Royalty Points - Music Royalties - Royalties in Digital Distribution

Royalties in Digital Distribution

The term "digital music" typically applies to Internet and wireless (mobile) technologies. Digital music files can be identified by serial numbers embedded in the data ('watermarking') or natural patterns in the data ("fingerprinting"). Digital music have begun to give music a different direction by their capacities to internationally distribute the music for instant hearing or storage by private and public persons. Digital music is generally expected to become the predominant form by which music is 'used' in the longer term.

Nonetheless, compact discs will continue to be the major form of musical reach and storage for the present. For example, revenues from the sales of CDs in the US in 2007 far outweighed that from digital downloads, representing some 85% of music sales, or 81 million units per quarter. Also, as the following data illustrates, the amount of music (tracks) available on CDs (stored music) is extremely large compared to what is available in digital format:

• PPL’s CatCo holds details of over 7 million recordings
• There are 15 million published works with ISWC codes (and many more without)
• The Gracenote database (CDDB) holds details of 51 million tracks
• Around half a million new tracks are formally released every year.

In contrast to:

• RealNetworks license 60,000 albums for home entertainment services.
• The USA digital jukebox suppliers license about 200,000 tracks.
• There are over 2 million on XM Satellite Radio (Sirius has over 500,000).
• UK Inspired Broadcast Network jukebox THE music offers 2 million tracks.
• RedDotNet’s kiosk system has over 2.5 million tracks online.
• There are about 20 million retail tracks on iTunes Music Store.
• Kazaa has about 1 million tracks.
• Last.fm has a music-discovery database of 60 million titles.

Nonetheless, there has been a decline in CD sales since 2000 in the US (perhaps less so in the EU). At the same time, digital tracks legally downloaded from the internet continue to be a growing force, track downloads totalling 417.3 million units in the first half of 2007 – a 48.5% increase over the corresponding period last year according to Nielsen SoundScan. Apple Inc's sale of over 100 million iPods and the strong presence of iTunes and eMusic (a subscription service) in the US, and now in EU and in other 18 countries, testify to the strong emergence of digital music. This is further emphasized by the large presence of internet broadcasts of live and internet-only radio stations ("streamed music"). They represent the "buy" and "listen" choices.