SCCR/41/2 ORIGINAL: ENGLISH DATE: JUNE 1, 2021 Standing Committee on Copyright and Related Rights Forty-first Session Geneva, June 28 to July 1, 2021 INSIDE THE GLOBAL DIGITAL MUSIC MARKET prepared by Susan Butler, Butler Business & Media LLC The information provided in this study is the sole responsibility of its author. The study is not intended to reflect the views of the Member States or the WIPO Secretariat. SCCR/41/2 page 2 TABLE OF CONTENTS METHODOLOGY ....................................................................................................................... 4 INTRODUCTION ....................................................................................................................... 4 1. OVERVIEW: A DIGITAL SHIFT IN RIGHTS AND VALUE CHAINS ....................................... 5 (A) NON-DIGITAL RIGHTS AND VALUE CHAINS ................................................................. 6 (B) DIGITAL CHAIN OF RIGHTS ........................................................................................... 7 2. SONGS (MUSICAL COMPOSITIONS): DIGITAL CHAIN OF RIGHTS ................................... 8 (A) MOST COUNTRIES ......................................................................................................... 8 (B) CONTINENTAL EUROPE AND ARGENTINA .................................................................. 9 (C) RIGHTS ISSUES ............................................................................................................ 11 3. SOUND RECORDINGS: CHAIN OF RIGHTS ...................................................................... 11 4. THE DIGITAL VALUE CHAIN (HOW MONEY FLOWS) ....................................................... 13 (A) CONFIDENTIALITY AND COMPETITION ...................................................................... 13 (B) PHYSICAL vs. STREAMING .......................................................................................... 14 (C) DSP REVENUE MODELS .............................................................................................. 15 (D) THE ROLE OF PLAYLISTS ............................................................................................ 17 (E) THE ROLE OF USER ENGAGEMENT ........................................................................... 18 (F) THE ROLE OF CONSUMER ACCESS ........................................................................... 19 (G) PAYMENT MODELS ...................................................................................................... 21 (i) SMALLER, NICHE, LIMITED OFFERING DSPs ........................................................... 21 (ii) DOMESTIC AND MULTINATIONAL DSPs .................................................................. 21 (iii) THE USER CENTRIC PROPOSITION ........................................................................ 25 (H) PERFORMER AND SONGWRITER ISSUES ................................................................. 27 (i) DIFFERENT PRICE POINTS AND METRICS .............................................................. 28 (ii) STREAMING vs. RADIO .............................................................................................. 30 (iii) AGGREGATORS: ACCESS TO THE DIGITAL MARKET AND DATA ......................... 31 (iv) FEATURED ARTIST RECORDING CONTRACTS ...................................................... 32 (v) BACKGROUND PERFORMERS ................................................................................. 33 (vi) SONGWRITERS AND COMPOSERS ......................................................................... 34 (I) TRANSPARENCY ............................................................................................................ 35 (i) COMMON CLAIMS RELATED TO TRANSPARENCY .................................................. 36 (ii) ADDRESSING TRANSPARENCY ISSUES ................................................................. 37 (J) THE DIGITAL RIGHTS (VALUE) DEBATE ...................................................................... 39 (i) BACKGROUND ............................................................................................................ 40 (ii) RIGHTS IN PLAY ......................................................................................................... 40 (iii) THE MAIN ARGUMENTS ........................................................................................... 42 (K) REVENUES .................................................................................................................... 42 SCCR/41/2 page 3 (i) DIGITAL MUSIC SERVICE REVENUES ...................................................................... 42 (ii) RECORDED MUSIC REVENUES ................................................................................ 43 (iii) COMPOSITION REVENUES ...................................................................................... 47 (iv) PERFORMERS AND SONGWRITERS ....................................................................... 48 (L) COSTS OF DIGITAL ....................................................................................................... 48 (M) VALUE GAP, UNAUTHORIZED SERVICES AND THE SHARE OF VALUE .................. 50 (i) VALUE GAP AND UNAUTHORIZED SERVICES ......................................................... 50 (ii) THE SHARE OF VALUE .............................................................................................. 52 5. THE INFORMATION FLOW ................................................................................................. 52 (A) INFRASTRUCTURE AND PIPELINES ........................................................................... 53 (B) IDENTIFYING, MESSAGING AND COMMUNICATING .................................................. 54 (i) IDENTIFIERS ............................................................................................................... 54 (ii) MESSAGING AND COMMUNICATION ....................................................................... 55 (iii) CHALLENGES ............................................................................................................ 56 (iv) DATA QUALITY AND MATCHING .............................................................................. 56 (v) TRENDS ...................................................................................................................... 58 CONCLUSION: INFORMATION, CLARIFICATION AND INNOVATION .................................. 59 APPENDIX: SOURCES ........................................................................................................... 60 SCCR/41/2 page 4 METHODOLOGY The information provided in this report is the sole responsibility of the author. The report is not intended to reflect the views of the Member States or the WIPO Secretariat. This report provides the results of investigative journalism by the author, consistent with journalistic standards. The goal is to provide objective facts and analysis and not recommendations or advice, proposals for change or adjudication of issues in debate. This report represents the results of interviews of more than 85 individuals across 25 territories on six continents, together with the review of material as described throughout this report and in the appendix. The focus was on obtaining and confirming information from individuals with first-hand knowledge of the matters they discussed. Where possible, information was obtained from individuals' declarations filed with courts or judicial tribunals. The author sought to verify second-hand information through further analysis and information from sources with first-hand knowledge, and when that was possible the information was included in the report. Finally, when anonymity was requested, sources were not named in this report. This report reflects the information and data available as of May 2020. INTRODUCTION The digital music market is evolving in every geographical region. Digital music services are continually expanding into new territories around the world. Changes that occur in every region are being spurred from both ends of the value chain, from new creative music collaborations to consumer responses. The music industry is working to support this evolution far more quickly today than ever before in the history of recorded music. While each piece of music reflects the culture of the creators and often their homelands, and consumers will differ in preferences and digital behaviors from country to country, the business structures, operations and needs to support these creators and meet consumer expectations are strikingly similar from region to region depending on the stage of the country's digital and copyright development. From Asia to Africa, Europe to Australasia and across the Americas, the challenges and potential level of success, described in this report, in each particular country are much the same as those in other countries that are within the same stage of development, whether the countries are part of the underdeveloped markets, emerging markets or more advanced markets. Within each category of digital market development, then, how effectively the marketplace anticipates and responds to changes depend on a number of factors, such as how well each market participant understands consumer preferences and behaviors; designs the digital music services and offerings; streamlines the operations of the music supply chain; overcomes any limited availability of mobile devices and wireless broadband access; adjusts the legal framework in each country where it fails