The Performing Right Society (PRS) has just announced it broke UK music history in 2016 to pay out more than half a billion pounds to creators.
The organisation delivered £527.6m in royalties to its members last year, up 11.1 percent (£52.5m) on 2015, with international, online and public performance business all recording healthy gains. You can read more about it here.
We catch up with PRS for Music chief executive Robert Ashcroft to learn the story behind the numbers and hear about the society’s biggest challenges in 2017 and beyond.
He talks us through his calculation of £100m per year in missing royalties for rightsholders due to the value gap, outlines the society’s focus for this year and lets us in on how the joint venture with PPL is coming along…
Which business area do you feel achieved the most in 2016?
I’m most proud of the growth in public performance revenues, which were up 4.6 percent to £183.2m. We announced in April last year we would be going into a joint venture with PPL, which had a big impact on staff working in that area. They worked really hard to deliver growth, which is fantastic. My highlight of the year would have to be their success.
How about the record growth in online royalties? They jumped 89.9 percent to reach £80.5m in 2016…
Our online growth is obviously very satisfactory, driven by the growth in streaming, improved licensing deals and some mandates that we won. But it is still an area of future uncertainty. We face a problem with the lack of a level playing field in the online market, where some digital service providers are paying on a fully licensed basis and others we believe are under-licensed. So we have all eyes on the European Parliament to see if they accept the recommendations made by the European Commission around the transfer of value.
We lobbied very hard for that over a couple of years. We persuaded them that there is a problem in the market, and they need to address the boundaries of safe harbour. That’s really important, if you think take into account the 80 percent increase in the number of online music uses reported to us last year, and the fact that we paid out royalties to a third more individual members, on 45 percent more works. That’s 4.2 million individual works overall.
The underlying challenge for our members is that an individual songwriter or composer might perceive they are receiving less for a shorter period of time, as the shelf life of new music appears to reduce.
This is a cultural phenomenon, and one of the challenges we face with the concentration in the market is that the same songs are being listened to all around the world. We’re moving into a ‘winner takes all’ environment where it’s increasingly difficult for many to earn a good living out of what is visibly the fastest growing part of the business. It is really important that we sort out this problem of the transfer of value because the future of the business is online.
Can you quantify how much creators are missing out from this value gap?
Yes, we have done those calculations and we believe that if all the digital service providers were paying on a similar basis, there’s probably another £100m a year in royalties to be earned – and that figure is set to grow in the future.
It is heartening to think this would take us back to where we were before CD sales started to decline; you could say we’ve completed the transition across the chasm. We always knew that streaming was potentially of value but there was a huge risk going from the known business of CD sales to receiving revenue from subscription sales.
PRS has reported increased revenue and royalty growth over a number of years now – what’s driving that?
I think our ongoing success for members has been down to the systematic approach of our strategy.
Our first priority when I joined in 2010 was to make sure we secured what was called the ‘option three’ environment for European competition where collecting societies competed for online mandates rather than licensees, and that has been successful. We’ve seen a growth in the revenues we get from online as a direct result of that.
We’ve also invested systematically in our international business. We have pursued a strategy in public performance sales of selling the value of music to companies rather than merely enforcing our rights.
In the broadcast world we’ve been working really closely with broadcasters to improve their reporting and accurate identification of members’ works. This has yielded a much better understanding of not only who’s music but how much music is being played to the public. That has driven our licensing rates up in that area too.
Across the board we have been investing in the business and it has borne fruit.
What are the forecasts looking like for this year and what growth areas are you expecting to see?
It remains difficult to forecast online accurately for structural reasons. It’s a market that is still in development, it is growing strongly but it is one in which we compete with other providers, so we can win as well as lose mandates.
We are aware that the Canadians are looking at the European market and the American society SESAC has entered into a joint venture with the Swiss so they’re looking at the market; we are obviously mindful of the competition. Also we are not licensing our rights directly, we are dependent on the forecasts of the major publishers who are licensing through special purpose vehicles.
It remains an area of volatility. I can say that this year we are going to have to work very hard to maintain momentum in public performance sales as we approach the launch of our joint venture with PPL. It would be remarkable if we were able to move from one to the other without losing a little momentum.
I’m very confident that, in the long term, the joint venture is the right thing to do and we will yield extremely positive results both for us and our licensees. But in the year of transition it might prove to be a challenge.
We’re also in discussions with the BBC. It’s that time when we come up for a renegotiation of our most important license and there is some uncertainty attached to that, as there is uncertainty attached to the outcome of MCPS deliberations.
So looking further forward to the next five years, I am confident we will achieve further growth. This year could be an area of risk but, what we’ve proven over the past few years is that we’re pursuing the right strategy and, if you pursue the right strategy and execute it well, you can grow the business. But it doesn’t remove the risks so we are focusing on them this year.
We know there is also a music data improvement programme underway between PPL and PRS. Are there any other areas in which you envisage the two societies working more closely?
We’re looking at improving the linking of ISRCs [International Standard Recording Codes] and ISWCs [International Standard Work Codes], and other opportunities will most definitely arise to share costs with the other organisation over time. But we have to make sure we deliver on the initiatives we’ve started before contemplating others.
My main concern now is that, with the enormous increase in online usage, we’ve got to make sure the ICE platform is fit for purpose and capable of handling that extra volume. We must continue to invest in it, in order to meet rising demand.
Lastly, I think it’s crucial the government clarifies its intentions on employees’ rights to remain in the UK. We have a lot of nationalities working here and it’s really important that we continue to depend on them. The challenge for them is that uncertainty, which doesn’t create the right environment to work as hard as we have to.
Read our full financial results story