Over the past several years, organizations that collect public performance rights have grown much faster than most music businesses, especially in Europe. French collective management organization SACEM's revenue will grow by 34% in 2022, while its UK counterpart, PRS for Music, has doubled its revenue since 2014. Growth is fast enough to make the whole alphabet soup exciting at the point of attracting investment – supported competitors of traditional non-profits – think BMI, which just took outside investment, or Kobalt's AMRA.
Until about a decade ago, traditional collective management organizations, known as CMOs, licensed rights in a given territory for compositions played in public — at concerts, in stores and restaurants, on TV and radio, and eventually by streaming services. (Some also collect for mechanical rights or neighboring rights and pass them on to rights holders through related organizations.) And while European CMOs still do this, in the last decade they have also competed with each other to represent and license online rights in Europe and in certain other territories (outside the US). This has made the most complex part of a complex business even more difficult to understand, as it allows publishers and songwriters to assign different kinds of rights in different territories to different CMOs. In the US, for example, songwriters can join ASCAP or BMI and then assign certain rights in other territories to different organizations in order to collect that money directly instead of indirectly, although only very successful creators tend to do this. they do this.
As the pandemic receded in 2021, CMO growth turned into overgrowth, fueled by increases in online revenue, restaurant and store openings, and the rapid return of the gig. The annus mirabilis it was in 2022, especially for the European societies that represent the largest US repertoire: SACEM grew 34%, PRS 23%, Sweden's STIM 20%, and Germany's GEMA 13%. Now growth is falling to earth, but still healthy – last year, revenue grew 5% at SACEM (where distributions grew 19%), 12% at PRS, 8.4% at GEMA and 14.2% at STIM . So I was looking forward to writing a column about how important this is to songwriters and the music publishing that supports them, what this means for the future, and how creators can figure out which CMO would be best for them. Instead, I ended up spending a few days staring into an abyss of uncertainty.
CMO revenue growth means that either publishing activity is growing, or a given CMO is doing better than its competitors, or some combination of the two. However, although the European Union enforces transparency, each CMO represents revenue so differently that it is very difficult to compare them. For example, STIM categorizes revenue collected from online licenses in foreign territories as “foreign income”. SACEM considers this “online”. while PRS treats this income as online when it licenses directly and foreign when it does not. It gets much more complicated from there.
As the competition between societies heats up, the most important few move away from the rest. PRS, GEMA and STIM operate ICE as a pan-European licensing hub based in Berlin, and most publishers and other companies license online rights in Europe and other countries either through it or through SACEM, which is itself a node. This means that at least some of the growth in these societies is coming at the expense of their European competitors, although it is hard to say how much.
Even when CMOs compete, they also cooperate in various ways — including sending money to each other. Some of the societies' success actually depends on their opponents: GEMA members stand to gain more if SACEM maximizes the money it collects on their behalf in France, for example. The closest analog I can think of is global trade, where countries drive prosperity by enhancing the success of their peers while trying to surpass them. Consider that every CMO wants to be accountable to its members faster than its rivals, but the final accounting is only possible when numbers come in from other markets. It is a game that can only be won by defeating and boosting opponents. At this point, the abyss begins to look back.
Perhaps because the CMOs are so dependent on each other, top executives agreed on a few points – the most important being that growth will come back down to earth and that, as it does, cost efficiency will become more important. “I think we will continue to see growth, but not as fast as during the pandemic,” said STIM's CEO Casper Bjørner told me. As this happens, “I think the cost ratio becomes very important,” GEMA CEO Tobias Holzmüller he added, referring to the percentage of revenue that goes to expenses, which historically has been between about 10% and 15% and is generally declining. And since CMOs collect relatively similar pay-per-play from streaming services, Holzmüller said, “You're competing on cost and services.”
CEO of SACEM Cécile Rap-Veber he said the same: “What matters to me is value for our members.” CEO PRS Andrea Czapary Martin it has also prioritized efficiency, setting a target of reducing the PRS cost ratio below 10%, which it did in 2023 for the second consecutive year, in addition to reducing the management rate for rights from online services by 20%. “We can do this,” Martin said recently, “because we are exceeding our goals.” The idea is that, amidst the accounting chaos, the cost ratio can emerge as a comparison that is easy for songwriters and publishers to measure.
Cost ratio can be an easy way to compare CMOs — but even that gets complicated because different sources of rights come at very different costs. For example, revenue from blanket licenses for music played in stores or restaurants is relatively expensive, as signing licensing deals with new businesses is relatively labor intensive. Income from online services costs less, while income from foreign bonds is even cheaper. This gives an advantage to CMOs that are more dependent on foreign revenue relative to their size — and helps STIM and PRS reduce their costs. (That's not the whole story; these societies are also very good.) It also makes SACEM's 10.76% expense ratio even more impressive.
Despite their competition, in reality, the major European CMOs do not always play the same game. STIM receives 73% of its income from foreign and online rights, so to some extent its success is tied to that of Swedish songwriters who write for global pop stars, although they have to make sure they can't get a better deal from another CMO. GEMA is at the opposite end of the spectrum — more than a third of its revenue comes from general and concert licenses, for which it receives more than its competitors, possibly in part because the German economy is Europe's largest. PRS collects more online and foreign income, in part because its English-language repertoire travels globally. SACEM, the oldest CMO and the largest outside the US, benefits from operating its own hub. The analysis to determine the best deal for a particular creator becomes even more difficult and may simply come down to which of these specialties offers the most attractive advantage.
That doesn't mean competition doesn't work, though — even if some executives said they measure themselves by their performance in previous years more than rivals. “Competition has forced many of us to improve our efficiency,” Rap-Verber told me when SACEM announced its results. And that benefits creators involved in any CMO.
