BPI PRESS RELEASE | New business models boost income for British record labels: licensing and multiple rights deals net £122m in 2007 : 30:6:2008

- New types of artist deal help grow additional income by 13.8% to £121.6m as new business models generate higher returns for British music companies

- Record labels now generate 11.4% of income from outside physical and digital retail sales

Figures released today by British record companies’ body the BPI show that record company revenues outside direct sales of music increased by 13.8% to £121.6 million in 2007, from £106.9m in 2006. These additional revenues now account for 11.4% of record companies’ domestic income.

Record companies generate income through sales (selling music recordings to consumers via retailers), licensing (giving permission for third parties to use recordings commercially) and multiple-rights income (revenue derived outside recording copyright).

These figures, released for the first time by the BPI, show that record labels are beginning to generate significant revenues outside their traditional base of retail sales.

While physical and digital music sales continue to represent a huge proportion of record companies’ income, generating £1.4bn in retail revenue and £943m in trade income in the UK in 2007, there are encouraging signs that these new revenue streams will contribute substantial additional revenue in years to come.

New partnerships and business models mean record labels’ income through licensing is increasing. Labels are also generating income outside the direct sales of music and licensing by extending their relationships with artists to include a broader range of artist services.

Digital sales are going from strength to strength, with digital formats now accounting for around 85% of all Top-20 singles sales. More than 200 million downloads have now been sold in the UK since the launch of the first mainstream stores in early 2004. In total, digital formats now account for 8.6% of all UK record company sales income.

Digital licensing income is increasing too. On-demand streaming services, both online and on mobile platforms, including advertising-supported services such as We7 and Yahoo Music saw income from new digital business models grow by 55.7%.

In addition, labels are generating more income from other areas of copyright licensing. Synchronisation licence income, from the use of music in advertisements, films and games continued to grow strongly in 2007, where revenues grew by 20.1%. There was also a 14.8% increase in record label income from PPL: broadcast and public performance licensing.

With record companies looking to add value in other areas of the music business, new multiple-rights deals (also dubbed “360 degree deals”) that include other aspects of artist services, are also beginning to have an impact on revenues. Such deals may generate income from merchandise, touring, the use of artist logos, digital products such as mobile phone wallpaper, and sponsorship deals. Revenues generated by record companies in this area increased by 16.2% in 2007.

BPI Chief Executive Geoff Taylor said:

“The core business of record companies is investing in talent, working in partnership with artists to create great music and to help to find it an audience. Selling CDs and digital downloads remains the main way in which we recoup that investment, but increasingly new streams of revenue are coming into the picture.

“As consumption patterns change, music companies are finding new ways to recoup the huge investments they make in music.  They are using new technology to find new audiences and offer consumers more choice. Today’s record business is unrecognisable to that of five years ago. Labels have rapidly evolved into digitally literate businesses that generate significant revenues through licensing.”

- ENDS –

The BPI (formerly known as British Phonographic Industry) represents the British recorded music business.

For further information, contact the BPI’s Communications Department on 020 7803 1395 / press@bpi.co.uk

For further information on PPL income, contact Jonathan Morrish on 020 7534 1245 or visit http://www.ppluk.com

- NOTES –

This report does not include export: i.e. international shipment of physical product, or international licensing deals (e.g. when a CD or download from a UK-signed artist is sold overseas). A 2004 BPI study estimated this figure at £83.4m.

1. Domestic UK music retail sales, 2007

“Sales” are defined as units of physical or digital product bought by consumers through retail: singles, EPs and albums across all formats, e.g. CDs, music DVD, vinyl, USB keys, downloads.

95% of albums are still bought as CDs, and with 131.4 million CD albums bought by UK consumers in 2007, sales remain higher than a decade ago (Source: Official Charts’ Company). UK consumers buy more CD albums per capita (2.3 a year, Source: BPI/ IFPI) than any other nation in the world.

2007 Trade Value: £943.4m (Source: BPI)

8.6% of all trade sales revenues are derived from digital formats (annualised figure: refers to the 12-month period up to end March 31, 2008). Source: BPI.

2007 Retail Value (inc. sales tax): £1,391m (Source: BPI/ Official Charts Company)

2. Methodology for calculating licensing and multiple rights income

The BPI survey figures are based on returns from the major record companies and weighted according to Official Charts Company market share data in order to provide a representation of the whole market.

In total, licensing and multiple rights income generated £121.6m for labels in 2007. Combined with trade sales income, domestic record label earnings amounted to £1,065.0m in 2007.

3. Explanation of Terms

Digital Licensing: Copyright licensing income from online and mobile platforms: such as non-music retailing internet sites (eg. youtube, mySpace), and ad-supported models (Spiralfrog, We7). Does not include single track downloads: for instance sales on iTunes and 7digtial.

Synch Licensing: Copyright licensing income received from the use of sound recordings in film, TV, games and advertising (e.g. Phil Collins & Queen in Dairy Milk adverts, Guitar Hero, title music for films & TV programmes).

Product Licensing: Copyright licensing income received from the use of sound recordings by companies for promotional purposes (e.g. Newspaper and magazine covermount CDs, artist brand partnerships such as Robbie Williams & T-Mobile, McDonalds and Coca-Cola “free music” giveaways)

Performance Licensing: Copyright licensing income received by UK record companies from domestic public performance of recordings from PPL and VPL (e.g. blanket BBC licence, commercial radio, commercial TV, video play on the likes of MTV, online, public use of music in pubs, clubs, bars, shops etc). The figures supplied in this press release relate to 2007’s distributable income

Multiple rights income/ “360 degree income”: Income received outside direct sales & licensing of recorded music copyrights (e.g. use of artist logos, merchandise, touring, use of music in shows, digital products such as mobile phone wallpaper, artist services, sponsorship deals)