Tag Archives: IP on Wall Street

Apple is seeking to cut license royalties paid to record labels

While the share of revenue from streaming paid to record labels and recording artists is rising, Apple Inc., among the fairest licensees in on-line music, is now seeking to reduce record labels’ share of revenue from streaming.

Bloomberg reports that the record labels’ deal with Apple were expected to expire at the end of June, though they are likely to be extended if the parties can’t agree on new terms, according to the people who asked not to be identified.

“Part of negotiations is to revise the iPhone maker’s overall relationship with the music industry.”

The negotiations would bring number two Apple closer to the rate industry streaming leader Spotify Ltd. pays labels, and allow both sides to adjust to the new realities of the music industry. Streaming services have been a source of renewed hope following a decade of decline in the digital age.

Patent holders may believe there is an element of deja vu taking place in music content. Once rock solid copyrights are now subject to renegotiation and diminished revenue because of lost leverage due to lower valuations and easier access. A key will be finding what will make copyrights more relevant again, and creating more competition among streaming services for content.

More Optimistic

Record labels are now more optimistic about the future health of their industry, which grew 5.9 percent last year worldwide thanks to paid streaming services Spotify and Apple Music. They recently negotiated a new deal with Spotify further lowering their take from the service, provided Spotify’s growth continues.

“Apple initially overpaid to placate the labels,” says Bloomberg, “who were concerned Apple Music would cripple or cannibalize iTunes, a major source of revenue.”

For the full Bloomberg article, go here.

Sales vs. Streams 

Though online sales of music have plummeted over the past few years, they still account for 24 percent of sales in the U.S., according to the Recording Industry Association of America. Vinyl record sales also are up but they are still limited to a specialty audience, while CD sale are way down.

According to Billboard, streaming led the U.S. music industry to its first back-to-back yearly growth this millennium and in the first half of 2016 was the single ­highest source of revenue in the U.S. recorded-music industry, ­bringing in $1.61 billion. All three major labels — Universal, Sony and Warner — posted streaming-driven double-digit percent boosts in earnings throughout the year.

The Trichordist, a publication devoted to “Artists for an Ethical and Sustainable Internet,” reports that Spotify was paying .00521 back in 2014, two years later the aggregate net average per play has dropped to .00437 a reduction of 16%.

                     Apple Music generates 7% of all streams and 13% of revenue

YouTube now has their licensed, subscription service (formerly YouTube Red) represented in these numbers as opposed to the Artist Channel and Content ID numbers we used last time. Just looking at the new YouTube subscription service numbers isolated here, they generate over 21% of all licensed audio streams, but less than 4% of revenue! By comparison Apple Music generates 7% of all streams and 13% of revenue.

Apple sits in the sweet spot, generating the second largest amount of streaming revenue with a per stream rate .00735, nearly double what Spotify is paying. But, Spotify has a near monopoly on streaming market share dominating 63% of all streams and 69% of all streaming revenue.

The top 10 streamers account for 99% of all streaming revenue.

New Technology, New Values

IP rights holders, including those with patents and trademarks, need to think through where they fit in the current digital scheme of things, and how much should be expected in a world that finds not paying for others’ intellectual property increasingly acceptable.

For patent holders, the streaming/copyright battle could be the proverbial canary in the mine.

Image source: fortune.com

An AT&T-Time Warner deal may affect the value of more than premium content & copyrights

The $85.4 billion buyout of Time Warner Corporation (TWC) by AT&T, if it goes through, is a good omen for the value of content providers, like HBO and CNN.

It is unclear, however, how the ambitious acquisition will affect less well-branded copyright holders like independent film productions, TV studios and recording artists dependent on digital distribution.

If content is now truly king, the tide may rise broadly, and rather rapidly.

If nothing else, the proposed acquisition conveys a heightened respect for content – and willingness to pay premium for it – that Google, its YouTube subsidiary and others have heretofore been reluctant to acknowledge.

“The deal is probably neutral for copyrights, but it has the potential to be positive,” one purveyor of music and the content told me from Los Angeles. “The combined entities will still be about half the size of Google, and will be saddled with $120 billion in debt. With those numbers, AT&T’s 5.1% dividend may longer be a given.”

Time Warner is the world’s largest diversified media company.

AT&T’s $107.50 per share offer is 35% premium over its market value. You have to wonder what the transaction might do to secondary content brands like indie labels and movie producers. It’s not just about having a great lineup, but about the particular content that Internet provides believe audiences will crave, which is currently in flux.

AT&T is betting that premium content will matter deeply. Other streaming services are not so certain.

The Future of TV & Broadband

If all of this sounds a bit speculative,” reported The New York Times, “that’s because it is. What this deal actually symbolizes is that the future of television is increasingly going to be built on lots of bold, possibly speculative, experiments.”

Recent acquisitions by Verizon included AOL and Yahoo, which some view as content. I tend to believe that content protected under copyright, and premium content (HBO, CNN) will certainly benefit.

time-warner-1-1024x390

This chart represents TWC prior to the sale of  AOL to Verizon.

 

Bad Business or Goog Timing?

Is the AT&T-TWC deal inherently anti-competitive or merely timely recognition of undervalued assets? After the deal will all content delivery continue to be treated fairly on the AT&T network so far as delivery speeds are concerned?

Will Disney, Comcast – which had acquired NBC-Universal – and Fox move swiftly to shore up their own content?  It’s too soon to tell, but there may be more pressure on Google to become more proprietary with regard to content (and maybe patents) than it has in the past.

It also will be interesting to see if there is a ripple effect on streaming content like music with services like iTunes, Pandora and Spotify.

A list of assets owned by TWC can be found here.

Image source: cnn.com; valuewalk.com

Big Media is Buying into YouTube Networks; IP Battles May Loom

New sources of content created independently, produced cheaply and distributed on YouTube are challenging network and cable TV dominance.

The impact on copyright and brand licensing is unclear.

If you are over 25, or so, you may be too old to notice it, but changes are taking place that are altering how and by whom television content gets developed and delivered to different audiences. It’s no surprise that YouTube, a once fledgling music video portal owned by Google, is at the center.

In a compelling cover story in the current Bloomberg Businessweek, “YouTube: Hollywood’s New Hit Factory,” the magazine looks as how new technology and shifting demographics (and shrinking attention spans) are changing television and content as we know it. The future of youth entertainment, the magazine reports, is not in broadcast or cable TV but in short-form digital videos, particularly on YouTube. The article steers clear of copyright and trademark issues, but those are sure to follow.

Several of the Top 30 YouTube Networks already are in play. AT&T, Disney, Warner Brothers, Hearst-Fox and Comcast all have either bought YouTube networks Fullscreen-Black-Logoor are considering it.

Just how popular are these fledgling networks? Maker Studios, for example, which was bought by Disney for $950M is ranked number three with more than 33 million total unique views. (See the Top 30 YouTube Networks guide here very worthwhile.)

It’s difficult to say whether MCNs (multichannel networks) will simply remain a “minor league” for the network, cable and even feature film industry, or it will be a viable medium of its own. If it can get organized and the revenue can be generated, I’m betting that it will evolve into a viable medium the way cable has.

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Google bought YouTube for $1.7B in 2006 and focused on improving the sites technology and fending off copyright suits. Not it appears many of those who were fighting it are joining the party. YouTube has started to take an active role in original programming, encouraging entrepreneurs, producers, and established TV stars to start channels, which on YouTube refers to a collection of videos hosted by an individual or by a creative team.

“Rather than create all the programming themselves,” reports Bloomberg Businessweek,”the MCNs were recruiting tens of thousands of independent YouTube creators, from the semi-prominent to the obscure. Each of the MCNs offered a slightly different slate of services, but they generally promised aspiring YouTube talent that, for a cut of gross revenue (typically 30 percent), the MCN would get them more attention and make them more money. Sign up with us, kid, we’ll make you a star.”

Authors and some musicians, many prominent, also have been bypassing traditional distribution channels for self publishing. Controlling the rights to content will not be easy, but it maker-studios-disney-600x369can be done.

While it looks like more opportunities for artists and and content providers, such as writers, musicians and comics, it remains to be seen what these deals will look like for them and how much control will they maintain.

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“With summer TV ratings falling, the domestic movie box office down sharply, and upfront sales of TV advertising surprisingly weak,” Businessweek continues, “a slew of mergers, acquisitions, and investment has shaken the YouTube cosmos. Big media companies, which a few years ago were furiously filing copyright lawsuits against YouTube, are jostling for a piece of the action.

“DreamWorks—the studio behind animated franchises such as Shrek, Madagascar, and Kung Fu Panda—has landed on Planet YouTube with a healthy respect for the native culture.”

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With the early upfront costs defrayed by talent agencies, Hollywood studios, and Google itself, in exchange for a piece of the action, the rights on content and brand deals are important parts of the narrative yet to be told. Stay tuned.

Related stories: IBTimes – Why Big Media is Snapping up YouTube Networks; Forbes: Do All Big Media Companies Need to Up Their YouTube Game?

 

Image sources: turnstylenews.com; tubefilter.com


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