The Nigerian Music Industry: Random Thoughts

It’s been an eventful couple of weeks for the entertainment industry here in Lagos, on the legal side of things. Injunctions were sought (and allegedly flouted), some arrests were made (a label was following the money) and some deals were re-done. Some thoughts on the goings-on and more –

 

  1. It’s a business, not a charity

One of the viewpoints to first make the rounds on social media was that labels ‘in the abroad’ aren’t as hardnosed as Nigerian ones. They, allegedly, invest millions in the artist and if the artist doesn’t make it, everyone just parts ways.

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It’s a slightly outside way of looking at things. Yes, it’s a risk the labels are taking and if they’re not happy at the end of your contract, everyone parts ways happily (see, for example Skales and his former label, EME). However, no “abroadian” artist is going to simply up and try to jump ship. You either run out your contract, try to get the label to release you, or ask the court to tear the contract up. It’s a very naïve or poorly advised artist that declares a unilateral end to a contract that hasn’t yet expired.

 

  1. Contracts are almost unbreakable. But bring the tear of a dragon & a unicorn’s horn & we’ll see…

Contracts are the lifeblood of commerce. If people were able to make commitments to others and fail to honour them without any consequences, business/trade would be in tatters. For this reason, all over the [free] world, Courts are very reluctant to end or amend contracts that have been freely entered into.

 

However, courts have in the past released musicians from their labels, where they were convinced that the recording contract, or the circumstances of the relationship between the parties, prevented the musician from making a living (restraint of trade). Typically, this is where the label has refused to honour music release/publication commitments or has made the terms for doing so too tasking for the artist. Courts might also be minded to declare a contract invalid if the artist can show undue influence on the part of the label. So, basically, if you can show that you were strong-armed into signing onto the label, or that the label is making it virtually impossible for you to earn any income, you might want to talk to a lawyer about securing your release. Lawsuits can be expensive though, especially for an artist alleging that the label is closing off his/her income…

 

  1. Those Unbelievable Clauses? It’s the economics, St#$@*!

Following the ‘arrest’ and questioning of one artist and his manager, snippets of the artist’s recording contract were released and many commentators were shocked at the terms. The most fantastic of the terms appeared to be the £10m release/buy-out clause (riddle: when is a label like a Premier League club?) and the assignment to the label of the artist’s copyright in compositions that existed prior to his joining the label.

 

The immediate assumption was that the artist signed the contract without seeking legal advice or, in the alternative, that he had a bad lawyer. It’s an assumption that misunderstands the dynamics of the Nigerian music industry, as the thinking behind it is that an artist can get a label to significantly change the terms of its contract.

 

There are indeed a few artists that can get their requests for changes agreed to, but most are either label owners or execs themselves. For artists on the up and come, there is very little leverage that can be applied on the label, so it’s usually a take-it-or-leave-it situation. The artist in question here had just been released by his former label, where he’d only been moderately successful and had this new label promising him a signature bonus, a brand new SUV and a flat in Lekki. How many artists in that situation would listen to the lawyer’s advice not to sign?

I’m speaking from personal experience, having advised an artist on a nearly identical contract (whose template is it, anyway?) sans SUV and flat. The label lawyer rejected virtually all the changes requested, so the artist was advised not to sign. Artist signed anyway.

 

  1. Where’s the money, anyway?

Ask the average Nigerian artist where they expect their money to come from and you’re likely to hear live performances and product endorsements. Maybe caller ringback tunes as well. Virtually no one is interested in record sales. This Nigerian model is predicated on music being given away for free in the expectation that fame (and then the live performances and endorsements) will follow. This model probably only works for the Top 20-30 artists in my estimation and I don’t believe it to be sustainable. In addition, on CRBTs side, the average artist will get only 6-12% of the gross revenue, depending on the network (those that pay, that is; some are notorious for not paying).

 

Globally though, the highest growth area for music revenue is music streaming, with the IFPI 2016 Global Music Report showing that streaming revenues increased globally by 42.5% on 2015’s numbers. Digital sales on the whole have overtaken physical, the figures now standing at 45% and 39%, respectively.

Streaming accounts for nearly half of the global industry’s digital revenues. I might have a slight occupational bias here, but artists as a whole stand to make a lot more if they began to take digital REVENUES (not merely distribution) seriously.

Screen Shot 2016-06-08 at 12.50.31 PM

 

  1. Which brings us to COSON…

COSON continues to do a great job of informing the public in the various rights that music users should respect. They have also done well, as the sole collecting society authorised by the Nigerian Copyright Commission, in collecting license payments from broadcasters and public venues where music is played and enjoyed (hotels, bars, restaurants, etc.).  However, this is performance rights revenue, which globally accounts for only 14% of the pie. If the aim, as the representatives of COSON frequently say, is to ensure that producers, session musicians, songwriters, etc. also get a slice, there’s the question to be asked whether or not it’s helpful to join the industry in ignoring sales. A few producers have been in the news recently, accusing artists of not having paid for the work – they have no share in the revenue from the artist’s live performances, so what’s the remedy? There’s also the issue of sampling and covering – ordinarily, there should be a minimum statutory fraction of the sales revenue (from the song doing the sampling or covering) that goes to the original composer. In a jurisdiction where sales aren’t paid attention to, and no statutory rates apply, how do the original rightsholders get compensated?

 

I am aware, I should say, that COSON has a digital licensing framework in the works, and I look forward to its publication in the near future.

 

 

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Cracking Digital Music in Nigeria: The COSON Summit

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Disclaimer: The views expressed in this piece are totally personal to me, in my personal capacity as someone who has had a keen professional interest in the development of the copyright administration system in Nigeria for over 10 years.

coson

The Copyright Society of Nigeria (COSON) just concluded the hosting of a summit on digital music distribution, licensing and consumption. The 2-day event was tagged “The Nigerian Digital Music Summit” and its theme was “Establishing the Basic Rules of Engagement in the Digital Environment”. It was attended by industry practitioners, lawyers and also had resource people from countries with more mature copyright systems, such as Norway, Finland and South Africa. At the end of the summit, a communiqué was published, outlining the various things the community wanted to see in place.

The summit was timely for a couple of reasons – this year, for the very first time, it was reported that revenues from digital exploitation surpassed sales from physical. Revenue from streaming is quickly bridging the gap with revenues from downloads, with some companies actually reporting higher income from streaming than downloads. Streaming is the future, as I have previously written, and the time to begin to lay the groundwork for the Nigerian music industry to fully partake of it, was at least 3 years ago.

THE TELCOS ARE EVIL CORP.

Moving quickly to the substance of the proceedings, the gathering very quickly turned on the telcos, accusing them of benefitting unfairly from the music they exploited, mostly via Caller Ring Back Tones (CRBTs – the songs you hear playing when you give someone a call). And it was understandable. For an industry that has risen from piracy-ridden ashes to becoming arguably the leading hub in Africa and a major contributor to GDP post-rebasing, CRBTs were the content producer’s goldmine for sometime. Network saturation, in terms of subscribers and availability of CRBTs now means there are lots more mouths contending for the same pot of beans and individual revenues are declining somewhat.

In the middle of all this however, is the [unsavoury] fact that the telcos retain anywhere between 60 and 80% of the income generated from CRBTs. The remaining 20-40% is then shared between the Value Added Service (“VAS”) Company and the artist/or record label, with of course an even smaller share for the artist if they are signed to a label. With the bulk of their earnings coming from either corporate endorsements (but we can’t all be Don Jazzy, Phyno, Wizkid or Olamide) and CRBTs, the industry is probably justified to demand a larger cut.

Tellingly, however, very little attention was paid to streaming in spite of the efforts of CAPASSO CEO, Nothando Migogo, to stress that the time to focus on it was now i.e. before bandwidth and data costs stop being issues.

The industry should be worried about streaming because each of the four telcos in Nigeria now operates a music streaming service – MTN Music+, Airtel Wynk, Etisalat Cloud9 and Globacom’s Music App. If these telcos have held on to the lion share of the revenue with CRBTs, what’s going to happen with streaming revenue from their services? For other music streaming services, the most efficient way to take payments from subscribers and purchasers is via their airtime. However, when the telcos convert airtime to cash to pay for a transaction, they typically retain about 70% of it, leaving only 30% to be shared between the stand-alone streaming service and the artist/label. Perhaps the even more pressing issue is that the aim of the telcos in starting these services, in my opinion, is to sell data, as voice revenues have peaked globally – data is the new frontier. It’s the same reason some of them are getting into video on demand, etc. In other words, data sales are the real target, the real pot of gold at the end of the rainbow for the telcos, and these guys don’t share data revenue (larger than music download or streaming subscription revenue) with anyone.

BUT EVERYONE LOVES THE FREE DOWNLOAD SITES

music

Perhaps it’s even more striking that an industry that wants to earn serious digital revenues made no reference to the industry practices that cannibalise the larger portion of digital earnings, particularly the way nearly everyone offers vast amounts of music for free downloads. What will the incentive be for consumers to buy albums when 70% has previously been released for free. If one also considers the fact that the industry is globally now more singles-driven than albums (iTunes killed the album), this is effectively a limiter on potential earnings, if all singles are given away. The CRBT gravy-train won’t last forever and it isn’t even really working for those who need it to, who have neither the eye-watering performance fees or the juicy telco endorsement deals. Will those ones dare cross the picket line against their benefactors?

ENTERTAINMENT DEVICE LEVY?

Another interesting issue that came up was the Private Copy Levy. This is basically a surcharge on all mobile phones, tablets, PCs, storage devices, etc. to compensate musicians for the revenues they lose when we email or Bluetooth music to each other. I would be very interested to see how our analogue National Assembly would treat this sort of legislation.

F.U.B.U.

Perhaps a final impression is on a comment made by the panellist on the need to develop homegrown solutions to our problems. Yes, benchmarks can be drawn against global best practice, but ultimately the mature systems matured because they developed relatively organically and catered to the needs of their locale, not necessarily pidgeon-holing themselves into systems others had developed. I think it’s important to take local peculiarities into account, to get the system that works best for us.

All said, COSON is doing very important work and deserves commendation for how far its come in the past few years. As long as it becomes clearer how it distributes revenues it collects, and as it increasingly delivers value to the industry, the benefits to will be immense.

Guest Post – Collective Rights Management in Nigeria: Unitary v Multiple Collecting Society Models by Olumide Mustapha (@lumes_bg)

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The recent reports regarding the Concerned Copyright and Intellectual Property Owners’ (CCIPO) open letter to the Honourable Attorney-General of the Federation, Mohammed Adoke-Bello (SAN) (AG-Fed) is of tremendous import with regards to the development of the music industry in Nigeria. The letter contained a plea by the CCIPO for the AG-Fed to intervene on behalf of the former to compel the Nigerian Copyright Commission (NCC) to approve another collecting society for owners of music copyrights.

 

The matter centres around the issue of collective administration of musical copyrights in Nigeria. In particular, the issue of the collection of royalties and the monopoly of the Copyright Society of Nigeria (COSON) in this area, being the only body approved by the regulator, the NCC, to operate as a collecting society for music rights.

 

As it stands, COSON has both been very vocal and visible with respect to its fight against criminal copyright infringement as well as holding various organisations and industries liable in civil law for lack of payment of license fees. This is in addition to its public relations offensive and educational activities to promote the issue of copyright in the music industry. The organisation’s efforts over the last two years have been commendable and the amount of fees they have been collecting and distributing have reportedly been increasing year on year.

 

Where the organisation has been heavily criticised has been in relation to its royalty calculation and distribution formulae, and associated methods. Lack of transparency has also been a levied at the company in addition to the issue of its lack of adequate infrastructure for monitoring the uses of works by commercial users throughout the country.

 

Now, while I am in total agreement with the wide held view that competition is crucial to the development of any industry and economy, the area of collective rights management is unique and therefore requires a gradual process of development until it can be (fully) de-regulated.

 

The mere approval of another collecting society will not in itself ensure that more users will pay license fees for use of music in their respective businesses, nor that music owners will enjoy greater compensation for use of their works. The tendency of (over)- “fragmentation” that is prevalent in most spheres of Nigerian social and economic structures will likely be the result of this desire for ‘de-regulation’, resulting in more confusion, higher transaction costs and ending in less users paying license fees or using music.

 

What   is Collective   Rights   Management:   Pro-Monopoly   v Anti-Monopoly

 

Collective management of copyrights is a system in which owners of works authorize collective management organisations (“Collecting Societies”) to monitor the use of their works, negotiate with prospective users, issue licenses against appropriate remunerations, (usually on the basis of a tariff system), collect such remuneration and distribute it amongst the owners of the works.

 

The rationale for this system arises from the impracticability of managing these activities individually. The transaction costs involved for rights owners to individually administer the public performance rights, (for example), to their works would likely end up being more than the price of the license fee for the use of same.

 

Thus, third-party organisations represent the interests of a group of owners and these ‘collective rights’ organisations, (by virtue of their core activities), enjoy economies of scale when administering these rights on behalf of a large group of rights holders.

 

COSON has repeatedly argued that it is adequately protecting the interests of Nigerian music copyright owners, citing the many civil suits it has filed against various organisations and industries that use music in the course of their businesses. The anti-monopoly advocates, on the other hand, point to COSON’s lack of transparency and accountability, with particular regard to monitoring of works and royalty distribution amongst its members.

 

NCC: Collecting Society Approval Powers

 

Nigeria’s current legal framework with regards to the collective management of music rights (and its regulation) is contained in the Copyright Act Chapter C28, Laws of the Federation of Nigeria 2004 (the “Act”), and the Copyright (Collective Management Organisation) Regulation 2007. We operate what can be described as a unitary Collecting Society model with the flexibility to accommodate multiple societies, while having NCC as the overall regulator.

 

Based on our system, the NCC is not obliged to grant any other organisation a license to operate so long as it is of the opinion that COSON is adequately serving the interests of music copyright owners. Also, because the Act is silent on what would constitute the ‘adequate protection of interests’, it is presumably left to the NCC to decide upon.

 

Going Forward

The primary focus should be on issues surrounding the distribution methods of COSON as well as the adequacy of its infrastructure for the monitoring of the use of works. Audio recognition software as well as the use of ‘field operatives’ to gather accurate evidence of use of works by businesses, broadcasters and other commercial users should be the short to medium term aim. The accurate collation of music usage by licensees also serves the secondary purpose of providing a basis for a more equitable distribution of royalties and license fees amongst members. Commercial users are not mandated by law to keep playlists and logbooks so it is even more imperative for COSON to carry out these activities.

 

Both sides in the dispute must not lose focus of the ultimate goal; to wit, having a suitable administrative framework for music copyright administration in Nigeria, that would involve a simple and efficient method for users to obtain lawful   licenses   to   enjoy   creative   works,   whilst   ensuring   the   equitable distribution of fees and the rewarding of creators thereby stimulating further creativity and innovation. It seems both sides of the argument have this intention in mind and must therefore cooperate and engage in continuing dialogue to find some middle ground on which a consensus can be built.

 

Olumide Mustapha Esq (QSEW) is a Media and Entertainment Attorney. He can be reached by telephone on +234 810 421 55 00, or by email at lumimustapha@gmail.com. He also tweets from the handle @lumes_bg.

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To read further on COSON and its battles, disputes and progress, check out BON, COSON and MUSIC-SHUNs: 5 THINGS.

 

 

 

Streaming IS the Future; but Nigerian Music Needs to Turn on The Tap

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Last week, Adele’s manager, Jonathan Dickins, was reported as saying during an interview that streaming is the future whether musicians liked it or not. His comments followed news that Taylor Swift had pulled her entire catalogue from Spotify, the world’s most popular streaming service.

Taylor Swift is not the first musician to grow less than enamoured of the service, or with streaming as an income generator for the industry. Last year, Radiohead musician Thom Yorke described Spotify as “the last desperate fart of a dying corpse”, when the group pulled its music off the service. More recently, musician/songwriter Aloe Blacc published an op-ed in which he also expressed grave reservations about streaming as a sustainable source of income. How true, can it be then, that streaming is the future?

Looking at it from Blacc’s perspective, there might be a point about the reward system but I think rather than an indictment on Spotify, it’s more symptomatic of where the industry is, as a whole. Blacc writes –

“Consider the fact that it takes roughly one million spins on Pandora for a songwriter to earn just $90. Avicii’s release “Wake Me Up!” that I co-wrote and sing, for example, was the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US. And yet, that yielded only $12,359 in Pandora domestic royalties— which were then split among three songwriters and our publishers. In return for co-writing a major hit song, I’ve earned less than $4,000 domestically from the largest digital music service.”

If that’s what’s now considered a streaming “success story,” is it any wonder that so many songwriters are now struggling to make ends meet?”

It sounds dire, but that’s 168 million streams versus exactly how much in sales? According to this site, the track sold 237,000 copies when it debuted in July 2013 and only broke the 1,000,000 mark 5 months later in October. Take a look at Billboard’s half year charts for digital singles too. Album sales are down, and have been on the downward trend since 2010. Streaming and subscription revenues, on the other hand, are growing, climbing 51% in 2013 and crossing the $1bn mark (summary here; full report here). The head of Global Trends and Futuring for the Ford Motor Company has also been quoted as saying that “young people prize access over ownership.” So, what’s the issue? Is Spotify, together with the other streaming services simply ripping people off?

The issue may be that content creators don’t fully understand the service yet. Chances are that many users don’t understand the back-end either (they don’t really need to, in all honesty), so if you’re one of them, you might want to check out this post. Another post suggests that Spotify has not sufficiently controlled the narrative and has allowed content creators and the media replace fact with fantasy.

In the latter post (the Lefsetz Letter), the point is made, agreeing with Adele’s manager, that YouTube is by far the bigger monster, paying far less than Spotify does, closely followed by P2P platforms, which pay nothing at all. The post however disagrees with Adele’s manager on some music being taken behind the subscription pay wall, because that would simply push users to YouTube and P2P, leaving the content creators with nothing.

Does this mean anything for streaming in Nigeria? Probably not in the near future. Unreliable mobile internet and expensive data plans mean that very few people without WiFi modems stream much. Furthermore, given that most of our musicians give most of their music away for free downloads, there is little incentive to explore streaming anyway. So, perhaps the Nigerian market prefers ownership to access and this is all moot for now. But I’m an advocate for long-termism, and mobile internet will work someday and voice/data bundles will become more affordable for the streaming demographic. What then?

The current industry model will probably need to change in a year or two. Right now, the model for success is giving music away for free, hoping it becomes a hit that leads to RBT revenue and, ultimately, live performances. This sort of ties in with Dickins’s breakdown of how revenue streams for successful artists today –

60-65% of their income is going to come from tickets, 15-25% from tour merch, 10-15% from publishing, 2-4% from ancillary and 2-4% from record sales.” (Here’s the link again, just in case; emphasis in the quote mine).

You can see though that it’s significantly different, in that 70-90% of revenue will come from touring (not “shows”!) and tour merchandise. However, publishing revenues aren’t insignificant either. Enter, COSON (and its pursuit of digital royalties).

If RBTs are going to be the way forward here, then the crazy percentages that the telcos take of the gross revenue (60-72%, before VAS companies split the net with the artistes/labels) need to come down significantly. The music industry should lobby as hard as they can for legislation to support this (shouldn’t be too hard, with so many entertainers gunning for office in 2015).

If, on the other hand, the African market is to become as competitive as the foreign market, then the industry needs to support its domestic music streaming companies. Streaming kills piracy, and if the numbers are large enough (hint, hint, artistes and label execs), it will put money directly in their pockets. As Lefsetz says, “tech is all about scale” and “people who put brakes on the future end up screwing themselves.”

In conclusion, everyone knows that digital is here and analogue is gone. For Nigerian musicians to fully maximise  revenue from digital, given that their largest market is local, they may need to approach the issue a little differently.

BON, COSON and MUSIC-SHUNs: 5 THINGS

It has now been widely reported  that IBAN* and BON** (associations of independent television and radio broadcasters) have chosen, in response to lawsuits by COSON, seeking the payment of royalties for its members, to stop playing the music of COSON-registered artists. Here are a few bits and bobs on collecting societies and royalty payments.

  1. What is a Collecting Society?

A collecting society is an organisation that, as the name suggests, collects royalties income on behalf of its members. What income? Well, you’d have to go back to Copyright 102, on who owns the music, for copyright basics. However, to quickly summarise, the music and the process through which it is made confers exploitable rights on different people. If you’re a busy song writer or a touring singer, the chances are that you cannot track all the stores, radio and tv stations, digital platforms, etc. playing or selling your music. Collecting societies do this for their members. Examples of collecting societies outside Nigeria are The Harry Fox Agency, PRS for Music, ASCAP, NORM, SAMRO and so on. In Nigeria, we have COSON – the Copyright Society of Nigeria. COSON is the collecting society for musical works and sound recordings in Nigeria. What are musical works and sound recordings? See Copyright 101.

2.   Does COSON represent only singers/artists?

In theory, no. I reckon COSON would also argue that it doesn’t just represent singers in practice.  In theory, COSON should represent and indeed holds itself out to represent everyone in the music-making process – singers, writers, instrumentalists, producers and so on. However, the nature of copyright is such that if a producer or instrumentalist was hired and paid a one-off fee for their work, it is deemed a work-for-hire and copyright vests in the employer. Which brings me to the “in theory” part, because in Nigeria,  most singers write their own songs and the producer (hired and paid a one-off fee) sequences the music with software. After Cobhams, not too many others hire session bassists, guitarists, percussionists, etc., unless you’re part of a fuji or highlife band, but you get the drift. If a singer who’s written his own music (or his label), hires a producer (on a one-off fee) who lays the beats, who owns the copyright in the work? The artist? That’s right. But I am more than happy to be corrected if my assessment is wrong.

3.   How do Collecting Societies pay their members?

I’m just going to copy and paste the ASCAP formula . You can find the breakdown and explanation on their webpage, here.

Use Weight  X  Licensee Weight  X   “Follow The Dollar Factor”   X   Time of Day Weight   X   General Licensing Allocation

+

Radio Feature Premium Credits
(for radio performances only where applicable)

+

TV Premium Credits
(for performances in highly rated series, where applicable)

=

CREDITS

You can also view BMI’s method here.

How does COSON pay its members? They also describe it on their website and here’s another copy and paste:

“At COSON, there are two categories of distributions: Specific Distribution and General Distribution.

“When a license is issued for a clearly identifiable work or a log is received from which the royalty due to a particular work is clearly discernible (e.g radio & TV promos, road shows, jingles, ringtones, etc), the copyright owner/s is entitled to a royalty based on how much the society has collected on behalf of the owner from the user. The only deduction in this case will be the administrative cost.

On the other hand, a general distribution is made to members across the board, in cases where the royalty collected cannot reasonably be ascribed to any specific work or where the members at an AGM have decided that a token be paid to all members irrespective of the amount of use of their works. General distributions are usually done once in a year.”

4.   Is COSON the only collecting society in Nigeria?

Uhm, yes, although Charlie Boy and his friends at MCSN would probably disagree with me. And this article, here, suggests there should be more than one. However, the Copyright Act says that you cannot officially be a collecting society unless the Copyright Commission licenses you as such. The Act goes further to state that that the Copyright Commission does not need to license more than one collecting society if it is satisfied that a single society can carry out the role adequately. Therefore, as the law currently stands, royalties for the broadcast of musical works and sound recordings in Nigeria are payable to COSON alone.

5. Does COSON’s “International Standards” Argument Fly?

COSON prefaces most of its statements on this matter with a reference to international standards and practices for the industry. If we want a world-class industry, then YES, it certainly makes sense for us to adopt the standards that the very best representatives of the international industry have imbibed. However, our history, both economic and political, has shown (and it’s unclear to me whether this is fortuitous or by malevolent design) that wholesale adoption of international standards has not always worked. In his piece on the matter, industry heavyweight, Efe Omorogbe frowns at the BON/IBAN tack of wanting to develop a system that takes the “peculiarities of the Nigerian industry” into cognisance. Obviously, given how long BON and IBAN have contended with collecting societies (and other, more sinister motives, as alleged by COSON), there are some trust/credibility issues. But there is nothing wrong (if BON/IBAN are sincere) with looking at the roles that culture, environment, etc. played in the evolution of international systems while they were evolving, and see if we need to tweak any parts of what we’re adopting. For instance, is it a factor worth considering that in the royalty regimes practising these international standards, pirates and piracy are not as pervasive as they are here? Is it worth considering that our traditional channels for distribution now involve an Alaba “distributor” negotiating a one-off fee with the artist and  the artist expecting no more sales income from the album (thank God for digital)? These have no direct bearing on radio and television per se, but they underscore the point that our industry is neither American nor British – it is Nigerian.

Clearly, BON and IBAN have to pay for licences to exploit the music, unless they all decide to become 100% talk radio stations. This is more so as they are required to have 80% Nigerian content. If their ban is as a result of not wanting to pay at all, it is unconscionable. If, on the other hand, they want to develop a royalties regime in good faith for the Nigerian industry, then rather than merely complaining about antagonism and harassment, they should be putting out counter-proposals to COSON’s. Eventually, the law suits that have been filed by COSON will reach a conclusion and things will come to a head. It will be interesting to see if the ban will last as long as the lawsuits.

________________________________________________________

**IBAN – Independent Broadcasting Association of Nigeria

**BON – Broadcasting Organisations of Nigeria

Cracking Digital Music in Nigeria

One of the courses I treated with the greatest disdain in University was GES 101. I can’t  remember the official title of the course now but I do remember that one of the topics was language and how culture and technology affect language. This has been proved true and become more evident as we march forcefully on into the 21st century.  Until about 5 years ago, tablets were medicine, tweets were onomatopoeic sounds, swiping meant stealing and streaming was something only a river or estuary did. The secondary (?) meanings that all these words and many more have acquired, one could argue, are actually close to achieving primary status now.

 

The advances in technology have presented new challenges for distributors of entertainment content. The market is swinging firmly away from scheduled to content to “on demand” or “a la carte”, where the user/consumer merely pays for access and is thereafter able to determine the order in which he will watch or listen to the content.  The consumer could also decide to purchase the content outright, and with purchase comes the ability to move content between storage devices. Delivering content in this manner will require the consumer to have enough space to store his content library. Thus, advances in digital broadcast have also been accompanied by exponential growth in storage technology.

 

A result of all this progress is that while my dad still has a collection of vinyl records occupying roughly twenty cubic feet of space somewhere in my late grandmother’s house, I can carry infinitely larger amounts of music around on a device no larger than my palm. This is good for the honest consumer but it makes piracy a whole lot easier.

 

Forgive me for being Captain Obvious so far, but a context needed to be set.

 

Piracy – in this context, the unauthorised distribution or selling copies of music – has always been with us and will probably always be with us. The problem is worse in many African countries, including Nigeria, where the government’s anti-piracy efforts are extremely feeble where they exist at all. Today, anyone can be a pirate, as is evident with so-called “offline downloads” being the primary concern of many labels and artistes in Nigeria.

 

“Offline downloads” is the copying that goes on, frequently for paltry sums, from laptops or external hard drives to USB storage devices. It has been reported that the “content aggregators” (with sincere apologies to legitimate content aggregators) charge as little as one naira per track copied.  With more and more cars and even portable radios coming with auxiliary USB audio sockets, one can see why members of the Copyright Society of Nigeria (COSON) are alarmed.

 

The Nigerian industry is also peculiar in the way its revenue stream works. Piracy killed record sales decades ago. The industry tried to solve this problem by selling record masters to distributors at the major piracy centres (tragically ironic, right?). Even at that, many emerging artistes are willing to give their music away for free on popular blogs and websites in return, hopefully, for exposure and recognition, which ought to translate into touring and performing income.

 

Thus, music is largely freely available on both the supply and demand sides of the music equilibrium. How then can digital translate to money for the local, large-scale distributors?

 

The challenge before Iroking and Spinlet, Nigeria’s two main digital distributors – the companies adopting the Spotify/Deezer models of monetising content – is to convince a large enough number of people to agree that paying for music is worthwhile.  In a country of 160 million people with a median age of 19, the market is certainly there. Potentially.  However, even Spotify, with its 24 million users (6 million of whom are paying subscribers) is yet to turn a profit, in its 7th year of operation. iTunes, it is claimed, is running barely above break-even (another great infographic here for dataheads), though Deezer claims to be profitable.

 

These companies exist in countries with mature copyright enforcement systems, where music royalties have been a dependable source of livelihood since forever. This means that there already exists a culture for paying for music. In spite of this, however, musicians are complaining that the revenue from streaming isn’t anything to get excited about. According to Zoe Keating (crossover classical musician) these are the different streaming rates that various distributors offered her (very useful table, actually). So, if neither the streamers nor the streamed are making money (though this point is heavily disputed), what’s the point of this business model? What will the point of this business model be in Africa, in Nigeria?

 

To understand profitability in the business, one must first understand how the service is priced. Most digital music distributors, in addition to outright sales, have a free (advert-supported) service, a limited subscription service (ad-free, but limited number of streams), and a premium subscription service (ad-free, unlimited streams). Therefore, first of all, the difference between outright sales and streams must be taken into account.

 

A physical CD in Nigeria is usually priced between N150 and N1,500 (not counting “deluxe” editions).  This pricing model can easily be adopted for digital sales. A stream, on the other hand, occurs when a track (not downloaded) is listened to for at least 30 seconds. The minimum listening period varies (some agreements say 45 seconds) but the first problem streaming has is how you quantify a listen. Do you randomly estimate how many listens can be extracted from a CD before it becomes unplayable? If a 9-track album costs N150, this equates to about N16 to “own” each track for life. How many times should a streamer be able to listen to a track before his use translates to N16 for the artist? Is this even the metric that distributors and artists/collecting societies use?

 

Speaking of collecting societies, one must commend COSON and the efforts they have made thus far in ensuring that music makers receive royalties for the use of their music. It is not clear however, whether they will function as an aggregator in respect of their dealings with digital distributors. Their primary revenue targets to date have been radio and tv stations, hotels, events venues, etc. and this category of people should rightly pay COSON a licence fee. However, should an Iroking or a Spinlet pay COSON a licence fee, given that each artist enters into a licensing agreement with the digital distributors? If yes, would that not effectively be double licensing, as the artists will collect under their individual licensing agreements, regardless of whatever fee COSON extracts. More importantly, was it the intention of the artists when joining COSON that the collecting society would take over all licensing activity? These are the issues that will need to be clarified as digital music expands in Nigeria.

 

The Value Added Service (VAS) companies that collaborate with telcos to sell ring-back and call-back tones are currently the silent winners in this quest to monetise digital music. Personally, I would never willingly activate a ring-back tone but I am a single subscriber in a pool expected to surpass 128million by 2014. The VAS market in Nigeria is currently valued at over N78.5bn and “may actually be moving towards $1bn in the next three years” .

 

In addition  to all that’s been said here, artists should consider ditching the “listen for free” model and start steering their fans towards platforms where listening generates them money. This may mean starving the blogs of some content and some blogs therefore going rogue and becoming pirate broadcasters (lawsuits, yaaay!!) but if physical sales are dead, then digital must reward maximally.

As for who will win the race to crack digital music in Nigeria, Iroking and Spinlet need to take on and subdue Deezer and Amazon first and hope that Spotify doesn’t decide to expand its operations to Nigeria before then. The catalogue is everything!

 

 

 

The COSON Summit on Digital Licensing

COSON (the Copyright Society of Nigeria) hosted a summit on digital licensing at the Ikeja Protea, on Monday the 12th of August 2013. The purpose of the summit was to discuss the challenges posed to the industry by digital formats for musical works and sound recordings. In attendance were lawyers, record label owners, recording artists, VAS companies (ringtones, caller tunes, etc.), as well as other stakeholders such as representatives of the Record Label Owners Association and the Audio Video CD Sellers Association of Nigeria (AVSAN).

 

The Chairman of COSON, Chief Tony Okoroji, led a panel of moderators that included Efe Omorogbe (Now Muzik), Audu Maikori (Chocolate City), Mark Redguard (Spinlet), Erelu Keji Okunowo (Industry Veteran), as well as a representative of the Nigerian Copyright Commission.

 

After Chief Okoroji took the gathering through the evolution of recording formats from vinyl to 8-track to cassette to compact disc to MP3 and other digital formats, the discussions very quickly split into 3 strains – skilled lawyers/judges are either small in number or not well-known, contracts are not respected, the industry is too fragmented and “disorganised” and offline downloads. Brief summaries and then my 50 kobo on these key issues.

 

LAWYERS AND THE JUDICIARY

One of the problems facing the industry is that many lawyers drafting and reviewing licensing agreements do not have the requisite specialist knowledge. As Managing Partner of G. O. Shodipo & Co, Mr Femi Fajolu, said, “…if you use the same lawyers for maritime as you use for general corporate work, you will sink in the water.” Or, as Audu Maikori said, “Dentists don’t perform eye surgeries.”

 

The danger in non-specialist lawyers preparing specialist agreements is that you are more likely to have bad agreements – the sort that precipitate litigation. Litigation is also an unattractive proposition because apart from its duration (and lack of assets to satisfy judgment debts, in the case of most artists), there is also the problem of not having a sufficient number of judges versed enough to properly settle IP disputes.

 

The summit proposed training sessions for artists and the judiciary. Industry practitioners were advised to contact the Intellectual Property Lawyers Association of Nigeria (IPLAN) for lawyers with specialist knowledge. It was also advised that IPLAN begin to lobby the National Judicial Commission and the judicial institute on appointing judges with IP expertise.

 

Nothing to add, for me.

 

OFFLINE DOWNLOADS

I was unfamiliar with this term before yesterday, though well aware of the activity it describes. Offline downloads occur when, for example, you hand your phone or tablet memory card to a laptop entrepreneur with a library of several thousand songs, some of which he copies onto your memory card for the paltriest of fees; something like 5 or 10 naira per track. Apparently, these guys have become such an issue that even Alaba marketers are complaining. I repeat, Alaba is complaining!!! AVSAN was especially passionate about this, though someone needs to tell them that their model is in terminal decline anyway.

 

This is an extremely tough nut to crack. Proposals considered for tackling it included licensing and persistent raids. However, as they’re literally everywhere, raiding them, no matter how frequently, would be akin to fighting vermin on a 5-acre farm with only a can of home insecticide – very minimal distortion. Licensing would also be tricky. How would pricing be enforced? What would compel people currently evading “capture” to voluntarily come forward for licensing? Should we even really be considering licensing – will the government also license operators of illegal crude refineries, for example?

 

Perhaps market-place executives need to start being held jointly liable for allowing copyright infringement go on within the markets? That way, the local market unions would be compelled to drive such people away from many public spaces. This would probably require a revision to existing laws, however, as people can only be liable for crimes as defined in existing laws.

 

OVER-FRAGMENTATION

“How do you know the real owner of the copyright in a musical work?” “How do you know you have not obtained your license to distribute digitally from the wrong person?”

 

These questions become more relevant as more and more disgruntled artists leave the labels where they became established, to set up their own companies. Inherent in that is the issue of attitudes within the industry to contracts and whether contracts have been properly terminated. However, there is the practical question, where the artist leaves properly, of ownership of new material.

 

Proposals put forward to solve this included mandatory copyright registration (which is not currently required under the law), the establishment of an authentic industry copyright registry and, most worryingly for me, mandatory registration/identification as an entertainment industry practitioner.

 

I think, in considering “sanitising” the industry, a few issues need to be borne in mind. First of all, registration of intellectual property, even where it is mandatory, is only prima facie evidence of ownership. What this means is that anyone who can demonstrate superior title can rebut the title granted by the government in respect of the intellectual property.

 

Secondly, the trend in Nigeria, once older folk start talking sanitisation or regulation is that financial and regulatory barriers to entry begin to crop up. In some cases, the promoters of regulation push for their body to become “chartered”, after which it usually becomes illegal for unchartered people to work within the trade. Caution must be taken that industry veterans do not stifle the creativity of younger participants with whatever remedial actions are agreed upon.

 

Overall, the summit was a useful meeting, the highlight of which, for me, was meeting Laolu Akins. A committee has now been formed to map out an industry strategy to tackle the digital challenge, and we look forward to its report in the coming weeks.