The Music Business - Revenue Streams and the Future

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The music industry is a highly complex and extremely profitable. Popular music is seen by many as the only truly universal mass medium, and the industry as a whole is estimated to be worth between $30-40 billion. However, for many people starting out in the music industry; whether their composers, artists or session players, are unaware of the complicated process of how this money is generated and how it is distributed between the relevant parties involved. There is a large ‘hierarchy’ in the industry which money flows through and it is essential for someone that is starting out to know how the Music Industry works.

The Phonographic Performance Limited (PPL)
The PPL is the UK music industry’s licensing body. The PPL licenses sound recordings and music videos for use in broadcast, public performance and new media. They represent the recording rights owner, which is usually the record company but due to recent developments in the industry sometimes the recording artist can also be the record label. Unlike other licensing bodies the PPL is a non-profit making organisation and only take a cut for operation costs. Their aim according to Fran Nevrkla is to ‘get some recompense for the tracks that play in the background of nearly every place in Britain’. The PPL was formed by EMI and Decca in 1934 to protect songwriters’ copyrights. The PPL is also heavily linked with the VPL. The VPL was created in 1984 to carry out the same role for music videos that PPL was already carrying out for recorded music. The PPL collected £115 million in 2007 distributing £99.5 million of this to their registered performers and record company members. This income is calculated by using play lists from commercial radio stations, television networks and Public Performance Licenses. Therefore the labels who have more of their recordings played on the play list will get more money. Broadcasters bring in the majority of the PPL’s revenue, the BBC being the largest. They also receive licence fees from more than 300 terrestrial commercial radio stations, 157 internet radio services and from all television channels. However, its fastest growing revenues are coming from Public Performance Licences for business such as hairdressers, pubs and restaurants that play music. There was £48 million worth of these licenses in 2007. 50% of all these collections are paid to the record label and the other 50% will go to the performers on the recording, broken down into 32.5% for featured performers and 17.5% to session players. The PPL also has created the Repertoire database which is where a record label can submit all the relevant data for its releases and can also act as an agent for mechanical licenses. The database was updated this year to reflect ownership transfers, merges and other changes within the music industry.

Performing Rights Society (PRS)
Set up in 1914 the PRS is the UK collection society for composers, songwriters and music publishers and is charged with administrating the public performance and broadcasting rights in music and lyrics. The PRS generate revenue for its members by collecting licence fees from radios and public places where music is being played. Public places and radio stations must provide play list information to the PRS or they may be visited by a representative who will note what is being played, with this information the PRS will calculate a fee or a tariff to charge the venue/station.

Each Composer/Writer must register with the PRS separately; they each pay an annual fee to join. By joining a member not only assigns their performing right but also their film synchronisation right to the PRS. The PRS will then collect for their compositions but will take a commission of anything from 12.5% for a BBC broadcast to 16% for an MTV broadcast. For performances the PRS will take anything from 16% for a cinema performance to 20% for a ‘popular concert’. More recently the PRS has started to collect and charge for internet...
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