What Is Rights Management?

A rights manager helps copyright owners maintain control over their work, metadata, licensing, and most notably their royalties. In today’s digital environment, this is an increasingly essential task. The internet is comparable to the “wild west” when it comes to intellectual property management. The sheer volume of content and information being shared between users and across platforms makes it difficult to track the use of music, film, and other assets — not to mention accounting royalties back to a given rights owner.

Users upload over 720,000 hours of content each day on YouTube alone, a seemingly unmanageable figure when scaled across the internet as a whole. The question then becomes how much of that content belongs to you, and are you being properly compensated for its use? More than likely, a rights management professional can help you find out.

In this newsletter:

BMI is reportedly considering an offer to sell to private equity firm New Mountain Capital for $1.7 billion.

Several US songwriter groups have written to the CEO of American collecting society BMI, raising concerns about its decision to become a for-profit entity and recent reports of potential sale to private equity.

NetEase Cloud Music, China's second-largest music streaming service, reported a growth in paying subscribers and music streaming revenue in its recent earnings report.

Now, the details...

Exploration Weekly - August 28, 2023
Compiled by Ana Berberana

BMI Reportedly in Talks to Sell to Private Equity Firm for $1.7B

Private equity firm New Mountain Capital is looking to buy performance rights organization Broadcast Music Inc. (BMI) to the tune of $1.7 billion, sources close to the situation tell Billboard. The deal is yet to be signed, while New Mountain Capital has entered an exclusive window to look it over. Sources indicate that New Mountain Capital will pay around $1.7 billion for BMI if the deal closes. In its first year as a for-profit entity, the performance rights organization claimed $145 million in earnings before interest, taxes, depreciation, and amortization. New Mountain Capital’s website says the firm has $40 billion in assets under management and utilizes a “growth-oriented, value-add investment approach, rather than reliance on excessive risk, as the best path to high and consistent long-term returns.” The firm has invested in industries including software, business services, information and data, logistics, and financial services, among others. BMI first announced it was selling itself in October last year as it transitioned from a not-for-profit entity to a for-profit company. Before switching to a for-profit model, BMI reported in its fiscal 2022 that it collected $1.573 billion, with distributions totaling $1.471 billion. Many songwriters and publishers have questioned the company’s move, despite BMI stating that the shift will enable spending more money on developing technology and infrastructure to support songwriters better.

Songwriter Groups Demand Information About a Newly For-Profit BMI’s Plans and Possible Sale

Various groups representing songwriters in the US have written to the boss of American collecting society BMI asking a number of questions about the organization’s decision last year to become a for-profit enterprise, as well as recent reports that it is again considering selling itself, possibly to a private equity outfit. In the letter, published by Billboard, the songwriter groups state: “As you know, there is no BMI without songwriters. Songwriters have a vested interest in changes at BMI and in any proposed transaction which is wholly dependent on songs they have written. BMI does not own copyrights or other assets; it is a licensing entity for copyrights owned by songwriters and, by extension, publishers. Songwriters have a right to understand these decisions and how it impacts us”. BMI CEO Mike O’Neill was quick to respond, although with rationale and reassurances rather than answers to the questions posed by the songwriter organizations. The shift to being a for-profit society was benefiting songwriters, he insisted, and if any new owner comes on board down the line, “we would ensure that any partner embraces our mission of prioritizing the interests of songwriters, including their financial success”. Most of the music industry’s collecting societies around the world are not-for-profit organizations owned by their members, which are usually some combination of artists, songwriters, record labels and/or music publishers. BMI, somewhat unusually, is actually owned by a group of broadcasters, having been established by the US radio sector in the 1930s as a rival to the existing US society ASCAP. However, like ASCAP, it was still a not-for-profit operation. Until last year. The society’s top team had been reviewing BMI’s operations for some time, initially as part of an investigation into whether or not there were any investors out there which might be interested in buying the organization from its current owners. Despite ultimately deciding not to seek a buyer, BMI nevertheless announced it was shifting to a for-profit approach, seemingly to allow it to seek new investment in order to expand and enhance its operations. Then last month Reuters reported that BMI was again working with Goldman Sachs to sound out potential acquirers, the investment bank having also performed that role last year.

Netease Cloud Music’s Paid Monthly Users Grew 11% To 41.8M at the End Of June

NetEase Cloud Music, China’s second-largest music streaming provider, recorded yet another increase in paying streaming subscribers and music streaming revenue in its latest earnings report, but the numbers fell well short of its chief rival, Tencent Music Entertainment. In its earnings release Thursday (August 24), NCM, a subsidiary of Huangzhou-headquartered internet giant NetEase Inc., reported 41.8 million paying music streaming subscribers at the end of calendar Q2 and H1 2023, an 11.0% YoY increase from the 37.6 million it reported in the same period of 2022. Revenue from paying subscribers reached RMB 2.0 billion (USD $275.6 million at current exchange rates), up 13.3% YoY. The company also recorded an increase in monthly average revenue per paying user (ARPPU), to RMB 6.8 from RMB 6.5 in H1 2022, which the company attributed to “pricing optimization initiatives.” “We have worked diligently to strengthen our music-centric monetization capabilities throughout the first half of 2023,” the company said in a statement. “Our online music business has continued to show solid growth momentum on a year-over-year basis. Our subscription-based memberships revenue continued its solid upward trend and grew by 16.7% year-over-year, driven by subscriber scale-up and ARPPU improvement.”

WIN: Global independent sector takes 40% market share

The Worldwide Independent Network (WIN) has published its 2022/23 annual report. The international body for the independent recorded music sector has welcomed new members the Asociación de la Música Independiente del Paraguay (AMI Paraguay) and the South India Music Companies Association (SIMCA). Its network now spans 36 trade associations and 40 territories, which represent over 8,000 music companies and entrepreneurs worldwide. According to the report, the independent sector accounts for at least 40% global market share and is responsible for 80% of the world’s new releases, with at least $4.1 billion having been invested in discovering and nurturing global independent talent. The report reflects on the mounting pressures that face independent music businesses and touring artists in the global live landscape, including rising visa costs, stringent post-Brexit travel restrictions, the aftermath of Covid-19, anti-competitive behavior from bad actors in the live sector, and inflation. It calls for more governments around the world to implement support measures for independent artists and venues, in order to facilitate economic growth and cultural exchange between territories. The report also responds to the growing use of generative AI in the recordings business, as well as the rise of streaming fraud. WIN has pledged to encourage and facilitate the use of best practice, as well as ensure the independent community is equipped to respond to the challenges of rapidly advancing technologies. Over the past year WIN's support has included the creation of resources such as the ISRC Factsheet, providing accessible advice designed to ensure accurate reporting and royalty payments.The report’s foreword sees Zena White, chair of the WIN board, set out plans for further expansion into emerging markets, noting Asia, MENA and Sub-Saharan Africa as priorities. White also reaffirms the organization’s mission to support the creation of new domestic trade organizations to support developing independent music communities. The report sets out plans to develop key projects including the Southern Cone’s Independents Forum (FICS), as well as WINHUB – an international networking hub promoting collaboration between independent music businesses and trade bodies. Launched in December, WINHUB has brought together over 400 professionals across two in person and three online events, connecting businesses from 37 countries.

YouTube’s three principles to embrace generative AI in music: All details

Google (MusicLM), Facebook-parent Meta (AudioCraft) and OpenAI (Jukebox) are some of the companies that are working on generative AI models that can create music with a text prompt. The industry has already seen an uproar when it comes to use of AI in content creation and YouTube is now taking a note of it. The company CEO has said that the Google-owned company is going to "embrace" AI responsibly together with our music partners. YouTube CEO Neal Mohan said that the company, along with its music partners, have created principles for partnering with the music industry on AI technology. "Now, we’re working closely with our music partners, including Universal Music Group, to develop an AI framework to help us work toward our common goals. These three fundamental AI principles serve to enhance music’s unique creative expression while also protecting music artists and the integrity of their work," he said. According to the company, YouTube creators have embraced AI to boost their creative processes and in 2023, there have been more than 1.7 billion views of videos related to AI tools on YouTube. YouTube is introducing YouTube’s Music AI Incubator that is aimed to use AI technology in music creation in a responsible way. The company is also working with the industry's artists, songwriters and producers, including Anitta, Max Richter, Ryan Tedder of OneRepublic, and the estate of American musical icon Frank Sinatra, amongst others. The platform is also working on Content ID, a rights management technology, that aims to ensure rights holders get paid for use of their content and provide 'appropriate protections' for music partners. "We’re continuing our strong track record of protecting the creative work of artists on YouTube. We’ve made massive investments over the years in the systems that help balance the interests of copyright holders with those of the creative community on YouTube," Mohan added. The third area YouTube's work is going on is scaling up of policies as well as detection and enforcement systems. The company said that it is applying policies and trust and safety teams that help protect the YouTube community, to AI-generated content as well. "The limitless potential of generative AI demands a thoughtful approach that maps to the expansive boundaries of creative expression. Generative AI systems may amplify current challenges like trademark and copyright abuse, misinformation, spam, and more," the CEO said. He added that while AI technology can be used to manipulate or to promote false claims or mislead viewers, it can also be used to identify this sort of content. He said that the company will continue to invest in AI-powered technology.

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