piracy and flawed collection systems are holding Africa back
There is a guesstimate that indie publishers generated €18.36m in 2018 across the entire African continent. Some regard this as low, but know that accuracy in reporting is an impossibility for now. “The main issues confronting the African market are high rates of piracy, poor enforcement, embezzlement of money, poor administration, lack of medium-size venues (making it difficult to plan tours outside major cities), inexperienced promoters, poor security, and the fact that many music fans can’t afford to buy tickets,” is how the report summarises all the challenges here. John Fishlock, MD and co-owner of Active Music Publishing in South Africa as well as an IMPF Board member, explains the difficulties further. “In most of the African countries, when it comes to performing rights, the majority of the CMOs are government owned; this poses a problem for distribution to international clients,” he says. “And when it comes to mechanical rights, it is often simply not worth the effort as piracy levels are immensely high. So, publishers never focused on trying to collect mechanicals from CMOs outside South Africa. It would have taken way too much effort to collect next to nothing.”
8. China also suffers from a transparency problem
While China has long been held up as the music market with the biggest potential globally, putting precise numbers on it all is proving close to impossible. The value of publishing there in 2019 was estimated at anywhere between €58m and €150m depending on which source you turned to. Most surprisingly, the report claims that publishers themselves only get 19% of this. “Problematic copyright enforcement explains the small contribution of publishing to the total music market (around 6%),” it says. “Poor technological infrastructure is also an issue, with a lack of cross-referencing databases and the use of ineffective identification methods.”
9. Indian publishing numbers were historically hard to pinpoint as they were rarely separated out from recorded income – but the humble ringtone started to change that
The other major market bursting with global potential also presents challenges in terms of getting exact numbers as publishing and recorded music income have historically been rolled up together in India in its music industry reporting. “For a long time, film producers and artists would sign all recording rights over to the music label,” explains the report. “This was because the labels were the only music business entities in operation. Even if someone wanted to look at a separate publisher, there were few options.” It was the boom in ringtones in the early 2000s that saw a new focus on reporting music publishing income separately.
“Being independent affords a company with the ability to nimbly pivot as needed with the goal of exchanging information and ideas to further the industry’s growth in support of its songwriters.”
– Mary Jo Mennella, Music Asset Management
10. Indies are being hit hard by the pandemic, but they have the resilience to make it through
The report, as noted above, does not draw on numbers from 2020 so it is unclear for now just how badly hit economically everyone was by the pandemic. A quote, however, from Mary Jo Mennella, the CEO and founder of Music Asset Management, offers some hope that indie publishers are uniquely placed to face adversity. “Solid businesses are built on relationships,” she says. “Being an independent publisher showcases your entrepreneurial spirit and through those relationships creates a global network with like-minded colleagues and companies forming a powerful bond. Particularly during challenging or uncertain times being independent affords a company with the ability to nimbly pivot as needed with the goal of exchanging information and ideas to further the industry’s growth in support of its songwriters.”