Home Uncategorized The Music Industry’s 6:1 Ratio

The Music Industry’s 6:1 Ratio



One of the many things that the
digital revolution has done to the music
is to create and accentuate a number
of imbalances.
Imbalances that will either change,
become the foundations of the next era of the music business,
or both.


Guest Post by Mark Mulligan on
Music Industry Blog

In fact there are three key areas where, coincidentally, the
lesser party is 6 times smaller than the other:

6 to 1

  • Digital music revenue share: A common
    refrain from songwriters and the bodies that represent them
    (music publishers, collection societies etc.) is that
    everything starts with the song. And of course it does.
    However it is the recorded version of the song that most
    people interact with most of the time, whether that be on the
    radio, on a CD, a download, a stream or a music video. This
    has helped ensure that record labels – usually the owners of
    the recorded work – hold the whip hand in licensing
    negotiations with digital music services. Labels have
    consequently ended up with an average of 68% of total
    on-demand streaming revenue and publishers / collection
    societies just 12%. The labels’ share is 6 times bigger.
    Publishers are now actively trying to rebalance the equation,
    often referred to as ‘seeking out a fair share’. For
    semi-interactive radio services like Pandora where labels do
    not license directly and statutory rates are used instead,
    the ratio is roughly 2:1.
  • Artist income: While music sales
    declined over the last 10 yeas, live boomed. And although
    there are signs the live boom may be slowing, a successful
    artist can now typically expect to earn as little as 9% of
    their total income from recorded music, compared to 57% from
    live. Again, a factor of 6:1. There are many complexities to
    the revenue split, such as the respective deals an artist is
    on, fixed costs etc. but these splits tend to recur.
    Ironically just as everything starts with the song for
    digital music, everything starts with the recorded work (and
    the song) for the live artist. The majority of an artist’s
    fan base will spend most of their time interacting with the
    recorded work of the artist rather than live. The recorded
    work has become the advert for live. In fact the average
    concert ticket of a successful frontline artist costs on
    average 8 times more than buying their entire back catalogue.
    Thus for fans the ratio is even more pronounced at 8:1.
  • Free music users: The freemium
     are dominating the contemporary music
    industry debate. Spotify and other services that have on
    demand free tiers are under intense scrutiny over how these
    tiers may be cannibalising music sales. However YouTube’s
    regular free music user base is about 350 million compared to
    approximately 60 million free freemium service users across
    all freemium services. Again a ratio of 6:1. Whatever the
    impact freemium users may be having, it is 6 times less than

The music industry has never been a meritocracy nor
will it ever be one.
So it would be fatuous to suggest
equality is suddenly going to break out. However there will be
something of a righting process in some areas, especially in
the digital music revenue share equation. Most significantly
though, these ratios are becoming the foundational dynamics of
the new music industry. These are the reference points that
artists, rights holders, and all other music industry
stakeholders need in order to understand what their future will
look like and how they can help shape it.


Source link