Merlin members report streaming surge, 73% rise in payouts

Streaming has been a boon for independent labels, giving them a greater global presence and a significant revenue stream.

Two-thirds of respondents from 35 countries to a membership survey by indie digital rights agency Merlin reported that digital now accounts for the majority of their overall business revenue, and 73.5% experienced a rise in digital revenue

Revealing the survey figures (its fourth) at A2IM’s annual meeting in New York, Merlin CEO Charles Caldas (pictured) announced a 73% increase in payouts to members, rising year-on-year to US$232 million (A$313.5 million).

“2016’s survey offers yet more evidence that Merlin’s independent record label members continue to grow and break new ground in the digital space,” Caldas observed. “Over successive years we have seen audio streaming revenues surge for the vast majority, and it is particularly heartening to see members capitalize on consumer demand in new or previously untapped international markets.

“The digital business is a global business, and Merlin members are at the heart of it.”

Merlin’s 700-strong membership covers over 20,000 labels – including Beggars Group, Domino, Epitaph, Kobalt Label Services, Merge, Ninja Tune, [PIAS], Secretly Group and Warp Records. The most valuable set of rights outside of those controlled by the three major labels, Merlin members control over 12% of the global digital recorded music market.

In March 2016, the volume of audio streams by Merlin members was over 4 billion, up 80% from 2.5 billion in March 2015.

Significant in the findings is that much of independent music is being consumed by those willing to pay for it. An analysis of 11.5 billion streams in Q1 2016 (January to March) showed member repertoire performing 27% better on paid tiers of audio streaming and subscription services than free ad-funded ones.

In other words, Merlin members generated 6.435 million streams on paid tiers in the three months compared to 5.065 million streams on ad-supported tiers.

They survey showed 39% of Merlin members found that over half of digital revenues originate from outside their home territory, compared with just 16% for physical revenue.

Almost half (46%) reported audio streaming/subscription as their primary source of digital revenue –up from one third last year. Virtually two thirds (62%) found that digital currently accounts for over 50% of their business (up from 55% the year before). For one in three, it accounts for over 75%.

As with major labels, downloads were less of a revenue source. They remained the primary digital revenue source for 28% of respondents – well down from 41% in 2015. For 64% of respondents, video-streaming platforms like YouTube accounedt for less than 10% of overall digital revenues. Caldas observed that indies faced a challenge: Spotify only has 10% of the audience that YouTube has, but Spotify generates 10% of revenue to Merlin than YouTube.

Despite the change in the landscape of the music industry, overall business growth remained consistently high among Merlin members. 79% were “optimistic” about the future of their business. 65% saw growth in their business, the same figure as last year. 86% confirmed membership of Merlin was important to their business.

Since commencing operations in May 2008, Merlin has licensed key digital services including SoundCloud, YouTube Red, Spotify, Pandora, Google Play, Deezer, Vevo, KKBOX and Guvera. Its 2014 licensing deal with Pandora has shaped 2016 statutory webcasting rates.

Merlin also reached a number of copyright infringement settlements on behalf of its members with, amongst others, Limewire, XM Satellite Radio and Grooveshark. Merlin has offices in London and New York, with a head office in Amsterdam. More info, www.merlinnetwork.org.

As Caldas reported at the A2IM meet, Merlin has arguably the lowest overhead of any rights administration organisation. He said that it spends only 2% of revenue on administration (down from 4% in 2013 and 2.5% in 2014) and will pay out $1.9 million ($2.5 million) in membership dues rebates from 2013 and 2014.