Foreword

Running the Swedish Music Export office with a significantly smaller financial support from the government than other comparable countries demands us to prioritize firmly and always question where we should focus. Additionally, the outlook for music exports has and is rapidly changing. Where is the future at risk for the Swedish Music Industry and where lies the greatest opportunities when it comes to export? Are we missing out on the first mover’s advantage when numerous territories with huge populations opens up as streaming services are launched and old gatekeepers are swept away?

Is Sweden really the world’s third biggest net exporter of music as some international media claimed, and if so – what must be done urgently to maintain that remarkable position? What could a substantial governmental financial support channeled through Export Music Sweden lead to internationally for Swedish songwriters, publishers, record producers and performing artists?

Can the Swedish government not only provide more support to sustain this remarkable export success story, but target it to produce a positive return on investment for songwriters, artists and Sweden’s cultural heritage for years to come? Where will the Swedish government get the most bang for the buck?

Export Music Sweden needed a proper mapping and we engaged two experts in their respective fields, Will Page from Scotland and David Safir from England. With the generous cooperation and statistics of STIM, SAMI, IFPI, OMDIA, MIDiA and Spotify they delivered this report.

You are in for an interesting read for sure.

Jesper Thorsson
CEO
Export Music Sweden

Sweden’s ‘First Mover’ disadvantage: what goes up must slow down

Thanks to Spotify and the streaming model, the global music industry is growing again – revenues surpassed $20bn in 2019, the highest since 2004, and are now well on their way to eclipsing the previous peaks reached around the turn of the millenium. This, of course, is old news for Swedes, as their country was the earliest adopter of streaming with the launch of Spotify in late-2008 and the first to see a reversal in its fortunes thanks to the streaming platform’s success in beating piracy at its own game. Spotify remains the global leader in streaming, comprising one in every five dollars earned by artists worldwide.

But all good things must pass, and Sweden now faces an early-adopter dilemma. It must prepare itself first for a coming slowdown, where revenues and streaming volumes flatten. There’s no textbook explaining how this streaming revolution will play out, yet while streaming is exploding at

double-digit rates around the world, we must face the inconvenient question – what happens when the party stops?

The chart below presents evidence on the size of Sweden’s total addressable market (TAM) at the end of 2019, and how little runway is left for future growth. Of a population of ten million, almost seven million people are termed ‘addressable’ – they possess both a Spotify-enabled smartphone and a credit or debit card to pay for it. Just under five million of them are already users of paid music services (including via a family plan). For comparison, almost six million Swedes use either Facebook and YouTube. Lastly, there are 3.8 million households with at least one ‘addressable’ occupant, meaning there are a million more subscribers than there are households.

There is some room to keep growing – but the room is feeling increasingly crowded.

The grass is greener on the export side

The lawn may have been Spotify-green in Sweden between 2009 and 2019, but the grass is likely to be even greener in Sweden’s export markets from 2020 onwards. Working with data scientists at Spotify, we can illustrate how much greener that overseas grass has become by charting the growth of Swedish recording artists on Spotify at home and abroad from 2014 to 2020*.

The data overleaf (p. 8) shows that streaming of Swedish artists within Sweden has almost trebled between 2014 and 2019. The majority of that growth, however, occurred in the period between 2014 and mid-2019. In the year to May 2020, streaming volumes grew by only 5%. In contrast, Swedish export streams (red bars) have ballooned eightfold since 2014, meaning for every stream Swedish artists get on Spotify at home, they are achieving two overseas. This represents opportunity.

* The methodology draws on the very latest data from (i) internal human curation, (ii) external human curation (gracenote), (iii) S4A data (where did the artist profile sign up), (iiii) consumption data to produce a comprehensive analysis artist-origin.

Confronting the ‘Red Queen Race’ Dilemma

Swedish artists and songwriters face a dilemma that’s reminiscent of Lewis Carroll’s famous novel, Through the Looking-Glass. It involves a Red Queen, representative of a Queen in chess, and Alice, who is constantly running but stuck in the same spot. “Now, here, you see, it takes all the running you can do, to keep in the same place,” the Queen says . “If you want to get somewhere else, you must run at least twice as fast as that!” To keep Sweden’s music industry moving forward it needs to grow export streams (p. 8) twice as fast to avoid remaining in the same spot. There’s a volume-value trade-off in dealing with the Red Queen dilemma. Norway increased streaming prices by 10% in late 2018 and grew domestic revenues in 2019 by 5% compared to Sweden’s 4%. Sweden could do the same, but a bigger prize can be had by increasing exports to an expanding global market. Otherwise the Swedish industry could face a future of “constantly running but remaining in the same spot”.

Calculating STIM’s actual 2019 foreign revenue abroad (and positive trade balance), however, requires several adjustments from reported figures. These six adjustments qualify and explain the unique components of Sweden’s (as against UK or US) net exporter status:

1. Deducting what is “passed through” to Swedish sub-publishers of foreign repertoire performed outside Sweden (SEK 393M; 40% of total foreign revenue)

2. Deducting what is licensed and collected by affiliated societies for cable retransmission but distributed via STIM (SEK 15M; 30% of SEK50M)

3. Adding what is collected by ICE for multi-territorial online licences (including Sweden) reported generically as “domestic” income (SEK 195M; 35% of SEK 564M)

4. Reflecting STIM’s relatively high deductions for administration costs and Social & Cultural deductions compared to its affiliated societies – which dilutes what it sends abroad

5. Accounting for STIM’s free-of-charge processing of foreign income, which increases the foreign revenue it distributes

6. Recognising the one-off positive effects of currency fluctuations, the settlement with GEMA (which paid nothing in 2018) and a supplementary payment by NCB

Illustrating what it means to be one of only three net exporters of music

A country’s ratio of music exports to music imports is akin to its balance of payments; when a song written by Swedish songwriters is exported and played overseas, that overseas collecting society sends money back to STIM in Sweden (and vice versa).

Remarkably, there are only three countries in the world that bring more money in than they send out overseas (i.e. export

more than they import): the US, UK and Sweden. The two main US collecting societies, ASCAP and BMI, had an export ratio of 4.5 in 2019, meaning for every dollar they sent overseas that year, they collected four-and-a-half dollars back. The UK’s export ratio was 2.2. Sweden sits between, with an impressive ratio of 2.7. These export revenues provide direct and indirect benefits to the Swedish economy, through economic activity, taxation and cultural promotion.

The changing roles of STIM and SAMI

Since the 1960s, STIM has been a cost-efficient, culturally responsible Collective Management Organisations (CMO). It has played a leading role in nurturing new societies in the Baltic States and in designing and building regional hubs from NCB to ICE. Nevertheless today STIM faces increased competition for members and repertoire: major publishers are directly licensing digital; Epidemic Sounds is “buying out” new music; and rights management entity AMRA has unbundled licensing and distribution to cut administration costs…

SAMI – which represents only performers when it comes to international collections (in Sweden they collect public performance on behalf of performers and producers), unlike

most neighbouring rights societies – has more reciprocal representation agreements than its peers and duly collects 32% of its income abroad. Its future growth, however, depends on increasing and accessing its share of revenue collected by labels licensing exclusive master rights.

Sweden is well positioned to pivot from a domestic to export strategy. STIM and SAMI provide an efficient and effective institutional backdrop for Sweden’s artists. With strong institutions, the country’s songwriters and artists can achieve great things. Let’s now turn to where those artists are exporting their work.

Charting Swedish artists abroad

The chart which breaks out Swedish artists’ Spotify exports by region, is illuminating for policy makers. Notably, the shares of North (27%) and South (13%) America feel relatively high compared to the 10% that go to its Nordic neighbours. Almost a third of all Swedish exports went to non-English speaking European countries, raising questions about the relevance of language in cultural markets, especially as many Swedes sing in English. This information suggests the strategic choices artists would make if more government resources were made available.

Music Export Policies: Key Strategic Choices compiled by Sound Diplomacy

As one of only three net exporters of music in the world, Sweden clearly has a success story. But its future is at risk as its domestic market matures and approaches stagnation.. Two additional noteworthy risks are: (i) the effects of ‘winner takes all’ globalisation which has seen the US share of global music revenues increase from 26% in 2011 to 36% in 2019; and (ii) Sweden’s current music export strategy receives relatively little financial support compared to other similar sized markets. For Sweden’s music exports to avoid an economic standstill, here are six examples of policy best practices, compiled by Sound Diplomacy.

Export-Led Events
An export-led event is a city-based showcase festival that features acts that a music export office proposes, funds or otherwise supports. These events often have a consumer led festival platform alongside, but reserve a chunk of their line-up for new and emerging acts. Examples include The Great Escape, Reeperbahn Festival and Jazzahead.

Financial Tour Support
Governments may provide acts or businesses with funding to export their products via live performances abroad. Funds may pay directly for events or for generalised tour costs, such as hiring transportation, visas or equipment. In most cases, export offices either supply or adjudicate the funding and in most markets, it is sourced through public subsidy.

Participation in Export Networks
Export networks are coalitions that require membership dues. Examples include the NOMEX (Nordic Music Export Program), European Exporters Exchange, which convenes export offices, and Music Cities Network, composed of cities interested in exporting their musical talent. Most have been centralised in Europe, due to the availability of EU funding to support the creation and maintenance of such networks.

Import Events
Many countries operate their own festivals, often through local partnership with promoters and cities, and use them to showcase local talent. Countries may buttress these platforms by importing buyers through showcase trade missions. Canada is one of the most active countries in pursuing this strategy (see box), hosting numerous events that are specific to showcasing talent from a particular region. Sweden does not do this.

Trade Missions
Many export offices or outfits, such as the BPI’s export program, organise sector- or genre-specific trade missions. These are intentional, singular initiatives, not linked to an external showcasing opportunity nor built on top of one, but rather in addition to existing showcasing opportunities’.. BPI’s sync mission to Los Angeles is one such example. Another is the Music Finland which has organised sector-specific missions to Japan, Korea and China for over a decade.

Satellite Offices
Over the past two decades, a number of countries have created in-market offices to facilitate export programs and network development. France’s network of Bureau
Export Offices around the world is the most prevalent. Some countries set up offices in conjunction with cultural diplomacy efforts, though several examples exist of music export offices going at it alone in the market. Music Norway’s office in London is one such example and Australia has stationed representatives in New York on and off for many years. Canada also experimented with this in the UK and Europe, between 2007 and 2013. Some of these representatives are public employees, others are contractors hired by music lobbies representing a wider stakeholder base.

To give policy makers a sense of who’s doing what, the table below lists all six music export policy initiatives and compares Sweden’s policy platform with four mid-sized countries – Canada, Australia, Finland and Netherlands. Sweden is lacking in the ‘Financial Tour Support’ and ‘Import Event’ spaces, and has not invested much in Trade Missions. No countries have satellite offices but that may change, given the revelation of the Spotify export data shown earlier.

Defining who is (and isn’t) Swedish

When allocating more resources to support exports, there is the inevitable awkward question of who should qualify for them? As music becomes more borderless, the concept of nationality becomes more blurred. For example restricting any government support to members of SAMI and STIM makes intuitive sense but could be deemed anti-competitive as it excludes new entrants in the collective rights management space. What’s more, the definition of a Swedish artist may differ from that of a Swedish songwriter. Afterall, it’s easier to export Swedish songs than it Is Swedish recordings. Fortunately, we can learn from the Canadians as to how to determine who does and doesn’t qualify as a Swede.

The way that the Canadian Government outlines who qualifies is based on four parameters; the person or people who wrote the music, the artists’ origin, place of production and the person or people who wrote the lyrics. For an artist or project to be deemed Canadian, two of these parameters must be led by Canadians. This is called MAPL (music, artist, production, lyrics), an acronym of the four requirements developed by John Mills, then executive director of PROCAN, the precursor to collection society SOCAN. Famously, Brian Adams’ Cuts Like a Knife didn’t qualify, because Adams was the only Canadian involved.

Recommendations for Export Music Sweden

Take nothing for granted: Government resources are needed – and needed now

The pandemic has devastated the economies and ecosystems of both established and potential markets for Swedish (or any) music markets. Income from live performance and background music fell immediately. Income from broadcasters (selling less advertising) will inevitably follow. In the medium-term it is neither practically nor financially viable to produce new music as before. CMO’s have been forced to delay domestic and foreign distributions, create emergency welfare funds and increase cost deductions. With a shrinking domestic market, Swedish music must now play to its exporting strengths. If winning the battle for foreign revenue depends on harnessing the demand for streaming in undeveloped and established markets, STIM and SAMI are uniquely endowed with the repertoire and the expertise and experience to win that battle – but they must be supported.

But exporting more and importing less are not enough. Renewed and sustained growth depends on confronting existential challenges, including the fragmentation of licensing, the widening value (and confidence) gap and the inefficient dissemination of the metadata that our systems and processes need to distribute promptly and transparently. Other societies rely on STIM and SAMI not just as a source of revenue but as proven innovators and advocates on legal and technical issues. If their profile rises, revenue will surely follow.

The global prize is only growing, and now is the time to revisit Sweden’s music export strategy. With 3.5 billion smartphones in circulation the global recorded music market won’t slow down anytime soon. This expanding opportunity means intervention through financial support can achieve a positive return on investment for one of Sweden’s most successful cultural exports.

Capitalizing on this opportunity requires not only understanding the risks of being squeezed out by globalization, slowed down by saturation or overtaken by export competition, but also recognizing the urgent importance of supporting artist’s streaming volumes so they can make a living from their work during the pandemic. And when the dust settles and live music returns, Sweden’s artists, managers and labels need the support to position themselves as first movers to succeed.

With evidence that supports taking action, the next question for Swedish policy makers is what should they do? More precisely, if more resources were granted to the Swedish music export strategy, where should they be allocated? And once in place, how could they be evaluated?

Getting bang for your Krona: where should Export Music Export prioritise?

Thanks to the generous cooperation of STIM, SAMI and Spotify, we have been able to exclusively reveal how Swedish artists are performing on the platform at home and abroad. These insights give Sweden a first-mover advantage, again, as it now knows more about its exports than anyone else, and can do something about it. Swedish government policy makers are encouraged

to ask investment-oriented questions, such as whether to buy when others sell or sell when others buy. That is to say, should Sweden allocate resources to what is working in Europe and the Americas, or to regions that barely registered on the export chart, like Asia and Australia.

In North America, the US may represent the most lucrative prize for songwriters and artists, but it comes at the greatest cost. Breaking bands in America is not cheap. In South America, where Spotify reaches over 50 million listeners, it is remarkable that current Swedish export activity doesn’t travel beyond Mexico City. With more resources, Swedish labels and publishers could target Santiago, São Paulo and Rio de Janeiro – whose airport is named after their most famous music export, Antonio Carlos Jobim.

In Europe, it is striking that France and Benelux are bigger export markets than the UK (and Southern and Eastern Europe is greater than its Nordic neighbours). If the government financial support were to expand available resources, then Export Music Sweden could build on this untapped potential. NOMEX, a collaborative organisation facilitating growth and development in the Nordic music sector, can use these data to understand intra-trade within its countries.

For every stream at home, Swedish artists stream twice abroad: let’s double that

For Swedish policy makers to put this report into action and make a real impact on their artists’ and songwriters’ livelihood, a simple metric is needed to measure the success of government intervention. To get that, let’s revisit the predicament posed by Lewis Carrol’s Red Queen Race – under the current strategy, at some point Sweden’s streaming success story will grind to a halt.

To avoid this, the Swedish government needs an export strategy that can keep it running forward and building on its first-mover advantage. Recall Carrol’s adage:

If you want to get somewhere else, you must run at least twice as fast as that! Currently, Swedish artists achieve two streams abroad for every one at home. With more financial support, Swedish artists could and should be able to double its export ratio to 4:1 – achieving four overseas streams for everyone one at home. This target is plausible and meaningful; but it requires more resources, and they’re needed now.

With more resources, Export Music Sweden can seize this opportunity and write the next chapter of Swedish music’s remarkable export story. We hope this report enables policy makers to learn from the strategic choices made by other countries with far less to offer.

Acknowledgements

This report was commissioned by Jesper Thorsson, Managing Director of Export Music Sweden with the cooperation of Ludvig Werner (IFPI Sweden), Peter Lindström (STIM) and Karin Inde (SAMI). The authors would like to thank Shain Shapiro (CEO and Founder, Sound Diplomacy). Mark Dennis (Sony Music) and David Erlandsson (Senior Economist, Spotify) and Jomar Perez (Senior Data Scientist, Spotify) for their helpful contributions. The authors would also like to thank Omdia, MIDiA and Chartmetric for supporting this work with both data and insight.

About the Authors

Will Page is the former Chief Economist of Spotify and PRS for Music where he pioneered Rockonomics.. At PRS he published work on Radiohead’s In Rainbows and saving BBC 6Music. At Spotify he helped redefine catalogue and articulated the global value of music copyright. Will is now working on his first book, ‘ Tarzan Economics: Eight Principles in Pivoting through Disruption’ , A passionate communicator , Will’s work is regularly featured in Billboard, The Economist and the Financial Times. His most recent publication examined COVID-19’s Impact on Britain’s Live and Recorded Music Industries. He has also been profiled in The Daily Telegraph. Will is a Visiting Fellow of the London School of Economics and Fellow of the Royal Society of Arts.

David Safir is widely considered an expert in the applied economics of intellectual property. A multilingual graduate of the London School of Economics and the University of Chicago Booth School of Business, his early career in broadcasting led to being appointed the first Head of International Relations at the Performing Right Society (PRS) followed by 18 years with leading US performing rights organisation ASCAP as Vice President, International. David is uniquely experienced in maximising the foreign income of the collective management organisations that protect and administer their members’ rights, David has recently co-authored four publications on collective rights management: Can Two Societies Ever Be Better Than One? Lessons in collective rights management from Brazil, Turkey and the USA | The Causes and Consequences of Allocating Revenue Between Mechanical and Performing Rights | Money in, money out: Lessons from CMOs in allocating and distributing licensing revenue | User-Centric Revisited: Unintended Consequences of Royalty Distribution Policies