Music publishing`s biggest challenges laid bare

thereport
ISSUE 376 | 14 OCTOBER 2015
Contents 06 Beyond Music –
Twitter’s growing pains
07 Pinboard: Stats, deals,
startups and more
09 Country profile:
Chile
Writing
wrongs
Music publishing’s biggest challenges laid bare
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COVER FEATURE
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Music publishin
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Writing wrongs
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the report
D
iscovery through both metadata and
lyrics; streamlined royalty reporting
and payments; and the moving
target of revenue displacement.
Based on detailed conversations music:) ally
has had with key companies in and around
music publishing, these are the three biggest
themes gripping the sector in 2015 and the
things it needs to sort out before 2016.
There is a sense of progress being made
but also a gnawing realisation that what
were once open goals are now shrinking and
the publishing sector as a whole needs to do
something – fast – before they close forever.
Here we work through the topics
dominating the publishing debate and explain
what – if anything – is being done to capitalise
on them as well as pinpoint the areas that
require urgent attention before what was
once brimming with potential sours into a
missed opportunity.
Recorded music and live tend to dominate the discussions around
the music industry – one on the horns of navigating the transition from
physical to digital and the other having enjoyed a long period of
growth as online has yet to significantly disrupt its business. Within this,
publishing can sometimes feel like an overlooked part of the equation.
With that in mind, we spoke to those both in and around music
publishing about what is helping them accelerate into the fast lane as
well as what is grinding their gears. From metadata as both a payment
and a discovery channel to wider licensing and regulatory issues, the
coming year will be a bumpy one.
LYRICS: FROM MAYHEM TO
THE ULTIMATE METADATA
“With lyrics, it used to be a Wild West
scenario,” says Will Mills, chief revenue officer
at LyricFind, on the early websites offering
(often user-generated) lyrics. These lyrical
transcriptions were almost always unlicensed
and also they were very often wrong.
With over 400 publishers signed up
and deals in place with around 100 clients
– including Amazon, Deezer, Shazam,
SoundHound and MetroLyrics – LyricFind
is not only moving to tidy up this space but
also to create new revenue and marketing
opportunities for publishers.
Robert Singerman, global business
development at DotMusic, has been active
within the lyrics space for over a decade
and is highly enthused about what the
publishing industry can and should do
here. “I’ve been working on giving music
subtitles – or legal lyric translations – for 11
years,” he says. “Through that process and
through working with LyricFind on licensing
international indie publishers for legal lyrics
for the past five, I’ve had the opportunity
and the challenges to experience the
stasis and also the positive changes in the
publishing and performing rights businesses
globally. It’s been extremely interesting and
there is news somewhere almost every day.
Some of it’s even good news.”
A decade ago, lyrics online really
amounted to a sprawling mass of
transcription sites, often replicating each
other’s woefully transliterated song lyrics.
They were often unlicensed so there was little
quality control. Since then, sites like Genius
(formerly Rap Genius) have come along to
not only re-run lyrics but also dissect them.
On top of this, lyrics videos are often the first
way a new pop single is released (often as
a stopgap until the full promo video is shot
and edited together) while music services like
Deezer and Spotify are offering synchronised
lyrics on their players to not only enhance
the user experience but also to increase the
amount of time a user plays music.
“Static lyrics feel like an older technology,”
says Mills of the changing demands that
services now have of lyric services. Beyond
serving as a way to boost listener dwell time,
he says they also have a growing commercial
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function. “Synchronised lyrics are really
important for ad-supported services as they
increase the session time of the user and their
engagement,” he says. “That has a material
impact on ad CPMs.”
He gives the example of this at work
in tracks that mention brands, consumer
products and even places. With these key
words identifiable and taggable within a song,
specific ads can be targeted at the listeners
of the track. In basic terms, if a song mentions
clubbing in Ibiza, ads for flights, hotels and
clubs on the island can be sold around the
listeners to the song. “All of that is powerful
for big data plays,” says Mills. “We like to think
of lyrics at the ultimate metadata.”
To stress the importance of having
clean lyrics, Mills also argues that they
are increasingly important in search and
discovery terms. “We [LyricFind] serve many
billions of lyric impressions every year just
through our API,” he says. “I would say [lyrics
are] the biggest music discovery channel out
there digitally.”
THE MESS OF METADATA AND
MICRO-TRANSACTIONS
the report
services, labels, publishers, PROs – look bad
at the precise point when they really should
be doing a lot more to improve how they are
viewed as acting here.
COVER FEATURE
While Mills talks about lyrics as “the ultimate
metadata” and a way to get better and more
targeted ad results, the broader issue of
having clean and detailed metadata is still a
huge problem for the digital music industry
as a whole and the publishing business in
particular.
“Data is a huge issue,” says Gregor Pryor,
partner at legal firm Reed Smith, adding
that incorrect data can be open to abuse.
“The problem in the supply chain is that the
publishers are not as involved as they could
be. If a file gets delivered by the label that has
Synchronised lyrics are really important for
ad-supported services as they increase the session
time of the user and their engagement. That has a
material impact on ad CPMs”
Will Mills, LyricFind
input the metadata, publishers sometimes
use this to their advantage by saying that, if
something is not matched, they must own
it – or they must own some of it. I wouldn’t
want to be an indie songwriter or publisher
today. [Their share will be claimed by the
bigger publishers until it is sorted out.] That is
a problem.”
One publisher, speaking off the record,
says that incomplete and basic song
metadata is causing a huge logjam in
payment systems, with the smallest players
and writers suffering the most.
“Instead of suing people for unpaid
royalties and working out after the fact how
you pay it out, we should be really pushing
all of the big DSPs to provide us with data so
that from day one everyone can be paid,” they
say. “There is a massive amount of injustice
at the moment in terms of how people are
paid and who is paid. With digital, it should be
agreed that if you get played you should get
paid. In reality, it’s just not working.”
What is the best and quickest way to
fix this? “It’s difficult to put your finger on
the solution,” they say. “If you think about
collection societies, they are membership
organisations and they only run with
their members’ money. The members are
continually pushing for lower overheads
– which means you have fewer people
internally to sort things out. You are also
running on systems that
are 25 years old.”
They give the recent
example of La Roux
tweeting about her
streaming payments
as a consequence of
this royalty processing
tardiness that makes
everyone in the chain –
“@Spotify thanks for the £100 for this
quarter just gone, one more month and I
might be able to afford your premium service,”
she tweeted on 22nd September, piling on the
sarcasm. “Lucky me!”
Picked up on by numerous media outlets
and held up as yet another example of artists
getting a raw deal from streaming services,
this was a PR disaster that could have easily
been avoided, says the anonymous publisher.
“The infrastructure that artists and
publishers rely on is the reason that people
like Spotify are getting bad press,” they say.
“Take La Roux’s tweets about this. She was
looking at Spotify where she has millions of
plays and that will be worth more than £100
[after splits]. If you are getting paid 18 months
after a stream and streams are a growing
object, it is really difficult to say you have
millions of plays but only got £100. The way it
currently is, you’ll not be able to find it in the
ecosystem.”
Antony Bebawi,
European EVP of digital
& society relations
at Sony/ATV Music
Publishing, takes
exception at the point
about slow payments,
suggesting this has
been improving
markedly in recent
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COVER FEATURE
years. “We have managed to squash the
lag period because, in the beginning, it was
ridiculous,” he says. “The amount of data
coming in and hitting society systems was
unprecedented from their point of view. But
that lag has come down.”
He does, however, accept that robust
metadata is still the industry’s Achilles’ heel.
“The problem is the lack of good metadata
on digital services – and this is probably one
of our biggest challenges,” he says. “Our
perspective is that there is a value chain
and everyone in the value chain needs to
take some responsibility for their role within
that value chain – and not just accumulate
problems that they just end up bumping
into the lap of whoever it is at the end of the
value chain. Our perspective is that there
needs to be a way of incentivising labels,
aggregators and digital services to capture
much more information about compositions
when material is effectively ingested into
the services rather than leaving it for the
rightsholders to match an increasingly large
number of uses with inadequate information.”
It is this flaw in the current metadata
set up that is derailing the speed of microtransactions. Some are growing impatient
that this is being talked about as a problem
but feel that nothing is being done – or
certainly things are not being done fast
enough. They point instead to other
industries that have responded to these
challenges and long ago proved proof of
concept.
“If the mobile phone industry can run
on billions of micro-transactions every day,
why can’t we get a way where acts are not
paid in two years’ time?” they say. “They
should be able to get paid within 30 days
of a transaction. The thing that is massively
The problem is the lack of good metadata on digital
services – and this is probably one of our biggest
challenges” – Antony Bebawi, Sony/ATV Music
missing is clean
data.”
Kobalt is being
pointed to as a
company that
could, ultimately,
force the hand
of everyone else
here to both
speed up their
payments and
make the whole
system more
transparent.
“Kobalt has at
least gone out there and tried to be different,”
says Pryor. “I think it’s a really positive thing.”
Another publisher, speaking off the record,
says of Kobalt, “That is what everyone will
aspire towards.”
Pryor adds, “Much of that will depend on
if Kobalt attracts more and more songwriting
talent. If they grow their artist repertoire – and
they have already got some incredible artists
– the more that happens, the more everyone
else is going to have to take notice. Why has it
happened? They have invested in technology
and they are much more songwriter-friendly.
They are just generally innovating.”
Against all this (and despite 12 years in the
market), even the biggest digital music service
in the world is, due to weak metadata, still
unable to smoothly process all transactions
here. “I have heard that even iTunes still
has about 25% of monies generated held in
escrow because of conflicts and claims over
improper information and metadata,” claims
Singerman. “I’d imagine the numbers are even
higher for other DSPs.”
At a cost of
£8m, the collapse
of the GRD
(Global Repertoire
Database) in
July 2014 is held
by many in this
sector to be the
music industry’s
greatest own
goal in recent
years. “There were
just too many
different kinds
of stakeholders
involved,” is Singerman’s summation of why
the GRD hit the wall. “There were too many
internal battles within each participant’s
structure and board. When you have so
many participants involved, it is difficult to
pull it together. On the recording and master
negotiating and licensing side, Merlin has
done a great job for the indie labels.”
He does, however, point to a new platform
(and one that he works with) as possibly
helping to right many of these wrongs.
“Heaven 11 is basically what the publishers
and the PROs were trying to do with the
GRD – integrating all the related master
information and the release information from
DSPs,” he says. “It is a global, multi-territorial
map of rights – from contract registration,
content management and royalty accounting
– with toolsets for metadata ingestion,
marketing, conflict resolution and so on. It’s
an amazing platform that could really change
things.”
While much of the focus around metadata
has been about payments (and this is, of
course, hugely important), Chris Garrett,
co-founder and product director at licensing
company Beatroot, feels that the industry has
also unwittingly handed the keys of discovery
over to music services.
“The industry is like a bowl of spaghetti
– it’s a total mess,” he says. “There is no real
coherence or simplicity to it and how the
well-established publishers do business. That
is particularly frustrating.”
He continues, “The whole metadata
thing is really interesting. The rightsholders’
inability to get it together has ended up
with the streaming platforms building their
own data sets instead. For example, Spotify
bought The Echo Nest because it couldn’t get
a decent set of tags from the record labels.
They ended up building their own data set
around that and they are not in control of
what they recommend. The record labels
[and publishers] have no influence over that
whatsoever.”
This is an interesting take on what else
is being ceded in the wider failure to get
metadata up to speed for the modern age.
While the micro-payments side of things will,
eventually, get resolved, it may take copyright
owners much longer to redress this increasing
imbalance over the power of discovery,
especially as streaming will continue to grow
to become the main way of consuming music.
FROM REGULATION
TO ZERO LICENSING
On a macro level, a number of major things
are rumbling in both Europe and the US
that could have a profound effect on the
publishing business in general and the PROs
in particular.
“The Department Of Justice is currently
reviewing the consent decrees that govern
ASCAP and BMI,” explains Bebawi. “This is
neither a good news nor a bad news story
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COVER FEATURE
yet because we don’t know what the result of
the review is going to be. We are hopeful that
the result of the review is going to be greater
flexibility for rightsholders to decide which
rights to put into ASCAP and BMI. That would
put the US on a similar track to where Europe
is. That is what we are hoping for. But it is
difficult to know when it will land.”
Singerman, however, feels that
consolidation is the real issue here for
everyone. “Perhaps a Merlin licensing and
lobbying for the indie publishers can’t work
as the national publishing organisations
and the PROs have the majors onboard
as [that means] there are balancing, direct
negotiating, market share and leveraging
issues,” he says. “But for the independents,
Merlin has that opt-in representation and
joint lobbying clout as well as being a single
licensing party for a huge number of different
constituents.”
He adds, “I think that part of the problem is
the competition among the PRO institutions
creating consolidation – as some might
not necessarily want solutions to these
problems. Because if and/or when things
are harmonised, then they might feel that
their roles, power, positions and even their
organisations could diminish or even go away,
as licensing and accounting becomes simpler,
or more accurate; [as that happens] conflicts
over black boxes, escrow accounts and
upfront equity deals decrease.”
Pryor argues that publishers are, after
years of feeling they are playing second
fiddle to the labels, really exerting their
muscles here and this, because they are more
disaggregated than labels, can make it tricky
for new digital services to get deals in place.
“These days, if you want a licence from a
label, you can get global rights one time,” he
“These days, if you want a licence from a label, you can get global rights one time. Bang – you’re
done. For publishing, it is so fragmented and so difficult that, from a pure labour intensity point
of view, it is incredibly hard” – Gregor Pryor, Reed Smith
says. “Bang – you’re done. For publishing, it
is so fragmented and so difficult that, from
a pure labour intensity point of view, it is
incredibly hard.”
He adds that “the pernicious thing about
publishing” is that while a label can, if it wants,
pull its music from a service it is relatively
easy for services to comply; but, because
several publishers might have a share of the
same composition, it is a more convoluted
takedown process for the service.
“There is some discussion in the US
about this zero licensing idea where you
can’t be prohibited from using a song where
a publisher just owns a share,” he says. “It is
very controversial. It couldn’t really happen
in Europe. You could see why it’s a problem.
If a publisher says so, in a way that makes
them more powerful than a label because
they have a share but you can’t identify
their content.”
While the lyrics side of things has been
cleaned up and, in doing so, created new
licensing and advertising opportunities,
the focus really must
be on doing the same
to metadata. Not
only will it streamline
payment processes, it
can also give copyright
owners a greater
hand in discovery and
recommendation on
digital music services.
Rich real-time data will
also help organisations
better understand and
prepare for revenue
displacement; as one
source starts to dry up
(mechanicals from CDs
and downloads), new ones come on track
and they need to be in the best possible
position to maximise the opportunities here.
That does not, however, mean that
licensing rates get hiked up as the sole way
to offset losses elsewhere. One source,
speaking on condition of anonymity, said
this is starting to happen and warned it
could have hugely negative repercussions
for new services trying to enter the market.
“There have been dramatic price increases in
licensing deals,” they said. “What’s happening
is that publishers are doubling their prices in
percentage terms.”
They added, “The age-old argument
has always been that the labels and the
publishers should have parity in price.
Publishers are forever trying to claw back
that gap as they see it being inequitable.
That causes a challenge if you are a digital
music company because there is only so
much margin and it is already wafer thin. If
one of the rightsholders starts to ask for more
money in percentage terms, the only victim is
going be the company that is actually selling
and distributing the music.”
The Kobalt model was referred to again
and again by people we spoke to as what the
publishing industry as a whole needs to aspire
towards. Last week the company signed up
Deadmau5 and as it secures more and more
marquee names, its power will grow as will the
pressure on other publishing organisations to
think and behave much more like it.
Beyond that, the rumblings in the PRS/
SoundCloud legal case could have huge
implications for everyone here, especially with
regard to safe harbour exemptions.
As Bebawi puts it, “PRS is testing the
boundaries of safe harbour under the current
legislation and the EC is also saying that it is
potentially interested in opening up a debate
about whether safe harbour needs to be
recast, redefined and reviewed. That could be
big news if it happens.”
He adds, “The system, as it is today, is best
described as ‘notice and takedown’. The onus
is on the rightsholder to police everything. It
is difficult to know, actually, who has got the
burden of having to deal with it. There have
been conflicting decisions coming out of
different courts about whose liability it is to
monitor what is happening on platforms like
YouTube and SoundCloud. I don’t think there
is a really clear interpretation of the current
legislation anyway.”
Those close to the developments here
argue that it is unlikely we will see anything
concrete happen here until next year at
least. But, as an issue, it is ticking away in the
background and getting louder by the day.
It is still too early to call but everyone here
is – depending on what side of the debate –
steeling themselves for the very best or the
very worst outcome. :)
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BEYOND MUSIC
Twitter’s growing pains
While 316m active users are not to be sniffed at, it’s
no Facebook, with Twitter struggling to throw off
accusations that it appeals to a tech-savvy, liberal-leaning
elite rather than a truly mass-market audience”
Twitter’s new CEO has work to do
in growing the platform’s user base
the report
T
he good news for Twitter employees
this month is that they finally have
a new CEO, and he’s a familiar figure
– co-founder Jack Dorsey. After
a three-month stint as acting CEO when
previous boss Dick Costolo stepped down,
Dorsey now has the job permanently.
The bad news for up to 336 Twitter
employees this month is that they won’t
be working for him. The social network has
announced plans to lay off up to 8% of its
workforce. “Some tough but necessary
decisions that enable Twitter to move with
greater focus and reinvest in our growth,” is
how Dorsey explained it.
Wall Street approved, sending Twitter’s
share price rising after the announcement
of the layoffs. But Dorsey’s main challenge
is less about cutting costs and more about
plotting his company’s path into the
mainstream, reigniting the user growth that
has slowed down over the past year: there
were 284m users in Q3 2014; 288m in Q4
2014; 302m in Q1 2015; and 316m in Q2 2015.
While 316m active users are not to be
sniffed at, it’s no Facebook ( just under 1.5bn
active users at the end of June 2015), with
Twitter struggling to throw off accusations
that it appeals to a tech-savvy, liberalleaning elite rather than a truly mass-market
audience.
Or, as British Prime Minister David
Cameron witheringly put it in a recent
speech noting the Twitterati’s (misguided)
belief that he could be defeated in the UK
general election earlier this year: “Let me
put it as simply as I can, Britain and Twitter
– they are not the same thing.”
Twitter would like to change that globally
and it’s been working on the challenge for
some time – a process that began under
Costolo’s leadership. It involved making
the “onboarding” process better for brand
new users, including helping them find
interesting accounts to follow.
Dorsey’s first task as CEO was to launch
a feature called Moments, which was known
as Project Lightning under his predecessor.
Pitched as “the best of Twitter in an
instant”, it’s a new section of Twitter’s app
collecting tweets and media around specific
“moments” – breaking news stories, cultural
memes, big sporting and music events and
so on.
Moments is a big bet for Twitter as it
tries to become the kind of service that’s
interesting, useful and entertaining to a
much broader swathe of the population.
This, in turn, will boost the company’s
hopes of following Facebook’s path towards
a lucrative mobile advertising model:
Twitter’s revenues in the last four quarters
have been (in order) $361.3m, $479.1m,
$435.9m and $502.4m. Its net losses,
meanwhile, have been $175.5m, $125.4m,
$162.4m and $136.7m over the same period.
Figuring out how to attract and retain a
wide, mainstream audience – and then turn
that into the kind of advertising business
that can bring Twitter out of the red – is a
big challenge. If Dorsey succeeds, he’ll have
proved himself as among the most adept of
Silicon Valley heads. :)
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TOOLS
PANDORA/TICKETFLY
HP LOUNGE
Pandora has bought ticketing company Ticketfly in
a deal estimated at $450m (split between cash and
stock). This follows Pandora’s acquisition of analytics
company Next Big Sound in May.
TICKX/MoS
Universal Music
Group has licensed
its music, including
exclusive content, to
Hewlett Packard’s
new HP Lounge ad-free online radio service that is
bundled in free for a year for anyone buying a new
HP computer. Thereafter it costs £3.20 a year.
PAROLA
Collaborative remix and music discovery app
Parola has raised $2m in seed funding. The round
was led by Capital International, Innodo and Miki
Tunis (SVP at The Orchard).
#TPP
@KimDotcom
The leaked
final #TPP text
confirms all of our
fears.
@brokep
CROWDMIX
Ministry Of Sound has
invested in TickX, a
startup offering price
comparison for events.
It has received £175k in
investment so far, with
MoS being the lead
investor.
the report
Tweets
Pinboard » Deals
Social music startup Crowdmix
has raised $20m in funding ahead
of its Q1 2016 public launch. It is
aiming to raise a further $20-30m
before the end of the year. It has
also appointed former Universal
Music Group digital head Rob Wells as its global chief
commercial officer and CEO.
LIVE NATION AUSTRALIA
Live Nation Australia has signed a partnership
deal with Telstra to offer the telco’s customers
48-hour priority access to tickets, exclusive
content, merchandise and VIP experiences
among other perks.
The #TPP
chapter on
immaterial
rights is not for
the people but
for corporations. We can’t
accept it!
@RobertBLevine
I’m curious
whether TPP
bans local-datastorage rule that
could undercut
EU privacy laws, as rumored.
If so, that’s a big deal.
Follow Music Ally
on Twitter...
twitter.com/musically
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TOOLS
Pinboard
» Stats
US DIGITAL MUSIC
NEW SERVICE ELECTRIC JUKEBOX
250bn
118.1bn
Market share of album and TEA
(track-equivalent album) sales
(January– September 2015)
Indies
Music streams (Jan–Sept 2014)
13.2%
232bn
Music streams (Jan–Sept 2015)
1bn
118.1bn
756.3m
Track sales (Jan–Sept 2015)
Warner
19.4%
10.9%
Decline from Jan–Sept 2014
(Note: indies
distributed by majors
are folded into
the corresponding
major’s share.)
100m
118.1bn
77.3m
Digital album sales (Jan–Sept 2015)
Sony
27.3%
0.3%
Decline from Jan–Sept 2014
What is it?
the report
AKA What Rob Lewis Did Next, with the Omnifone
founder resurfacing with a brand new digital music
startup. It’s a hardware and software play: people
buy a stick-shaped device that plugs in to their
television’s HDMI port, which then streams playlists
from a promised catalogue of “millions” of songs.
Celebrities are on board as curators, too – from
Robbie Williams and Sheryl Crow to Stephen Fry.
Electric Jukebox will sell the device for £179/$229,
with a year’s worth of music included. After that
point, a one-year pass will cost £60/$60. With
an advisory board of industry veterans, Electric
Jukebox certainly isn’t entering this space with its
eyes closed. And while its status as a rival to Sonos
seems like the pitch, we wonder whether Google’s
£30 Chromecast and Chromecast Audio devices will
be the stiffest competition.
Universal
39.2%
Source: Nielsen SoundScan (October 2015)
US SOCIAL MEDIA ADOPTION
2005
Source: Pew Research Centre (October 2015)
SPOTIFY – DISCOVER WEEKLY
2010
90%
1bn
2015
78%
65%
68%
62%
Tracks played during Discover Weekly’s
first 10 weeks
50%
46%
71%
42%
Discover Weekly users who save at least one
song to ther own playlists
7%
All adults
using social
media
12%
Young adults
(aged 18-29)
using social media
8%
6%
Men
using social
media
Women
using social
media
60%
Discover Weekly users who stream 5+
recommended tracks
Source: Spotify (October 2015)
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MARKET PROFILE
Chile
CHILE
STATS
f
17.4m
Population d
GDP per capita US$23,000
h
Internet users c
Broadband households i
Mobile subscriptions Active smartphones
Active tablets
Sources: IFPI/CIA World Factbook
the report
When Music Ally last examined the digital music industry in Chile,
back in July 2012, the talk was of a “new dawn” for digital music
sales after the launch of iTunes in 2011...
A
nd so it proved: after falling
dramatically in 2011, digital music
sales in Chile were on the up again
the following year, helping the
overall recorded music market to record
a 33% growth in income in 2012. “iTunes
has been very important in Chile,” says
Francisco Nieto, MD of IFPI Chile.
Download sales may have slipped in
2013, albeit by relatively small amounts,
but they were quickly back on track. In
2014, income from sales of digital tracks in
Chile climbed from $1.61m to $2.24m, while
income from digital albums increased from
$0.81m in 2013 to $1.05m last year. Overall,
recorded music income grew 13.6% in 2014
to $23.2m, making Chile the fifth biggest
music market in Latin America and the 36th
largest music market in the world.
Nieto believes that downloads can
11.2m
2.4m
23.7m
9.1m
1.4m
continue to grow in Chile. “[The growth of
download sales] has been mainly because
Chile is one of the countries in the world
where the technological companies test all
the new devices – especially the telephone
companies,” he says. “Therefore, our
penetration in smartphones is higher than
other countries and, as a consequence, this
trend will follow in the future.”
Numbers from eMarketer bear this out.
Chile is estimated to have smartphone user
penetration of 55.5%, the highest in Latin
America, ahead of Colombia in second with
50.4%. This is expected to grow to 66.3%
in 2018. The same is true of internet use:
eMarketer says that Chile has the highest
internet user penetration in Latin America
at 70.5%, compared to the regional average
of 54.1%.
Chile also leads both North and South
America in social media penetration
according to Statista, with 61% of internet
users in Chile considered monthly active
social media users in June 2014. That’s
versus 56% in the US, Argentina and
Canada.
2014 was also significant for
the digital music business in Chile
as it saw streaming income pass
downloads for the first time. This was
largely thanks to significant growth in
revenue from ad-supported services,
which climbed from $1.04m in 2013 to
$4.19m in 2014, making up almost half
of all digital income in Chile last year.
The obvious factor behind this was
the launch of Spotify in December
2013. As in many other countries,
Spotify was not the first streaming
service on the market – Deezer
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MARKET PROFILE
Chile
continued...
* Even though iTunes has been live in the country
since 2011, 2014 was the first full year that
IFPI reported digital track sales.
Other
4.19
16.3
Digital
tracks
CD/other
physical
0.8
0.62
1.21
0.97
2.5
3.3
3.9
2010
2011
2012
1.8
1.4
2013
2014
Chile: recorded music sales volume (millions of units) Source: IFPI
the report
Chile is one of the countries in
the world where the
technological companies test all
the new devices – especially the
telephone companies”
launched in Chile in 2012 and Rdio followed
in 2013 – but it is the one that has had the
most impact, according to Nieto. Guvera,
Tidal, Google Play, Apple Music and Claro
Música – a Latin American digital music
service offering streaming and downloads
that is backed by the region’s largest telco,
America Movil – also operate in Chile.
The fly in the ointment here is
subscription. While revenue from ad-
Francisco Nieto, IFPI Chile
supported services shot up in 2014,
subscription services festered, with income
of just $0.83m, barely up from $0.71m in
2013. More worryingly, perhaps, there
are currently no partnerships between
major streaming services and telcos in
Chile – traditionally seen as an on-ramp to
customers paying for subscription services.
Subscription
streams
1.04
0.86
2.43
2.16
2010
2011
0.71
0.83
1.09
1.05
0.81
Ad-supported
streams
1.75
1.61
2.24
2012
2013
2014
Mobile personalisation
Other downloads
Full album downloads
Single track downloads
32.0
Chile: digital sales by format (US$ millions, trade value) Source: IFPI
Could Chile have a problem in
converting free users of streaming services
to subscriptions? Nieto says no: he argues
that subscription income is low because
“the most important of streaming services
arrived during last year – no other reason
and everybody is expecting an important
increase in the future.” In fact, Nieto is
generally positive about the future of
the digital music industry in Chile. “Do I
feel positive? Yes, due to the high rate of
penetration mainly in smartphones with 4G
and 3G,” he says.
Chile, of course, is a relatively small
country, with a population of just 17.4m. In
Latin America, it is considered a secondtier music market alongside Argentina and
Colombia, its business dwarfed by Brazil
and Mexico. Get past this, however, and
there are a number of reasons why Chile
could prove a worthy investment for foreign
acts and digital music services.
Chile’s GDP per capita of $23,000 is the
highest in Latin America, while the Chilean
music business has the second highest
per capita revenue in the region, behind
Argentina. What’s more, in contrast with,
say, Argentina, the Chilean economy is
remarkably stable, leading Latin American
nations in competitiveness, globalisation,
economic freedom and low perception
of corruption, according to the UN
Development Programme.
Physical music, it is true, still dominates
recorded music income in Chile, bringing in
$9.2m in 2014 compared to digital music’s
$8.8m. But with internet penetration in
Chile expected to grow to 73.5% in 2018,
it seems only a matter of time before this
situation is reversed. :)
11
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