Publishers

At the UK Music PublishersAssociation’s AGM in London

in July, members of theorganisation were exposed to asimple message: “Adapt to, andmake the best of the new digitalenvironment, or else!”

Amid the usual business of anAGM, the MPA’s managementbrought in two luminaries – industryveteran turned mobile entertainmentexpert Ralph Simon and self-titledmedia futurist Gerd Leonhard – toshare their visions about thefuture of the music industry. Bothechoed MPA chief executiveStephen Navin who claimed(almost as a mantra) during hisopening speech that it was “agreat time to be a publisher.”

The vast majority of publishershave begun adjusting their businesspractices to the new digital paradigm,but both Simon and Leonhardinsisted that more must be done,especially in foreseeing the changesto come. Both were equallybuoyant about the future of musicpublishers who, in the new

ecosystem, are well positioned toharness their repertoire for amultitude of uses.

To give a sense of the revolutionin the making, Leonhard presented some statistics, outliningthe magnitude of the changestaking place:

• In the past 12 months, over300 million people in theworld joined onlinecommunities that use music.

• In 12 -18 months, digitalbroadcasting with ‘drag-and-drop’ TV andradio stations will bewidely available.

• About 75,000 differentdevices can play MP3 files.

• In the next 12 months,high-capacity wirelessdevices such as the iPhonewill be widely available.

“The wireless broadbandexplosion will dwarf anything wehave seen to date in terms of auser’s activity with media,”Leonhard warned the audience.This process will be sped up by theaccelerating convergence betweendifferent devices: an iPhone hasthe capabilities of a computer, aPDA can be a music player, mobilephones play music, and video

games consoles can now accessthe internet.

Ralph Simon, chairman emeritusof the Mobile EntertainmentForum, concurs. “Mobile phonesare now mini-PCs,” he says,stating that the real convergenceof media will occur in the mobilespace, which boasts 3 billionmobile phone users compared tojust 1 billion internet users.

User powerLeonhard claimed that consumersare running the show and theirbehaviour is evolving from an“ownership” model to an “access”model. “Wireless broadband iskilling the ‘selling copies’paradigm,” he said. “Sellingcopies has become secondary –selling access comes first.

“New technologies alwaysdisrupt, but always make themarket bigger,” he continued,adding that one consequence ofnew technologies is that the webhas become “a gigantic machineto copy content,” which is onebusiness aspect that publishershave been familiar with from theearly days of sheet music. “Theinternet is a publishing machine,”he declared.

Leonhard forecasted that in afew years from now, 75% of amusic publisher’s business will belocated in emerging territories inSE Asia or Latin America, regionswith a high rate of economicgrowth, a young population and arapid mobile phone penetration.But, for the business to grow, itwill have to morph from a

Music publishers are in a good position to make thebest of the digital revolution, argue mobileentertainment guru Ralph Simon and media futuristGerd Leonhard. And many publishers agree.

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‘unit sales’ and ‘$ per copy’ model tonew models. He warned againstturning users into pirates andinstead, invited the music communityto “participate, not prevent” inorder to benefit from potentiallylarge revenue opportunities. Butsuch active engagement requires adifferent mindset.

Leonhard urged the audienceto become “digital natives” andstart thinking and acting digitally.“The world is rapidly becoming adifferent place but most of thebusiness rules and traditions ofmusic publishing have notfundamentally changed,” he said,explaining that with the rapidpace of change, rights ownersmust be flexible and able to adjusttheir business practices fast.

And as much as themarketplace is changing at speed,so too must publishers be able tooffer a speedy solution. “Recordedmusic and publishing are mergingin terms of licensing,” Leonhardsaid. “Going forward, music rightsmust be marketed and licensedtogether.” If not for ease for the

consumer, then because bothusers and service providers don’thave the luxury of time.

Gazing into his crystal ball, hepredicted a sharp drop inmechanical revenues (albeit with

the potential to regain strengthwith the advent of new formats)in the mid- to long term, in synchwith the decline in sales ofphysical goods. But it’s notentirely negative news, as heforesees a rise in revenues fromseveral business sectors: on-demand services; flat rates

revenue sharing; public, internetand live music performances; alltypes of synchronisation;background music; sheet music (inprint or digital scores); lyricsservices and ringtones.

FlatliningLeonhard is a major proponent offlat rates applied to any servicewhich gives consumers access tocontent, the proceeds of whichcan be shared among rightsholders. “It is more about revenuesharing,” he claimed. “The digitalecosystem is broken, so we mustlook at music as a service…freeand flat rates [with users] could bea solution.”

The concepts of music as aservice, revenue sharing andrevenues based on usage ratherthan acquisition are the way tothe future, he claimed. ButLeonhard admitted that successwould only be possible if licensingis simplified – in particular bytearing up territorial deals –

JEREMY LASCELLESCEO, Chrysalis Group

If you look at the sector, it’sclear that recorded music is hurting,whereas music publishing is robustand has a healthier future becausewe can tap into so many differentrevenue streams. Our businessstarted over 100 years ago sellingpublished music. One century downthe line, it’s still a thriving business,because along the process we haveadded many new revenue streams,such as performance andsynchronisation. Obviously,revenues from mechanicals aredeclining, but as long as we’reable to grow in other areas, we’llhave a healthy business.

NIGEL ELDERTONManaging director, peermusic UK

The internet has been a sort ofcultural revolution in the way we gotour heads around licensing. Becausewe have always been in the businessof licensing, we have been quickto license to the new players. Therecent deal the Alliance made withYouTube is systematic of the waywe license to new models. We onlywant to make sure it gets monitoredand that we get remuneration outof it.

NICHOLAS RIDDLEManaging director, Edition PetersVice-president, MPA UK

Anybody involved in music oughtto be optimistic. Music probablypre-dates speech, and is a veryimportant part of human expression.If music continues to exist then thequestion for us publishers is to figureout our role. We have to changeand we have to go with the change.There is going to be a role for peoplewho look after those who create themusic. I see lots of opportunitiesfor publishers. The fact that atechnology can be misused is not agood reason for not using it. Theinternet forces commercialchanges upon us, and like GerdLeonhard, I believe we cannotbase our future model on usage; ithas to be on access. As publishers,we have to figure out what to doto contribute to the food chain.

FABRICE NATAFManaging director, EMI MusicPublishing France

Our job is to continue to findways to exploit music and keepour authors satisfied. I think ofpublishers as solution finders andproblem solvers. We do not havedirect access to markets to reachconsumers, but our role is to thinkabout the ways to get there. Andfor each track or for each author,there must be something that youcan find and that can be done.

“Going forward, music rights must bemarketed and licensed together.”

Gerd Leonhard

What publishers sayabout the future...

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and if masters and publishing canbe offered together to licensees.

So after adopting an entirelynew collection system, jointlicenses, a major philosophicalshift and the burying of manyhatchets, how did he foresee therevenue itself flowing back topublishers? He predicted that thesheer volume of content beingused would lead to a boom ofmicro-transactions that will needto be monitored and monetised.

The irrepressible technologicaladvances make it mandatory forall rights holders to license to alltypes of business models as fast aspossible. Because of the ever-evolving nature of technology,business models are changingrapidly, so deals should be madeby rights holders for the shortterm, and be flexible.

The risk, Leonhard believes, isthat without proper licensingschemes, consumers willnevertheless continue to use musicon a host of different devices andplatforms, and with the ‘usecontent and ask permission later’mentality of service providers, it’s

up to rights owners to pre-emptthese opportunities by licensingcontent, and fast! “The ‘no’ worldof rights must become a ‘yes’world,” said Leonhard.

Collection plateAs much as publishers and labelsmust throw off their real-worldtrappings for a new ‘digitalnative’ existence, so the other endof the revenue chain needsadjusting: both the mandate androle of authors’ societies needsredefining. According toLeonhard, however, technologywill also be their saviour,transforming how societiesmonitor content, collect payment,and redistribute the monies.

Leonhard believes that the wayto ensure all rights holders areremunerated is to set up collective

licenses for the digitalconsumption of music, close to thecurrent radio license. Theremuneration of rights holderswill be based on the monitoringof the use of music. He takes theexample of the UK where a flat

rate could be set at £1 per weekper user, through mobile phoneproviders or ISPs. Such a levywould yield around £40million(!57m) per week or £1.92billion(!2.75b) a year, twice the currentlevel of revenues from recordsales. “The pot is going to grow,”he asserts.

For such a swelling of coffersto occur, there are pre-requisites:a need for a concerted approachwith record labels; open,transparent and aggressively

“The ‘no’ world of rights mustbecome a ‘yes’ world.” Gerd Leonhard

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affordable licensing standards; flatrates for access to digital music;and smart and efficient technologyfor global-licensing tasks.

Mobile magicIn his presentation, MobileEntertainment Forum Americachairman emeritus Ralph Simonwas similarly enthusiastic aboutthe future of music publishing,stating in his preamble: “Are weracing to an uncertain future? No!

There are great, new mobileopportunities for music publishersand copyright holders.”

In the same way that Leonhardasked the audience to become“digital natives”, Simon declared itwas time to “mobilise” the musicand creative businesses. With theadvent of wireless communicationtechnologies, consumers areincreasingly becoming ‘nomads’,wanting to access their content anytime, anywhere. To adjust to thesenew ‘nomadic’ patterns, publishersneed to change their licensing andexploitation processes and beopen to new music models.

Backing up his comments,Simon cited a recent report intothe spending habits of youngEuropean consumers fromW2Forum which showed that“kids spend eight times more ontheir phones and phone bills than

they do on analogue music.”According to the report, theaverage European would spend$28,000 (!19,500) oncommunication in a lifetime.

In the US, total wireless datarevenues were up 77% in 2006 to$15.2b (!10.2b) with revenues frommobile games up 37%. Overall,there will be 2.87 billion mobilephones in the world by the end of2007, with 230 million in the USalone. About 100 million subscribersare actively using wireless data.

Simon also made the case forthe importance of ‘cross-platform’thinking, with television, radio,print and the internet becomingmobile and accessible anywhere,especially with faster connectivityand bigger storage space inwireless devices. “Consumers preferto control their media rather thanbe controlled,” he said.

Content explosionFor Simon, the consumer’s thirstfor all things mobile provides newopportunities to the music community.The mobile experience can includepodcasts, mobile sites, artists’ photogalleries, video and audio streamingand downloads, not to mentionaccess to lyrics and news content.“You need to build a mobile sitefor your artists,” he stated.

“There are great, new mobileopportunities for music publishersand copyright holders.” Ralph Simon

Ralph Simon

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