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Roundtable Highlight: Australian Music Industry Trends and Forecast – The Expert View

Dan Rosen, Evelyn Richardson and Brett Cottle at the Contemporary Roundtable 2016 Dan Rosen, Evelyn Richardson and Brett Cottle at the Contemporary Roundtable 2016
Chris Bowen · August 16, 2016

For a second year we gathered the chief executives of Australia’s three major music industry bodies at our Roundtable conference, to share data and insights on sales, royalties, trends, and forecasts. Positive industry forecasts based on solid growth in music royalties and sales were tempered by less optimism for a live sector still in flux.

The panel was chaired by Music Victoria’s Patrick Donovan.

Brett Cottle – APRA AMCOS

12 months ago APRA AMCOS chief Brett Cottle shared an upbeat picture of the state of the music industry. A year on he provided this update:

“In the last 12 months in Australian and New Zealand we have seen a 10 percent net increase in distributable royalty income, a record high. On the mechanical rights side, AMCOS will deliver a seven percent increase, and this year total APRA and AMCOS royalty revenues will hit a third of a billion dollars.

“Over two years from July 2015 through to end of June 2017, publishing revenue will have increased from $11.5M to over $46M dollars in royalties. Over the same two year period cannibalisation by streaming services will reduce the digital download market from $27 M to $18 M. When these two are added together – the subscription and download royalty revenue – we see an increase of 64 percent over the two year period.

“This year total APRA and AMCOS royalty revenues will hit a third of a billion dollars” Brett Cottle – APRA AMCOS

“The royalty pool from digital will have gone from $39 M to $64 M, and this reflects a growth in subscriber numbers in the same period from around 200,000 to about 2 million now. Over the past year there has been growth of 1.2 million subscribers.

“So, a year ago I said that subscriber numbers needed to get to 4 million, about 4 or 5 times of the then subscriber base. Over the past 12 months there has been an increase of about 150 percent, to 1.4 million subscribers. In my view we’re about a third of the way towards a subscriber base which will provide revenue for the industry and an ecosystem which is equal to or better than it ever was at the peak of the physical market.”

Brett Cottle also noted strong growth on the audio-visual side, sometimes overlooked. Streaming TV services along with YouTube. In the same two year period the publishing side of the business will have seen an increase from $8.5 million to $27.2 million in their royalty pool.

“If those two figures are added, audio and audio visual, you get royalty growth of almost 100 percent over two years, from $47.5 million to $91 million.”

“So, the good thing for the industry is this massive powerful growth in digital has not killed off tradition media and traditional sources of revenues. In broadcasting we’ve seen 5 percent growth, and from public performance we’ve seen 6 percent growth. This is organic growth that most industries would consider to be perfectly healthy in the current environment.”

Another positive trend is the solid growth in international as well as domestic revenues. International performance royalties earned by Australian songwriters over the past 3 years “has seen increases of 25 percent, 23 percent, and 12 percent. Overall, this is 70 percent growth in foreign royalty earnings over the past three years. We’re projecting a further five percent growth over the year ahead.”

He concluded; “so on the face of it, from our corner of the business, things are looking remarkably healthy, and the kinds of scenarios we were hoping for 12 months ago, appear to be coming to pass.”

 

Dan Rosen ARIA

Australian Recording Industry Association CEO Dan Rosen echoed Brett Cottle’s sentiment:

“There is definitely more optimism in the recorded music market. Last year we saw 5 percent growth which got us up to $333 million in wholesale figures, still a way down from where we were, but certainly in an upward trend which is fantastic. Of that, we’re looking at approximately one-third physical and two-thirds digital, so digital continues to take more of the market. Physical has actually held up well in Australia compared to most other markets. Vinyl has been a nice little story too.

Dan Rosen noted that digital is two thirds downloads and one third streaming. “Streaming has come from zero to a third of the digital market in three years, and is doubling year on year. This year I think it will be a 60:40 split, and in 2018 it is likely to be 50:50. Probably then streaming will become the dominant digital force. We’re seeing streaming figures double year on year which is very positive.

“After a long and difficult decade, and the transition to digital, we’re certainly not out of the woods, but we’re on an upwards trajectory.” Dan Rosen – ARIA

Interestingly, a key driver is that Australia is one of the most competitive streaming markets. “Spotify has done an incredible job here, and we’ve seen the telcos embracing music streaming. If you look around the world where streaming has had the best penetration in terms of paid streaming, its where there has been a partnership between a streaming service and a telco. It’s the model that really got Spotify going in Scandinavia with the local telco Telia, and in France with Deezer and Orange.

Here we have both major telcos in the game, with Optus offering Spotify, and “we’re the only country in the world where Apple Music have launched with a telco with Telstra.”

“60 percent of Australians have a Telstra mobile phone, that’s 15 million mobile phones – with just one telco. So, we have an incredible opportunity here to get to that 4 million subscriber mark, and hopefully surpass it.

“On the public performance side with PPCA we’re also seeing great growth, we’ll probably hit $50 million of revenue in the next six months, and we’ve doubled that revenue over the past decade.

“On the piracy side we also had a win last year getting legislation through and are hopeful of traction to encourage more people onto legal services rather than illegal pirate sites.”

PPCA has also just won its case on commercial radio simulcasts. “After ten years, a high court case, a federal court challenge, and several House of Reps inquiries. It’s been a long battle for PPCA and we have now finalised a scheme with new revenues from commercial radio online.

“After a long and difficult decade, and the transition to digital, we’re certainly not out of the woods, but we’re on an upwards trajectory. There’s optimism and a sense in the industry that we’re no longer worried about what was, but excited about what will be.

“Internationally, the amount of Australian artists that are starting to dominate global charts, global festivals, is probably greater than we’ve ever had, and pulling the next generation of Aussie artists through as well. So it’s an optimistic time.

 

Evelyn Richardson – Live Performance Australia

LPA chief Evelyn Richardson, sounded a cautionary note in relation the live performance market:

“In Australia we’re witnessing a seismic change, with increased globalisation and fragmentation of our market, and changing consumer behaviours presenting challenges we’ve certainly never seen before.”

Big global companies entering the Australian market – promoters, festival organisers, venue operators and ticketing companies – will have a big impact on the local music scene. This trend, already underway globally, has reached Australia, and Evelyn Richardson noted that we’ve seen some consolidation with companies like Live Nation acquiring Michael Coppel Presents, and more recently TEG picking up The Dainty Group, and we expect this consolidation by larger companies to continue.”

The saturation of our market by large international acts is another factor impacting on Australia, “and while we expect to continue to see those large tours coming into Australia we are now seeing a market adjustment occurring.” This is driven by a number of factors, including the falling dollar impacting on costs, and the plethora of entertainment options on offer to audiences.

“In Australia we’re witnessing a seismic change, with increased globalisation and fragmentation of our market, and changing consumer behaviours presenting challenges we’ve certainly never seen before.” Evelyn Richardson – LPA

Evelyn pointed out that after “a decade of continuous growth, the golden years of touring are over. We would say the bubble has burst and we can see a plateau through to 2020”. For a decade the LPA Ticketing Survey has showed significant growth in live music, with contemporary music consistently the largest revenue generator across all live performance genres. This data “is conservative because we don’t collect for clubs and pubs, and a whole range of activity in the live music scene”.

The most recent survey, from 2014, found a 10 percent drop in ticket revenue for contemporary music when adjusted like for like. “While less than expected, it was a very strong indicator that the tide was turning. 2015 data will come out in October and we expect this decline to continue.”

The shakedown in the festivals market has also been considerable with the demise of huge festivals like Soundwave, Future Music and Big Day Out. In the two years to 2014/15, 55 festivals cancelled and 6 downsized. Adjusted LPA data shows a five percent decline in festivals revenue since 2013.

Other issues impacting on the live music scene include touring costs increasing faster than inflation, unsustainable high average ticket prices, saturated markets here and overseas, and live shows growing faster than audiences, meaning LPA expects further consolidation in the festivals market.

On the optimistic side Evelyn endorsed comments by her colleagues on our export potential: “There are opportunities for our music industry globally, we do see growing exposure for our local artists internationally, and access to a growing global consumer base, which is far greater than our own domestic market.”

There is also optimism on the global live music scene. “It is predicated globally that live music revenue will rise at a rate which will almost compensate for declines in recorded music income through to 2019, and ticket revenue will grow faster than sponsorship revenue. And according to a recent Price Waterhouse survey, total global live music revenue is expected to continue to rise at around 3 percent compound annual growth through to 2020.

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