Economics of music publishing: the law and the market Ruth Towse Professor of Economics of Creative Industries CIPPM, Bournemouth University and CREATe Fellow in Cultural Economics (University of Glasgow) Ruth.towse@gmail.com

Copyright and business models in UK music publishing project Historical analysis of the effect of changes in copyright law on business models. Music publishing an old established industry: survived effect of disruptive exogenous technological change. Little endogenous tech. change; entrepreneurial adaptation in face of changing market. Music publisher – ‘classic’ creative industry intermediary. Contracts with composer to get works to market – edits, prints, publishes music. Finds performers, recording contracts etc Business model - revenues based on sales of sheet music until shift to rights management in early 20th C. Buy-out contract with composer until 1920s. Disruptive effect on sales model of mass media technologies – sound recording, radio. Copyright law responded - lags not leads.

Markets for published music: sales and hires Markets for music until 19th C. were home, Church, theatre. Public concerts and music hall of ‘serious’ and popular music by mid 19th C. Publishers plugged new works – hired performers to repeatedly perform them in music halls as advertising. Home performance required printed music: sales. Theatrical music printed after performances – popular tunes published for sale to public. As market grew, orchestral parts printed for hire, also arrangements. Heyday of sales was end of 19th C. Genres were religious, instrumental (piano, brass band, orchestral ), choral and songs. Songs biggest market. Soldiers of the Queen sold 238,000 in 1898. Sullivan’s Lost Chord sold ½ million 1870-1902. Hit=sales over 200,000. Piracy of printed music was rife but market grew despite it. Copyright law only effectively enforceable with 1906 Act. As the market grew, publishers became more specialised by genre etc.

Copyright in musical compositions Statute of Anne not deemed to include musical composition. Copyright for composer from 1777 court case (Bach v Longman). Composer assigned rights to music publisher for reproduction and publication. Performing right for non-dramatic music established in 1844 but ignored by publishers until PRS founded in 1914. Mechanical right established in 1911 Copyright Act. MCPS first British collecting society. ‘Synchronisation’ right relates to music coupled with moving image.

Business models and contracts in music publishing Performing rights and mechanical rights offered new sources of revenues to both composers/songwriters and publishers. These rights required collective management. Role of publisher switched to rights management. Changed contracts: contract with songwriter part of business model. Traditional contract with composer was buy-out of all rights for fee; publisher bore all risk and cost of exploitation. Performing right ignored as clashed with plugging model Rights management model -> royalty contract. Composer gets % of revenues, shares risk. Royalty contracts universal only since 1920s. Evolution of contract types and royalty hsares.

Switch to rights management PRS set up by music publishers in 1914 but major ones did not join (Boosey&Co.in 1927. Novello in 1934). Inhibited blanket licensing and bargaining power to set rate. (Similar problem today with individual and transactional licensing). BBC signed up early on: monopsony broadcaster and biggest user of published and recorded music. BBC monopoly lasted until 1950s then commercial market grew. BBC banned plugging (even of announcing titles at one stage!). Altered publishers’ business model. Public performance of music has increased hugely with ever more markets at home and abroad. Synch rights increasingly valuable.

Table 1 PRS Income 1930-2010 (£000) with percentage of broadcasting Growth of PRS income Table 1 PRS Income 1930-2010 (£000) with percentage of broadcasting Year Total gross income 2014 value Broadcasting 1920 23 918 1930 173 10,101 35% 1940 619 30950 54% 1950 1,495 43,756 43% 1960 3,296 67,800 44% 1970 9,127 126,195 28% 1980 39,342 150,684 42% 1990 123,297 250,321 34% 2000 236.83 356 2010 611,200 699,980 (includes online) Source: PRS Annual Reports and author's calculations

Music Publishing Revenues (2012) Source: Music Publishers Association Annual Report (2013/4). Table 2 Revenues to Music Publishing 2012 (£m) and percentage   Collection societies 247 27% Foreign affiliates 334 37% Direct licensing 239 26% Printed music (sales and hire 76 8% Other 8 >1% Total 904

Value of various rights to a publisher:percentage (2012) Popular music Mechanical royalties 40 Live performance and broadcasting 36 Synchronization fees 14 Other (ring tones, online, sheet music) 10 Classical music Sales of printed music 50 Hire fees 15 12 8 5 Source: MPA (unpublished)

What conclusions can be drawn from this research? The market environment was the main stimulus to growth of sheet music and hires: growth of population, incomes, leisure and transport; falling costs of musical instruments; falling costs of printing music. Consumers’ adoption of new technologies caused sales to fall. Failures of copyright law did not prevent growth in music publishing up to WW1. Presence of performing rights did not provide incentive to music publishers until sales fell; however, 1911 Act was effective in introducing mechanical rights. Music publishers followed the money rather than leading the market. Business models are possibly more significant in understanding the economic history of music publishing than copyright law.

What does history tell us? History may not repeat itself but some trends are remarkably similar. Interaction of market and copyright law: law inevitably lags behind market trends. Music market has always been international. Trend now exacerbated by globalisation of taste, growth of incomes and access to internet. Markets change due to unanticipated sources of exogenous technological change. Speed of entrepreneurial response to these changes determines success. Large corporations are often sclerotic: new entrants are innovators. Competition in industry important for keeping up with economic, technological and cultural trends. Music publishers’ intermediary role in the chain of musical production is important for its A&R but other professionals now involved in that role; also record labels. Present day business models attuned to rights management. Threat from better data management?