© 2019, IPQuorum

Valeria Brusnikina, manager of the IT projects portfolio of the IPChain Association, answers questions from foreign media

How can musicians manage their streaming revenue? How should the royalty payment system be reformed?

Today, the copyright holder is dependent on a large number of market participants, from iTunes, Spotify and other services that pay royalties, to collective management societies (CMRs), which sometimes are not ready to provide detailed statistics on the use of works. In Europe, the market is more for platforms, intermediaries and users rather than rightsholders and it is the content showcases that determine how much the creators get. In my opinion, the main player in this field is still the musician and he/she needs services that will allow him to independently determine who, where and under what conditions uses their creative works. In contrast to the European market, Russia is building a system in which copyright holders have instruments for managing rights and receiving reports on the use of content.

What changes do you want to see in collective management of rights?

The activities of the CMRs should be based on technological digital tools for collecting statistics, using musical phonograms and monitoring Internet resources. Based on the collected reports, digital services will make it possible to form fair remuneration. Rightsholders, in turn, receive solutions that allow them to monetize content and manage rights to it. In Europe, solutions like FONMIX and Hypergraph, which analyze data on the use of musical works, form the most objective reporting and calculate the exact amount of remuneration to the artist, are not used at all. Reporting is collected only on radio and television as the artist receives royalties for each playback of a musical composition on the air. In other fields where artists are owed royalties, European CMRs operate on the principle of collecting remuneration and calculating payments in accordance with ratings and averaged indicators. Meanwhile, the public performance of music in commercial spaces is one of the main articles of intellectual property monetization!

Do you think the streaming market will continue to grow after the pandemic?

The Russian media market was estimated by PWC at $694 million in 2019. During the lockdown, it fell by a record 48% to $363 million. At the same time, the pandemic has intensified the trends associated with digitalization. The consumption of content on online platforms and other digital services has sharply increased in Russia. In the situation of banning mass shows, artists were forced to look for new ways to monetize their own content. If before, 75 percent of a musician’s income came from concerts, quarantine restrictions have changed the structure of revenue and now streaming platforms are sources of the main income. We believe that offline concerts will return, but streaming will remain the most important source of income for musicians in Russia, as in Europe.

Are the current collective management issues undermining the credibility of the industry?

CMRs are experiencing a crisis of confidence; in Russia we faced this a few years ago. The problem is that musicians do not see the statistics on the use of musical compositions, on the basis of which a fair amount of remuneration is calculated, which can undermine their confidence in these organizations. This problem is being addressed with digital tools. In Russia and CIS countries, CMRs do not even have the technical ability to manipulate ratings or statistics because the use of works is recorded by the Hypergraph software package (automated system for collecting, distribution and payment of royalties to righrtholders) and the FONMIX player (b2b player for public performance venues and monitoring system for radio, TV channels, social media networks, streaming services etc). The collected information is written in the blockchain infrastructure IPChain and provided in the “Personal Account” of the copyright holder, and each author can check the calculations and make sure that he has received all the remuneration he is owed down to a penny. We believe that over time, thanks to platforms based on blockchain infrastructure, each author will be able to manage and earn royalties for his intellectual rights without intermediaries and earn. Blockchain guarantees the safety and immutability of data, which means that the crisis of confidence is resolved purely technologically.

Do you see your experience being useful to other countries?

Russia is developing an intellectual property management system based on the IPChain blockchain infrastructure. Services built on the basis of the IPChain network allow rightsholders and users to independently manage the rights to their creative works. We have researched intellectual property management systems in many countries around the world, consulted with representatives in the music industry and made sure that our model is applicable almost everywhere. We are already cooperating with CIS counties, Italy, Latvia, Germany, Ghana, and Colombia. Our ecosystem can work without being rigidly linked to current legislation, business processes, and the institutional landscape. Blockchain has shown itself very well in the field of intellectual rights management, since it allows you to work with large databases in the “infrastructure of trust” mode. Information about all transactions enters the distributed IPChain network in a universal, standardized form, where it is impossible to replace and falsify data. In fact, the information is owned not by a specific player, but by the entire market at the same time.

Are there any alternatives to the collective management of rights?

Today, all of the prerequisites which are required for artists to independently manage their rights not only in the digital environment, but also offline, exist. This opportunity, in particular, is provided by FONMIX, which can equally be used by CMRs. It is in this capacity that it functions in most countries today.

Can you quantify the sector / artist losses from the pandemic and what impact the crisis has had on the industry?

We have conducted research on this topic. Due to the restriction of concert activity, the Russian music market in 2020 sank by 47.7%. In 2019, the market size was $694 million and after the pandemic, it shrank to $363 million. At the same time, the structure of income has changed. If before, streaming accounted for 18% of musicians’ revenue, after the pandemic, its share is 57.3%.

However, the industry is gradually recovering. The average annual growth rate of the Russian music market, according to our calculations, will be 6.9% by 2024, and its volume will reach $968 million. However, we predict that “live” concerts will likely make up no more than 20 percent of this figure.

As for the global market, according to various estimates, it has decreased by 28-34%. The reason for this is a months-long lockdown with concert bans, retail store closings, and so on. Globally, before the pandemic, most of the income (56.1%) for musicians came from streaming services, so the financial implications of the quarantine were not as dramatic for the global market as for the Russian one.

A crisis can always present new opportunities for those who are willing to see them. For the music industry, it can be a growth driver. In Russia, the lockdown spurred digitalization and the development of services, and motivated rightsholders to actively engage in monetizing their content.

Can your initiative contribute to the growth and recognition of lesser-known artists?

The global collective management system is more geared towards supporting major and well-known artists and labels. The Russian experience in creating a digital infrastructure for rights management shows that such platforms provide access to smaller teams, young and little-known artists to break through in the industry. Creative teams can protect IP assets in n`RIS service, raise IP-secured funding on the Co-Fi crowdfunding platform, or sell a song or samples for use in a TV show on IPEX platform. And most importantly, the available services allow you to choose and build an independent strategy on the market, while maintaining independence, and not selling out to producers and music publishers.

Why is all this important to a wider audience?

Global creative content is constantly growing and diversifying at a rapid rate. In the twentieth century, everyone listened to a dozen or two pop stars, for whom labels and merciless marketing and PR machines worked. Web 2.0 ushered in the DIY era in creativity. It is now possible to become popular without a label and huge marketing power. Stars are born on social media sites like VK, YouTube, TikTok. We are living in a new era of content, which requires new approaches to production and content management. That is why influencer marketing is replacing large distribution and promotion channels, and collective management is being replaced by individual content monetization strategies.