A New Multi-Billion Naira Revenue Opportunity For Nigerian Music

http://i.huffpost.com/gen/1515929/thumbs/o-MONEY-MUSIC-facebook.jpg

It became clear as far back as 2015 that the social networking giant Facebook had intentions to “legalize” a key feature of most of the user generated content on its platform; music.

Since that intention became known there have been periodic reports about the company’s progress, from its opening talks with the major recording companies (and their respective publishing affiliates) to the most recent statements regarding the agreements reached with same.

Indeed Facebook has also reached an agreement with a large swaithe of the music publishing sector, having reached terms with Sony/ATV, Universal Music Publishing Group, Kobalt Music Publishing and SESAC’s HFA/Rumblefish.

The importance of these deals hinges on the fact that user generated content — a major component of its platform — is increasingly including commercially and independently released music. As things stood (prior to the announced deals), rights holders had to search and hunt down all such uses of their music themselves; a time consuming and costly enterprise.

The alternative — which has now been adopted — was for rights holders to simply roll with the tide, whilst at the same time ensuring that some monetary value was extracted from all the user generated content that included (and will continue to include) their works.

There are almost 20 million monthly users of Facebook in Nigeria alone, with a further 100–120 million across the rest of Africa. These users — like most Facebook users around the world — are increasingly creating their own content on the platform of which said content also includes music; specifically, homegrown music.

This means that the owners of Nigerian and other African music content are faced with the same dilemma as their counterparts in the westerm markets: either try and stop the inclusion of their music in user generated content (a near impossibility); or ensure they receive some level payment for the inevitable use of their works in this manner.

Although specific figures are unknown, it has been reported that Facebook was willing to pay the music industry “hundreds of millions of dollars” as licence fees to allow use of their music by Facebook’s users in their various self-made content, including those on their Instagram and Oculus platforms. Bare in mind that with this move Facebook brings itself into more direct competition with YouTube and thus will need to match — if not pay more than — the licence rates currently paid by the latter.

Youtube has stated that it had paid out $1b to the music industry as at 2016. Although arguments still abound as to this exact figure — and more importantly the value it represents to both Youtube and the music industry respectively — it serves the purpose of contextualising the fee range Facebook can expect as a starting point.

For the Nigerian music industry, this development presents opportunities to further monetize Nigerian music and enjoy some of the anticipated windfall. Of course the value of the local music industry (estimated at around $70 million) is certainly not (yet) anywhere near that of the advanced markets (e.g. the US market estimated at just under $7b, whilst the UK market is valued around £3.5b) However, with the increasing number of local Facebook users and the correlating increase in consumption of Nigerian music respectively, it would certainly still be in the platform’s interests to come to agreement with Nigerian — and other African popular — music rights holders.

The challenge for the Nigerian industry in particular is its fragmented nature. The Nigerian music business is made up of an ever growing number of ‘independent’ and disconnected participants with ownership of popular works widely dissipated across a multitude different rights holders.

As such, labels and artists — save for possibly Mavin Records, Chocolate City and other music companies with strong catalogues and roster of artists — will find it difficult to negotiate worthwhile licensing agreements individually.

Thus ‘smaller’ rights holders, (i.e. those with rights over a small(er) catalogue of popular songs), need to find a means of leveraging the (perceived) value of their respective repertoires in order to secure favourable terms and rates from any negotiations.

Nigerian music rights holders must therefore immediately begin to put together strategies for officially licensing their repertoires to Facebook in order to ensure they receive adequate compensation for the use of their music in content generated by the platform’s users.

However, to secure maximum value in return for licensing their works, rights holders must understand the current dynamics related to such licences including rates paid by Facebook (to rights holders from other parts of the world) and its competitors; in addition to the means of increasing the (perceived) monetary value of their works. There are a number of different solutions to achieve the above highlighted objectives if advisors with the necessary expertise are engaged.

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Attorney • Analyst • Entrepreneur — Entertainment/Tech/Finance

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Lumi Mustapha, Esq.

Lumi Mustapha, Esq.

Attorney • Analyst • Entrepreneur — Entertainment/Tech/Finance

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