APRA AMCOS’ Head of Revenue Richard Mallett has penned an opinion piece for TIO readers on the state of the music industry, covering the rise of the curated mega-playlists, the biggest mistakes the music industry is making, and his suggestions on how best to move forward given the benefit of hindsight.

The piece follows the release of APRA AMCOS’ Year In Review data yesterday, which announced streaming royalties had grown an unprecedented 127% to $62.2M, while the total amount of royalties paid to songwriters, publishers, and affiliated societies equaled $335.9m, a 17.7% year on year growth.

Read Mallett’s op-ed in full below:

For 16 of my 22-year tenure within the Revenue Department at APRA AMCOS, global recorded music revenues were on the decline. Now, for the first time since the turn of the century, those numbers are on the increase – evidenced by the 127% year on year increase in our collections from digital music services, which is on the back of last year’s 140% increase on 2014/15 collections.

The music industry needs to learn from its mistakes in order to overcome future challenges

From sheet music to vinyl to cassette tape to CD to MP3 to streaming – each new format, device and success has come with unforeseen challenges. I’d argue that 17 years ago when illegal downloads right hooked the industry – we clearly weren’t ready for the challenge. Indeed, when Spotify launched in this territory a little over five years ago, the streaming model was met with varying levels of consternation and backlash, but Spotify, Apple Music and similar digital music services are now being referred to as the industry’s knight in shining armour. It’s nothing new to say but it’s worth restating that the music industry needs to learn from the mistakes of our recent past and future proof ourselves against the challenges that come with success.

So, five years later and with the benefit of hindsight the challenges accompanying the successes of streaming are much clearer. Initially the challenge, financially but also largely on principle, was opening access to unlimited, a-la-carte music options on freemium (ad funded) services with little compensation to music creators. Today there are growing calls to abolish the free tier. I would like to say it’s only a matter of time – but perhaps that is too optimistic. The numbers, however speak for themselves, and when subscription – or premium tier – streaming services deliver 500% more per stream to rights holders than ad funded – or free tier – services, the countermove is clear. Abolishing the free tier will increase returns to songwriters and industry and reset the tone of what is an acceptable use of copyright for emerging technologies. There was never a business case for giving away CDs to your prime customer-base to drive the purchase of the same – and I’ve not read or heard a persuasive argument that it’s any different for streaming services.

The second and more complex challenge has been the rise of the curated mega-playlists. Ironically, while playlists have buoyed the appeal of streaming services and opened up global audiences to Australian music (a good thing!), algorithms and powerful playlists curated by overseas teams are a very real threat to the local industry. The success of a song on personal devices has shifted seismically from the consumer to the invisible curators and their swag of algorithms.

2018 will be the year of the home networking device

The driver for our collections from digital music services over the last couple of years has been through the bundling of those services with other products, primarily mobile phone plans.  We expect to see a new wave of streaming uptake in 2018 via the mass penetration of home networking devices. Where Netflix benefited from easy availability of the service on traditional equipment that people already view TV content on, music hasn’t really had the same ease. However, with an expected push in this market for the likes of connected speakers (Apple’s Homepod, Google’s Alexa and Amazon’s Echo) or devices in vehicles (Tesla), should result in further growth in digital music consumption.

So, consider then, what happens to your listening habits when you introduce in-home and in-vehicle devices en masse: literally, physically, taking control out of your hands and fully into the hands of the man behind the curtain.  Of course you can still program the service through your phone or other device, but in reality the off shore playlist has more influence than ever, and Australian content less chance than ever – unless you land a spot on one of those coveted lists.

It’s true that we have work to do exporting and introducing our music to these northern hemisphere curators, but it’s also true that something needs to change here at an administrative level. Perhaps a Streaming Services voluntary Code of Conduct that makes clear suggestions toward local content quotas or visible in-app representation. I mean, browse through the Genres & Moods section on Spotify and why is there “Folk & Americana”, “K-Pop” and “Latin” but not an “Australian” icon?  Answer me that Daniel, and don’t tell me it’s down to demand when you also have (but with no disrespect to the genres) “Classical” and “Sleep”!

Won’t someone please think of the Value Gap?

Self-regulation aside, there was one key move missing from our defensive repertoire in 1999 – decent, fair and strong copyright law – backed by supportive governments.

Had the regulatory framework been water-tight or amended quickly to deal with new technologies, perhaps Australian entrepreneurs would have been inclined at the time to invest in digital music services and Australia would have its own home-grown Spotify or Apple Music?

And perhaps Australia wouldn’t have been forced to cohabit with the Digital Millennium Copyright Act and its offspring, the value gap, which continues to unwaveringly support advertising-funded User Generated Content and Social Media services and completely ignore the continuing collateral damage that brings to our songwriters and recording artists because of one-sided take-down policies.

Lessons to be learned

If ever there was an area to echo a King Canute-like acceptance of the futility in fighting against the tide, this is it.  We must accept that the music industry often lies at the forefront of technological change, and that partnering willingly and early with new services to provide access to music will facilitate the best possible leverage to support our artists.  At the moment this includes specifically licensing digital music services to provide background music to restaurants and retail stores (something that is actually against the terms and conditions of those services) and looking slightly further ahead, perhaps to enable the further rollout into virtual reality shopping malls!