sign in sign up
<<
Home , Content ID (system), Electric Jukebox

thereport ISSUE 398 | 23 NOVEMBER 2016 Tube exit What if labels withdrew from YouTube?

Contents 08 Beyond – EU rules on e-book lending 09 Data dive: 10 key facts about SoundCloud 10 Need to know 11 Country profile: Italy 2

ISSUE 398 23.11.16 COVER FEATURE Tube exit What if labels withdrew from YouTube? YouTube and music rightsholders have been at loggerheads over the ‘value gap’ throughout 2016, a year in which the video service’s last set of major label licensing deals elapsed. Within the industry, the consensus is that new deals will be agreed, perhaps with the threat of safe harbour reform enabling the rightsholders to secure better terms. But what about the alternative scenario, where one or more major labels walk away from YouTube entirely? Right now, that’s not such an unthinkable prospect as you may think.

n the last month, music:)ally has heard represents a new twist to 2016’s tale of ID system (which launched in its initial from several credible sources that at tension between music rightsholders WMG’S FAILED ATTEMPT form in mid-2007) to block user uploads of least one major label is preparing to and the world’s biggest music-streaming In 2008, (WMG) tried its music on the platform. pull its catalogue from YouTube before service – all happening against a backdrop to pull its entire catalogue from YouTube WMG argued that “even back in the Christmas. of continued uncertainty over which side after negotiations to extend the licensing 2009 timeframe, video creators IWe are treating the claims with caution. will be favoured in the upcoming reform of deal it signed (pre- knew how to defeat detection We are sure that the threat has been safe harbour legislation in the US and EU. acquisition) in 2006 broke by Content ID” and noted that it made, but are reserving judgement on the That makes this a useful time to explore down. did not at the time identify live intention to actually carry it out. High- what would happen if a major label really did In its filing to the US versions of performances by stakes bluff-calling has long been an pull out of YouTube in 2016. music:)ally has Copyright Office’s copyright WMG artists.

report inescapable element to music licensing talked to a variety of sources on background consultation earlier this year, The label group “also negotiations, after all. about the prospect; but first, there are some WMG outlined what happened deployed substantial and costly Still, the threat is real and that past case studies to learn from. next as it tried to use YouTube’s Content human resources to manually identify the 3 Although the company put on a brave face at the time, the terms of the arrangement reached by WMG with YouTube in September 2009 were only slightly better than the ISSUE 398 COVER FEATURE 23.11.16 terms that WMG declined in December 2008” – WMG filing

and request takedown of recordings that slipped by Content ID”, before finding itself bogged down in the process of disputes over its video blocks. “In 2008-2009, WMG’s blocking efforts provoked tens of thousands of user disputes per month. When disputed TAKE IT OFF, TAKE IT OFF videos were manually examined by WMG, the disputed and reinstated videos For a more recent example of what a overwhelmingly presented no arguably label trying to keep content off YouTube legitimate defence to WMG’s claims,” would look like, ’s claimed the filing. (UMG) submission to the same US “However, this reinstatement Copyright Office consultation details “one phenomenon alone was sufficient to recent effort to partially protect just one ensure that all popular WMG recordings album, from just one artist, for just a short remained available on YouTube at period of time” – namely Taylor Swift’s essentially all times, because having 1989 album. even one copy of a recording available UMG’s policy stretched beyond Universal also had criticism for Content claim being upheld in 10,168 instances, or on YouTube means that the recording is YouTube: it involved actively searching for ID’s disputes process, based on an analysis approximately 98% of the time,” claimed available to all users.” and blocking the album (bar lead single of an eight-day period in March 2016. its filing. WMG estimated that it spent around ‘Shake It Off’) on YouTube, as well as “Between March 5 and March 12, 2016, “UMG’s investment in human capital $2m over a nine-month period in 2008- filing takedowns for copies uploaded to inclusive, the data currently available to to contend with just infringement of its 2009, but that these efforts are viewed as SoundCloud and Tumblr. UMG reflects that YouTube users disputed content on YouTube is substantial, and as “having been largely unsuccessful” even “A staff of UMG employees devoted a total of 7,068 of UMG’s claims, ranging YouTube continues to add content, is only with an investment of resources “that essentially 100% of their time between from a low of 840 claims on March 8 to likely to increase.” probably could not be sustained in the November 2014 and February 2015 to a high of 1,112 on March 6. As of March 5, long term by any copyright owner”. manually search for infringements of 1989 2016, UMG already had 13,741 disputes in its COST CONCERNS “In addition, WMG’s blocking effort and its tracks on YouTube and other sites, queue, resulting in a total of 21,349 active ultimately did not put WMG at any so that these unlawful uses could disputes during this eight-day period.” So, UMG says it employs around discernible advantage in its negotiations be blocked or taken down,” explained UMG added that it employs around half a dozen staff to handle YouTube with YouTube,” claimed the filing. “Although UMG’s filing. half a dozen people in the US and UK disputes, while its publishing division the company put on a brave face at “These efforts were supplemented “solely to address YouTube disputes”, has another half a dozen manually the time, the terms of the arrangement by approximately a dozen employees helped by staff from its data protection claiming content on YouTube relating reached by WMG with YouTube in working for IFPI who devoted a significant division and other departments. to around 500 compositions and dealing September 2009 were only slightly better portion of their work days to the same “This team was able to process 10,335, with any disputes. than the terms that WMG declined in task.” The result: nearly 114k YouTube or a little less than half, of the existing UMG also claimed it pays an external December 2008.” blocks automatically put in place by claims during the same eight-day period. company “hundreds of thousands of dollars

report Content ID, and a further 30k manual This effort required manual review of a year” to mop up recordings unidentified blocks and takedowns across YouTube and the dispute notice and the video for by Content ID – a policy matched by Sony SoundCloud. each disputed claim, and resulted in the Music, according to that label’s Copyright the 4

ISSUE 398 COVER FEATURE 23.11.16 Sony typically spends over one million dollars a year to remove or claim just a small fraction of Sony’s catalog from YouTube, a platform widely regarded Office filing. as employing robust voluntary measures to prevent copyright infringement “Sony nonetheless typically spends over one million dollars a year to remove or claim just a small fraction of Sony’s catalog of Sony Recordings solely from YouTube, a platform widely regarded as employing robust voluntary measures to prevent copyright infringement,” claimed Sony Or would it be the hardest of hard Yexits Music. where a label blocks every single user Sony has also tried to keep specific upload of videos that include its music, and releases off YouTube in recent times, hiring perhaps even withdraws its content from three different external companies to other Google services (from work on its behalf identifying and blocking Music to Android apps) in a two-footed infringing uploads. tackle on YouTube and its parent company? “Although three separate contractors “If they have the balls to do it and vigilantly blocked the relevant recordings really wanted to hurt them, they’d pull over the focus period, consumer views of from Google Play too,” said one source. “In each user uploaded file they identified and fact, pull from everything Google-related: took down over the entire period of weeks anything with any hint of music on the for each recording generally exceeded Android store, for example.” several thousand views (in some cases Even given the level of tension between hundreds of thousands and even millions of YouTube and music rightsholders in 2016, views) before the were identified and it is hard to imagine this level of bridge taken down,” claimed Sony. burning even being threatened, let alone The overall picture here, according to carried out. the labels, is that trying to keep a few keeping its entire catalogue off YouTube so horror stories about costs are part and There was also a consensus among specific tracks off YouTube – even with would be “several orders of magnitude parcel of that argument to legislators. Even music:)ally’s sources that YouTube Red Content ID in operation – is an expensive above the substantial effort reflected so, the three majors’ filings are an insight would not loom large in any withdrawal; it business. Which in turn hints at escalating above, and all but impossible as a practical into the scenarios they envisage if they is not yet a significant revenue stream for costs if a label wanted to keep their entire matter” – referring to its efforts with 1989. were to pull out of YouTube now. labels, but nor does music appear to be the catalogue off the platform. Bear in mind that these claims were main driver of subscriptions for it. “Based on its experience, WMG all made in submissions to the Copyright HARD YEXIT OR SOFT YEXIT? While YouTube Red might still be a estimates that, currently, it would take at Office consultation on DMCA reform. All casualty of a major label pullout, the least 20-30 people, at a fully-loaded cost in three labels were arguing that, even with So much for history, what about the future? emphasis would be on original music excess of $2 million per year, and probably Content ID in place, the costs and effort Starting with the question of what, exactly, videos and on a blanket-blocking policy the use of an outside content monitoring required to keep music off YouTube are a YouTube pullout – or Yexit, if we must – for user-uploaded content. For both of contractor at additional expense, to too high, which in turn puts YouTube at an would involve. these, sources agree that the gap between meaningfully affect (but not entirely block) unfair advantage in licensing negotiations. Would it mean removing their audio and what YouTube wants to (or is able to) pay

report just WMG’s top 25 album releases on The impossibility of keeping specific video catalogue from the YouTube Red and what labels want to be paid is large YouTube,” claimed WMG’s filing. music off YouTube is a key plank in the subscription tier? Would it mean setting all enough to mean they will struggle to reach Universal, meanwhile, claimed that labels’ argument for safe harbour reform, existing videos to ‘private’ on the free tier? agreement. the 5

ISSUE 398 of YouTube and SoundCloud,” added 23.11.16 COVER FEATURE one source. “Why would they go to CONTENT ID QUESTIONS ?” On the piracy question, Universal One important question about a Music’s Copyright Office filing noted major label pullout is what happens that Taylor Swift’s 1989 album was regarding Content ID. Could a label downloaded nearly 1.4m times from make its existing videos private and torrent sites. “Notwithstanding UMG’s refuse to publish any more, pull its and Big Machine’s considerable efforts, audio content from YouTube Red, and infringement was still accomplished on yet retain the ‘partner’ status that a massive scale,” explained the label. would enable it to provide reference A more nuanced reading of those files for Content ID, and use the system to efforts might suggest that by keeping block all user-uploads featuring its music? Content ID also looms large in any the ‘value gap’ – that if fans could the album off YouTube, SoundCloud and It’s a sensitive question. Under current consideration of the revenues that a label not find the music they want on YouTube, Tumblr, Universal simultaneously boosted safe harbour legislation, YouTube is not would lose by pulling out of YouTube, which they might be more likely to sign up sales and piracy of the album. If a YouTube obliged to offer rightsholders access to said earlier this year that “half of the music for Spotify, and other pullout led to a similar scenario (albeit Content ID: it only has to respond promptly industry’s YouTube revenue comes from fan subscription services. with audio streams as well as sales) then to takedown notices for infringing content content claimed via Content ID”. YouTube The counter-argument is that fans unpicking the gains and losses would be that they discover on its platform. It is not has paid more than $3bn out to music would end up on piracy sites instead. Hard a challenge. required to provide the tools to discover rightsholders, and claims that they choose evidence for either theory is sorely lacking: this content for them or to automate the to monetise (rather than block) more than indeed, one of the (admittedly weaker) process of claiming, monetising and/or 95% of videos claimed under Content ID. arguments for a label to make the leap and blocking them. Any label withdrawing from YouTube abandon YouTube would be to generate YouTube doesn’t have to provide would hope to take its own videos to other some decent data to support or debunk Content ID. Rightsholders argue that this platforms and replace (or perhaps even those theories. state of affairs shows why safe harbour grow) the revenues derived from them. But music:)ally’s sources do not see a legislation needs to be changed; and factored into any pre-pullout calculations single-label Yexit as a needle-mover for YouTube argues that it proves that the will be the fact that the income from UGC subscription services – for a variety of service is already willing to go above and videos via Content ID would be lost and not reasons. Some think it would merely beyond its legal requirements as a partner immediately replaced. drive up viewing of videos from artists on for the music industry. the labels that remain on YouTube, while The two sides are just as divided on what YOUTUBE ALTERNATIVES others think YouTube’s most engaged would happen in a post-Yexit scenario. music viewers already use audio services Labels fear that YouTube would strip them There are two strands of thinking when alongside it. of Content ID access and send them back it comes to making up for lost revenues “There are whole swathes of people who to a world of having to detect and send post-Yexit. First, there is the hope – implied are in their core music consumption years, an individual takedown for every single throughout the debate on safe harbour and and who have only ever grown up in a world , AND MORE infringing video. The second way to make up for lost YouTube YouTube has maintained that it would revenues post-Yexit would be to make not take this approach: that a rightsholder YouTube has paid more than $3bn out to music money from video on other platforms – and

report wishing to block their content would just rightsholders, and claims that they choose to not just from the official three or four- have to provide the necessary reference monetise (rather than block) more than 95% minute music videos that have traditionally files for Content ID to work from. been the industry’s focus on YouTube. the of videos claimed under Content ID...” 6

ISSUE 398 23.11.16 COVER FEATURE

Without pushing the Brexit comparison have monetisation built in; apps like catalogue from SoundCloud, it provoked too far, it’s become apparent that the Musical.ly may find their business models angry responses from some artists. Dance politicians campaigning for Britain to leave in 2017 (and even if not, they’ll certainly star Madeon even accused the label of the EU both underestimated the brutal have to strike more licensing deals); “holding your own artists hostage” in financial realities of such a move and failed Snapchat’s CEO has never hidden his May 2015. Sony’s later licensing deal to make proper plans to tackle them. interest in music; VR is opening up as an with SoundCloud smoothed over those In contrast, a major label contemplating opportunity… problems, but they were a glimpse at the a Yexit in 2016 can survey burgeoning The point here is that any major label potential headaches of a YouTube pullout. opportunities for music videos – and music- leaving YouTube would have a firm idea There are undoubtedly many prominent related video content. of how much income they’d be leaving artists who support the industry’s Vevo is pushing on with its efforts to behind; and the chance to come up with a campaign to modernise safe harbour bolster itself as a standalone platform, bold and coherent plan to replace and grow legislation, as seen by the open letters not just a funnel of content for YouTube. those revenues through a range of new and signed by a host of stars earlier this year. It Facebook has seen video viewing expanded partnerships for various kinds of does not necessarily follow that they would explode on its platform and is laying video content. be happy to see their YouTube channels the groundwork for sharing ad revenues (It is only fair to point out that every deactivated at the behest of their label. with partners (not to mention policing label should be putting together such a Imagine, too, the reaction of publishers copyright). plan anyway, even if they are remaining on if a major pulled its entire catalogue from Videos are part of Spotify’s app – not YouTube.) YouTube. Historically peeved at their music videos (yet) but a succession of perceived second-class licensor status music-related shows on the way – while ARTISTS AND PUBLISHERS on the platform (although YouTube has Apple Music has funded videos by Drake made efforts to better serve them), losing and The Weeknd among other stars, There are two more issues to consider YouTube income without having a say in the while experimenting with long-form about the potential fallout for a major decision to pull music would spark more documentaries (Taylor Swift) and even label mulling a Yexit in 2016. It would have controversy.

report virtual reality. to consider the reaction from artists and One source suggested a different Live-streaming services like Twitch, publishers. theory: all the major labels have YouNow, Live.me (right) and Live.ly already When began removing its their affiliated publishers, so the one the 7

ISSUE 398 “If one of these three big publishing companies pulled 23.11.16 COVER FEATURE their deal with YouTube, it wouldn’t just affect the music budget to go out and buy whatever you that the label’s side of the house is responsible for. It need to buy.’” contemplating a YouTube pullout may well would affect every single one of the majors...” Google’s past acquisition of Motorola for bring its sibling in on the strategy. $12.5bn in cash, before selling its home- – Music Ally source “If one of these three big publishing products division for $2.5bn and its mobile companies pulled their deal with YouTube, phones arm for $3bn but holding on to the it wouldn’t just affect the music that the company’s patent assets, was brought up label’s side of the house is responsible by multiple sources. for,” said the source. “It would affect every The comparison of Motorola and its single one of the majors.” portfolio of patents and a major label and It certainly would, even if the much- its catalogue of music rights could make an criticised plans by the US Department of article in itself. The point is that in several Justice to bring in a system of 100% licensing observers’ eyes, if YouTube has ever been – where one publisher can license an entire minded to open its wallet in this way, song in which it owns a fraction of the rights – a major label pullout might bring those come into force in that one country. thoughts back into focus.

WHAT WOULD YOUTUBE DO? THE BEST PATH FORWARD

While we’re on scorched earth policies, it’s Wherever you stand on the ‘value gap’ vital to think about what YouTube’s response debate and other areas of tension between might be to a major label exit, beyond Google and the music industry, it’s clear retaining their access to Content ID. that the best future scenario sees YouTube Several sources pointed to PRS for and labels (as well as creators and other Music’s lawsuit against SoundCloud in 2015 rightsholders, obviously) as strong partners, as a comparison, noting that the digital good luck: if you ever come back to me, logical follow-through for that comment. not estranged enemies. service was caught in the sticky situation the price I’ll pay you just went down by “The craziest thing they could do is YouTube would be poorer for a major of being unable to raise (much-needed) half, and the longer you keep it off, the open the chequebook and buy one of the label pulling out, and the label would be funding with litigation hanging over its more the price goes down. And by the way, label/publisher majors; that’s a logical thing removing itself from a platform that is head. A settlement was thus inevitable. we’re shutting down your channels.” if they wanted to truly play,” they said. still evolving rapidly, but which already YouTube? One source argued, “The only Several sources suggested another, “What’s the craziest thing Google could do? has huge cultural importance for younger way a [major-label] pullout would be of longer-term scenario that is not Go to Vincent Bolloré and say, ‘How much generations of music fans in particular. any value would be if Google thought they necessarily related to a specific label’s is it? $10bn? $20bn? $30bn?’ Or they could Both sides could cope with a Yexit, but in could be sued. If not, pull it and so what?” pullout, but rather the wider tensions with go smaller and pick up a Warner Music an ideal world they would find a licensing We are far from the stage where a the music industry. Group from [Len] Blavatnik.” agreement that both can live with. YouTube pullout would be followed by “Google has got They continued, Our suspicion remains that the strategy litigation against the service. But that in enough money to “Then they could here from the label’s side is that the threat turn means a pullout arguably has fewer buy the record hand it to the guy of a pullout will hasten such an agreement teeth, which in turn could embolden labels in a they just hired rather than destroy the prospects for it. YouTube – if the company so desired – to heartbeat,” said [Lyor Cohen] and The concern is that the backdrop of safe

report be more aggressive in its response. one source, say, ‘Build it out harbour lobbying will encourage the kind One source painted a picture of YouTube while another now, please. You of posturing on both sides that is harder to telling the withdrawing label to “pull it and elaborated on the have an endless back down from. :) the Bolloré and Blavatnik 8

ISSUE 398 23.11.16 BEYOND MUSIC Book-ends: EU rules on e-book lending As the digital side of book-selling expands, the potential stumbling blocks are familiar to those of a music industry persuasion

n an echo of what the music industry (public or schools) has worked based on went through 15 years ago, the book a set number of copies per library and industry has been slowly making the also only applying books of a certain transition from physical to digital and age, effectively a sort of windowing Inow a new ruling will define what shape the where books are commercially available ebook market takes in the future. for a set time before they can go to Earlier this month, the Court of Justice libraries. Writers are paid through things of the European Union (CJEU) ruled that, as like the Public Lending Right, which long as writers are properly recompensed, applies in 28 countries around the world, public libraries can lend ebooks. all using slightly different calculation It all stems from a case brought by methodologies. Vereniging Openbare Bibliotheken (a Amazon also has its Kindle Unlimited Dutch library association) against rights service which is applying the subscription collection agency Stichting Leenrecht, (rather than ownership) model to books, with the former arguing that digital books offering access to 1m titles for £7.99 a should be lendable in the same way that month. For fast readers, this could be print titles are. construed as a bargain, but for others, it Under a “one copy, one user” model, a the apocryphal story doing the rounds instead to sit on shelves as shorthand for could mean à la carte purchasing of books single digital copy is downloaded by one in 2012 about Bruce Willis not being able the owner’s great taste and knowledge. is still more cost effective. user for a set lending period but, when to bequeath his iTunes collection to his The lobbying and the litigation of the The bigger problem, of course, is that that period lapses, the book is no longer children, more serious test cases have record industry in the aftermath of the the ebook industry is dominated by one accessible and can be borrowed by taken place to determine what people can original was around a shared MP3 huge player (Amazon) and it is risky to another user. actually do with their digital collections equating to a “lost” sale. Those lobbying rail against as French publisher Hachette Key to the CJEU’s ruling was the line the outside of personal use. ReDigi tried to set against the labels argued that it was a leap found when it pulled titles in a dispute “copyright must adapt to new economic up a business selling “used MP3s”, but was of faith to presume that and, besides, it was over pricing control. Both sides eventually developments”. The Federation of European blocked from doing so in an oppositional more like a “try before you buy” means of resolved the very public dispute at the end Publishers responded to the CJEU, outlining move in the courts by Capitol Records in musical discovery. With streaming, playlists of 2014 and since the start of last year, its criticism. It said that lending a book “in March 2013. are designed and encouraged to be shared, Hachette could set the consumer prices of fact means copying” and borrowing a book The difference, of course, between making this a moot point today. its ebooks. “resembles the experience of buying a books and music is the context of Yet with books, the idea of lending That deal worked in the publisher’s book”. Its conclusion was that “it’s hard to consumption. someone a book – with the common favour but, as the digital side of book compete in a market in which virtually the Music tends to be listened to repeatedly presumption they will only read the book selling grows, it is far from a given that

report identical product is available for free”. – either in a concentrated burst or spread once – there is more of an argument that publishers will continue to have the whip There have been test cases in the past out over years – whereas books tend to this could be seen as a “lost” sale. hand here, making the lending library about selling MP3 collections. Beyond be read once and rarely returned to, left In the UK, the lending library system dispute look like small beer. :) the 9 SoundCloud has been back in the news again this month, signing a new pan-European licensing deal with ICE, discussing IPO/Spotify ISSUE 398 23.11.16 STATS acquisition rumours and claiming to pay more money to more people Data dive as a result of more deals. It’s a long way from the start of 2015 when SEK300m it was one of the key targets in the industry’s war on free. The launch Amount in debt funding secured from Tennenbaum Capital 10 KEY FACTS ABOUT SOUNDCLOUD of SoundCloud Go helped dampen that ire down (or played into the Partners in January 2016. (The funding is equal to around majors’ hands, depending on your view) and now most of the heat is $35m.) According to Swedish tech site DiGITAL at the time, on YouTube and the value gap instead. A bullet dodged? Or a company SoundCloud had the option to borrow a further 600m $100m painting itself into a corner? Here are some of the key numbers around Swedish krona in convertible bonds. Source: DIGITAL SoundCloud’s latest funding it to put in context, precisely, what is at stake. round in June which gives it a valuation of $700m. This is, by far, the company’s single $10m largest funding round to date. Source: ReCode What SoundCloud paid (split between cash and stock) for Instinctiv in May 2012. Instinctiv is described as “a music management and discovery app that syncs a user’s entire music library to any desktop or mobile phone” and, to date, $70m remains SoundCloud’s sole acquisition. Source: Crunchbase Amount of that $100m that came from Twitter. Interestingly, Twitter had been kicking the tyres of SoundCloud back in May 2014, but ultimately walked away 135m from the deal after – according to rumours – an exclusive Number of tracks currently on SoundCloud. This puts it far negotiating window closed. Source: ReCode ahead of the major audio streaming services which have around 40m tracks each. The bulk is user-uploaded, but the company also claims to have one of the largest podcast oœerings globally. Source: SoundCloud Its funding round that came in 2014. It also gave the company $60m a valuation of $700m, the exact same as its current valuation after the Twitter-led investment. Institutional Venture Partners 175m was the lead investor at that time and the money was apparently Number of total listeners per month that SoundCloud claims to have earmarked for the licensing deals with labels and publishers (as of July 2015). Within that, it has 150m registered users, an increase that eventually led to SoundCloud Go. Source: Wall Street Journal of 10m from 2011. In August 2014, it was estimated that 10m creators were using the platform. Source: SoundCloud $193.32m Total investment in SoundCloud to date, spread across 10 investors and six rounds. Its seed funding from 2009 is €1.37m The company’s revenues in 2014. It has seen steady revenue growth, undisclosed, but Doughty Hanson Technology Ventures was its ˆrst public investor generating €1.37m in revenues during 2010, €4.32m in 2011, €8.04m in (€2.5m in 2009), followed in 2010 by $10m split between Index Ventures and Union 2012, €11.28m in 2013 and €17.4m in 2014. Square Ventures. In 2012, it raised $50m and then in 2014 it drew in a further $60m. Source: Companies House Source: Crunchbase

report The company’s losses in 2014. Those losses have increased over a ˆve-year period: €1.55m in 2010 to €3.74m in 2011, €12.43m in 2012, €23.11m in 2013 and €39.1m in 2014. the €39.1m Source: Companies House 10

ISSUE 398 DIGEST 23.11.16 Need to know THE PICK OF MUSIC ALLY’S CONTENT THIS MONTH Amazon bets big on is for very good reasons.” 01 voice control With the launch of Music 01 Unlimited in the UK, we spoke to Amazon’s head of music, Paul Spotify says it will Firth, about what they were going 08counter playlist to do to stand out. Alexa, it seems, homogenisation is the prescient secret weapon. With the BPI and others “Voice control is the future of concerned Spotify playlists music listening in the home, and will be dominated by US probably in the car as well,” he acts, the streaming service said. “The way you and I would 05 says it is investing in talk about music together is the curators to ensure such way people want to talk to Echo homogenisation doesn’t and Alexa about music.” the changes and aimed squarely the indies’ split happen. Speaking at BIME, contextual discovery. 02 at first-time of unattributed Jordan Gremli, Spotify’s “We’ve done a lot of streamers. black box income head of artist insights, said, “I consumer research flip from 15% to 07 think there is value to surfacing Eventbrite talks with different 65%. “Basically you the stuff that is globally popular 02 profitability and models, and the one [were] rewarding the biggest […] It’s also important to surface secondary ticketing they respond to best Ne-Yo companies with the largest share the local stuff as well at the same music:)ally spoke to Eventbrite’s is the one that justifies 05 and of this black box income, but it is time. These local curators are co-founder and new CEO, Julia the recommendations,” he said. Tinie Tempah say completely counterintuitive as you super-important in that.” Hartz, about their plans for “They’re often suspicious of things streaming is short- are rewarding the most organised growth. Valued at $1bn, she said they don’t recognise, but if I tell changing the writers with the money that belongs to the company will swing into you epic film scores do very well Speaking at Web Summit in the least organised,” she said of profitability next year and focusing with people who are writing or Lisbon, both pop stars pulled no the old system. Mahalia: “You on small music venues, initially in reading and don’t want to be punches when attacking streaming 09 cannot stop the US, will be key to that. She also distracted, it makes much more for underpaying the writers. interacting on YouTube” charged into the secondary debate sense.” “Songwriters are barely getting by Atlantic signing Mahalia spoke to “The fact of the matter is that now because of the fact there are Music is seriously us about her Diary Of Me project more people are in on these deals no laws in regard to streaming,” 07 underinvested in (10 new songs and videos released that anyone would like to admit,” was Ne-Yo’s summation. “It sucks.” tech terms every fortnight on YouTube and she said of under-the-table deals. Electric Jukebox: So claims Bob Moczydlowsky, head Facebook) ahead of her debut 04 radio, not Spotify, of the Techstars Music accelerator album (possibly next year). “The is our competition program and former Yahoo, Topspin thing that was clearest for me was It’s an interesting spin on Indies secure and Twitter executive. “Music is still that you cannot stop interacting Google Play competition, at least. “The reality is 06 a greater share less than 3% of the invested dollars on YouTube,” she says. “With this 03 redesigns that if you are yet another person of black box income in the mobile ecosystem,” he said. biweekly and episodic thing, it’s Personalised playlists and sharper wanting to do another £10-a-month During her last public speaking “That’s under-invested: music is really working. If after this, it recommendations are at the heart subscription service that’s on all engagement before starting at the second most engaging loses momentum, that would be a shame.” report of a major overhaul of Google sorts of devices, then really you’re WIN, outgoing AIM CEO Alison activity you can do on a mobile Music Play. Its product manager, wasting your time,” argued Rob Wenham revealed at BIME in device behind chatting to people. Elias Roman, spoke to us about Lewis of Electric Jukebox, a service Bilbao that a deal with PPL will see But part of that under-investment the

Most of this content is for Music Ally subscribers only, so you’ll need your login to access it. If you need a new password, follow this link... 11

ISSUE 398 23.11.16 MARKET PROFILE Italy

I TA LY

STATS f Population 61.9m d GDP per capita $35,800 h Internet users 37m c Broadband connections 14.1m 2015 was an exceptional year. i A 1% increase on an astonishing In the first six months of 2016, the Italian music industry passed Mobile subscriptions 92.5m 2015 isn’t bad at all. It means an an important milestone, with revenue from digital music overtaking Active 48.1m increase of about 26% on 2014...” that of physical for the first time ever according to figures from Active tablets 6.4m – Enzo Mazza, FIMI recorded music body FIMI. Sources: IFPI/CIA World Factbook

he change came about as digital Italian music business, with annual income in Italy turned around years of decline, to from subscription streams increased 68% revenue grew 20% year-on-year, up 25.1% according to IFPI figures. This add 1.5m extra unit sales in 2015. year-on-year in the first half of 2016 to up from €28.2m in the first six performance, which came about thanks to Nobody expected this rate of growth €19.3m, while income from ad-supported months of 2015 to €33.9m in the an exceptional release slate that to continue into 2016. As such, an overall streaming grew 19% in the same period to firstT half of this year. Meanwhile physical included albums from Jovanotti, increase of 1% in the first six months of €7m. This is particularly significant in Italy, revenue fell 13% in the same period, to Mengoni, the Kolors, Volo the year was very welcome. “2015 was an where ad-supported streaming outstripped €32.5m. and Tiziano Ferro was so exceptional year,” suggests FIMI CEO subscription for many years, the latter only Overall, the Italian recorded music strong that CD sales Enzo Mazza. “A 1% increase on an drawing level in terms of revenue in 2014. market was up 1% at €66.4m in the first astonishing 2015 isn’t bad at all. It FIMI said that in the first half of 2016, half of this year. While that might not means an increase of some 20% of music consumers in Italy paid sound particularly impressive, it is about 26% on 2014.” to access streaming services, which include worth remembering that 2015 was Even better, familiar names in Spotify, Apple Music a year of freak success for the this 1% increase and as well as TIMmusic, a service

report reflects a strong operated by Telecom Italia that claims Tiziano Ferro (left) and growth in subscription to have a 20% share of the digital music Mengoni (right) streaming: income market. Overall, streaming revenue was up the ISSUE 358

12

ISSUE 398 23.11.16 MARKET PROFILE Italy continued...

RECORDED MUSIC SALES DIGITAL MUSIC REVENUE BY FORMAT, DIGITAL MUSIC REVENUE BY FORMAT; (Volume, million units) IFPI FIGURES MUSIC ALLY DATAMAP FIGURES (Source: IFPI) (In US$ millions / Source: IFPI) (In US$ millions / Source: IFPI, Music Ally) New generations, like the 25 40 60 13-16 [age group] are more active 35 20 50in paid streaming; piracy is 30 decreasing [apart from the issue 40 15 25 regarding the stream ripping] and therefore we are very 20 30 10 optimistic for the future of the 15 20 digital music business...” 10 5 – Enzo Mazza, FIMI 5 10

0 0 What’s0 more, Italians’ obsession with 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 their mobile 2011 phones 2012– according 2013 to Deloitte’s 2014 2015 2015 Global Mobile Consumer Survey, they CD and other physical Single downloads Paid/freemium top theDownloads charts for smartphoneAd-supported dependence Subscriptions Single-track downloads Full album downloads subscriptions in Europe – is helping with the transition of Digital albums Ad-supported streams Mobile personalisation the music market towards streaming. “Mobile penetration is very high,” Mazza says, “and this also confirmed by an Ipsos 51% to €26.3m in the first half users are YouTube music users, by Vivendi, has been mainly focused on Connect study, which shows a high degree of this year, more than making according to Ipsos Connect] reducing costs in a company with a very of usage for music streaming up for a 30% decline in and this is a serious problem high debt. It sounds funny that since within Italian consumers [68% compared to download sales. for the sustainability of the [Universal Music parent company] Vivendi a global usage of 55%]. New generations, These results suggest a digital business.” owns a large share of TIM, the budget for like the 13-16 [age group] are more active in positive future for the digital What’s more, TIM has the music bundle has been reduced, but paid streaming; piracy is decreasing [apart music business in Italy. Yet showed signs of reducing that’s it.” from the issue regarding the stream ripping] clouds remain, according to its focus on music after Overall, though, Mazza remains and therefore we are very optimistic for the Mazza, and in a rather familiar Vivendi increased its stake in optimistic. Digital penetration in Italy future of the digital music business.” shape. “We believe that a significant the company at the end of last may still be behind the big EU economies The 25.1% increase in recorded music impact on future revenues from digital year. “In 2015, TIMmusic made a lot of – the country has 37m internet users revenue in 2015 may remain something of could be reached by solving the issue investment in marketing a promotion of the versus 57.3m in the UK, a country whose a freak result for the Italian music industry,

report connected to the value gap,” he says. service,” Mazza says. “In 2016 TIM reduced population of 64.1m is only slightly bigger then. But more of the modest increases “YouTube remains by far the most-used investment on the platform. The new CEO than Italy’s 61.9m – but Mazza says internet that Italy saw in the first half of 2016 music platform in Italy [91% of internet of TIM, Flavio Cattaneo (pictured), backed use is growing fast. appear to be on the cards. :) the 13 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 398 industry and provide information and insight into every aspect of the business, consumer research analysing 23.11.16 example of perceptive the changing behaviour and trends in the industry, consultancy services to companies ranging from blue journalism at its chip retailers and telecoms companies to start-ups; and training around methods to digitally market your best, with unrivalled artists and maximise the effectiveness of digital campaigns. We also work with a number of high profile music Andrew Fisher, events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good CEO, coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

ANTHONY CHURCHMAN KARIM FANOUS Contact: music:)ally Business development Head of research Studio 11, Holborn Studios, 49-50 Eagle Wharf Rd, [email protected] [email protected] London N1 7ED Tel: +44 (0)20 7250 3637 EAMONN FORDE PAUL BRINDLEY b www.MusicAlly.com e [email protected] Reports editor CEO & founder [email protected] [email protected] Registered company number: 04525243 VAT number: 858212321 STEVE MAYALL STUART DREDGE © Music Ally Ltd. For the purposes of personal, private use the subscriber may print this publication or Director & founder Editor at large move it to a storage medium; however, this publication is intended for subscribers only and as such may [email protected] [email protected] not be redistributed without permission. Subscribers agree to terms and conditions set up on the Music Ally website, except where a separate contract takes precedence. Music Ally has taken all reasonable LIL PATUCK endeavours to ensure the validity of all items reported within this document. We do not assume, and hereby disclaim, any liability for loss or damage caused by errors or omissions. In particular the content is Research & development not intended to be relied upon in making (or refraining from making) investments or other decisions. We [email protected] cannot be held responsible for the contents of any linked sites.

Our clients include: report the