By Emmanuel Legrand
The creative sector has entered a new phase in the coronavirus global crisis by starting to measure the impact of the pandemic on its global streams of revenues for all businesses and individuals affected, following a first wave of urgent relief packages put together by governments in most countries and regions.
In the short-term the businesses most impacted are those who depend on performances and whose live shows have been canceled, in particular in the music sector. This also includes the whole film and TV production field, as all projects have been halted in Asia, Europe, Africa, North and South America.
Rights collections societies have warned that they will also feel the impact. The music sector, and the AV sector, are bracing for a reduction of the proceeds from authors' rights and neighbouring rights, due to a decline in advertising revenues from traditional media (radio, TV), and from the use of music in public spaces, due to the closing of most businesses, and a drop in advertising revenues. Private copying schemes are also impacted by the reduction in global consumption.
Lifeline for publishers
In Europe and other regions, collective management organisations have been at the forefront of the aid mechanisms for the sector, such as GEMA in Germany, SACEM in France, SOCAN in Canada or PRS for Music in the UK, first by ensuring that monies collected would be distributed, and also by setting up emergency relief funds.
"It is appreciated that PRS and other CMOs around the world are looking at ways of helping publishers and songwriters at this moment," said Roberto Neri, Chair of the UK's MPA. "This will provide a lifeline for publishers and songwriters suffering hardship at this time."
However, the CEO of a music rights society told Creative Industries Newsletter that the impact on collections will most likely be felt in six to 18 months, as the whole system of collective management has a time delay between the use of music, collections and distributions, but there is no doubt that collections will be impacted.
Decline in collections
"According to the uses and countries, rights have an inertia of three to 24 months," said the CEO. "Eventually, it should really affect everyone if the traditional media go into meltdown and for a long time."
For Jérôme Roger, director general of French neighbouring rights society SPPF, it is obvious that the collection of neighbouring rights as well as authors' rights will be affected in the coming months." Talking about the impact of the pandemic on collections in an interview with NewsTank, Roger said that equitable remuneration for the use of music in public spaces, will be significantly impacted due to the closure of bars, restaurants, discotheques, hairdressers, specialised stores, etc.
These music usages represent 73% of the collections from SPRE, the umbrella society that collects music rights on behalf of all rights agencies in France for the public performance of music.
Risk of recession
"Their closure for a month and the risk of recession to come will cause a significant loss of income for the beneficiaries," said Roger, who foresees a tense situation financially throughout 2020.
The French music sector will also be impacted by the decline in revenues from the private copy levy, as sales of devices has significantly dropped, in particular the sales of smart phones, which make for the major part of collections for private copying.
In Germany, ten of the music industry's trade associations representing the live industry (BDKV, LiveMuzikKommission, BVPop), record labels (BVMI, VUT), music publishing (DMV), artists and rights organisation (GEMA and VPL) have estimated that the music sector (artists, concert promoters and festivals, labels, music publishers, retailers, venues) in Germany could face up to €5.4 billion in lost revenues in the next six month, according to a document published by MusikWoche.
Big losses for the live sector
In the live sector, the survey estimated that revenues of €3.6bn would be lost from canceled shows, with an additional €206m lost by clubs and smaller venues, €232.6m losses from 550 canceled small and medium-sized festivals and €451m from large festivals.
In the music publishing sector, the DMV estimated that revenues from royalties for the use music at events would be down 60%, revenues form radio and TV down 25%, from mechanicals down 20% and for the use of music in clubs and restaurants down 50%. Publishers also expect a decline in sync revenues since all film and TV production has come to a halt. Overall, the DMV puts the losses of €362.9m.
In the recorded music segment, BVMI and VUT expect sales losses in a range of €100m to €150m due to the closing of brick-and-mortar retailers. Neighbouring rights are also expected to be impacted since there will be limited revenues from public performances and private copy.
An uncertain future
Based on these figures, the organisations claim that the diverse music culture in Germany is “in a dramatic situation” and faces “an uncertain future." While they welcomed the first wave of measures taken by the German federal government, which "showed the underlying appreciation of the cultural and creative industries in general and our industry in particular," the organisations noted that the first aid measures were short on specific answers for the sector. They claim there is an urgent need for “non-repayable emergency aid” to compensate for damage.
"Rapid state emergency aid is therefore urgently needed, for example for rent payments and wage payments," said the organisations. "These should be made available quickly and unburdened by bureaucracy and should not depend on restrictive conditions such as direct impact on health policy measures."
In the UK, Peter Leathem, CEO of PPL, unveiled that the neighbouring rights society had distributed its highest ever round of international royalties in Q1 2020. He acknowledged the importance for societies to continue make payments "at such a crucial time for our members."
Urgent to deal with this crisis
Leathem added, "We know that PPL’s collections are an important revenue stream to performers and recording rights holders and, in these challenging and uncertain times, we hope the monies will help to provide some real assistance for the weeks and months ahead. Everyone at PPL will be continuing to work hard during this time to ensure music people get paid.”
Leathem did not elaborate on the impact the pandemic will have on the long term prospects for collecting societies, but PPL, like other societies, is expecting a drop in collections resulting from a drop in advertising revenues from traditional media and from the closure of businesses using music.
Tom Watson, the new chair of cross-industry body UK Music noted that "at the heart of the sector are the songwriters and musicians, many thousands of whom stand ready to serve in the national effort against the coronavirus." He added, "The cancellation of live music events has devastated the sector. Thousands of jobs are now in peril and threaten the long-term bottom line of the UK economy. Our urgent task is to work with our colleagues and partners in Government to support the national effort to defeat coronavirus, whilst protecting the jewel in the crown of British culture -- commercial music."
The newly appointed Chair said the urgency was to "deal with this crisis" and he said he would be seeking "urgent talks with ministers and officials to ensure that we support the music-makers of Britain and the industry that always sustains us through the good times and the bad.”