This Week In Royalties: March 27 - 31

U.S. recorded music gains, Ole's recapitalization, and a screed on the "safe harbor" provision lead this week's music royalty headlines and analysis.
March 31, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

RIAA Report: U.S. Music Industry Reports Double Digit Gains In Nearly Two Decades (Music Row)
Benom’s Take: The overall revenue is still half of what it was in 1999, but the 114% growth in paid subscription revenue is hopeful for us all. This report is just more hard data showing a pattern of streaming growth while physical/digital sales continue to decline.

“”Majorly Indie” Canadian Music Publisher Ole Seeks $650 Million Recapitalization Bid” (Billboard)
Benom’s Take:  Ole is a powerhouse independent music publisher. It appears this deal is not for the sale of the company, but for an equity bid in Ole. With its home office based in Toronto, the company has not only been a creative force in the industry, it is also a major competitor in the world of music asset investments. Ole has specialized in acquiring film, TV and production music along with a very successful catalog of pop, rock, hip-hop and country hits.

This article gives some incredible detail: Ole has an NPS (net publisher share) of approximately $57 million and company EBITA earnings of approximately $35 million. The article also states they are predicting a purchase valuation of 11.5x to 14x the NPS. The company is backed by the Ontario Teachers’ Pension Fund at approximately $500 million, and determining whether such an 11x to 14x valuation is warranted or not, depends on your point of view and how we play with the math.

It is true that “...production music usually trades at lower multiples than songs…” and the Ole NPS is about 75% production music assets. I believe the final multiple for Ole  just depends on the leverage of the negotiators and again, how they play with the math. Whatever the result, Ole is certainly a valuable brand and big player in the music industry - and this recapitalization story is proof of such.

Watch What Happens When Spotify Gives Unknown Music Acts A Big Push (Recode)
Benom’s Take:  It’s true that when artists are featured on Spotify playlists (Weekly Discovery, New Music Friday, etc.) exposure, streaming and royalty numbers get a significant boost. For those working to get their music on a Spotify featured playlist, it really comes down to industry networks. “Who’s in charge of the Spotify playlists for Pop, EDM, Country, Weekly Discovery, New Music Friday, etc.?” Chances of getting on a playlist are better if you know someone (or know someone who knows someone). That’s where Kobalt Music’s “streaming label” AWAL comes in to help the unknown indie artist become known. Of course, music curation is the job of these Spotify “tastemakers.” They live for finding hidden musical gems and sharing for millions to enjoy. On-demand curation services are definitely the new discovery tool.

Supreme Court Won’t Hear Appeal in Capitol Records v. Vimeo Copyright Dispute (Billboard)
Benom’s Take: (Warning, biased comments ahead):

The pre-72 sound recording issue was addressed last week and I’m not surprised SCOTUS rejected this case because there’s no federal copyright for pre-72 sound recordings. But I would like to comment on the Safe Harbor issue.

Under current law, what’s really happening is the copyright owners are playing a big ol’ game of “whack-a-mole” in the dark. The “safe harbor” provision mentioned in the article is in reference to the 1998 Digital Millennium Copyright Act (DMCA). A provision in this law essentially allowed Internet Service Providers (ISP’s) to be shielded from liability (receive “safe harbor”) from any copyright infringement activity, uploads, etc occurring on their services. Which means copyright owners are responsible for policing their own content and sending “take down notices” to ISPs.

The is a terrible burden on time and resources for copyright owners. And while YouTube, SoundCloud and other sites have automated systems that track unauthorized uses and take them down immediately without notice, this can be counterproductive at times.

For instance in my music publishing job, I posted a song our publishing company owned, but received a notice that we had infringed on the record company’s sound recording copyright. “But they recorded OUR SONG!” I thought. Bottom line… this issue must be addressed in copyright reform policy decisions and I’m sure it will, for better or worse.  

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