State Champ Radio analysis
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Back in 2018, when music producer Sherman Nealy filed a lawsuit against Warner Music Group, it was just a run-of-the-mill copyright case. Nealy claimed that Flo Rida’s 2008 tune “In the Ayer” featured an unlicensed sample of “Jam the Box,” a 1984 track released by Pretty Tony that he owns.
It’s the same kind of claim that’s made in federal courts every day.
But five years later, Nealy’s lawsuit is now headed to the U.S. Supreme Court, which will use it as a vehicle to answer big unresolved questions about how much money can be awarded in copyright cases. Are those damages limited to just the last three years before a case was filed? Or can they range back decades, adding potentially many more millions to the total?
The high court’s eventual ruling, which the justices will issue next spring, will apply to all forms of copyrighted works, but the music industry is paying particularly close attention. In a filing earlier this year, record labels and music publishers called the case “exceptionally important” to their business.
Pay After Delay?
The controversy at the center of the case against Warner dates back to 2014, when the Supreme Court ruled that the movie studio MGM could be sued for copyright infringement over Raging Bull, even though the case was filed decades after the Martin Scorsese-directed film had first been released in 1980. The studio argued that long delay was unfair, but the justices pointed out that the Copyright Act has a three-year statute of limitations that resets with every new infringement.
Under the court’s interpretation of the law, as long as copies of an allegedly infringing book, song or movie had been sold during the three years prior to the lawsuit, it was fair game for a copyright case. Perhaps unsurprisingly, that ruling led to a surge in long-delayed infringement cases, including a high-profile lawsuit against Led Zeppelin over the 1971 song “Stairway To Heaven.”
But like many Supreme Court decisions, the Raging Bull ruling ultimately raised as many questions as it answered. Chief among them: if you can sue many years later, how far back can you seek damages? If you successfully sue someone in 2023 over a song that came out in 1995, can you demand payment based on 27 years of illegal sales?
In the Raging Bull ruling, the Supreme Court seemed to say no. In her opinion, the late Justice Ruth Bader Ginsburg was fairly clear: “A successful plaintiff can gain retrospective relief only three years back from the time of suit. No recovery may be had for infringement in earlier years. Profits made in those years remain the defendant’s to keep.”
In the years since, the New York-centric U.S. Court of Appeals for the Second Circuit has taken that language literally, ruling a copyright accuser cannot win damages for any for any conduct older than three years – full stop. If you wait to sue over a hit song from the 1990s, you cannot tap into those huge profits when you win the lawsuit.
But the U.S. Court of Appeals for the Ninth Circuit (covering California) disagrees. If you can prove that you only recently “discovered” the fact that your copyright was infringed, the Ninth Circuit says you can seek damages going back all the way to all the way back to the very first infringement – potentially decades worth of penalties.
That means the two courts that contain the vast majority of the country’s creative industries are directly divided over how copyright law works – a so-called “circuit split” that the Supreme Court is tasked with correcting.
Heading To Court
Nealy sued Atlantic Records, Warner Chappell and Artist Publishing Group in Florida federal court in 2018, arguing he had never actually granted them a valid license for his “Jam the Box” to be sampled in Flo Rida’s “In the Ayer,” which reached No. 9 on the Hot 100 after being released in July 2008.
In 2021, the judge overseeing the case cited Raging Bull and ruled that Nealy couldn’t win any money from earlier than 2015. Though Nealy said he had only learned of the illegal sample in 2016 and wanted damages going all the way back to 2008, the judge cited the Supreme Court’s “binding precedent” that had “explicitly delimited damages to the three years prior.”
But earlier this year, the U.S. Court of Appeals for the Eleventh Circuit overturned that ruling. Siding with the Ninth Circuit’s approach, the appeals court ruled that Nealy’s late discovery of the infringement was a different situation than the one dealt with in Raging Bull – and that any similar “discovery rule” cases would be allowed to seek damages as far back as they went.
Warner quickly appealed that decision to the Supreme Court. Repped by elite SCOTUS attorney Kannon Shanmugam of the law firm Paul Weiss, the company argued in a May petition that the “discovery” approach would unfairly expand the “financial exposure” of a copyright defendant and potentially lead to frivolous lawsuits that aimed to “extract settlements.”
“Deprived of a predictable limitations period and faced with expensive, time-consuming, and difficult litigation in order to defend years-old uses of copyrighted works, defendants will often be left with no choice but to settle claims early even in the absence of wrongdoing—or potentially never enter valuable agreements in the first place,” Shanmugam wrote for his client.
“Vitally Important”
The phrases “retroactive relief” and “three-year lookback period” might make your eyes glaze over, but the Nealy v. Warner case has big implications for copyright-heavy industries like music.
After the Raging Bull ruling dropped in 2014, artists and labels saw a rash of long-delayed cases. The lawsuit against Led Zeppelin – which resulted in more than six years of costly litigation before the band was ultimately cleared of all wrongdoing – was the most prominent, but it was just one of many. Meatloaf was sued over his 1993 song “I’d Do Anything For Love”; U2 was accused of ripping off its 1991 hit “The Fly”; and another case claimed that Notorious B.I.G.’s 1993 hit “Party and Bullshit” featured an unlicensed sample.
If the Supreme Court eventually rules in favor of Nealy, it would almost certainly encourage more age-old cases, creating a far larger potential prize for a successful accuser. As Nealy’s attorneys argued at an earlier stage of his case, when it comes to years-old copyright claims, “the vast bulk of damages” will typically fall outside the three-year limit.
Labels and publishers are watching the case closely. In a June brief at the Supreme Court, the Recording Industry Association of America and National Music Publishers’ Association didn’t advocate for either camp, but simply urged the justices to take up a case that is “vitally important to the music industry.”
“Because copyrights are the music industry’s most consequential asset, music labels and music publishers regularly find themselves both enforcing and defending copy right lawsuits,” lawyers for RIAA and NMPA wrote. “Without a clear national rule setting the temporal limits of recoverable damages, amici and their members face serious uncertainty.”
It’s been nearly 20 months since Neil Young pulled his music off Spotify and, according to Billboard’s estimate, the move has cost him about $300,000 so far in lost recorded music and publishing royalties.
On Jan. 24, 2022, the singer-songwriter gave the streaming company an ultimatum: “You can have Rogan or Young. Not both.” Young blamed Rogan and his Spotify-exclusive podcast, The Joe Rogan Experience, for spreading “fake information about vaccines” and putting the public’s health at risk. Spotify acquiesced a few days later and removed Young’s catalog from its platform.
Other artists in Young’s circle of friends, such as Joni Mitchell and Nils Lofgren, also requested that Spotify remove their music from the platform — and remain off to this day. But Young’s absence leaves the largest hole in Spotify’s catalog: 45 studio albums, two EPs and 12 live albums as a solo artist and with his band Crazy Horse, plus compilations and soundtracks, that includes such rock classics as “Cinnamon Girl,” “Heart of Gold” and “Rockin’ in a Free World.”
Young’s open letter and demand for removal from Spotify attracted worldwide media attention and caused a brief spike in streams, but his departure from the platform at the end of January 2022 created an immediate decline in his average stream rate — and it hasn’t rebounded since, according to Luminate data. From 2021 to Sept. 21, 2023, Young’s average weekly global on-demand audio streams declined 32% from 10.5 million to 7.1 million. The actual loss is deeper considering that weekly on-demand audio streams in the U.S., Young’s largest market, increased 25% over that period.
The impact of Young’s Spotify pullout isn’t much for an artist of his stature and net worth, but it’s not nothing, either. Each month Young is away from Spotify, he loses about $16,000 in royalties from both his record label and his music publishing, according to Billboard analysis of Luminate data.
In nearly 20 months, Young’s absence has cost him about 273 million on-demand audio streams. The gross amount of lost royalties during Young’s Spotify absence totals roughly $1.3 million. Billboard estimates that Young’s labels, Warner Music Group’s Reprise Records and Universal Music Group’s Geffen Records, have lost approximately $1 million in gross revenues, from which Young receives a royalty. Young’s gross publishing revenue has fallen about $270,000. Young sold 50% of his publishing rights to Hipgnosis Songs Fund in 2021.
Sales of Young’s music in the U.S. have dropped, too, although whether his absence from Spotify played a role is unknown. So far in 2023, Young has sold about 25% fewer albums per week than compared to 2021; 2022’s weekly average was 9% below 2021 levels. Physical album sales, which outnumber digital album sales nearly eight-to-one for Young, are down 24% from 2021 to 2023. This year, weekly digital album sales are off 29% from 2021 (they increased 3% in 2022). Young’s weekly digital track sales have fallen by 35% from 2021 to 2023.
The cumulative effect of the sales slowdowns amounted to 59,000 fewer album sales and 54,000 fewer track sales over nearly 20 months. (Luminate does not track the Neil Young Archive, an online subscription service that provides access to a vast catalog of Young’s audio and video, but in October 2019 Wired reported it had 25,000 subscribers with a goal to reach 40,000 paying $1.99 a month.)
There’s much more to Young’s career than Spotify, though, and plenty of other ways for him and his rights holders to earn off his music. In the last 18 months, for example, Young’s music has been used in over 75 TV and film synchs, according to a person with knowledge of the songwriter’s business. These have included the NBC series “This Is Us” (Jill Andrews’ cover of “Only Love Can Break Your Heart”), the AMC series “Dark Winds” (Young’s recording of “Birds”), the Hulu series “Poker Face” (Young’s recording of “Walk On”), “The Tonight Show Starring Jimmy Fallon” (the band’s performance of “Old Man”) and “Sunday Night Football” (Beck’s cover of “Old Man”).
One place you won’t see Young’s music is advertisements. Young is famously opposed to using his music to sell products and advertise corporate brands. Young encapsulated his distaste for putting music in advertisements in his 1989 song “This Note’s For You” — a take on a Budweiser ad slogan from the era, “This Bud’s For You.” “Ain’t singing’ for Pepsi, ain’t singing for Coke,” Young sang in the album’s title track. “I don’t sing for nobody, makes me look like a joke.” The song’s video stirred up controversy — and was initially banned from MTV — for its mocking depiction of a 1984 Pepsi commercial shoot during which pyrotechnics set Michael Jackson’s hair caught fire.
Surely, Young has lost untold millions of dollars over his career in potential ad sales and endorsement deals. But as an artist who’s always clearly voiced his principals and stood by them, he’s long made it clear money is not his first priority.
In late August, Billboard reported that BMI is in serious discussions to sell itself to New Mountain Capital for $1.7 billion, less than a year after the organization announced it was switching for a for-profit model. No deal has been signed, but talks are serious enough that the two sides have entered into exclusive negotiations, and the change in the way BMI operates — especially after the industry became aware of how much profit it has generated in its most recent fiscal year — has triggered an avalanche of questions from songwriters and music publishers. The most important: Will BMI’s future profits come at the expense of royalty payouts to its more than a million affiliated songwriters and publishers.
BMI had $147 million in earnings before interest, taxes, depreciation and amortization in its most recent — but as yet unannounced — fiscal results, according to Reuters. The question is where this money came from.
“Where does profit come from for a performance rights organization?” asks one veteran music publishing executive. “It can come from only two buckets — the cost bucket or the royalty distribution bucket.” And that executive, like several others, believes that BMI “definitely didn’t cut $147 million in expenses.”
Although BMI made news in October 2022 when it announced it would begin to operate on a for-profit basis, all four U.S. performance rights organizations are actually set-up as for-profit corporations – BMI and ASCAP both file form 1120 with the I.R.S., as SESAC and GMR likely do as well. For decades, though, the first two have operated as not-for-profit companies, which likely means that since they pay out all the royalties they collect, minus expenses, they have no profit on which to pay tax. ASCAP’s Articles of Association states that “all royalties and license fees collected by the society shall be…distributed among its members,” except for expenses and contributions to a reserve fund.
BMI has always operated the same way, even though it has always been a private company owned by radio and television companies. In July 2022, though, rumors started spreading about BMI’s plans to change its operations, and the company hired Goldman Sachs to shop the company, preferably to a company which can fill the role of a strategic, but non-industry, partner. That effort didn’t result in a sale, either because the not-for-profit model BMI operated under at the time left it without any profit to show potential buyers, according to some sources; or, as other sources say, because BMI didn’t find a partner at that time that shared its vision of prioritizing the interests of songwriters.
Last October, when BMI announced it would switch to operating on a for-profit basis, the initial reaction in the industry was muted. This summer, however, when Reuters reported that BMI was once again up for sale — and that it had generated $147 million in earnings before interest, taxes, depreciation and amortization — creators expressed alarm, especially at the idea that those earnings might have been taken out of their royalties.
On Aug. 17, five creators groups sent an open letter to BMI CEO Mike O’Neill that asked 17 questions about BMI’s new business model, including whether songwriters and publishers would receive any of the proceeds from a potential sale, how the organization generated so much profit, and how it could continue to do so without reducing payouts to songwriters and publishers, the last of which is an especially significant worry, according to sources. The letter came from the Black Music Action Coalition, the Music Artists Coalition, the Songwriters of North America, SAG-AFTRA, and the Artists Rights Alliance.
So far, the only music publisher to comment on the changes at BMI is Universal Music Publishing Group chairman and CEO Jody Gerson, who said in a statement that, “We will only support changes that increase value for songwriters and will not stand for any that result in our songwriters being paid less than what they deserve.” Other publishers would not comment on the record but expressed concerns.
On Aug. 18, O’Neill responded in a letter to the creators groups and acknowledged that they raised “some important questions” about BMI’s evolution. (His letter was shared with Billboard, and published in full along with a story on it.) He said that the change would allow BMI to invest in its business in order to grow, plus increase payouts. Most important, O’Neill wrote, in the event of a sale, BMI “would ensure that any partner embraces our mission of prioritizing the interests of songwriters, including their financial success. This is especially important as we navigate this rapidly changing industry together.”
(BMI executives declined to be interviewed for this article but they responded to questions with emailed statements, issues other statements for two other stories on the issue, and provided Billboard with the letters O’Neill wrote in response to the creators groups.)
“Relying on the past never sustained a business for the future,” BMI said in an Aug. 29 statement to Billboard. “Our goal is to stay ahead of the changing industry and invest in our business to grow the value of our affiliates’ music.”
O’Neill’s initial letter didn’t satisfy the groups behind the letter, which followed up with another letter to BMI on Aug. 25, which was also obtained by Billboard. “While we appreciated you responding to our letter,” it read, “all of our questions went unanswered.” So far, sources involved with the music creators groups argue. BMI has still not responded to most of the questions in the original letter.
SLICING A FOR-PROFIT PIE
The other big question hanging over a potential sale of BMI is what it would mean for its competition against and its relationships with the other collective management organizations that it competes with but also collects money for and in turn receives royalties from under reciprocal agreements. Because of BMI’s change in governance, it has gone from being a member of CISAC, the international organization of CMOs, to a client, so it is no longer bound by the organization’s transparency rules but will still have access to its data systems.
ASCAP, BMI’s main competitor in the U.S. for more than eight decades, had a pointed take, which it shared in a social media campaign clearly aimed at BMI, though it did not mention the company by name. Its tweets included “We pay songwriters, not shareholders;” “growth without greed;” “Not for profit since 1914 and still growing;” and “There is no I in ASCAP.” Asked to respond, BMI issued a statement: “Our focus is not on how our competitors position themselves, our focus is on delivering for our affiliates.”
So far, BMI has made record payments to affiliates under its for-profit model, the company claims. In a Sept. 5 letter, posted on BMI’s website, O’Neill points out that the company has made three distributions under the new model, each higher than the corresponding one from the previous year. BMI said in an emailed statement that the three combined payments are 9% higher than they were in the previous year. Two of those payouts, according to O’Neill’s Sept. 5 letter, “are the “largest in [the] company’s history.” BMI also set a record in 2022, when it collected $1.573 billion, a 15.58% increase over the previous year, and distributed what it called an “unprecedented” $1.471 billion, a 10.2% increase.
If BMI’s core business keeps growing, it would be relatively easy for the company to continue to increase annual payouts, while keeping healthy profits for itself, industry financial executives point out. From now on, though, songwriters and publishers will have to take BMI’s word for its financial success because, according to sources, its 2022 results are the last ones it will make public. The kind of financial information BMI has traditionally shared would allow publishing executives to see where BMI’s EBITDA is coming from – which could potentially fuel further debate about how much of that money ought to have gone to rightsholders, but didn’t.
Going forward, BMI will instead emphasize and expand the financial information it provides to individual songwriters and their publishers to allow them to compare its payouts with previous years – and potentially, if BMH songwriters so choose, with those going to their co-songwriters who are affiliated with other PROs. That information would show affiliates that it takes its obligations to pay creators competitively, say sources familiar with BMI’s thinking.
BMI’s reluctance to share information is not unique. Both SESAC and Global Music Rights (GMR) operate under a for-profit model, and neither shares information about its overall financial results. Sources speculate that GMR, a boutique U.S. performance rights organization that represents top-tier writers for performance rights licensing, collects more than $150 million. Less is known about SESAC’s financials, which it guards closely, but in 2013 when investment firm Rizvi Traverse acquired a 75% interest in the company, Billboard obtained the financial information used to shop the company which showed that in 2011 SESAC took in $128 million in collections, and paid out $60 million in distributions, leaving itself with $68 million in net publisher’s share. After $27 million in expenses, the company realized $41 million in EBITDA, an EBITDA margin of 32%, according to Billboard calculations. (Rizvi Traverse subsequently sold SESAC to Blackstone for about $1 billion in 2017.) For the year ended June 30, 2023, Billboard estimates that BMI has an EBITDA margin of 8.1%, although BMI is unlikely to make public these financial results. In other words, SESAC’s 2011 EBIDTA margin was four times larger than BMI’s, Billboard estimates.
SESAC and GMR declined to comment or could not be reached to comment on their profitability. But an executive familiar with SESAC’s strategy noted, “everyone who’s affiliated with SESAC has known SESAC is a for-profit” company. The implication is that it didn’t switch models, as BMI did.
The same goes for GMR, and some industry sources find it ironic that Irving Azoff, who founded the for-profit GMR, is on the board of two of the creators groups leading the charge in criticizing BMI. Like SESAC, GMR has always made clear to songwriters that it operates as a for-profit business, and it shows its affiliates a rate card with the amounts of money it collects from different licensees, sources say, so they can compare that to other PROs. It sticks to those rates, unlike BMI and ASCAP, which have bonus plans, explained on their respective web sites, which pay out more money per play to songwriters who accumulate a certain number of plays.
At BMI and ASCAP, for example, a pop song might generate a payout of about a dollar a play on a popular big-city radio station, but a composition that qualifies for a bonus could generate three times that much, to use a simplified example. These bifurcated rate structures apply to most big genres, and to subscription streaming and satellite radio play, as well as terrestrial radio. While some songwriters and executives argue that it’s not fair to pay top songwriters and their publishers at a higher rate, since their songs accumulate more plays anyway, these plans allow BMI and ASCAP to compete for top writers with SESAC and GMR, which are not bound by antitrust consent decrees the way BMI and ASCAP are. For BMI and ASCAP, having those top writers helps them get better rates from licensees. “A rising tide lifts all boats,” as one PRO executive says.
Even so, these plans show how the two big PROs structure their businesses in order to pay different rates to songwriters, which sources suggest BMI had to do even more in order to generate a profit.
Sources familiar with BMI’s thinking dismiss as inaccurate the idea that it will change the way it pays songwriters and publishers and BMI in an email to Billboard called this unfounded speculation. But other industry sources suggest that BMI’s switch to a for-profit model gives it an incentive to grow that would make such a switch worth considering. And there are plenty of ways it could do so. “There are a lot of rule changes they can make there and in other places to get dribs and drabs that would impact people equally but not so noticeably,” says an executive at a competing PRO. As another executive notes, paraphrasing a music publishing saying, “If you get a crumb here and a crumb there, eventually you have a loaf of bread.”
If BMI does decide to alter its payout structure, changes are likely to come at the expense of less popular songwriters on the so-called long tail, argue other sources, or smaller publishers who are less likely to push back. “The people with no representation are at the biggest risk in the for-profit model,” the music publishing executive says. “For sure, [BMI’s profit] will come out of the pocket of many, many people who are currently paid little amounts of dollars.”
Another executive familiar with BMI’s plans says that this kind of speculation is nonsense, and O’Neill said in the Sept. 5 letter that there is no truth to these rumors. “The industry’s most successful music creators didn’t start out that way,” he said in the Sept. 5 letter, “and we pride ourselves on our work helping to guide, develop, and support your talent to ensure your passion can also be a profession.”
Not everyone is convinced, though. “In the music industry,” says another veteran executive, “we usually oil the squeaky wheels with money.”
OTHER QUESTIONS
Even after these two big questions are addressed, others remain. One: Will BMI loosen its rules on songwriter departures, since its switch to a for-profit model represents such a dramatic change in how it operates?
More immediately, will BMI’s balancing act – operating for-profit while continuing to make sure its affiliates are paid fairly – appeal to a private equity player? The company already operates under a consent decree, and its first attempt at a sale, in the summer of 2022, didn’t succeed.
It’s also hard to predict what effects a potential BMI sale to a private equity fund would have on its regulatory environment, from the possibility of more antitrust scrutiny from the U.S. Dept. of Justice to the chance of a renewed look at a compulsory license for public performances.
And the big question driving all of the arguments still remain unanswered. If BMI does make a deal to sell itself, will songwriters and publishers share in what sources suggest is a $1.7 billion valuation price? Will some of that money be earmarked for infrastructure improvements? Or will all of it go to the radio and TV stations that own BMI? Since BMI has taken in an average of about $238 million a year in annual licensing fees from terrestrial radio and broadcast television over the last half-decade, that means that a price of about $1.7 billion would fund about a seven-year licensing rebate for BMI’s owners.
Will Hipgnosis Songs Fund, a trailblazer in making music an alternative asset class in the financial world, fight to see another day? The sale of catalogs for $465 million, announced Thursday, is meant to help Hipgnosis Song Fund’s sagging share price and bring it closer to the company’s per-share net asset value (NAV). But it also intends to give investors a reason to vote for a five-year continuation in the annual meeting that’s likely to be held in October.
Given its need to shore up investor support, the catalog sale didn’t come as a surprise. Board chair Andrew Sutch said at a July 13 investor presentation that the board was pursuing options to boost shareholder value, and Hipgnosis has said that many of its largest shareholders favor share buybacks and partial debt repayment to help the struggling share price. This transaction provides the capital for those measures: Hipgnosis intends to use $180 million for share buybacks and $250 million to pay down the revolving credit facility.
Whether the deal ultimately succeeds depends on investors’ belief they are getting a good deal on the sale — the majority of which is to a sister company, the Blackstone-backed Hipgnosis Songs Capital (a joint venture with the royalty fund’s investment advisory, Hipgnosis Song Management, led by Merck Mecuriadis). Hipgnosis Songs Fund has long traded at a steep discount to its per-share NAV. That could partly be explained by higher interest rates that make the royalty fund, launched when interest rates were lower, a relatively less attractive investment to safer bonds. A larger factor could be investors’ lack of faith in NAV. Hipgnosis, which has argued the share price does not accurately reflect the value of its catalog, is now giving the market a transaction to help prove its point.
In the days following the announcement, some analysts have shown concern about the deal’s terms, transparency and related-party buyer. Investec analysts criticized the deal for valuing the assets “as being little more than the IPO price” in an investor note on Friday (Sept. 15) and stated, “there is substantial value leakage to related parties that again sadly raises significant corporate governance concerns.”
Numis predicts that Hipgnosis investors’ views will be “mixed, particularly given the Round Hill offer,” analysts wrote in a Sept. 14 investor note. In that deal, announced Sept. 8, Round Hill Music Royalty Fund — a royalty fund listed on the London Stock Exchange like Hipgnosis Songs Fund — received a buyout offer from U.S. music company Concord. Unlike the Hipgnsosis deal, Concord bid for the entire publicly traded company — at a price 11.5% below Round Hill’s net asset value. It’s a more straightforward transaction than Hipgnosis’ proposed partial catalog sale.
Numis believes that Hipgnosis’ share price’s discount to NAV “may persist for some time,” which could mean the board and the investment advisor, Hipgnosis Songs Management, “will continue to come under pressure.”
Analysts at Stifel, who have long been critical of Hipgnosis and Round Hill’s music royalty funds’ valuation methodologies, focused on the value Hipgnosis Songs Fund was extracting from Hipgnosis Songs Capital. The $465 million transaction consists of two parts. The first disposal worth $440 million, which accounts for 95% of the purchase price, is 17.5% below the fair value and 26% above the catalogs’ acquisition price.
Little is known about the smaller, second disposal that amounts to a $25 million slice of a catalog acquired from Kobalt Music in 2020 for $323 million. Hipgnosis Songs Capital is not the buyer of the second disposal.
Adding to the deal’s complexity, Hipgnosis Songs Fund is on the hook for bonuses and other payments under the original acquisition agreements; the company believes that will amount to $5.5 million, and it will be capped at $30 million. In addition, Hipgnosis Songs Capital is due royalties on the acquired catalog earned going back to Jan. 1 — about $15.3 million through Sept. 14.
“The complex nature of the deal suggests that it is hard to say the NAV has been validated,” wrote Stifel analyst Sachin Saggar.
If the share price is any gauge of investors’ initial reaction to the deal, opinions aren’t good. Shares of Hipgnosis Songs Fund dropped 6.5% on Thursday and another 7% on Friday. The 13% two-day decline eliminated nearly all of the 15.7% bump the share price received on Sept. 8 following news of Concord’s bid for Round Hill.
If investors are considering what Hipgnosis Songs Fund has left after the sale, they will find many jewels remaining in its catalog, including Neal Schon of Journey, Christine McVie and Lindsey Buckingham of Fleetwood Mac, Red Hot Chili Peppers, Tom DeLonge of Blink-182, Neil Young, Blondie, Steve Winwood, Rodney Jerkins, Chrissie Hyde of the Pretenders, RZA, Teddy Geiger and The Chainsmokers. Five of those names — Journey, Red Hot Chili Peppers, Blink-182, Fleetwood Mac and The Chainsmokers — rank in the year-to-date top 500 recording artists ranked by global on-demand audio streams, according to Luminate. Two of them, Red Hot Chili Peppers and Fleetwood Mac, are in the top 100. It’s also keeping Walter Afanasieff, co-writer of Mariah Carey’s “All I Want for Christmas Is You,” which is a No. 1 song in the United States, United Kingdom and Canada every November and December.
Hipgnosis is giving up some quality, though: The 29 catalogs in the first portfolio include 21 of 473 songs in Spotify’s Billions Club, five of Rolling Stone’s 500 Greatest Songs, and five of YouTube’s 30 most-viewed music videos. They include some older music by Barry Manilow and Rick James as well as newer artists like Poo Bear, RedOne, Martin Bresso and Colombian star Shakira, who ranks No. 55 in global audio on-demand streams. But, on average, these are younger songs with less proven royalty histories than the average song in Hipgnosis Songs Fund’s portfolio. In general, younger songs are less valuable than older, more established songs. Shareholders will vote on the sale at the annual general meeting.
The second disposal represents “non-core” assets worth $25 million that represent a small portion of the 33,000 songs acquired from Kobalt Music for $323 million in 2020. That deal also included the 18,000-song publishing catalog of Canadian music company Nettwerk. Hipgnosis Songs Fund said at the time it paid Kobalt an 18.3 times net publisher share multiple for the catalogs.
Hipgnosis believes the two disposals achieve multiple aims. The $465 million price tag is “the smallest possible that would provide the required capital” for share buybacks and debt repayment, the company stated in a press release. Also, the catalogs the company chose to sell leave intact “the fundamental investment case for Hipgnosis Songs Fund….by protecting the strength of the remaining portfolio.” Come October, we’ll see what investors are thinking.
Why is the music business picking on Brewster Kahle? All the technology activist wants to do with the Internet Archive, which he founded in 1996 and still chairs the board of, is create a digital library that offers “universal access to knowledge.” Isn’t that the promise of the digital age — that anyone with an internet connection can access anything ever created?
Turns out it’s more complicated than that. On Aug. 11, Universal Music, Sony Music and Concord Music filed a lawsuit, managed by the RIAA, against the Internet Archive, Kahle’s foundation, Kahle himself and an audio archivist who worked on the project, for infringing the copyrights to old recordings that the Internet Archive makes available through its “Great 78s” project to digitize old recordings originally issued as 78rpm records.
Already, in June 2020, four big book publishers had sued the Internet Archive for making available for a limited time copy-protected digital versions of books — first as many as it had in its collection or those of its partners, then during the pandemic, with its National Emergency Library, as many as users wanted. The publishers won on summary judgement, although the Internet Archive has said it will appeal.
The Internet Archive does lot of worthwhile work: its Wayback Machine tracks old web pages, offers access to considerable information in the public domain, and boasts an expansive collection of live Grateful Dead recordings. The Great 78s project makes available some old recordings that might otherwise be lost, but according to the RIAA lawsuit it also offers streaming access to plenty of recordings that are big business, including Bing Crosby’s iconic version of “White Christmas” — by some measures the most popular recordings of the 20th century — plus Buddy Holly’s “Peggy Sue,” Chuck Berry’s “Roll Over Beethoven” and Frank Sinatra’s “I’ve Got the World on a String.” The 78, may be an obscure format, but some of the music originally released that way is still relatively popular.
The Internet Archive responded in a blog post that it’s a “lawsuit targeting obsolete media.” “When people want to listen to music they go to Spotify,” Kahle said in a statement on the blog. (The Internet Archive did not comment other than pointing to this post.) “When people want to study 78rpm sound recordings as they were originally created, they go to libraries like the Internet Archive. Both are needed. There shouldn’t be conflict here.”
Except that many of those “78rpm sound recordings” aren’t obsolete at all — they’re the exact same recordings that are on Spotify, plus Apple Music and other streaming services. The versions available on the Internet Archive sound scratchy, but the recordings themselves weren’t originally created that way, and the wear on the particular 78s that were digitized by the archive is less about the history of recorded music than about how careful a particular person was with his or her records.
Kahle presents himself as a “digital librarian” who’s making books — and music and other media — available the way libraries always have. But it’s worth remembering that the legal arguments for the Internet Archive’s book-lending program aren’t based on the provision of copyright law that provides exceptions for libraries. Instead, the archive’s legal claim is that copying and distributing books temporarily is fair use. Which means that, if the Internet Archive had won, any library — or, importantly, perhaps any nonprofit entity that defined itself that way, or maybe any entity at all — could copy books it had purchased in order to distribute them. (The archive, in turn, says that its loss is a disaster for libraries, since they have to license books from publishers; but shouldn’t libraries — an essential public good — be funded by the public in a way that’s fair to creators and rightsholders?) Kahle, who has campaigned for years against what he sees as the excesses of copyright, seems to want to change the law.
“The fact that you own a particular copy doesn’t mean that you can make and distribute copies of that copy — this is basic copyright law,” said Maria Pallante, chief executive of the Association of American Publishers (AAP), which helped to guide the publishers’ lawsuit. “They were trying to bloat fair use, while also asserting a first sale defense that applies only to tangible goods, not bootleg digital files.”
The RIAA is suing at least partly to establish case law behind the part of the 2018 Music Modernization Act, which extended federal copyright protection to recordings made before 1972, which were previously only covered under state law. The labels may also want to collect damages: Since statutory damages for willful infringement can be set by judges or juries at up to $150,000, this case could potentially cost the Internet Archive as much as $412 million. “This is the kind of egregious behavior that the Music Modernization Act was intended to address,” says RIAA CEO Mitch Glazier.
Recordings were only covered under state law until the Copyright Act of 1976, but it wasn’t retroactive. And although some opponents of copyright characterized the Music Modernization Act as a land grab by media companies, that doesn’t hold up: Some state laws made it unclear whether copyright protection ever lapsed at all. Indeed, one reason that sound recordings copyrights were federalized in the first place was to help libraries and archives take advantage of the exceptions and limitations that exist in federal copyright legislation, including fair use and specific exceptions for libraries and archives.
As it happens, the subject of federal copyright protection for pre-1972 recordings was studied in a 2011 report by the Register of Copyrights, and substantial attention was devoted to “challenges of preservation and access.” “Substantively,” the report recommended, “the use of section 108 and the fair use exception should encourage more preservation and public access because they provide time—tested rules with which libraries and archives have experience.”
The law under which the Internet Archive is being sued was actually set up partly to help it and other archives, especially in its “orphan works” provision, the result of a compromise between Music Modernization Act proponents and opponents, that allows organizations to use pre-1972 recordings for non-commercial purposes after checking to make sure they’re not in commercial use. (There’s a procedure for this.) If the Great 78s project really intends to make available music that is in danger of disappearing, the law allows for that. Why aren’t Kahle and the Archive following it? It’s hard to imagine that Kahle doesn’t understand the law.
And that’s why the music business is picking on Brewster Kahle — because it sometimes seems as though the Internet Archive is as much about pushing the boundaries of copyright law as it is about preserving creative works in the first place. Libraries play a crucial role in any democratic society, and Kahle and the archive do a lot of important work. But so do the performers and songwriters — and, yes, the labels and publishers — who made all of these recordings possible in the first place.
In two weeks, Oliver Anthony went from an unknown artist to the owner of the No. 1 track on the Hot 100 chart with the surprise hit “Rich Men North of Richmond” — and in the process went from earning less than $200 in weekly royalties to roughly $356,000 in his chart-topping week.
“Rich Men North of Richmond” generated an estimated $218,000 in royalties for both recorded music and music publishing from track purchases and on-demand audio streams in the week ended Aug. 17, Billboard estimates based on Luminate data. And because he owns his master – released through digital distributor Vydia – and publishing, Anthony will pocket all that money. The track, released through digital distributor Vydia, generated 147,000 track sales and 17.5 million audio on-demand streams over that time period. Luminate did not track any on-demand video streams for the recording. The track also earned Anthony a small amount of publishing royalties from 517 spins at radio.
After the unlikely, whirlwind week in America’s spotlight, Anthony’s long list of accomplishments include the first artist to debut a first Hot 100 chart entry at No. 1; No. 1 on the Hot Country Songs charts; the 23rd song to top both the Hot 100 and Hot Country Songs charts simultaneously (and the first to do so by a solo male); the first solo-written Hot 100 No. 1 since Glass Animals’ “Heat Waves” in March and April 2022; and a rare independently released recording to reach No. 1 on the Hot 100.
The intense interest in “Rich Men North From Richmond” — it instantly found favor in conservative political circles and became a cultural lightning rod among liberals — bled over to the other 18 individually released tracks in Anthony’s catalog and generated an additional $139,000 from 73,000 track sales, 14.8 million audio on-demand streams, 658,000 on-demand video streams and 65,000 programmed audio streams. Anthony had four of the week’s top 10 track downloads: “Ain’t Got a Dollar” was a distant No. 2, “I’ve Got to Get Sober” was No. 5 and “I Want to Go Home” was No. 10. (Strong download sales also put “Ain’t Got a Dollar” and “I’ve Got to Get Sober” onto the Hot Country Songs chart.) In all, Anthony had 16 of the top 100 track downloads in the country last week.
Country music took the top three spots on the Hot 100 but took different routes to get there. Track purchases was the deciding factor in “Rich Men North of Richmond” beating out Luke Combs’ “Fast Car” and Morgan Wallen’s “Last Night.” “Fast Car” had just 10,000 track purchases, 7% as many as “Rich Men North of Richmond,” but its radio audience of 101.7 million was more than 100 times more than the 937,000 achieved by “Rich Men North of Richmond.” Combs’ “Last Night” had the most on-demand audio streams of the trio — 20.5 million to 17.5 million for “Rich Men North of Richmond” and 16.4 million for “Fast Car” — but the fewest track purchases with 6,000 and a radio audience — 70.5 million — about 69% the size the audience of “Fast Car.”
Daily data suggests Anthony’s hot streak will continue. This week’s track purchases of “Rich Men North of Richmond” may decline from last week but through the first two days of the tracking week purchased enough to likely give Anthony the top download for a second consecutive week. And with radio programmers following the lead of consumer purchases and streams, this week’s broadcast radio spins will easily top last week’s count. That’ll all mean more money for the independent artist — and plenty of leverage as he considers offers coming in from major labels “rushing” to sign him.
Two weeks into earnings reports for the second quarter of 2023, the music streaming business is showing that subscriptions — not advertising — are the dependable driving force behind the industry’s growth.
Subscriptions — which accounted for 65% of the U.S. recorded music business in 2022, up from 63% in 2021, according to the RIAA — aren’t affected by economic forces that influence how brands spend their advertising dollars. Consumers continue to pay monthly or annual fees for Spotify, Apple Music, Amazon Music, YouTube Music, Deezer and other offerings. Even faced with higher prices (see “pricing power” below), more people are opting for subscription services.
More information will be gleaned in the coming weeks from earnings results from Warner Music Group (Aug. 8), HYBE (Aug. 8), Sony Music Entertainment (Aug. 9), Tencent Music Entertainment (Aug. 15), Cloud Music (Aug. 24) and Anghami (no date set).
Based on earnings by Universal Music Group, Spotify, Deezer, Believe and Reservoir Media, here are three takeaways from reported results through Aug 4.
The subscription market is holding up well. Spotify beat expectations for both monthly active users (MAUs) and subscribers, “aided by improved retention and marketing efficiencies,” the company explained in its July 25 shareholder presentation. Spotify’s premium subscribers grew 17% year-over-year to 220 million, beating its guidance of 217 million. Spotify’s MAUs increased 27% year-over-year to 551 million compared to guidance of 530 million. Universal Music Group attributed subscription growth in its recorded music segment — 13% in the second quarter and 11.6% in the first half of the year — to “broad-based growth in subscribers across all major global platform partners.” Reservoir Media CEO Golnar Khosrowshahi cited Spotify’s “higher than expected subscriber numbers” in the company’s Aug. 2 earnings call and said its strong quarterly results “reflect increasing demand trends for streaming music globally.” Not all subscription services made gains, though. Deezer lost 100,000 subscribers from June 30, 2022, to June 30, 2023, and Pandora ended the quarter with 6.2 million subscribers, down 100,000 from 6.3 million a year earlier.
Services have pricing power. Spotify raised its individual subscription plan in the U.S. on July 24 to great fanfare. After all, the price had gone unchanged since the service launched in the United States in 2011, although the family plan price increased by $2 per month in 2021. Spotify is relatively late to the game, though. Deezer raised its price from 9.99 euros to 10.99 euros in January 2022 — a major factor in the company’s direct subscriber average revenue per user climbing 4.9% year over year. Apple Music and Amazon Music both raised their prices last year as well. And according to Deezer CEO Jeronimo Folgueira, the increase had “pretty much no impact on churn” — the number of subscribers who leave a service over a period — and “clearly demonstrated that music is highly undervalued, and that platforms like us have more pricing power than initially anticipated.” That said, Folgueira stated that Deezer’s guidance for full-year revenue growth does not include another price increase later in the year.
The advertising market continues to have challenges. At Spotify, music advertising revenue grew in the “mid-single digits” year-over-year, lower than the 12% (15% at constant currency) growth in total ad-supported revenue. That implies advertising revenue from podcasts, which was up 30% year-over-year, contributed to most of the growth. Spotify also noted “softer pricing due to the macroeconomic environment” that offset double-digit gains in impressions. Universal Music Group’s ad-supported streaming revenues were up 5% in the second quarter and 2% in the first half of the year. UMG’s CFO Boyd Muir said “it’s too early to call a positive turnaround in the market.” Believe is “still impacted by the weak ad-supported monetization,” said CFO/chief strategy officer Xavier Dumont. The advertising malaise extends to broadcast radio, too. Weak national advertising “remained the main factor driving a decline in total revenue,” Frank Lopez-Balboa, Cumulus executive vp/treasurer/CFO, said in the company’s July 28 earnings call. National brands appear likely to increase ad spending in the second half of the year, however, according to B Riley Securities analyst Daniel Day.
The clock is ticking. Two weeks ago, TikTok announced the launch of the beta for its new streaming service in three new markets – Mexico, Australia, and Singapore – just a few weeks after it shared plans to roll out the app in Brazil and Indonesia. This suggests that the social media giant might also soon bring TikTok Music to the United States – although a source close to the matter claims TikTok has “no current plans” to do so.
However, if it does, TikTok Music could push the industry into a new, second generation of music streaming fueled by social media – and make ByteDance one of the most powerful and vertically integrated companies in the modern music business.
TikTok teased in a recent press release that TikTok Music will provide a “social music streaming” experience. Though it remains to be seen what the U.S. version of the forthcoming service will look like, a move to prioritize social interaction and cross pollination between the TikTok social app and its music streaming counterpart plays on the company’s greatest asset – and arguably also targets the incumbents’ greatest weakness.
The streaming services could be more social. It’s hard to find any examples of a music influencer that grew their following primarily on Spotify, Apple or Amazon. There is no longer a direct messaging feature on Spotify. There are practically no ways to engage with music beyond adding it to your personal library or clicking a “heart” icon. Unless, of course, the user leaves the app and shares a song to an Instagram story.
Instead, the current streamers invested in company-selected editorial playlists and radio stations. This allowed them to gain control in the promotion and marketing of music in the late 2010s and early 2020s as the streaming market in the United States began to mature. Top curators and hosts employed at Spotify and Apple in particular – like Zane Lowe or Tuma Basa – became modern kingmakers, much like radio DJs, MTV VJs, journalists and bloggers had been before.
But Billboard found that by late 2022, this was no longer moving the needle quite like it did just a few years before. At the peak of this model in 2019, a few high placements on key playlists often guaranteed a drastic influx of streams and interest from record labels, but its potency has since waned considerably. “There used to be a world where an unknown artist would get the cover of the Fresh Finds playlist [on Spotify] and they would get between 60,000 and 100,000 streams a week,” said one manager who works primarily with developing acts. “Now you’re looking at more like 15,000 to 20,000 streams a week.”
Instead, listeners – particularly Gen Z – increasingly turned to TikTok to find their new favorite songs, likely for its more interactive and organic feel; and labels in turn began offering lucrative contracts to artists who fared well on TikTok in the same way that they once offered deals to talent who landed on key playlists. In the words of MIDiA Research’s Tatiana Cirisano, the streaming services “cultural capital” was giving way to the China-based company which had become the most important place to market and promote music. As Chris Anokute, an A&R rep-turned-manager, previously put it to Billboard, “The biggest game in town is TikTok.”
The move into streaming, if successful, will allow TikTok to not only wield power over the marketing and promotion of music, but also the consumption of it. This, coupled with its popular music distributor and artist services company SoundOn, has the potential to make the company the most powerful in the industry today. With distribution, promotion, marketing and consumption all vertically integrated, ByteDance becomes a one-stop shop. (To take it even further, ByteDance also recently launched a music AI tool called Ripple, also inching the company into the music production process too).
SoundOn already has certain advantages over competitors like AWAL, Virgin and The Orchard: It can leverage access to TikTok data that lets signees identify promotional opportunities within the app. It can also afford to be a loss-leader, given that music is not ByteDance’s primary source of revenue. If SoundOn could add in the promise of editorial playlisting on a popular streaming service, it would be an even more formidable challenger for its competition. Today, traditional artist services companies cannot guarantee playlisting on any platform – all they offer is that their team will try. Imagine if an artist services company could guarantee social media success and playlisting for an emerging artist.
In many ways, TikTok’s democratization of music discovery is an exciting thing in that it has allowed artists without industry connections a chance to build an audience. But this comes at a cost. Today’s gatekeeper is not a music professional, it is an elusive, ever-changing algorithm, created by a company already criticized for its lack of transparency. In January, Forbes discovered that TikTok employees have access to a private “heating button” that can be employed to induce an uptick in video plays, and in March, a coalition of lawmakers cited potential issues with data privacy as a reason to ban the app nationwide. (Since then, Congress has gone mostly quiet on the idea of a TikTok ban.)
The incumbent streamers still have the upper hand against TikTok Music given their robust user bases. Though video streamers like Netflix, Hulu, and MAX struggle with constant cord cutting as users hop from service-to-service depending on their current film and TV offerings, music streamers generally offer the same catalog. This builds user loyalty to their music services and could possibly insulate Spotify, Apple and Amazon from a shiny new opponent like TikTok Music, even if that opponent’s experience proves better in some ways.
TikTok, however, has already influenced the rollout of new features on streaming services before it entered the streaming business itself. Take, for example, Spotify’s announcement earlier this year of a new vertical, swipeable discovery feed that sparked comparisons to the short-form video app, or its prior recruitment of TikTok-based music influencers – like Ari Elkins and Dev Lemons – to help popularize its now-defunct live audio app, Spotify Live. So even if TikTok can’t launch a streaming service that clinches the top market share, it will certainly continue to influence its competition even more than it already has. At the very least, TikTok Music’s launch signals the start of “music streaming 2.0,” – if not an even more seismic shift in power in the overall business.
Republic Records jumped out to a huge lead early on in the market share rankings this year among current releases (those released within the past 18 months), and maintained a 12.46% current share across the first half of the year — more than four points higher than the next-closest label, Interscope Geffen A&M (8.08%). But […]
At the midyear mark of 2023, there’s one over-arching theme: so far, it’s the year of Morgan Wallen. The artist’s album One Thing At a Time is the most-consumed album of the year so far by far, racking up 3.312 million equivalent album units in the U.S. since its March release, while its single “Last Night” gobbled up the most U.S. on-demand audio streams of the year so far, with 588.7 million.
That helps explain a huge leap in country music market share so far this year, with the genre growing to 8.36% of the U.S. market, from 7.83% at the halfway point last year. Overall, in terms of current consumption units — those derived from albums released within the past 18 months — country music increased by 4.5 million equivalent album units over the same period in 2022, the highest among all 15 genres tracked by Luminate in 2023 so far.
But that’s just one of the big takeaways derived from combing through the data six months into this year. Here are four other observations from the first half of 2023.
Why is Rock so big? Catalog.
Overall, rock has grown most of any genre year over year in consumption units, with 11.2 million more units in 2023 over 2022. That growth, however, is almost entirely from catalog — 10.3 million of it, compared to 900,000 units of growth from current releases. It’s the second-largest growth metric among genres in terms of catalog, just behind R&B/hip-hop in raw numbers (11.2 million), though because R&B/hip-hop actually declined in current releases (more on that later), rock saw the biggest overall growth in unit terms.
It’s a testament to the enduring value that exists in classic rock recordings — and a reason those catalogs continue to be valued, bought and sold at such high figures — and helps explain why it still represents such a large part of the market, despite rock not generally being represented in the highest echelons of the charts. Rock’s catalog share of 23.31% is behind R&B/hip-hop’s 27.15% in the rankings, but is much higher than that of pop (12.91%) and country (7.69%), the next two genres in share.
Courtesy Photo
Consider the rankings in terms of current share: rock (10.32%) slides to third place, behind pop (10.69%) and barely ahead of country (10.16%), with Latin coming in fifth at 7.84%. And its current unit growth year over year of 900,000 is significantly behind country (4.5 million), world music (3.3 million) and Latin (2.5 million), although at least it’s still growing, while R&B/hip-hop and pop is not.
R&B/Hip-Hop: The Elephant In the Room
The drumbeat has been growing louder over the past year when it comes to what, exactly, is going on with R&B/hip-hop from a market share perspective. But despite concern that the genres’ grip on the public consciousness is getting diluted, a few things have remained consistent: it remained the largest genre in consumption units, it was still growing the most in raw numbers (if not percentage-wise), and R&B and hip-hop artists were continuously topping the charts dictating the culture.
Some of that dominance, however, has begun to slip. There is the biggest one — in the first half of the year, no hip-hop album had yet topped the Billboard 200, a distinction that finally ended in the first week of the third quarter with Lil Uzi Vert’s Pink Tape this week. And in terms of year over year unit growth, R&B/hip-hop slipped to second at 13.01% of the market’s growth, behind rock (17.71%) and just ahead of country (12.35%). And as consumption overall grew by 13.4%, R&B/hip-hop remained stagnant at 6.3% — the same mark it had at the midway point of last year. Still, it’s been a weird year; R&B/hip-hop actually accumulated more growth in raw units in the first half of 2023 (8.3 million) than in the first half of 2022 (7.8 million).
Yet there are signs for concern — and not necessarily just because of gains in other genres. R&B/hip-hop’s overall market share has slipped from 27.64% halfway through 2022 to 25.92% halfway through 2023, more than a point and a half. Its share of on-demand streaming has dropped from 29.39% to 27.31% — more than two percentage points. Overall album sales growth — huge for rock (45.85%) and pop (30.99%) — was just 2.53%, though growth at all in that metric is still positive. Even more concerning are its current numbers, which we’ll get to in a second. So, with R&B/hip-hop’s market share at its lowest point since 2018, is it just a cyclical, first-half blip due to domination by the likes of Morgan Wallen and Taylor Swift so far this year? Or something deeper?
Current Share Tells the Story of the First Half
The three genres that experienced the biggest growth over the first half of 2023 also tell the story of the first six months of the year, and they’re undeniable on several metrics. In terms of overall percentage growth year over year, World Music — which encompasses ex-U.S. genres like K-Pop and Afrobeats — was up 42.5%; Latin was up 21.9%; and Country was up 21.1%. Each managed to grow their overall share of the market significantly over the same period last year: Country, the fourth-biggest genre, rose from 7.83% to 8.36%; Latin, in fifth, grew from 6.25% to 6.72%; World, in seventh, grew from 2.20% to 2.76%. In comparison, the top three genres — R&B/Hip-Hop, Rock and Pop, in that order — all ceded share of the market at least somewhat year over year.
Looking at the current share illustrates where those gains came from. The country genre came in 4.5 million units higher than at the same point in 2022, boosting its current share from 7.98% to 10.16%. world music added 3.3 million units, vaulting over dance/electronic into sixth with a 5.22% share of the current market, up from 3.29% at this time last year. And Latin added 2.5 million units over last year’s total, increasing from 6.86% to 7.84% this year.
The flip side of that is the current percentage drops from the other leading genres. Current R&B/hip-hop share fell from 27.50% halfway through 2022 to 22.62% this year, an almost 5% decline, and dropped 8.0% in consumption units year over year. Pop slid from 12.87% to 10.69% in share, dropping 7.1% in consumption units year over year. Rock’s slip in share was more modest (10.83% to 10.32%), but also still fell, though its unit count actually grew (the slide in share is due to larger gains elsewhere). It’s a reflection of how the first half of the year has gone in terms of impactful releases in the market.
World Music’s Growth Isn’t Slowing Down
World music now accounts for 2.76% of the overall market in the U.S., up from 2.20% at the midway point last year. It’s not huge, but by percentage, it’s far and away the fastest-growing genre (up 42.5% year over year) in the industry; by raw consumption unit growth, it’s sixth-highest, having increased by 4.4 million units over its midyear 2022 mark. And it’s up by huge percentages in just about every metric: overall album sales (71.3%), physical album sales (76.4%) and on-demand streaming (38.2%) growth all far outstrip the industry overall.
Some of this is just a function of how percentages work: a smaller number that’s growing quickly will naturally have a higher percentage growth than a larger number that, while growing at a larger volume, is growing at a slower rate. But these percentages continuing getting higher, not smaller: in 2020, it grew 8.0% over 2019; in 2021, the metric was 18.9%; in 2022, it was 26.4%. From the first half of 2019 through the first half of 2023, world music is up 131.3%.
So far this year over midway through 2022, K-pop consumption is up 154.9%, and Afrobeats consumption is up 143.8%. They’re still small in terms of actual consumption numbers — K-pop’s numbers compare most directly to those of children’s music for the first half of the year, for example — but they no longer exist in the realm of the potential. The industry has spent the past few years pouring money and resources into these areas and hoping to boost these artists in the States. The metrics are no longer about what the future may look like: it’s here now.
