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.

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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

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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.

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