Everything Is Awesome: Music Business Indicators Point To A Banner Year

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– Mariachis
TODO ESTA MUY BIEN! Music business quarterly financials point to a banner 2018 for the industry. Here, Mariachi Real de Mexico performs on the floor of the New York Stock Exchange for the Cinco de Mayo holiday in 2013.
Five months into 2018, a spate of good news and positive signals is showing the music industry in good health – if not great health. And things could get even better. 
Over the last decade, positive stories have come especially from the live side of the business. Outside of a brief recession dip in 2008, consumers have been willing to pay higher prices for increasingly entertaining experiences – from deep, diverse festival lineups to better stage shows and higher quality food, beverage and merch. 
But now the record industry has returned to growth – the most revenue in a decade. Global revenues are taking off. The major labels are growing at double-digit rates. Even money-losing Spotify boasts a positive narrative. 
Credit “strong tailwinds for both supply and demand” for the momentum in the global concert industry, Live Nation President / CEO Michael Rapino said during the company’s May 3 earnings call. 
Because Live Nation works in advance of its concerts, it already has enough bookings, ticket sales and advertising commitments to have a successful 2018 and double-digit growth in its preferred financial metric, adjusted operating outcome (adjusted to remove one-time items that distort a period-to-period comparison). After a record $10.3 billion of revenue in 2017, up 24 percent from an excellent 2016, Live Nation posted a 19 percent increase in revenue to $1.48 billion. 
The Madison Square Garden Company is flying high, too. The owner and operator of landmark venues such as Madison Square Garden Arena, Radio City Music Hall, the Beacon and the Forum has increased its revenue 23 percent to $1.24 billion in the last nine months (the company’s fiscal year starts July 1) and doubled its operating profit. 
MSG is planning to construct two eye-popping Spheres, futuristic orb-shaped venues in Las Vegas and London. The 18,000-plus-seat venues, which are currently slated to open in late 2020 (Vegas) and 2021 (London), will have images beamed to its inner shell to create an innovative and immersive audio-visual experience. Simply attempting to build such a unique, futuristic venue is proof the live business is both sturdy and competitive. 
This isn’t just thinking forward and focusing on improving day-to-day operations, it’s planning for well into the future. Madison Square Garden Co. is affiliated with Oak View Group, Pollstar’s parent company.
The popularity of country music is driving improvements in Ryman Hospitality’s entertainment division, whose assets includes the Grand Ole Opry and is doing so well the company is reportedly planning to spin off the division, suggesting the company believes the entertainment division is undervalued. Revenues in the latest quarter rose 6 percent to $23 million. Ryman uses a funnel approach to grow its business: the television series “Nashville” and Opry City Stage in Manhattan’s Times Square draw tourists to its Nashville venues and properties such as Ole Red, a restaurant/bar/performance space launched in partnership with country star Blake Shelton.
Record labels and music publishers have positive narratives, too. It turns out digital services and labels were right: people will pay for a streaming service if the user experience outweighs acquiring free music from pirated websites. All-you-can-eat access to curated playlists and a deep catalog is made more attractive when given access to high-speed mobile Internet. 
Global recorded music revenues were up 8 percent to $17.2 billion in 2017, according to the IFPI. Streaming revenue ballooned to $5.2 billion and helped Universal Music Group, Sony Music, Warner Music Group, and BMG report positive momentum in the first quarter of the calendar year. 
Much of their business is now driven by Spotify. The world’s largest music streaming service – by revenue and paying customers – ended the first quarter with 75 million subscribers and 99 million listeners of its ad-supported tier. The fact that Spotify loses money is secondary to 26 percent revenue growth to 1.14 billion euros ($1.35 billion). 
Operating loss of $41 million isn’t cause for worry. More than anything, Spotify’s 
entry on the NYSE speaks to consumers’ embrace of music streaming. For the major music groups, going public was far more than symbolic.
Spotify has been a financial windfall for the major labels in 2018. Spotify gave equity to the major labels as a part of their licensing deals. With Spotify’s market value hovering around $27 billion, a couple of the majors made a quick exit. Sony Music sold about 17 percent of its shares for roughly $166 million. (Both companies have publicly stated they will share their profits from the Spotify share sale with their artists.) Warner Music Group sold about three-quarters of its shares for roughly $400 million. Universal Music Group and independent rights group Merlin also own equity in Spotify. 
Nothing is perfect, though. Opponents to consolidation have plenty to complain about. Live Nation bolts on promoters and festivals with regularity (see the recent purchase of controlling interest in Rock in Rio). Small agencies and promoters are being 
subsumed by larger competitors. Recorded music and streaming is dominated by a 
handful of companies: Universal Music Group, Sony Music and Warner Music Group in 
recorded music; and Spotify, Apple Music, Amazon and Pandora in streaming. 
Is there a festival glut? LA’s FYF Festival was canceled because of thin interest; last year’s Warped Tour also encountered soft demand. 
While the live music business seems to have locked in a bright future, the record and publishing industries could use more help. Enter the bipartisan Music Modernization Act, the music community’s attempt to update copyright law and address several contentious issues. 
The legislation would improve many ways royalties are recognized and distributed to record labels and music publishers. Digital services will pay more, but they’ll avoid lawsuits because their incomplete metadata means songwriters are not always matched with the proper recordings. In short, record labels and music publishers would benefit from the changes. 
Jon Singer, COO/CFO at music publisher Spirit Music Group, tells Pollstar the MMA is “a positive step forward” because “there’s so much money” held up by incomplete or inaccurate information connecting songwriters to sound recordings. 
For record labels, the MMA would formally establish a performance right for songs 
released before 1972. In moves meant to inject fairness for rights holders and creators, the bill also tweaks how some royalties are established and rotates a group of judges who determine ASCAP and BMI performance rates. 
The MMA would also allow mechanical royalties at something closer to a market 
rate. The bill has a litany of supporters: the Recording Industry Association of America, Songwriters of North America, Nashville Songwriters Association International, 
and The Recording Academy, among others. David Israelite, president and CEO of the National Music Publishers Association, tells Pollstar the bill is a “truly historic for songwriters and the entire music ecosystem which they fuel” (he said as much in a lengthy op-ed co-written by Aerosmith’s Steven Tyler in support of the MMA). 
But the MMA has both critics and doubters.
Attorney Richard Busch of King & Ballow criticizes the bill because it “basically insulates Spotify and other [digital service providers] from liability for statutory damages and attorney’s fees for any lawsuits not filed by January 1, 2018.” 
Just creating the collective will be a challenge. Josh Gruss, CEO of Round Hill Music Royalty Partners, sees risk in the creation of the mechanical license collective – at least in the near term – and wonders if the right people are leading the technology endeavor. 
“This is basically going to be a startup,” he tells Pollstar.
The MMA has already passed the House of Representatives; the Senate will hold its first hearing on the bill May 15. The music industry gets a chance for an omnibus copyright bill once every generation, and sources tell Pollstar the MMA has a good chance of passing this year. 
A presidential signature on the bill would be a boost for the recovering industry. 
“It’s been a while since this business had a tailwind,” says Gruss. “It’s nice to have 
a tailwind.”