By Emmanuel Legrand
Canada's rights society SOCAN has informed its members that it anticipates an 11% drop in collections in 2020 compared to 2019's revenues, due to the coronavirus pandemic. However, the revised forecast is better than the one delivered in May when SOCAN predicted a 20% drop in revenues for the year.
In 2019, SOCAN collected a record CA$405.5 million (€261.1m) and, according to this new forecast, it should collect CA$350-CA$360m in 2020. Domestic revenue streams represent roughly 78% of total SOCAN revenue, with the remainder coming from international sources. In June, SOCAN forecasted that 2020 international revenue "will likely go down by approximately 10% when measured against 2019 international revenue."
The Toronto-based society released a detailed outlook of the situation, taking into account five months of lockdown in Canada and in most of the world. The figures show that live concerts revenues were hit the hardest with a 74% drop in May 2020 and 81% in July (compared to the same month a year before), followed by general licensing revenues with a 63% drop in May and 48% drop in July. Radio, cable and radio suffered moderate drops (between 10% and 20%), while both audio and AC streaming grew by 15% to 20%.
Decline in ad revenues
For the full year, SOCAN anticipates that revenues from concerts, that made 7% of total domestic revenues in 2019, will drop to 1% of total collections, while general licensing will drop from 6% in 2019 to 4% in 2020. Cable revenues are expected to be flat at 23% of the total with TV up 1 percentage point to 14%, and radio down 3 points to 14%.
"The expected decline in ad revenue has influenced a reduction in [radio, TV and cable] license payments to SOCAN," said the society. It added: "We forecast a 5% drop in Television royalties (an improvement over the 14% decline we forecasted in May), and an 11% decrease in Cable (again, an improvement over the 14% predicted before).Radio has seen a larger than projected decline in advertising revenue. This decline is mainly due to the regional aspect of advertising by small businesses that have had to reduce budgets or shutter completely. That reduction in advertising directly affects royalties, which we now expect to decline by 21%."
Meanwhile, audio streaming is expected to jump from 13% to 17% of the total, and AV online from 10 to 13% of domestic revenues. "Canadians are enjoying online music and television streaming more than ever," said SOCAN. "Music streaming continues to see steady increases, with the most significant growth (21%) in subscription-based audiovisual streaming services such as Netflix and Disney+. Internet music streaming revenues are showing a 13% increase. Together, Internet and AV streaming account for 39% of SOCAN's overall domestic performing rights revenue. The next few months should indicate how many subscriptions will be maintained as young students return, and adults could spend less time at home."
An 81% decline in live music royalties
Regarding concerts, SOCAN noted that in mid-March, all revenue from live, in-person concerts "mostly stopped." Five months into lockdown, and with some recovery stages already implemented by the government, large indoor shows are still not permitted, and outdoor concerts have mostly been cancelled. "This situation could continue for the foreseeable future, and possibly into 2021," warned SOCAN. "We hope that won't be the reality, but we have taken a cautious approach to forecasting. We expect an 81% decline in Live music royalties [in 2020] for our members."
SOCAN said its Encore plan to compensate songwriters for live-streamed concerts on Facebook and Instagram has seen CA$132,000 so far in royalties payment "to help replace at least some lost gig revenue."
A significant impact
Overall, SOCAN anticipates that the Covid disruption will impact collections in 2020, 2021 and even 2022. "It is essential to remember the six-to-nine-month lag-time in the collection of licenses and the distribution of royalties," said SOCAN. "Knowing this, we anticipate the projected 11% decline in domestic revenue in 2020 to begin to be realised by members in the first six-to-nine months of 2021. We expect revenue for Media licenses in 2021 to be closer to 2019 values with a slow recovery towards the end of that year. We anticipate that Concerts and General Background licensing distributions will not fully recover until 2022."
SOCAN added: "SOCAN members will begin to see changes starting with our November 2020 distribution. Our analysis shows that our member distributions will begin to see a more significant impact in February 2021 and, provided trends continue, the lowest point occurring in May 2021 and anticipated return to pre-COVID-19 values in February 2022."