The CEO of the International Federation for the Phonographic Industry (IFPI), Frances Moore, has given a firm but fair assessment of the record business’s year in 2014 – and called for legislation to prevent the likes of YouTube and DailyMotion taking advantage of ‘safe harbour’ laws in Europe.
As reported on MBW yesterday, global revenues from recorded music dipped again last year. Although the fall was just 0.4%, it was enough to take the industry under a $15bn annual turnover for the first time in living memory.
Streaming revenues across both ad-funded and premium services were up 39%, but download and physical sales were both down by 8%.
Speaking in the IFPI’s must-read Digital Music Report, Moore (pictured) acknowledged that the latest numbers showed that the industry has stabilised but “not yet [seen] year-on-year sustainable growth”.
There was, though, plenty of cause for optimism. Moore noted that “record companies are putting our business back on the road to recovery”, with overall digital music revenues (including SoundExchange collections in the US) growing 6.9% year-on-year.
Other positive signs included the number of streaming subscribers increasing five-fold since 2010 to 41 million users, she said.
Moore applauded the widespread licensing of digital music services by record companies, which now number 400 globally in some 200 countries. But there was also a dark side of this licensing story for the business, she pointed out.
“Another issue is the so-called ‘value gap’,” said Moore. “This is a fundamental flaw in our industry’s landscape which sees digital platforms such as Daily Motion and YouTube taking advantage of exemptions from copyright laws that simply should not apply to them.
“Laws that were designed to exempt passive hosting companies from liability in the early days of the internet – so-called ‘safe harbours’ – should never be allowed to exempt active digital music services from having to fairly negotiate licences with rights holders.
“There should be clarification of the application of ‘safe harbours’ to make it explicit that services that distribute and monetise music should not benefit from them.”
Further into the DMR, this ‘value gap’ – and YouTube’s accused abuse of safe harbour legislation in Europe – was given another mention.
“An illustration of this can be seen in comparing the share of revenue derived by rights owners from services such as Spotify and Deezer and those derived from certain content platforms like YouTube and Daily Motion,” said the report. “IFPI estimates music subscription services have 41 million paying global subscribers, plus more than 100 million active users in their ‘freemium’ tiers.
“This sector generated revenues to record companies of more than US$ 1.6 billion in 2014. By contrast, YouTube alone claims more than one billion monthly unique users and is thought to be the world’s most popular access route to music. Yet total global revenues to record companies generated by exclusively free-to-consumer advertising-supported services (predominantly video online platforms) amounted to just US$ 641 million in 2014, less than half the total amount paid by subscription services to the industry.”
A key part of the problem for this ‘value gap’, the report explains, is the protection granted to the likes of YouTube by safe harbour to ‘create a fair licensing environment’.
Safe harbour sees platforms claim that they are neutral hosting services entitled to benefit from exemptions to copyright law, rather than digital distribution services akin to Deezer or Spotify.
“[Governments] need to make sure that the law is clarified and applied correctly,” said the IFPI.
“Specifically, it needs to be made clear that any liability exemptions can only apply to genuinely neutral and passive online service providers, and not to services that play an active role in distributing, promoting and monetising content.”
IFPI’s call echoes that of European independent music trade body IMPALA, whose Digital Action Plan calls for the EC to tighten safe harbour rules in Europe.Music Business Worldwide