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MUSIC ONLINE HOW’S THE FUTURE LOOKING? Nick Edwards Online Manager – PRS for Music 15 OCTOBER 2012

January 2009: PRS Template Presentation


1) Intro to PRS 2) State of the Digital Market 3) How PRS licence these services 4) Questions


PRS for Music - Sitting at the heart of the UK Music Industry


Songwriters and music publishers

Music Users ACCESS TO MUSIC

MONEY ÂŁ


Mechanical Copyright Protection Society

Performing Right Society

The two companies formed an operational alliance in 1997 Re-branded as PRS for Music in 2009


Copyright Restricted Acts

Mechanical Right Right to Reproduce the Musical Work Issue Copies to the Public of the Musical Work

Performing Right Public performance Broadcast Communication to the public

Both are mechanical and performing rights are involved in online and mobile exploitation PRS for Music issues joint licences for both rights


State of the Digital Market


A familiar story…

£1,400,000,000 £1,200,000,000 £1,000,000,000 £800,000,000 £600,000,000 £400,000,000 £200,000,000 £0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 PHYSICAL

DIGITAL Source: OCC


Bottoming out? Tentative signs of stability?

BPI Trade Values by Format, 2008 Q1 to 2011 Q4, £000's £450,000

Non-Physical Revenues Physical

£400,000

£350,000

£300,000

£250,000

£200,000

£150,000

£100,000

£50,000

SEC 3 - CONFIDENTIAL

£0 Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11


Digital revenues continue to grow

Non Physical Trade Revenues, 2008 Q1 to 2011 Q4 (£m) £90,000

Other Digital £80,000

Ad-supported £70,000

Subscriptions £60,000

Mobile £50,000

Digital £40,000

£30,000

£20,000

£10,000

£0

SEC 3 - CONFIDENTIAL Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11


UK Digital Revenues – Sources & Shares

Source: BPI / Informa


UK: a leading digital music market IFPI European Digital Revenues per Capita, 2010 UK $6.00 UKDigital Digital $5.68 $5.64 worth $5.51 worth $347m $347m $5.00

$4.14 $4.00 $3.35 $3.21 $3.00 $2.29

$2.16 $2.10 $2.09

$2.00 $1.32 $1.27 $1.00

$0.90 $0.62 $0.58

$0.49 $0.32 $0.24

$-

$0.13 $0.07 $0.07 $0.06 $0.05 $0.05 $0.03


Total Revenues 2011 = ÂŁ630.8m


Online Revenues were up 42% to ÂŁ39.1m

Now responsible for 10% of domestic collections


Licensing Music in the Digital Domain

In the old days life was simple‌


Perhaps it still is …

The way consumers access music …

is now even simpler than before …


Changing Consumption‌

Owning

LP/CD/DVD

45rpm single

Ringtones

Consumption

1900 - 1995

Tethered downloads

Video Shop

Renting

iTunes

Ringbacks

Public Library

iPlayer VOD 1995 - 2011

AYCE Streaming (E.g. Spotify)

Spectating TV/Radio

Live

BSkyB Movie Channel

Scheduled

webcasting On Demand

Delivery

Cloud Services


Digital Timeline 1983

first commercial CDs

1993

MP3 format published

1995

Cerberus Digital Jukebox

1998

MP3.com, 1st digital only single in UK

1999

Napster

2000

Pressplay, first ringtone services

2002

Last.fm

2003

iTunes

2005

YouTube

2006

MySpace

2008

Spotify

2009 2010 2011

Rise in PRS digital > decline in physical Portable device access Cloud/locker services


Ownership

Access


Broadcast

Online


Sales of each item

The long tail?

Physical store inventory of 52,000 tracks, or 4,000 albums

Extra 1.5m items in digital stores

Items in order of sales rank


How do we licence these services? The Online Licensing Framework : Online Music Licences Limited Online Music Licence LOML+ General Entertainment Online Licence Ringtones & Ringbacks Licence

January 2009: PRS Template Presentation


A brief history… 1995 • MCPS granted online licence for Cerberus 1996 to 2000 • ad hoc licences for different types of usage • MCPS licenses first ringtone services 2002 • First Joint (Mechanical and Performing) Online licence launches in the UK, licensees include OD2, Vitaminic and Peoplesound. 2003-2004 • MCPS-PRS continue to operate the Joint Online Licence (JOL) on a annual mandate from members. • iTunes launches in the UK in June 2004 2005 • Early 2005, discussions begin with a number of significant service providers that have issues with our Joint licensing scheme.

Leading to....


Copyright Tribunal

January 2009: PRS Template Presentation


versus

January 2009: PRS Template Presentation


The ‘concept’:

Music Service Provider ‘last link in the chain’


Music Service Provider: • Contracts with the consumer? • Sets and controls the price the consumer pays? • Can fully report on all elements of Gross Revenue, including all relevant advertising revenue? • Can fully report on all elements of music usage or can secure such reporting? • Controls how content is offered and bundled? • Carries out or authorizes, on their instruction, the carrying out of the copyright restricted acts covered by the licence?


The ‘concept’:

Share of value with established minimum value per use, per sale or per subscriber.

The Greater of: Percentage of Gross Revenue defined in licence scheme OR Minimum fee specific to business model


Copyright Tribunal - outcome Service Type

Example

Rate

Minima

On-demand (downloads and on-demand streams)

iTunes, Napster, We7

8%

from 4p to 2p per download, 0.22p per stream

Premium & Interactive Webcasting

Last.fm

6.5%

0.085p per stream

Pure Webcasting

AOL

5.75%

0.055p per stream

January 2009: PRS Template Presentation


Online Music Licence Fees Your service will be charged whichever amounts to the greater sum of money; royalty rate or minimum Licence

Royalty Rate

Minimum Rate

Music Download (Subscription)

8.0%

Number of musical works in bundle 1–7 8 – 12 13 – 17 18 – 29 30 or more

Royalty per musical work downloaded 4.0p 3.5p 3.0p 2.5p 2.0p

Music on Demand

10.5%

0.085p per streamed work

Music on Demand (Sub)

8.0%

Type of access Dual Platform Single Platform Limited Service (<20,000 Tracks)

Interactive Webcasting

8.0%

0.65p per streamed work

Interactive Webcasting (Sub)

6.5%

22p per subscriber per month

Webcast

6.5%

0.05p per streamed work

Webcast (Sub)

5.75%

20p per subscriber per month

Single Artist Webcast

10.5%

0.85p per streamed work

Single Artist Webcast (Sub)

8.0%

Subscription minimum to be negotiated in good faith

Per Subscriber per month 60p 40p 20p


Limited Online Music Licence (LOML) Band A (Per Annum)

Band B (Per Annum)

Band C (Per Annum)

Limited Download/ On Demand Streaming Service

£120 <45,000 streams per annum

£240 <90,000 streams per annum

£600 <225,000 streams per annum

Pure Webcasting Service

£120 <180,000 streams per annum

£240 <360,000 streams per annum

£600 <900,000 streams per annum

£120 <115,000 streams per annum

£240 <230,000 streams per annum

Type of Service

£600 <575,000 streams per annum £600 £120 £240 Permanent Download Service <12,500 streams per <2,500 streams per annum <5,000 streams per annum annum

Premium Interactive Webcasting Service


LOML+ Annual UK Blanket Licence – available July 2012 onwards Table of fees - £2k to £15k UK services generating under £200k per annum Directly follows LOML Based on minima, so full blanket, no opt out Does not require Board approval, some ‘behind the scenes’ liaison with Majors LBL distribution c. 50 - 75 licensees


Joint Ringtones Licence

Realtones > of 12% or 10p per tone Monophonic & Polyphonic Tones > of 15% or 15p per tone


Joint Ringbacks Licence

Ringbacks >15% or 15p per tone >Includes any subscription element


General Entertainment Online Licence (GEOL)  This is an interim, non-precedential licence that runs until the end of 2012.  General Entertainment Online Licence fees are calculated on an individual basis  The factors we look at when agreeing a Royalty fee include: • Music hours consumed • Viewer/subscriber figures • Level of music use


Distribution splits MCPS

PRS

Permanent download

75%

25%

On-demand stream/limited download

50%

50%

Webcasting/Interactive Webcasting

25%

75%

Ringtones

66%

33%


UK Online Market in 2012 General Entertainment Licence (UK)

19

Ringtones / Ringbacks (Major UK)

12

Ringtones / Ringbacks (Smaller UK)

10

Online Music Licence (Major UK only or UK Element of Pan Euro Service)

31

Online Music Licence & LOML+ (Mid Tier UK only >20k on average)

25

Pan European Licence (European add on to UK Service)

20

Limited Licences (UK)

1,600

January 2009: PRS Template Presentation


Challenges we are now facing… § Licensing of Cloud-locker services (E.g. iCloud, Amazon’s CloudDrive, mSpot) § Evolving revenue models: A la carte, subscription, ad-funded & hybrid models (E.g. Comes With Music) § ‘Bundling’ of services with other goods or services (E.g. MP3 players, Mobile tariffs etc.) or to promote other goods or services (E.g. Digital Covermounts) § Continuing impact of unlicensed / pirate services § Shift from ownership to access models § Limiting fragmentation of rights for smaller & national services § Data challenges: quantity (high volume / low value) & quality of data


Multi-Territory Licensing Solutions: What developments are we making in the Pan European licensing of music publishing rights for digital services?

January 2009: PRS Template Presentation


Pan European Licensing


PEL: Option 1 -

UK

GERMANY FRANCE

Keep current system of licensing


PEL: Option 2 -

Competition based on licensees

8%

Central Licensing 5%

6% 3%

4%


PEL: Option 3 -

Competition based on repertoire

• competition for members’ panEuropean mandates • members have choice • pan-European licensing of specific repertoire • degree of complexity for music users


CELAS has been set up to exclusively represent EMI repertoire for online and mobile exploitation in Europe. Based in Germany, CELAS is a joint venture between the MCPS-PRS and GEMA company, with offices in Munich and London. CELAS is the first organisation of its kind to offer panEuropean licences for its repertoire, and it is an exclusive agent for the world's largest music publisher, EMI.

CELAS Registered in Germany; offices in London and Munich


‘PEDL’

PEDL


‘DEAL’


‘PAECOL’


PRS for Music Pan European Licensing

Anglo American Performing Rights


Pan European Rights Table


WHAT DOES ANY OF THAT ACTUALLY MEAN IN PRACTICE?

January 2009: PRS Template Presentation


How does Pan European Licensing Work?

Invoice per territory LESS Pan Euro Rights Holder share

Invoice per territory LESS Pan Euro Rights Holder share

Invoice per territory LESS Pan Euro Rights Holder share

Territorial invoices for non Pan Euro repertoire issued by the local societies

Transactional invoice for PRS (or other) share

Pan-European invoice issued by PRS


How repertoire is licensed by PRS for Music UK

EUROPE

Other Society rights Universal Music Publishing Sony/ATV Music Publishing EMI Music Publishing

PRS Direct Members IMPEL Warner Chappell IMAGEM Peer Music Publishing

RESIDUAL BLANKET LICENCE

REPERTOIRE SPECIFIC LICENCE

covers all repertoire expect that we know we do not have the mandate to collect

covering only the specific repertoire we identify as licensable under our mandate across Europe.

Rights covered by PRS for Music

Rights not covered by PRS for Music


‘Re-Aggregating the Blanket’ • Response to the market • PEL is fragmenting what was a simple process for a provider in a single territory • Primarily for UK only services • Strictly subject to member opt in and approval • Mandates currently being finalised • Positive for smaller services and National Services


PRS for Music Weâ&#x20AC;&#x2122;re here for Music

Nick Edwards T: 0207 306 4260 E: nick.edwards@prsformusic.com W: www.prsformusic.com

January 2009: PRS Template Presentation


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