The “Pheline committee” has been missioned by ex French Culture Minister Aurélie Filippetti to look into the sharing of the French music industry generated value among its stakeholders.

Lots of numbers, figures have been thrown around. Contracts have been revealed, lots of questions asked, proposition have been put forward, all points of view have been exposed and fought for pending on the side your on.

Major or independent record companies, publishers, artists, managers, collecting societies, trade bodies, distribution platforms, pure players or major internet company’s fully integrated subsidiaries have been invited to participate.

Percentages, before or after deduction, new releases or catalogue items, marketing and promotion ratios, net or gross sales, pricing issues, guaranteed minimum income for major label, market size, local versus international productions and their respective market share, A&R investments, no stone has been, apparently, left unturned excluding however tax incentives, grants and sales agreement which are key component of the creation of value.

The mission was not in any position to conduct independent searches and had to rely on the different industry representatives to disclose figures and facts.

The figures published in the report have been commented and criticized by most stakeholders.

As a consequence it is difficult to forge one’s opinion based on reliable hard facts and figures but it is most certainly worth trying to look at future trends especially when cross examining those figures with those of research company’s disclosed prospective market figures and trends.

To be really accurate the different external value chains evolution would also have to be taken into consideration for a global understanding. As in the case of major internet companies, built on what was called a “Time” model or to make it short a “content+network+os+devices” model, where the value is created down hill of the content industry or pure players who have to raise cash on the financial markets to secure their development and are hence under heavy return on investment pressure. Both models taking a fair share of the value created away from the creative community.

From an artist’s point of view it is interesting to look at the evolution of artist revenues while industry business models are changing.

In the case of an artist contract it is fair to assume that, all business models taken into consideration, the artist’s share remains in a 7 to 9% bracket of retail price ex vat, if considering, as far as physical distribution is concerned, a full price album, at specialized retail level and without taking any deduction into consideration.If we take la licencing deal into consideration the royalty rate will be between 15 and 17% of retail price ex vat.

The different business models, the different underlying contracts and the relation between platforms and labels, as major and independent label are not competing on the same level will most certainly be issues to be adressed over the coming weeks.

But still from an artist point of view the most interesting case to start with is probably the ad-suported streaming business model.

Let’s now take three figures into consideration that have not been questioned.

As stated in a previous post, according to Generator Research the music industry’s growth will be driven, during the 2013 – 2017 period, by streaming services with a projected 17,7% growth in value while physical sales as well as downloads are expected to decrease by respectively 12% and 3,9% in value.

On the other hand French market figures as disclosed by French IFPI member Snep shows that the growth in music streaming services is mainly due to the growth in ad-supported streaming services attracting in excess of 70% of service users with little if no translation factor from ad-supported to subscription based streaming services.Only 7% of streaming services users are subscription based users while the remaining 23% use both offers.

Last figure that has not been questioned as published by the “Pheline committee”: the turnover ex vat generated by ad-supported streaming services per listening is, on average, 0,003 € leaving, for the artist with a 10% deal, at best, a turnover of 0,0003€ per listening…….

In other words if the artist expects a 1 200 € ex vat turnover per month, generated by ad-supported streaming only,, or $ 1 600/ £ 1 000/ AUD 1 800, it would take a given track to be listened to 4 million times per month!!!!

Everything indicates that it’s about time for the creative community, the labels, the publishers and the platforms to sit together around a table to find a solution to the weak ad-supported to subscription based services translation ratio. If it is confirmed that streaming will be the leading way to access music in the short term future.

And, if we want to have individual rights, which is the existing legal situation, to keep on prevailing on a collective rights management threat hanging over our heads if we don’t find an agreement that is satisfactory to everybody involved.

At least in France…….

Thank you in advance for sharing information about the situation of ad-supported streaming services in your country.

Source: rapports/Musique-en-ligne-et-partage-de-la-valeur