It was not digitization of course but the development of sound recording, which quite quickly displaced home entertainment. Who would not have preferred Caruso singing ‘Una Furtiva Lacrima’ to Uncle Pete’s rendition (with Aunty Edna at the piano)? By the 1920s, radio had also arrived and people could listen to music that way. In its day, radio was hugely disruptive to the music industry.Up until these changes, music publishers had relied on sales of sheet music which they advertised through plugging songs and instrumental works in music halls and in promoting concerts of their works. They bought the copyrights from songwriters for a flat fee and took on all the risk and costs of getting the works performed and publicized, and all the revenues from eventual sales. They also had to contend with huge scale illegal copying by well-organized pirates who had their own printing and distribution arrangements; they got that under control but by that time sales were anyway falling.
Because they were ‘locked-in’ to the plugging and sales model of revenue-generation, music publishers ignored the existence of the performing right that had been enacted in copyright law already in 1833; nor could composers benefit from it as they had contracted their rights to the publisher. However, the 1911 Copyright Act made it clear that the performing right resided with the composer and at the same time, composers were awarded ‘mechanical rights’ for the reproduction of their works in sound recordings. A collecting society (MCPS) was set up to licence them and distribute the revenues to composers and publishers. Ironically, French composers had been collecting the performing right for performances in the UK since 1855 though a collecting society but the music publishers had regarded it as basically a waste of time.
As sales fell and mechanical rights were yielding revenues, however, UK publishers began to change their minds and in 1914 the Performing Right Society (PRS) was set up. Both these collecting societies distributed the royalties directly to the composers and songwriters side-stepping the publishers and this put them in a stronger bargaining position with the publisher. By the 1920s, buy-out contracts had been replaced by royalty deals and the role of the publisher now switched from selling sheet music to managing rights. This switch in business models is precisely what digitisation is forcing on other creative industries today as consumers prefer to license online services rather than buy products. This history also demonstrates the importance of copyright management organisations in collecting revenues for composers and music publishers, a topic that is also being discussed by economists eslewhere at the conference.
Revenues from the performing right have continued to grow from £10 million in 2014 money to £664m. Revenues from recorded media have fallen considerably, by more than 20 percent from 2013 to 2014, though online revenues grew by 18 percent in that time. These changes in the market echo the experience of music publishing 100 years ago. Historical analysis, such as this study, can throw light on how companies can survive by changing business models even in the face of huge changes in their external environment.
ENDS
Notes for editors: ‘Copyright and business models in music publishing: the law and the market’ by Ruth Towse is a paper presented at the European Policy for Intellectual Property (EPIP) Conference, University of Glasgow, 2-3 September 2015. For more information visit: http://www.epip2015.org/
Ruth Towse is Professor In Economics Of Creative Industries at Bournemouth University and Fellow of CREATe, School of Law, University of Glasgow.
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