COMPASS CEO says, "It's almost impossible to monetize music from new media."

During the 90-minute interview with Dr Edmund Lam, CEO of The Composers and Authors Society of Singapore (COMPASS), he was candid and forthcoming. As much as one hopes that a successful and more equitable business model will eventually emerge to monetize music in the new media age, he has seen a fair share of hopefuls that came and left the market, and what remains now are existing models that are still require improvement in many areas.

"It's almost impossible to monetize music from new media," he says. "But what new media has done is to provide more access for consumers to discover different types of music, which will encourage more artists to come to Singapore for live performances. New media has also helped artists save on marketing costs.”

                                         Dr Edmund Lam, CEO of COMPASS

Indeed, how artists and publishers earn their keep has continuously been a challenge, and Dr Lam shares how COMPASS, playing the role of Singapore’s sole copyright administrator, has evolved over time. He also talks about what he thinks will be the future of the music industry in Singapore.

Q: Based on COMPASS’s experience, what have been the best sources of royalties and other revenue in the 1980s, 1990s, 2000s? Has this changed over the years?

The bulk of the current copyright law is based on the 1989 Copyright Act and prior to (that) was the Imperial Copyright Act dated back in 1911. When the Copyright Act in 1989 was passed, COMPASS started around the same period, although we had not started administration then. Prior to that there was the Performing Rights Society, a subsidiary of the Performing Rights Society in UK has been operating here for a number of years based on the Imperial Copyright Act, but that Act granted limited rights to music writers. It was only applicable to situations where live music was performed; so the British Agency only licensed pubs, nightclubs and the like. But the new Copyright Act was a fundamental change, because overnight, it granted a number rights to creators and our composers, and that gave us a room to start our business and COMPASS commenced operations in 1991.

One of the most important rights then was the Broadcast right, which upset the radio and TV stations because they had to pay royalties to COMPASS, so there was a Copyright Tribunal. Under the Copyright law, there is a provisional section that allows a dispute between a collective management organization like COMPASS and the user to have the tariff arbitrated. And that was the first Copyright Tribunal hearing. Unfortunately, the decision from the Copyright Tribunal hearing in 1991 did not grant us attractive rates for traditional broadcast, but that was how we started our operations, and the revenue comes from TV and radio stations, which provided an unprecedented source of revenue. Back then, the users were upset, but over the years, we built up a very good relationship with the radio and TV stations and they do play a part: we sponsor programs and we jointly organize programs to promote the music industry. So the relationship has changed quite dramatically over the years. Now, traditional media understand and appreciate the need to compensate music writers for using the intellectual property of the songs, because without those songs, they wouldn’t have existed.

Resolving with the major broadcast stations was a major establishment in the 1990s; and the other was the licensing of live concerts, and the breakthrough came only in 1993 when Michael Jackson had a big concert for 3 nights at the National Stadium. Tickets were priced at over a hundred dollars each. The organizers of the concert refused to pay because he claimed that Michael Jackson had granted him all (musical) rights, and because of that dispute we had another major case heard at the Tribunal, which was covered by the media daily. It was a tough fight, but COMPASS won at the end of the day. The Tribunal agreed to the rate we have established at 2.5% of gross ticket sales, which translated to quite a sum for the Michael Jackson concert, estimating to be about over a million dollars. After this case, revenue flows included those from live concerts. After Michael Jackson’s concert, there was also a booming trend in live concerts, and even today, live concerts by major artists are on the rise, and this source of revenue has not diminished over the years. (Revenue from) broadcasting has also not declined over the years, but they faced competition from cable TV, which has also become our major source of income since 1995-6.

Traditional broadcast (radio and TV), live concerts and cable TV have become major revenues of COMPASS until today. In addition, the other major revenue source is from the entertainment industry – we managed to penetrate nightclubs, karaoke operators (karaoke is something probably only common in Asia), and so composers who compose songs that people like to sing in karaoke will earn more royalties.

In the late 1990s-2000s, there was a rise of the popularity of ringtones. COMPASS does not normally administer mechanical rights (reproduction rights) of a musical work. COMPASS started off with performing rights (i.e. broadcast rights/ live performance rights), and in the olden days of CD printing, COMPASS has historically not been involved in that line of business. The publishers themselves administer that particular right. So a composer will assign the musical rights to the Society but he will negotiate with the publishers to have his or her work to be recorded in a CD (sound recording) and this mechanical right is being administered by the publisher themselves, which was then licensed to the music labels for retail sales. But as we grow more established, we started to represent more independent writers who assigned those rights to us to administer. There was a short boom in ringtone, however the collections were not that attractive, because a ringtone supplier needed two licenses: one from COMPASS, which is a Communication right that we grant to them (when a ringtone supplier communicates to a handphone user, he requires this license from COMPASS). On the other hand, after the phone user receives the signal and makes a copy of it, that copy requires a reproduction right and requires a license from the publishers, and COMPASS does not have all the rights in this area. Some service providers took advantage of the confusion and did not pay the royalties. So although the ringtone business was doing very well (selling $1 each at its peak), we could only charge about 6-7 cents against a dollar, which translated into about $1-2 million of royalties out of a $20-30 million dollar ringtone business in Singapore. We didn’t manage to get much out of it because of the confusion, but in the end we all came together, because the publishers realized that it would be better to do it collectively, for the convenience of users. But by the time we got our act together, the ringtone business already went down. So the music industry was a little slow, and we couldn’t see the opportunity in time and was unable to catch up with trends quickly.

Q: What were some of the business models that worked or did not work for the music industry and why?

Similarly, for new upcoming business models, there’s some disunity amongst the different stakeholders in the industry, but hopefully we can get our act together to license the music to service providers. However, we realize it’s quite a challenging business because the Singaporean consumer does not purchase on a song-by-song basis. Consumers do not bite when you offer them $1 or $0.80 per song, as compared with markets in US, Japan and Australia.

One of them that failed was Soundbuzz, as the per-download model did not take off in Singapore. The telcos had the upperhand because they owned the platforms.  So some of them wanted a 50% margin if music was to be retailed through their platforms. Later, when the buffet-styled eat-all-you-can models was launched, it took off but in the process, music has become worthless. Nokia’s Comes With Music (product bundling model) also pulled out, because music has become too cheap and in the end we all don’t make any money.

The iTunes music service is not available in Singapore yet, but even if they launched it here, it will be very challenging for it to sustain because from the experience of the Nokia’s Come with Music business model, they used music not to make money but to use music to sell the phones. After they launched the service, Singaporeans downloaded several millions of songs but only for that small amount of money.

I think it is almost impossible to monetize music from new media. But what new media has done is to provide more access for consumers to discover different types of music, which will encourage more artists to come to Singapore for live performances. New media has also helped artists save on marketing costs. If you look at it broadly, artists can now promote their works more easily through YouTube and digital media. I observe that the cost of marketing Lady Gaga would be lower than marketing the Beatles, because with digital media, overnight, everyone will know about Lady Gaga, say in South Korea whereas in the past it would have taken months. Everything that happens now is instant and news spreads instantly. Marketing through new media is very massive and cheap. The labels and recording industry don’t benefit from all this, it’s more of the concert promoters and artistes themselves who are actually making the money now.

People are spending on music in a different way. People are willing to spend money on concerts to have a live experience and you’ll see the same artists coming back. One concert ticket is over a hundred dollars, and that, in the past, is worth 6-7 CD albums a years, so an average person is definitely spending more in music. Executives spend more time in bars, and more at karaoke sessions to have some kind of musical experience, as compared to previously.

Q: Could you elaborate more about COMPASS’s partnership with Youtube?

The license granted to YouTube is based on revenue collected from advertising. YouTube is also a place for our members to promote their works. More importantly, our license with Singapore YouTube allows the setting up of a Singapore domain. That’s the main motivation. We want YouTube to have a Singapore domain so we can track what kind of music and videos that Singaporeans or people in Singapore are viewing.

Q: What do you think would be the future of the music industry be like in Singapore?

In recent years, Opennet, the new generation of broadband, has started to roll out. It allows high quality streaming, which will connect our TV to all other devices in our homes. Once this is established, there are many services that can be provided to consumers. With Opennet, I could see changes in entertainment such as Xbox. Currently there are still limitations to Xbox with regards to the number of simultaneous multi-players because of limitations of bandwidth, but with Opennet, it will change the whole entertainment business. When you watch a football match, the resolution will be extremely clear. That will transform Singapore. Not many countries will have this – optical fibre. So I would see that the next kind of devices, such as the mobile phone, will be used as the interface to Internet TVs. Internet TV has not really picked up yet, but I think it will pick up after everyone has access to optical fibre broadband, and with that you can place your phone as a remote control to view YouTube on TV. That is already possible now, but currently it is still quite a cumbersome process to set up. In future, consumers will access their music through this platform, and probably people will watch programs and music using Opennet. It will be a revolution and change everything. Traditional broadcast media will be under threat, and so will cable TV. I believe that is the future.

Q: Geographically, which markets have the most potential?

Mainland China. It is a challenging market, but they would have to use a different model. They no longer make money through selling music, but once you establish a name in China, you can find other ways to milk the market. You can probably have many live performances. Just recently, I read that Eric Moo is making a lot of money, as every day he is performing at different places for those in their 40s and grew up with his music and can afford ticket prices. So he’s not doing new music but making money from all his old music. Artists can make money through touring and advertising. China has a population of 1.3billion people, and once you get an advertising right of a product, that would be more than enough for one album.

As for touring, I was told one cycle could last 4-5 years, given the number of cities and provinces that they could cover. Market size is still very important. Despite weak IP enforcement, there is still money to be made, albeit in other ways (e.g appearance fees). And so if CCTV invites you to be on their Chinese New Year show, you’d better not ask for money, because everyone will be fighting to get on it and the bargaining power will be different. Once you do an appearance like that, the chances of clinching a product endorsement deal are very high. And that’s how the industry will be involved, rather than through recorded music. Recording good music is still important, but the revenue cannot be from the sales of music.

About COMPASS

The Composers and Authors Society of Singapore (COMPASS) is an organisation created to protect and promote the copyright interests of composers, authors* (and their heir) and publishers of musical works and their related lyrics. COMPASS is a non-profit public company which administers the public performance, broadcast, diffusion and reproduction rights in music and musical associated literary works on behalf of its members. COMPASS deals specifically with music copyright and the usage of musical works.

For more information about COMPASS, visit www.compass.org.sg

17^th COMPASS Awards

The 17th COMPASS Awards Presentation will be held on 8 July 2012, 7pm at Marina Bay Sands, Sands Grand Ballroom. Event is exclusive to members.