The pandemic has fundamentally changed how music is monetized — the necessity of a sustainable virtual platform and distribution revealed how outmoded many streaming, publishing, and payment systems have become in a digital age.
Synchtank, a SaaS software company specializing in managing digital entertainment assets, intellectual property, metadata and royalties, recently published a report “Drowning in Data.” The report examines the issues facing music publishers in trying to tackle ever rising volumes of data from an increasingly diversified and fragmented number of sources.
The report found that many of the systems the industry relies on are unable to keep up with the sheer amount of data processing required. Due to poor data management and fragmented rights and payment landscape, the demands for payment transparency and efficiency are growingly difficult to satisfy.
Here are some of the key issues Synchtank identified, as well as some potential solutions to a modern royalty management system.
Key Takeaways from the report:
- Global publishing revenue is forecast to grow 5-10% compound annual growth rate (CAGR) over the next decade, but the data that publishers will have to process will grow at a higher rate of 20-30% per year.
- Increasing revenue is dependent on processing exponential growth in data, which Synchtank anticipates could be in the “hundreds of trillions” within five years for performance rights organizations (PROs)
- The report also found that to sustain a modern royalty system, it is necessary to be able to track income and payments on a global scale. The report states that much of the industry’s expected revenue growth over the next decade will come from emerging territories and regions
- Synchtank finds that “poor data management and antiquated, siloed royalty systems are causing … inefficiencies, duplication, data management problems and a fragmented payment landscape” potentially leading to “billions of dollars of revenue.”
- Artists want access to data, and they want full transparencies from PROs and royalty companies.
Volume and the complexities of a data-driven and global industry
While COVID-19 closed down large parts of the global music industry, streaming consumption remained on an upward curve in 2020. Synchtank predicts this will catalyze an industry shift, in which business models will move from the live sector to instead focus on generating royalties from digital platforms. According to the IFPI, streaming accounted for 62% of global recorded music revenue in CY2020, and the number of paid streaming accounts increased to 443 million by the end of the year.
However, while streaming numbers are growing significantly in the U.S., the report finds that there is still room for expansion. Significant subscriber growth lies less in domestic markets, but instead in emerging regions such as Asia, Latin America, and Africa, as “digital is the biggest growth driver in most of these territories.”
Latin America in particular recorded the highest rate of recorded music growth (+15.9%), with streaming revenue increasing by 30.2% and accounting for 84.1% of the region’s total revenue.
Goldman Sachs’ Music in the Air report estimates significant growth in China and India’s emerging markets, as 38% of paid streaming subscriptions came from emerging markets, the report suggests this number will rise to 67% in 2030.
Despite data processing increasing, the report finds that revenue per line of sales has dropped dramatically. The trend analytics highlight that significantly more data now has to be processed every year to produce the same revenue.
“Without having the computing scale to match, companies and organizations will have little chance of ensuring that statements can be fully processed,” Synchtank reports.
New technology, platforms, and revenue opportunities
With a growingly data-driven industry in mind, the report identities new technology, platforms, and revenue opportunities. Some of the largest generators of data and consumption are short-form video platforms, such as TikTok.
The report also found that there is an “increasing crossover” between Esports, online gaming, and music, especially with Fortnite and Minecraft. Streaming numbers have increased YoY across 2020, as well as Home Fitness programs, meditation and wellbeing apps, podcasts, and live streaming.
As a whole, social media and user-generated content (UGC) are, as many “industry insiders” find, the next big opportunity for music. MIDia Research estimated that UGC revenue would be worth $4 billion in 2020, but Synchtank claims that the “potential gains from these platforms are tempered by a lack of licensing deals and an inability to track music usage.” But, this issue might be resolved with the development of increasingly sophisticated Music Recognition Technology (MRT), which could improve licensing infrastructures.
A modern, cloud-based royalty system
Currently, payments and rights are growing more fragmented.
- There are a rising number of co-ownership and parties involved in “hit” repertoire, as multiple songwriters on one song has become the new norm in the industry
- This has lead to growing fragmentation within music rights, especially if songs come from different ownership or control shares, which vary from territory to territory
- Increasing number of income sources
- Different royalty rates and payment terms between different companies, organizations, and courts.
- Copyright laws are not uniform between different regions, countries, etc, and the music licensing system is subject to diverse national copyright regulations
- Securitization and the commodification of copyright royalties — the trading of music copyright royalties has become a lucrative market, which means that more people need to be reported to and paid.
Synchtank then proposes the following solutions and key features of a modern, cloud-based royalty system.
- Scalable – music royalty systems need to be scalable and efficient so they can cope with increasing storage and processing demands, while dramatically shortening processing times
- High levels of automation – as the music rights landscape grows more fragmented, it will need robust systems with vast processing power — which requires high levels of automation. High levels of automation can standardize statements and data from multiple sources
- Adaptable and intelligent – able to adapt instantaneously to industry demands, such as new standards, metadata, and payment sources
- Able to operate on a global scale – a modern royalty system needs to handle registrations with global CMOs, as well as deal with legal differences and varying copyright laws. It needs to be able to support multiple languages, including non-Roman characters, and adapt to different currencies and exchange rates
- Able to retain high volumes of data.
The full report is free to download here.