APRA CEO Brett Cottle

22 years is a long time. In terms of the Australian music industry, it encompasses the national expansion of triple j, the entire lifespan of Big Day Out, the birth and demise of Napster, the birth of iTunes and the iPod, the creation of online social media empires and streaming services, the introduction of Australian Idol and the career span of Powderfinger and Silverchair.

For 22 years Brett Cottle has remained a constant at the helm of APRA, the not-for-profit organisation, which with AMCOS since 1997 has been responsible for collecting and distributing royalty payments for over 67,000 Australian and New Zealand songwriters, publishers and composers. Considering the transitional state the Australian music industry finds itself in presently, Cottle is one of the few people whose commentary can hold true authority, shifting aside speculation to deliver a concrete assessment of where we are at and where we will be going in the next five years.

Selected to provide the keynote address to the FUSE Festival Conference in Adelaide on February 23, Cottle kindly gave FasterLouder a preview of his speech and free reign to pick his mind on everything that’s been troubling us about the industry in the last 12 months.

2011 continued the trend in declining physical sales. It seems like digital will never pick up the slack and this transition we’ve been talking about to online will never be fully realised. So where is the industry going to find it’s income in the future?

Well, last year was important because it was the first year from a sales and recordings perspective that the industry moved back into net growth. If you look at the total revenue at wholesale for physical and total revenue from retail with digital, you see that they’re at about the same value in the Australian market, but the rise in digital is much stronger than the decline in physical. We can see that we’ve passed the low point now. Digital is growing at around 35-40%, while physical is declining at only 10-12% on the latest figures available to us.

Do you still feel that the industry is trying to find a value for music in the online sphere? And are illegal downloads still hampering retail digital growth?

Illegal downloading is an issue, but in a sense it’s a separate issue. The first issue is how is the industry going to accommodate both the physical and digital markets. And I think the answer to that is as most people predicted; we end up with a hybrid of one form or another where physical will continue to exist and won’t be wiped out, but the digital has become the main means of distribution. I see that we’ve now reached that point and the revenue being produced from that hybrid model is in net growth, so that’s significant.

The second issue that I foresee is what will happen when digital subscription services become the norm over digital downloads. If digital subscription services, so anything essentially involving some form of streaming, become the predominant means of consumption of music, then you’ve got this value issue because the values produced under that business model are very small compared to the values produced under the download model. That will be the next issue for the industry I think.

We know that international streaming services like Spotify, which bring established reputations, are all expanding into Australia at the moment. What sort of interaction does APRA have in working with these companies to define the model that they can roll out here? Is it a discussion process? Or will they roll out what they intend to and the market will have to adapt?

They need a license both in relation to musical composition and in relation to the master recordings. So they need a deal with us and a deal with the record industry. Our discussions with Spotify and a whole range of other services which have either launched or will shortly launch in Australia have been relatively straight forward. We haven’t had any big disputes. We’ve got a well established set of licensing parameters including charges and they appear to be acceptable to the market. There are issues on the sound recording side. I can’t speak for the labels, but I think they are deeply suspicious of models which allow big consumption by punters for a very small price. They tend to take the view that their product, the recordings, ought to attract more than a minimum level of valuation on a per transaction basis and I can understand that attitude. So I think, if I may say so, the discussions where difficulties tend to arise are on the record label side not on the publishing side.

You’ve said in the past that you feel that the record labels didn’t adapt to online models of distribution and consumption. Care to expand on that for us?

I’m not alone in holding that view. I think it’s a widely held view and is probably a widely held view within the record industry itself. But I think that’s changed. The record companies now are open to all sorts of distribution models, but I think they do want to ensure that they get fair value for their product. Our view is that really you’ve got to regard yourselves as a partner of the promoters of these new business models and you have to give them a chance to work. You can’t expect a high level of remuneration in the early days of the business model, and you’ve got to give these businesses time to grow and be non-discriminatory in your treatment of them and in the end also hope that they don’t cannibalise the existing services.

Our philosophy tends to be that the market is big enough to accommodate all these different services and that Spotify will be able to co-exist with iTunes, and with Pandora, and co-exist with conventional radio and sales of physical product. The aim is to produce significant net growth in the whole industry. We’re still, of course, suffering with the disadvantage of having to compete with illegal access, but my feeling, and you mentioned the word transition earlier on, is that we may be in the early stages of a consumer change in attitude away from the feeling that everything should and could be free towards an acceptance that there should be some reasonable payment back to the intellectual property owners, so back to the artists and the songwriters. I sense that we may be moving into a new environment in that regard.

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