Industry Trends In Asia And Internationally - Frances Moore at Music Matters 2013
In China, we are seeing a new approach to licensing, as record companies partner with internet companies such as Baidu, with vast customer bases
IFPI (International Federation of the Phonographic Industry) CEO Frances Moore recently spoke at Music Matter 2013 in Singapore on trends shaping the music industry in Asia, including the acknowledgement of "a new approach to licensing" in China:
Good afternoon. It is a great pleasure to be here in Singapore, attending my first Music Matters conference. I would like to thank the organisers for their kind invitation, and also to thank the Singapore government for its support.
When I received my "call-up" to Music Matters from Jasper some months ago, IFPI had just published "Investing in Music". This is our global report showing how, even in the age when artists can go it alone, record companies have adapted to become more creative and more relevant than ever.
Jasper [Donat] had spotted an editorial I had published in the Daily Telegraph newspaper in the UK. The headline ran: "The record label is dead - long live the record label".
It is on that theme of change, revival and of optimism - albeit cautious optimism - that I want to speak today.
Let us start with change. We are an industry that is now on a path to global recovery. In 2012, for the first time in 13 years, our global revenues saw growth. It was, admittedly, only a very modest growth - revenues up 0.2%. Furthermore, that path to recovery is not likely to be smooth. Some markets are seeing growth, others are still in decline. It is clear that sustained year-on-year growth on a global basis may take a few more years to arrive.
But even so, there is a palpable buzz across our industry which hasn't been there in recent years. I want to pick up a few reasons for that.
First, we are a business that "gets" the internet. Consumer choice in music has transformed and is still widening. 30 million tracks available. More than 500 licensed services worldwide. These are impressive statistics and they debunk the myth still peddled by some that the music industry has not fully licensed its repertoire for the digital age.
Subscription services are surging, such as Spotify, Deezer, MelOn and KKBOX. Only last week, Google announced that it is joining the subscription club, starting in North America. Subscription revenues were up more than 60% globally in 2012, and growth is going to continue. Downloads are holding their own as well, helped by the new cloud features. Downloads still account for around 70% of digital revenues and are seeing strong growth.
Second, our digital business has gone truly global. In 2011, the major international services were present in only 23 countries. Today, just two years later, they are in more than 150. There is a rush of new services alongside the boom of smartphones and tablets - particularly in emerging markets such as Brazil, India and Mexico. Markets where growth in the last four years has been spectacular in comparison with global trends.
Globalisation does not mean all markets developing in the same way, of course. In fact the development of different models varies widely by country. Sweden, home of Spotify, has proved the extraordinary potential of subscription. In Sweden today subscription accounts for around 80% of digital revenues - a massive share. Yet for consumers elsewhere, such as the US and UK, downloads are still the dominant format. And physical sales are still important in many countries.
A third reason for optimism is the way local music is travelling internationally. Increasingly we see repertoire from emerging and non-English speaking markets reaching out across national borders. PSY's Gangnam Style was number three in IFPI's global best-selling single table of 2012. Brazil's Michael Teló was number six. It is exciting to see non-Anglo-American artists connecting to a fast-expanding global audience.
These are major achievements. And their impact is being felt far beyond the music industry. Look, for instance, at social media and see how music is driving it. Seven of the ten most followed people on Twitter are artists. Nine of the ten most watched videos on YouTube are music videos.
Recorded music is not just fuelling music platforms and services. It is driving internet traffic. Helping to sell devices. And helping a much broader digital economy. Music is an engine of the digital world.
Let me now turn to Asia. A region of huge potential for growth - but also of extraordinary diversity. It seems almost impossible to speak of one music market in Asia. This is clear in a quick snapshot of the region's four major music markets.
In terms of revenue growth, one of the most positive stories of 2012 was India. A market where the smartphone revolution helped revenue growth of 20% last year. And where new download and subscription services promise more in 2013. There are still very few countries in the world where digital income has crossed the 50% threshold and accounts for more than half of all revenues. India is one of them, along with the US and some Scandinavian countries.
South Korea's music industry is in many ways a showcase to the world. The country where subscription services achieved a mass audience, years before the model went mainstream elsewhere. Home to the internationally celebrated K-Pop. And home also to some of the most enlightened government policies on copyright anywhere in the world. They have encouraged investment, driven market growth and helped domestic artists go global.
In China, we are seeing a new approach to licensing, as record companies partner with internet companies such as Baidu, with vast customer bases. These deals aim to lay the foundations for a licensed digital business. More such partnerships can be expected. Only last month, a senior official of China's national copyright administration said paid-for music downloads are "inevitable" in China. Not long ago, the "inevitable" would have been the "unthinkable". Of course copyright enforcement, both by the internet companies and by the government, will have a vital role to play if this prospect is to be realised.
And then there is Japan - the giant market of the region. Japan is in a challenging phase of transition. CD sales grew in 2012. But the large traditional mobile music sector is in sharp decline. Japan is now moving into a new phase of download and subscription services. We need these to grow and expand over the coming months.
These four markets embody the diversity of Asia. But there are also important common features across the region. For example, the strength and vitality of independents - in South Korea, Japan and across many other countries. Often in Asia, the majors are in fact "minors" competing against larger and well-established indies.
And the whole of Asia is right now at a pivotal moment of development. Licensed digital content is spreading rapidly across the region. Physical sales and the first generation of mobile and ringtones businesses are giving way to a new generation of digital services, delivered on new platforms.
You can practically see the momentum building. iTunes has opened stores in 14 markets, many of them local language services and all of them licensed by majors and independents. If iTunes sales evolve in Asia as they have in other markets around the world, we can expect strong growth.
International subscription services are moving in too. Spotify and Deezer are open for business. The competition is getting hotter, with services trying to get into new markets before their rivals.
Of course, well-established home-grown subscription services have been there for some time. KKBOX is in Hong Kong, Japan, Malaysia, Singapore and its native Taiwan. MelOn, now long-established in South Korea. How will the competition evolve between the local and international services in Asia? Will the future be downloads or streaming? The answer is that the consumer will decide. Probably we will see a market of hybrid services.
This is the potential of Asia. Potential is one thing, however. Fully realising it is another. Both in Asia and globally, our industry still faces some huge obstacles to growth. And these have to be addressed.
First of all there is the unfair competition that the licensed music business faces from unlicensed services. According to our research, around 30% of internet users around the world regularly access unlicensed sites. That is a global figure, and in Asia the problem is generally worse than the global average. We have to tackle this problem, to protect our present and future business.
It takes more than just great digital services. We need to get the environment right. There are effective systems around the world which reduce piracy. Graduated response has been used to great effect in South Korea, France and New Zealand and has been recently introduced in the US.
Website blocking also works. In European countries where the Pirate Bay was blocked, traffic to that site fell dramatically. More than 250 unlicensed sites have been blocked by ISPs in India. And I'm pleased to hear that the government has just announced a proposal to introduce site-blocking. Website blocking is also under consideration here in Singapore - a welcome step in a market with a huge illegal file-sharing problem, where music industry revenues fell 25% last year alone. Singapore has declared its ambition to be a regional hub for intellectual property. We would ask the government to act urgently to make this a reality.
Cooperation from other players in the digital ecosystem also works. In recent years IFPI's work with payment providers, such as Visa, Mastercard and PayPal, has helped starve pirate sites in Russian and Ukraine of more than 500 million dollars of illegal revenues.
Other players need to step up to the plate too. Search engines such as Google should be prioritising searches to legitimate websites, not those that violate our rights. Brands should be sending clear instructions to advertisers not to place ads on pirate sites. All of these are key projects in progress for our industry.
Finally, the music industry needs essential rights to do its business. In some important markets, including in Asia, we lack those rights. Moving governments to fix this situation is a key part of IFPI's work, and in Asia we are making good progress. We need performance and broadcasting rights in Singapore and we are optimistic that will happen. In China performance rights have been proposed and hopefully will be adopted in 2014. This would be a key step forward. Japan and Indonesia, however, still lack public performance rights. We look to get these anomalies fixed as soon as possible. Performance income is very important. It's a growing source of revenue for our industry, now accounting for 6% of global music revenues.
So to conclude - this a time of optimism for our business globally. We are creatively monetising music and licensing new digital services and business models. The music industry is proving it is a "winner", not a loser, in the digital world. And it is precisely at this moment of transition that we most need to address the issues I have outlined. We are on the road to recovery. The next step is to get to sustained growth.
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