By Emmanuel Legrand
[This piece was originally
commissioned by MIDEM for the 2011 edition of the music trade show. I thought
its content would still be of interest a few months after it was initially published
on the MIDEM blog. Whenever necessary, I have updated information.]
Here are ten of the things
that were done, seen or heard in Cannes at Midem 2011 regarding music publishing.
1.
THE END OF A&R?
Hartwig Masuch, the CEO of
the recently launched BMG Rights Management, a JV between German media group
Bertelsmann and private equity fund KKR, dropped a bombshell during MIDEM’s
International Music Publishing Summit. He simply stated that in the 21st
Century, A&R as a function is no longer relevant for publishers, who should
focus on administration, and get the best back office possible in order to
track and pay royalties efficiently. He argued that the “bottlenecks” that
existed in the past are not prevalent anymore and artists have countless new
ways to develop their artistic craft through the internet. “I think that
A&R will be less important than the services [publishers can provide],”
said Masuch.
 |
| Peermusic' Mary Megan Peer |
That view goes against the
grain of what most publishers believe their business has to be (and makes one
wonder what the executives at Chrysalis, a publishing company that has always
taken pride in being an A&R incubator, and which has been recently acquired
by BMG Rights Management, must be thinking about it!).
For the record, on the
panel, Mary Megan Peer, daughter of publishing legend Ralph Peer, and in charge
of peermusic’s affiliate in Argentina, contradicted Masuch and reiterated the
importance of the A&R process for publishers. “We are doing more A&R
work than ever,” she said. “The role of A&R and the value it brings should
not be underestimated.” After the panel, one publisher told me that Masuch’s
vision of publishing was “one of the most depressing things I’ve heard in a
long time”.
2.
BIG CATALOGUES PROVIDE CRITICAL
MASS
It is often boasted that big
publishers have catalogues of over one million works. But it would be very
interesting to survey all four major publishers and see what is the share of
active works and where does the bulk of the action (read revenues) comes from.
It is quite likely that the most active copyrights are either standards or very
recent songs, with the rest constituting a huge and very thin tail. What keeps
the value of these catalogues up is the constant rejuvenation of catalogues
with new titles, new songwriters, new composers, new projects.
And the successful
publishers are the ones who keep the right balance between heritage and new
works. What these catalogues provide is critical mass and steady revenues,
which is why it attracts investors. Hence the recent acquisition frenzy of
VC-funded companies such as Imagem or BMG Rights Management. And it’s not over…
3.
BUT RECENT WORKS BY CREATIVE ARTISTS KEEP CATALOGUES ALIVE
One factor often overlooked
by investors is that a publishing catalogue’s value depends on the quality of
the compositions, and not necessarily on the number of works that constitute
said catalogue. Owning the rights to thousands of mediocre works is not the
same as dealing with 300 songs from a top class songwriter (or 150 from the
Lennon/McCartney songwriting partnership!).
Ask Ralph Peer, who had
bought just before MIDEM the catalogue of Canadian songwriter/producer David
Foster (Michael Bublé, Josh Groban…). With 3,000 tracks, it is not a huge
catalogue, but Peer points out that almost all of them are active, bringing
real value to the deal. And if you suggest to the chief executive of peermusic
that, as the rumour has it, he paid $30 million for it, he gently smiles at you
and says, “David probably wished we did...”
4.
MORE CONSOLIDATION IN VIEW
The talk around the
Croisette concentrated a lot on the shape of the music publishing business in
the next 12 months. With the quite volatile situation at Warner and EMI, and
the ambitions of KKR with BMG Rights management (which has now integrated
Chrysalis), the whole landscape could be completely changed by next MIDEM, with
quite probably more consolidation. Warner/Chappell could go to KKR/BMG, while a
new music entity would be created by the merger of EMI and Warner’s recorded
music units and incorporating EMI Music Publishing.
With the consequence that
quite a few executives who were stalwarts of MIDEM over the years may well have
changed jobs (if they still have one!) by then. Consolidation will most likely
create a gap between the top four publishers and the rest of the crowd, with a
few mid-size companies such as Imagem, Peermusic, Kobalt, Bug Music, Olé and a
myriad of small publishers.
[Update: Since then, BMG and KKR have acquired Bug Music and
are aggressively pursuing EMI Music Publishing.]
5.
PUBLISHING IS ALSO ABOUT RIGHTS MANAGEMENT
That’s what the above
mentioned Hartvig Masuch claimed during the Publishing Summit, and it is quite
obvious that in today’s digital environment publishers need to have the proper
infrastructure and administration systems in place to make sure they can locate
all the usages of their works and get paid.
 |
| BMG Rights Management's CEO Hartvig Masuch |
Masuch, who’s had the
envious position of starting a business of publishing from scratch, said that
music was an increasing “fragmented business” and called for “very transparent
services in collecting the money and distributing the money”. He added, “We
will see a proliferation of offerings, and the link is the system that allows
you to monetise your works. We want to be the best in the administrative field.
If you are not able to collect and pay out, there’s no need to be there.”
It is rarely a topic worth
mentioning, probably because it is not very sexy, but the key to survival for
publishers in today’s high tech environment, is to have a back office running
like a Swiss clock. And to achieve that level of services, it requires serious
investments in IT tools to make sure royalties are properly tracked and paid.
6.
A GLOBAL DATABASE – BUT WHAT FOR?
 |
| WIPO director general Francis Gurry |
And it is not surprising
that music publishers are the driving force behind what is described as the new
how potato of the moment: the Global Repertoire Database (GRD). This Babylonian
project consists in creating one single database for all the music works,
listing the various rights owners for each work. The GRD is believed to offer
greater fluidity for the digital market in enabling works to be identified and
rights owners to be remunerated and simplify licensing.
There were many discussions
at MIDEM – both in public and private – regarding the GRD, or what the director
general of Geneva-based World Intellectual Property Organisation Francis Gurry
called a global registry. In his MidemNet keynote speech Gurry positioned his organisation as the potential depository and
operator of the GRD.
To simplify matters, there
are at the moment two competing projects. One spearheaded by, among others,
Peter Jenner (chair emeritus of the International Music Managers Forum) and Jim
Griffin; and another coordinated around Deloitte on behalf of various
stakeholders, many of them being publishers.
Gurry wants WIPO to be at
the heart of the process, with his organisation capable of providing expertise
in three crucial fields: governance; a viable and sustainable system for
developing the registry; and a dispute resolution procedure.
Since MIDEM, discussions
have continued and it is not impossible that in January 2012, when the industry
convenes in Cannes again, serious progress will have been made with the GRD
with the merger of all the different projects. There is a business urgency,
stated Ralph Peer, that there be only one database and only one source of
information. “This is important,” said Peer, “because otherwise there would be
conflicting information. And money will not be distributed. So it is vital to
have one source.”
[Update : since Midem, the projects have moved on: CISAC, the
international confederation of author’s rights societies has joined the
discussions on the GRD project, already backed by
Amazon, EMI Music Publishing, iTunes, Nokia, PRS for Music, SACEM, STIM and
Universal Music Publishing, while WIPO continues to work on the International
Music Registry initiative (IMR). New developments are expected at Midem
2012.]
7.
COLLECTIVE RIGHTS MANAGEMENT: BARNIER IS ON THE CASE
In his MidemNet speech, the
European Commissioner for Internal Markets (and thus in charge of copyright
issues) praised the creative community for their contributions to the global
economy (for Europe alone, creative industries represent more than 4 million
jobs in Europe and more than €900 billion worth of business), but also
confirmed his intention to present a Directive of Collective Rights Management
this Spring. “The modernisation of collective management, and especially the
role of authors' and composers' societies, is a key project of the Commission,”
said Barnier, who noted that “rights are fragmented between authors,
publishers, artists, producers”.
The contours of Barnier’s
proposed legislation is still unclear, and it is obvious that between the views
of his Commission colleague Neelie Kroes, in charge of the digital agenda, who
has been vocal in advocating a far more open and streamlined system of
licensing, and Barnier, there will be some necessary adjustments.
Why does it matter to
publishers? Because they all rely on rights societies throughout Europe to
collect their royalties, and any change in the system, which has already been
dramatically transformed – not necessarily for in the way of simplifying –
under the impulse of Brussels, has an impact on their business. In the past few
years, the major publishers have made separate deals with rights societies
across Europe to license their Anglo-American repertoire for online usages. So
all eyes will turn to Brussels in the months to come to figure out what will be
the next steps.
[Update: Barnier eventually announced later this year that
the Directive on collective management proposing a
single European framework to make multi-territory licensing easier would be
disclosed at the beginning of 2012. In his World Copyright Summit's keynote speech in June 2011,
Barnier said the framework would also include “common rules for transparency,
governance and supervision”.]
8.
IT’S ABOUT LICENSING, LICENSING, LICENSING!
Forrester Research analyst
Mark Mulligan ruffled a few feathers in his MidemNet presentation when he declared that, “unless the labels and
publishers change the way they license services, we are going to see the trend
of dying CD sales and stalling digital downloads continue”. He continued,
“labels are going to have to feel the long-term pain before they start
licensing as aggressively and liberally as they need to.”
In the fringes, these
comments were seen less as an attack on publishers than on labels (especially
the majors) that were blamed for slowing down the licensing process. Publishers
claimed, at least in Europe, that they have been licensing “aggressively and
liberally” for some time already, directly and through collective management
societies.
Such trend was confirmed on
a panel titled “Digital Services & Authors’ Societies — Building
Efficient Partnerships”, moderated
by yours truly, in which representatives from societies like PRS for Music (UK)
and Sacem (France) explained that they have been licensing dozens of new site
sin the past two or three years. Their goal, they said, was not to slow down
the market but rather see the emergence of new players that will contribute to
the revenues of authors, composers and publishers. And societies must have
heard with relief the comments from Axel Dauchez, CEO of France’s streaming
platform Deezer, who declared that making a deal with Sacem gave the service
official recognition and precipitated licensing deals with record labels.
9.
AND IT’S BETTER IF YOU CAN PRE-CLEAR AND LICENSE BOTH PUBLISHING AND MASTERS
RIGHTS
Combining under one single
roof publishing and masters rights of tracks has certainly become a trend among
publishers and labels alike. Obviously majors have been bundling rights for a
long time now in order to facilitate the licensing process, especially for
syncs, for which time and easy access to rights is an issue. But it is not
limited to big companies.
Smaller players such as
Peter Gabriel’s Real World do it too. As Real World director Ed Averdieck explained during MIDEM’s Publishing
Summit, “A big part of [the
publisher’s process] is how to match the master with the composition and make
the process of licensing easier.”
But bundling the rights – in
order to offer clients both rights – is only one part of the process. The other
step is to be able to pre-clear these rights. In many cases sync deals require
the approval of rights owners, especially the authors and composers of the
tracks, which can slow the decision making process.
Averdieck says there is
going to be an increasing demand towards pre-cleared rights. “The advantage of
that is as well as being able to license the master and the song in one go, one
can license the rights instantaneously, which is what the clients are looking
for.”
It might be a reasonable
goal, but realism must prevail, responded Mary Megan Peer, who argued that a
lot of writers do still want to have a say on the use of their works, not least
because they may not want to be associated with specific brands or products.
And in the case of publishing-only operations such as Peer, not associated with
a label, this means negotiating with the owners of the masters’ rights. “We’ve
certainly seen the benefit of either controlling or working closely with the
owner of the master copyright,” she said. “In terms of automatic pre-clearance,
I think that’s pretty tough.”
Tough as it may be, it
certainly looks like a path to follow.
10.
PUBLISHING – THE BEST JOB IN THE MUSIC INDUSTRY?
In a recent blog, I
described music publishing as the greatest job in the music business at the
moment (OK, probably with that of a manager). Think about it: music publishers
will continue to be at the heart of the creative process simply because this is
what they’ve been doing by nature: signing promising songwriters and composers
at a very early stage, following their progress, helping them record or place
their songs, until they blossom. In an era where labels play this role less and
less, there is a gap to fill, and who else can do that but publishers?
Publishers are also the
custodians of heritage works, those that are cherished by investors because
they promise steady flows of revenues. But there are two types of publishers:
those who sit on their stacks of heritage tracks and wait for royalties to
flow; and those who relentlessly pursue new streams of revenues for tracks that
have already proven their worth. Part of BMG Rights Management’s business model
is to mine their catalogues, try to bundle publishing and recordings rights and
ship them around aggressively. That attitude also is constitutive of what a
modern publisher should be – a sales house.
Few sectors are at the
crossroads of art and commerce, new talent and heritage, traditional business
models from a century ago (selling sheet music) and digital licensing from the
21st Century.
An album by Rod Stewart once promised ‘Never A Dull Moment’ – and that could quite rightly apply to music publishing right now.
An album by Rod Stewart once promised ‘Never A Dull Moment’ – and that could quite rightly apply to music publishing right now.
If you found this post informative, you might be interested in the following stories:
Ten music marketing tips for the digital ageTen points about copyright from MIDEM 2012
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