The Global Music Publishing Market – An Analysis

In a Music Business World Wide article[1], music industry analyst Will Page calculated a value of US $11.34bn for the global music publishing market in 2014. The number comprises of US $7.55bn for the collection of performance fees, US $1.32bn for mechanical collections and US $0.35bn for private copying collections by CISAC[2] members and US $0.42bn for non-CISAC mechanical collections (e.g. Harry Fox Agency collections). Further US $1.70bn of revenue have to be added for music directly licensed by the publishers (“grand rights” and synchronisation rights).

 

Figure 1: The global value of the music publishing market in 2014

Source: After Music Business World Wide, “$25 billion: The best number to happen to the global music business in a very long time”, December 10, 2015 (retrieved January 19, 2016)

 

The analysis highlights that music publishing is as relevant as the recorded music industry with a global market volume of about US$ 15bn. Therefore, this blog post analysis the global music publishing market in a long-term perspective and investigates economic relevance of music publishing for the music majors – Universal Music Group, Sony Music Entertainment and Warner Music Group – as well as the structure of the global music publishing market.

 

The Global Music Publishing Market – An Analysis

A long-term analysis highlights that the global music publishing market nearly doubled from US $5.84bn in 1994 to projected US $9.4bn in 2011 (Baierle 2009: 215). Though the market data are from different and not fully comparable sources, they indicate nevertheless a robust growing music publishing market, whereas the recording music market significantly decreased in the same period.

 

Figure 2: The global music publishing revenue, 1994-2014

Sources: 1994-2000: NMPA Survey 2002; 2001-2005: calculation by Baierle (2009: 215); 2006-2011: Financial Times Music & Copyright, #344, June 6, 2007: p. 6 (values for 2008-2011 are projected); 2012-2013: no data available; 2014: Will Page in Music Business World Wide, “$25 billion: The best number to happen to the global music business in a very long time”, December 10, 2015 (retrieved January 19, 2016).

 

The Global Collections Reports by CISAC confirm that the music publishing market has been growing since 2008. However, CISAC statistics just cover the numbers reported by its member collecting societies. Therefore, data mechanical collections by Harry Fox Agency and similar U.S. mechanical rights agencies as well as revenue from the publishers’ direct licensing of rights (e.g. synch rights and “grand rights”) are not included in CISAC numbers.

 

Figure 3: Global CISAC collections for musical works, 2008-2014

Source: After CISAC Global Collections Reports, 2010-2015

 

The CISAC collections for performance and mechanical rights as well as from private copying and resale rights increased by 12.9 percent from 2008 to 2014, despite the ongoing decrease of the recorded music market. The drivers of the growth are the prospering digital music market and the live music sector, but also steadily growing revenues from licensing music to TV and radio stations. To sum up, the music publishing market shows no signs of a crisis, although in some segments – private copying, recording and reprography – the revenue is declining for years now.

The growth of the music publishing market is also reflected in the balance sheets of the major music publishers – Universal Music Publishing, Sony/ATV and Warner Chappell. The revenue of Universal Music Group Publishing increased by 63.3 percent from 2002 to 2014. The revenue growth, however, was mainly driven by the acquisition of BMG Music Publishing in May 2007 for EUR 1,639m. Nevertheless music publishing revenue continued to increase in the following years despite the sale of certain music catalogues (Rondor UK, 19 Music, 1 Songs and BBC Catalog) to CP Masters BV and ABP in 2008 complying with the stipulations by the EU competition authority (Vivendi 2007: 135).

 

Figure 4: The revenue of Universal Music Publishing, 2002-2014

Source: Vivendi Annual Reports 2002-2014.

 

Sony/ATV Music Publishing – a joint venture between Sony Corporation and Michael Jackson’s estate – also grew in the past few years by acquiring economically highly relevant music catalogues, such as Tony Martin’s Baby Mae Music in 2001, the country music publisher Acuff-Rose in 2002 and the catalogue from the famous songwriters Jerry Leiber & Mike Stoller in 2007. However, SonyATV became the world’s largest music publisher in 2012 by acquiring EMI Music Publishing – a vast catalogue with publishing rights for more than 1.3m titles (Sony Corporation 2013: F 31-32). Therefore, Sony’s 50 percent stake in Sony/ATV rose in value to US$ 649m (Yen 66.9bn) in 2014 Sony Corporation 2014: F 8).

 

Figure 5: The revenue of Sony/ATV Music Publishing, 2012-2014

Source: After annual reports by Sony Corporation, 2012-2014.

 

Warner Music Group’s music publishing company Warner/Chappell, which was acquired in 1987, recorded decreasing revenues from 2009 to 2013 with a slight increase in 2014. However, a US$ 25m additional payment of mechanical fees from record companies accrued in prior years can primarily explain the all-time high of music publishing revenues in 2009 (Warner Music Group 2009: 64). In the following years the decreasing music publishing revenue was due mainly to a decline in mechanical fees that reflected the ongoing recession of the recorded music market, especially the shrinking CD segment. Whereas mechanical fees contributed 43.5 percent to the total music publishing revenue in 2005, the share decreased to 19.5 percent in 2014. The performance revenues from music broadcasts and live performances has become the main income source for Warner/Chappell since 2008 with a share of almost 40 percent in 2014. The loss of mechanical revenues is offset by fast growing digital revenues. The income from licensing music copyrights to online music service providers and for mobile ringtones increased by 385 percent from 2005 to 2014. Whereas digital revenues accounted for just 3.3 percent of total music publishing revenue, they has become as important as revenues from mechanicals as well as synchronisations in 2014 with a share of almost 20 percent. However, the growth of digital revenue was mainly driven by a US$ 15m increase in music streaming revenue in 2014 (Warner Music Group 2014: 54). Synchronisation revenues as well as other revenues – mainly from sheet music licensing – remain more or less stable in the observed period.

 

Figure 6: The revenue of Warner/Chappell, 2003-2014

Source: After annual reports by Warner Music Group, 2005-2014.

 

Figure 7: The music publishing revenue of Warner/Chappell by segments, 2005-2014

Source: After annual reports by Warner Music Group, 2005-2014.

 

Figure 8: The music publishing revenue of Warner/Chappell by segments, 2005 and 2014

Source: After annual reports by Warner Music Group, 2005 and 2014.

 

The comparison of the three industry music publishers highlights that growth and gaining market share is only possible by purchasing large music catalogues such as Sony/ATV’s acquisition of EMI Music Publishing in 2012. When no relevant music catalogues are bought as in Warner/Chappell’s case, the music publishing revenue remains more or less stable. Nevertheless, the composition of revenue has altered dramatically. Mechanical fees from licensing physical sound carriers significantly lost ground, whereas revenues from licensing music performances and especially from online music providers increased. Thus, the growing music publishing market was fuelled primarily by the market entrance of independent music publishers, in particular BMG Rights Management and Kobalt.

After Bertelsmann AG had sold BMG Music Publishing in 2007 to Universal Music Publishing and had withdrawn from recorded music industry by selling its 50 percent stake of Sony/BMG to Sony Music Entertainment in 2008, the German media giant established a new publishing company called BMG Rights Management as a joint-venture with private equity firm Kohlberg Kravis Roberts & Co. (KKR).[3] BMG Rights Management quickly expanded by purchasing small and medium sized music publishing companies such as Crosstown Songs, Cherry Lane Music Publishing, Stage Three Music, Evergreen Copyrights, Chrysalis Music Publishing, Bug Music, R2M, Dreyfus Music, Montana, Union Square Music Publishing, USM Songs and Verse Music Group. BMG became the fourth largest music publisher when it acquired Virgin Music Publishing and Famous UK Publishing that had to be spun-off by Sony/ATV to secure European regulatory approval for its acquisition of EMI Music Publishing in 2012.[4] In 2013, Bertelsmann AG bought out KKR’s 51 percent stake in BMG Rights Management for EUR 300 million. In the same year, BMG again invested into recorded music by purchasing Sanctuary Records from Universal Music Group – a divestment made in compliance with the conditions imposed by the regulatory authorities to acquire EMI Recorded Music in 2012. However, the music publishing is still the main business of BMG Rights Management administering about 1.9m music copyrights.

Another fast growing entrant in the international music publishing market is Kobalt, which was founded in 2000. Kobalt just administers copyrights and, thus, songwriters retain full ownership and control of their works. Kobalt also guarantees a revenue share of about 90 percent for the copyright holders, which is significantly higher than in traditional songwriting contracts. Thus, Kobalt attracted prominent musicians such as music producer Max Martin, U.S. rapper 50 Cents, Gotye, Lenny Kravits, Skrillex, Maroon 5, Paul McCartney – to name just a few (see www.kobaltmusic.com). Kobalt is the only large music publisher that increased its market share – to 3.9 percent in 2014 – by organic growth rather than through acquisitions. However, Kobalt also set up a label service division in 2012 and launched with American Music Rights Association (AMRA) the world’s first digital mechanical and performing rights society.[5] Kobalt Music Group increased its revenue from GBP 25.7m in 2010 to GBP 50.1m in 2014, but is still making an operative loss of almost GBP 1.0m.[6]

Despite new market entrants the global music publishing market is a tight oligopoly controlled by the publishers of the music majors. Sony/ATV, Universal Music Publishing and Warner/Chappell had a combined market share of 65 percent in 2014. BMG Rights Management and Kobalt Music Group followed with 5.4 percent and 3.9 percent, respectively.

 

Figure 9: Music publishing companies, revenue market share 2014

Source: ¹https://musicandcopyright.wordpress.com/2015/04/28/recorded-music-market-share-gains-for-wmg-in-2014-sonyatv-is-the-publishing-leader/ (retrieved January 31, 2016) and ²http://www.musicbusinessworldwide.com/sonyatv-now-controls-rights-to-4m-songs/ (retrieved January 31, 2016) ³annual report of Bertelsmann AG (2014: 53), ⁴https://www.kobaltmusic.com/page-about.php (retrieved January 31, 2016).

 

Endnotes

[1] Music Business World Wide, “$25 billion: The best number to happen to the global music business in a very long time”, December 10, 2015 (retrieved January 19, 2016)

[2] CISAC is the acronym for International Confederation of Societies of Authors and Composers and is as an umbrella association for performing rights organisations.

[3] Reuters, “KKR, Bertelsmann plan music venture”, July 7, 2009 (retrieved January 31, 2016).

[4] The Hollywood Reporter, “BMG Buys Virgin, Famous Music Catalog From Sony/ATV”, December 21, 2012 (retrieved January 31, 2016).

[5] Music Business Worldwide, “Kobalt lauches a collection society – and invites publishers to join“, June 8, 2015 (retrieved January 31, 2016).

[6] https://companycheck.co.uk/company/04089275/KOBALT-MUSIC-PUBLISHING-LIMITED/financial-accounts (retrieved January 31, 2016).

 

Sources

Baierle, Christian, 2009, Der Musikverlag. Geschichte, Aufgaben, Medien und neue Herausforderungen. Munich: Musikmarkt.

CISAC Global Collections Reports, 2010-2015

Sony Corporation, 2013, Annual Report for the fiscal year ended March 31, 2013, Tokyo.

Sony Corporation, 2014, Annual Report for the fiscal year ended March 31, 2014, Tokyo.

Vivendi, 2007, Annual Report for the fiscal year ended December 31, 2007, Paris.

Warner Music Group, 2009, Annual Report for the fiscal year ended September 30, 2009, New York.

Warner Music Group, 2014, Annual Report for the fiscal year ended September 30, 2014, New York.