SOUNDEXCHANGE PAYOUTS TO LABELS LIKELY TO TOP $900M THIS YEAR

SOUNDEXCHANGE PAYOUTS TO LABELS LIKELY TO TOP $900M THIS YEAR

AUGUST 6, 2015    BY TIM INGHAM

SoundExchange just keeps getting more and more important to record labels and artists.

The US collection society has just announced that its distributions to recorded music rights-holders have now topped $3bn since 2004.

It’s an impressive number – but what does it really mean for the industry?

The first takeaway is really the growing importance of ‘non-interactive’ digital radio services such as Sirius XM, IHeartRadio and Pandora to the music industry.

(Pandora says it pays out around 44% of its total revenue to SoundExchange each year.)

As you can see in the steepness of the below graph, SoundExchange’s gross distributions to labels has grown at a staggering rate: up by 12,783% between 2004 ($6m in annual distributions) and 2014 ($773m).

SoundExchange

Mind-boggling percentage rises aside, what this tells us is that the vast majority of that $3 billion figure has come in the past three years: from 2012-2014, SoundExchange distributed $1.83bn to rights-holders.

In fact, according to MBW’s calculations, from 2004 – 2014, SoundExchange passed the music industry a total of $2.72bn.

So what of 2015 so far – and our headline above?

The organisation has revealed that it distributed $194.5m to labels and artists from digital radio via its statutory license in the first quarter of 2015.

Crucially, that was 20% up on the $162.4m it distributed in the same period of 2014.

It also took SoundExchange’s lifetime distributions since 2004 up to approximately $2.91bn – meaning it just needed to hand out $900,000 to labels and artist in Q2 to hit $3bn.

From there, labels can draw two rather exciting conclusions:

  • In Q2 2014, SoundExchange distributed $161m from its main income source, statutory US digital radio licenses. If we apply the same 20% uplift as we saw in Q1 to the second quarter of 2015, we can estimate that SoundExchange distributed around $193m in Q2 2015 from these licenses – taking its total lifetime distributions up to somewhere in the region of $3.11bn;
  • If we then apply the same 20% uplift – the difference, remember, between Q1 2014 and Q1 2015 – across the whole of 2015, SoundExchange’s distributions to labels and artists this year would rise to approximately $927m, while total collections would top $1bn.

One interesting angle on that kind of annual distribution forecast: it would take SoundExchange into the big leagues of US PROs alongside those collecting songwriter/publisher cash in the States.

In its last fiscal year, BMI’s revenue collections grew 3.5% to $977m, while it distributed$840m to members.

Meanwhile, ASCAP paid out $883m from total revenues in excess of $1bn in 2014.

“THIS IS A PHENOMENAL MILESTONE NOT JUST FOR SOUNDEXCHANGE, BUT FOR THE ENTIRE MUSIC INDUSTRY.”

MICHAEL HUPPE, SOUNDEXCHANGE

SoundExchange’s distribution of $773m in 2014 made up approximately 16% of total US recorded music revenues in 2014.

Our forecast $927m full-year figure would have represented 19%.

Discussing SoundExchange bursting through the $3bn lifetime distributions milestone, the body’s CEO Michael Huppe (pictured) said:

“$3 billion dollars in distributions marks a phenomenal milestone not just for SoundExchange, but for the entire music industry,” said SoundExchange president and CEO Michael Huppe.

“While we celebrate this great achievement, SoundExchange continues to advocate for every artist and label to be paid fairly whenever their music is used on every platform.

“There are platforms that are currently not paying a dime for the music they use to build their billion dollar empires and the future of music depends on all creators being paid fairly for their hard work and creativity.”Music Business Worldwide

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