A guide to buying music for marketing procurement executives — the Rise and Rise of Sync

This is the third post in a series from guest writer Richard Kirstein, Resilient Music, looking at the challenges around buying music to enhance sales and ultimately profit. 

In our previous post, we explained the term “Synchronisation” (sometimes called “sync” or “synch”). A quick recap -- this is a right, protected in law, that music rights owners can grant to allow their song and sound recording copyrights to be synchronised against moving images such as TV Programmes, Feature Films, Video Games, Commercials or any other form of audio-visual marketing communication.

Q: Why’s this relevant to Marketing Procurement Executives?

A: Your role involves the review of production budgets for commercials and video content. Where there’s a line for music costs, this figure covers sync licence fees payable to music publishers and record labels (with the exception of bespoke music). Remember - music publishers control songs (“Publishing rights”) and record labels control sound recordings (“Master rights”).

Some Context

It’s well documented that sales in recorded music are in what appears to be a permanent downward spiral. Since the peak in 2000 when recorded music comprised 60 percent of total global music revenues, by 2013 this had dropped to 36 percent. The chart below is taken from Music Industry Blog by the well respected analyst Mark Mulligan who explains in this article how the Live sector has replaced Recorded Music as the dominant revenue driver.

music-industry-revenue jpeg

So it’s important to understand that the sale of recorded music creates revenues for:

  • Record labels (who own the recordings) who pay royalties to artists
  • Music publishers (who receive mechanical royalties on sales) who pay royalties to songwriters

Whereas artist’s live performances create revenues for:

  • Promoters (who control ticket sale income) who pay fees to artists
  • Music publishers (who receive performing right royalties) who pay royalties to songwriters

Note that record labels do not directly benefit from the Live sector!

So, how can record labels create new income streams? One obvious answer is sync which covers film, TV, commercials, branded content, video games and any other audio-visual use of sound recordings. Within those sectors, brand marketing communications attract the highest sync fees.

Why does this matter to Marketing Procurement Executives? -- you may ask. Up to 2000, sync licence fees were considered “nice-to-have” ancillary income, managed usually by one person within each record label. In 2014, sync licence fees are a crucially important contributor to record label income, managed by large teams of creative and licensing staff who pro-actively promote the label’s catalogue. Their job is to aggressively monetise the label’s assets – with sync fees paid by brands!

The importance of sync is highlighted in 2014 by the first ever Music Week Sync Awards which take place on 2nd October. (Music Week is the UK music industry’s weekly bible, as Campaign is to the UK advertising industry).

http://www.syncawards.com/ proudly trumpets record label trade body BPI’s figure of £19 million in UK sync income for 2013 (much of which will have been paid by brands and their agencies).

However, it’s not just record labels that benefit, sync is even more important to music publishers!

http://www.syncawards.com/ refers to UK publishers’ sync income of £47.3 million in 2012. The much higher figure relates to the prevalence of “re-records” in commercials – where only the publisher but not the record label receives payment. The table below, taken from a survey of Music Publisher Association (“MPA”) members displays the importance of sync compared to other forms of direct licensing income.

Picture 2

Round-Up

All this matters because sync is now proper “bread and butter” revenue for music rights owners. When your brand wants to use an existing song or recording, the rights owners will aggressively seek to extract the highest possible fee they can for the use.

Don’t be fooled into thinking that by using their track it’s “good promotion” which they think will lead to more CD sales. It won’t! It’s just about the sync fee and that’s determined by many cost drivers including the competitive landscape surrounding the deal. We’ll deal with cost drivers in a later post.

Look out for our next instalment on unlicensed use and how this can be a very expensive mistake for brands and agencies that don’t “take care of business” properly!

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