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The Music Industry’s Dilemma: Distribution of Profit

기사승인 2018.06.04  14:21:48

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- Changes in the structure of profit distribution lead to music website fee increases

   
 

THE KOREAN music industry is a multi-billion-dollar enterprise that has taken the world by storm with its trendy artists and glamorous idols. Yet within this industry, only the popular, well-known artists are the ones who “make it,” able to make a living out of their music. Non-mainstream artists are often unable to survive within the brutal industry. Last year, indie artist Lee Lang went viral for auctioning off her trophy during her acceptance speech at the Korean Music Awards, saying that she needed the money to pay her rent. This is due to the fact that in Korea, fair compensation for artists often collides with traditional notions that artists should live in poverty. In recent years, upon receiving abundant criticism, the government has attempted to reorganize the profit structure of the industry to provide some assistance to artists struggling to survive. However, massive change is expected to follow. Is this change acceptable?

 

The proposed distribution revision
   On April 10, the revision of the bill for the use of “sound source transmission,” commonly referred to as streaming and downloading, was proposed by four organizations: the Korea Music Copyright Association (KOMCA); the Korean Society of Composers, Authors and Publishers; the Federation of Korean Music Performers; and the Recording Industry Association of Korea.
   Under the current structure of profit distribution, the copyright fee, or the exclusive right of a creator to distribute and use original music, takes 60% of the profit while 40% is taken by the companies distributing the music on their websites. Of the 60% copyright fee, composers and writers take 10% while singers and instrumentalists only take 6%. The remaining 44% goes to the company that produced the music. Artists are severely underpaid in Korea, making only an average annual income of 12.6 million in 2015 according to the Ministry of Culture, Sports and Tourism, almost three times less than the national average. Thus, the organizations representing musicians have deemed the current profit distribution to be seriously unfair to artists, proposing an increase of the copyright fee from 60% to 73%, in line with global standards, along with a subsequent decrease of the music distributor profit share from 40% to 27%. The ministry received and is currently reviewing this proposal.
   Another request of the revision is the reduction of the “bundle service” discount rate. In the Korean music industry, downloading and streaming are regarded as different services, so consumers have to pay to use each service respectively. But a third option that music websites provide is the “bundle service,” a package of both services provided at a lower combined price. Thus, the revision also seeks to reduce the discount the package option provides, intending to redistribute more profit to the creators.
 
Revision unwelcome by music websites
   However, music websites have protested the proposed changes. On April 10, the Korea Internet Corporations Association, which includes some of the biggest Korean music websites such as Melon, Genie and So-ri-ba-da, released a statement that “the revision that aims to increase the creator’s rights and interests will constrict the music industry.” In the same statement, they also predicted that the changes will negatively affect the affordability and convenience of services for consumers, ultimately leading to a net decrease in profits for everyone within the industry, including the creators. 
   These worries stem from the inevitable price hike of services provided by the music platforms, given that the share of profit the creators possess will increase. Explicitly speaking, consumers currently have to pay 12,000 to use the bundle service that provides unlimited streaming and 100 downloadable songs. However, according to the revision calculations, the price will have to be increased to 34,320 to make a profit. This is an increase of almost three times—a burden many consumers will likely find to be excessive.
 
Worries and exposure
   Yet the music websites are not simply looking out for the welfare of their customers; in reality, they try to convey that all music services, not just the bundle option, will increase in price. This is patently false. Currently, due to ease-of-access and the prevalence of internet data plans, people primarily use streaming services over both downloading services and the package option. According to the “2017 Music Industry White Paper” provided by the Korea Creative Content Agency, over 80% of music website users service the streaming option, while only about 50% of users service the downloading one. The price of the streaming-only service will remain the same at 7,900 even if the revision is enacted. The same document found that 90% of users also pay less than 10,000 per month, meaning that even if users download songs, that number is relatively small.
   In fact, the websites are primarily opposed to the revision because of the increase in price of the bundle product option—the service that generates them considerable profit. Since the unit price of a downloadable song is approximately 100 times more expensive than the price of a “streamable" song, music websites bundle these services up to create an affordable combo and maximize their profits. Music websites also earn left-over revenue from the downloading service. For instance, if a user buys a package of 100 downloadable songs, but ends up only downloading 73 songs, the remaining 27 songs are considered as left-over revenue. Music websites do not reveal their left-over revenue, but according to several employees, as well as research conducted by KOMCA, it is estimated to consist of around 20 to30% of the total profit made from downloaded songs.
   Furthermore, the worry that consumers will leave their platforms is exacerbated by the rise of foreign music platforms provided by the likes of YouTube, Apple and Google. Since this revision is targeted at the domestic music industry, the price hike will only occur in domestic music websites. And finding foreign alternatives more affordable, consumers will naturally abandon these domestic platforms, potentially vastly decreasing the profit the Korean music industry enjoys. According to the ”2017 Music Industry White Paper” provided by the Korea Creative Content Agency, 57.7% of Korean music website users use YouTube, which is only 1% fewer than the number of users servicing domestic top-ranked music platform Melon (users were allowed to select multiple options).
   At the cost of only 7,900 per month, YouTube recently launched their YouTube-Red service, which allows users to download an unlimited number of videos or songs, stream music and use the service free of ads. With a plethora of cheap substitutes emerging into common use in the nation, this revision affecting only domestic sites will naturally benefit foreign companies, allowing them to expand their position within the Korean music market while devastating domestic distributors.
 
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   Ultimately, however, this controversy exposes more than the struggles of artists and concerns of music platforms; perhaps the artists and websites themselves, instead of the government, should be allowed to work out fair music prices. The destitute plight of many artists is undeniable, and the burden music websites face if this revision goes through is also understandable. However, these chronic problems should be addressed by all parties involved, not simply mandated by the government. If this revision doesn’t go as planned, foreign distributors will be the only ones to benefit. 

 

 

Kim Bo-dam qheka6009@yonsei.ac.kr

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