Merlin on course to pay independent labels $500m a year by 2018

Digital rights agency Merlin paid out $232m in streaming revenues to its 20,000 independent label members in the 12 months up to end of March this year.

This is the first time that Merlin has revealed its exact annual payout sum, having previously only announced its total collections figure each year.

MBW has crunched the numbers to forecast Merlin’s future growth, and there’s exciting news for its members – including the likes of Beggars Group, [PIAS], Secretly Group, Domino, Epitaph, !K7, Kobalt Label Services Merge and Warp.

The first official yearly income figure we have for Merlin is from 2013/2014 (the 12 months to end of March of the latter year), when the organisation took in $89m.

We were told this amount was around double that seen in the previous year, so we can estimate that 2012/2013’s takings were approximately $45m.

The rate of growth at Merlin since then has barely let up, driven by rapidly increasing streaming income and an ever-growing member base.

In fact, according to MBW calculations, Merlin’s collections have shot up more than 400% in the past three years alone.


Merlin proudly pins its total commission rate for members at just 2% – a figure that has been cut five times in four years.

We can therefore estimate that Merlin’s total collections in 2015/2016 stood at around $236m – an average of around $4.5m every week, just from streaming.

Merlin says its payouts to members actually increased 73% during this period, no doubt boosted by that commission reduction to 2%.

The important bit: If Merlin can keep up this rate of growth, it will bring in just over $400m in 2016/2017 – and should easily top half a billion dollars in annual streaming payouts by 2018.

“All signs at the moment show the rate of merlin’s growth is not decelerating.”

Charles Caldas

Merlin CEO Charles Caldas (pictured) isn’t making any concrete predictions on that score. However, he tells MBW that maintaining his organisation’s rate of growth certainly isn’t out of the question.

“All signs at the moment show that the rate of Merlin’s growth is not decelerating,” says Caldas.

“Our sense at the moment – and I’m loathe to make predictions in a market that can move very quickly – is that it doesn’t feel like there’s a slowdown in our average monthly growth rates.

“Without predicting a number, I’m confident that next year we’ll report significant year-on-year growth again.”

Merlin’s $232m payout figure for 2015/2016 is entirely made up of streaming revenue (save a small amount of peripheral download income) and only represents the deals which Merlin has licensed itself.

Merlin is not in business with the likes of Apple Music, Amazon Prime or Rhapsody (who are licensed by independent labels directly), but has around 18 active deals with digital music platforms – including Spotify.

MBW caught up with Caldas following the publication of Merlin’s annual member report, in which it asks its members to submit anonymous feedback from their year in digital music.

Some key takeaways from this report:

  • In 2015/2016, 62% of Merlin members reported that ‘digital income’ was their primary source of business revenue;
  • Comparing usage in the month of March 2016 with March 2015, the volume of audio streams reported to Merlin increased by 80%.  In March 2016 alone, audio tracks by Merlins members were streamed more than 4bn times, up from 2.5bn in March 2015;
  • Downloads were the primary digital revenue source for 28% of respondents – down from 41% in 2015.

We grilled Caldas on some of the standout findings from the report, which you can read below…

What’s been the key factor in the 73% rise of your payouts to members?

The big revenue driver has been the massive growth in the value of territories like Mexico and Brazil, as well as increased numbers of adoption in territories like the US.

The US last year actually grew more for us on a percentage basis than it did in the year previously.

One of the important factors of that was the entry of Apple Music into the market.

Rather than cannibalising the market, it seemed to stimulate it, so that overall growth patterns in other platforms actually accelerated after it launched.

[Merlin doesn’t license Apple Music, but it does license Spotify – so Caldas’s point appears to chime with that of Spotify, which says Apple Music’s arrival has driven up interest in its platform.]

Around 74% of Merlin members reported an increase in digital income over the past year, Yet 13% reported a decrease… What were the main reasons for those decreases, and how are those companies going to transform their digital income to start growing?

There’s probably a number of factors there. One is that the market is evolving globally; different territories are in different phases of transition when it comes to streaming. Because the responses are anonymized it’s hard to break that down. There’s also always a natural flow in increases or decreases for labels depending on release schedules.

We’re focusing on the growth dynamics to see how they compare year-on-year.

During the period of the survey, some significant new markets came into the streaming space.

We started seeing meaningful expansion into South-East Asia, Eastern Europe and South America.

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Digital video platforms account for less than 10% of digital income for 64% of Merlin members. Bad news!

This is a really difficult thing to reconcile in the market at the moment.

As the survey shows the growth of the value of audio streaming has been phenomenal.

When you have the biggest point of consumption of music – with the biggest number of users – delivering those low revenues in a market where there are far, far higher value points, it really makes you question the place of those services in the overall digital ecosystem.

There’s something not right with that. Something’s going to have to give to re-balance this market.

We’re not alone in feeling that the YouTube revenues are not what they should be.

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You analysed 11.5bn streams (Jan-March 2016) and found usage of Merlin members’ tracks was 27% higher on paid streaming tiers than ad-funded. Is that the ‘connoisseur effect’; the fact that paying subscribers are more likely to value music higher and that independent repertoire sits well with that?

There are a number of reasons, and that’s definitely one of them; people who invest in a paid music service are probably more sophisticated music consumers, value it highly and consumer more broadly.

Given the amount of growth in the overall market, and in some territories the ‘mainstreaming’ of these streaming products, you’d imagine that dynamic would start to become less prevalent. But it’s actually incredibly consistent.

Another factor is that in the streaming environment, you can sample new music or to explore without needing to invest on a transaction-by-transaction basis.

Add in the large investment by the independent sector in new artists and the connection between streaming and social media, and it all contributes to this notion: once you free consumers from those tightly controlled channels of radio, television and store-fronts, they naturally consume more broadly.

Independent music is more visible and easier to discover than it ever was before.

The age old cry of the independents was: “Oh, if only I could get this into the stores and on radio, people would love it.”

Well, it is in the stores now and it’s on the equivalent of radio in playlists, and I think that really helps drive the success we’ve seen.

 Music Business Worldwide

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