APRA AMCOS2016-17 YEAR IN REVIEW

THE YEAR IN REVIEW – MESSAGE FROM CHIEF EXECUTIVE BRETT COTTLE

Financial OverviewFurther strong growth in consumer demand for music and video subscription services has led to another record year for APRA AMCOS in both licence fee collections and royalty distributions.For APRA, gross collections rose by 13.3 per cent to $292.8m (excluding AMCOS management fees), while AMCOS saw revenue rise by nearly 26 per cent to $93.8m. Gross revenue for the combined operation of the two societies therefore rose by more than $50m (or 16 per cent) to $386.6m, and will likely exceed $400m in the 2017/18 financial year.Operating expenses across the group – comprising APRA pro forma costs, system development related costs, costs of administering AMCOS and stand-alone AMCOS costs – were $50.7m, up 6.5 per cent from last year’s figure of $47.6m. This meant that Net Distributable Revenue – the amount available for distribution to members and affiliated societies – grew by 17.7 per cent, or $48.6m over the year.The group’s overall expense to revenue ratio was 13.1 per cent, a reduction from last year’s 14.3 per cent, and APRA’s stand-alone expense to revenue ratio was 13.8 per cent, a reduction from last year’s 15.2 per cent.A particularly pleasing aspect of APRA’s revenue growth during the year was that international revenue – at $43.5m for the year – grew at almost exactly the same rate (13.5 per cent) as domestic revenue, suggesting a level of rising and sustainable success by Australian and New Zealand songwriters on the global stage.Underpinning FactorsThe rise and rise of consumer subscriptions to music and video streaming services was the key factor underpinning revenue growth during the year. Digital revenue – comprising licence fee collections from streaming services, paid downloads, video on demand and user-generated content – increased from $68m to $110m across the group during the year. We estimate that there are now nearly four million

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subscriptions to one or other of these services across Australia and New Zealand.At the same time, licence fee collections from broadcasters (radio and television, free and subscription) remains the principal source of revenue across the group, albeit by a narrow margin. For the year under review broadcast revenue was $125.3m, down marginally from the previous year’s $127.6m, but adversely impacted by the administration of Network Ten in Australia. The $3.1m owed to APRA by Network Ten has not been taken up as revenue, but depending on the outcome of the network’s prospective purchase as we go to press, may yet be fully recovered.Notable in the year’s financial performance is the 9.6 per cent growth achieved by our Australian and New Zealand public performance licensing operations. Over the year collections from the oldest of our core business activities grew from $70.7m to $77.7m, a remarkable achievement in a patchy economic environment and one that will be significantly built on when we launch OneMusic Australia, our joint licensing operation with Australian record labels late in 2018.The removal of digital rights from APRA AMCOS by Kobalt Music Publishing in favour of administration by the U.S.-based AMRA had a marginal impact on the year’s results, as it impacted only the fourth quarter of the year. But the impact in 2017-18 will be significant and will partially offset what would otherwise be strong growth forecasts for that year. Conversely, the mandate given to APRA AMCOS to license digital services in Asia from a number of publishers including Universal Music Publishing has proven an extraordinary success and will significantly boost APRA AMCOS’ digital revenue global presence over coming years.Our transformational system re-development project, CLEF, continues to have a significant impact on the group’s costs. In the year under review, expenses totalling approximately $8.3m have been incurred by the group on the project – comprising the costs of internal personnel and payments to the system aggregator, Accenture. Similar costs were incurred and reported on in the 2015-16 financial year.

The system is due to go live early in 2018 at which time a carrying value of approximately $20.5m will be held on the APRA AMCOS balance sheets. Despite substantial time and cost overruns, this amount will be broadly in line with the budgeted carrying value of the system when we embarked on the project in July 2014.Future PrioritiesAfter 28 years, this will be my final commentary to the membership on our financial performance. The APRA Board will shortly appoint my successor and that person, in conjunction with the group Boards, will set the path and determine the group’s future strategic plans.In the short term, however, our focus will be on • securely deploying our new CLEF system, • completing all of the preparations required to go-live with our

joint licensing venture in Australia with the record industry – OneMusic Australia, and

• expanding our Pan Asian digital licensing operation. We also have major industry agreements with commercial radio, free-to-air television and Youtube to re-negotiate in Australia.The bedrock for all of our licensing and royalty distribution activities remains copyright law. In New Zealand there will be a thorough review of the law over coming months and in Australia the Federal Government has announced a number of reviews, including a review of the existing Code of Conduct for Collecting Societies, as well as further consideration of possible changes to the Act which directly threaten copyright owners’ rights and ability to monetise such rights. A great deal of work needs to be undertaken in these areas in the year ahead.On a personal note, I would like to say what a privilege it has been to work for so long for such a great organisation and for the artists (and their business partners) who contribute so much to human well-being.Brett Cottle

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APRA AMCOS GROUP EXPENSE TO REVENUE RATIO

13.1%

SONGS & COMPOSITIONS PAID

1,305,817

APRA MEMBERS PAID INTERNATIONAL ROYALTIES

18,052 +9.6%

APRA AMCOS GROUP REVENUE

$386.6m +16.1%

APRA AMCOS NET DISTRIBUTABLE REVENUE

$335.9m+17.7%

APRA INTERNATIONAL REVENUE

$43.5m+13.6%

BUSINESSES LICENSED ACROSS AUS + NZ

145,189

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APRA AMCOS REVENUE HIGHLIGHTS

I STREAM, YOU STREAM, WE ALL STREAM FOR…If you reflect on the introduction of television in the 1950s and mobile phones in the 1990s to our insatiable thirst for listening to streamed music, there is a subtle parallel. 12 months into the launch of streaming services in Australia and New Zealand there were around 900,000 paid subscribers. Six years since the first streaming service launched in Australia, there are four million paid subscribers, that means more than one in every eight Australasians are paying for a streaming music service. Even greater numbers of people access streaming services for free. Over the same period, annual revenue received by APRA AMCOS from the ad-funded/free tier increased by 1000 per cent.This year, royalties from streaming service providers operating in the Australasian market delivered $62.2m to APRA AMCOS, representing 127 per cent growth on last year. Even Apple Watch could only pull off 60 per cent growth this year.This increase in revenue was largely driven by subscription bundling deals with telcos by Apple Music in Australia and Spotify in New Zealand. Pleasingly, royalty growth from streaming services has outstripped the contraction in the physical and download markets for the last 24 months.Reports indicate there are more than 100 million paid subscribers globally and about the same who stream for free (paid for by advertising content served to them). Currently, subscription streaming services deliver 500% more per stream to APRA AMCOS members than ad-funded/free tier services, which highlights the value gap between the two models.

APRA AMCOS STREAMING REVENUE

$62.2m +127%

APRA LIVE REVENUE

$20.4m+15.9%

APRA AMCOS VIDEO ON DEMAND REVENUE

$14.1m +69.9%

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STREAMING REVENUE VS GROSS REVENUE

$100m

$200m

$300m

$400m

$500m

201720162015201420132012

$257.2m

$0.3m0.1%

$270.8m

$2.4m0.9%

$282.9m

$5.6m2%

$301m

$11.4m3.8%

$333m

$27.4m8.2%

$386.6m

$62.2m16%

STREAMING REVENUE VSGROSS REVENUE

% D

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TES

STRE

AM

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PO

RTIO

N O

F G

ROSS

REV

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REVENUE BREAKDOWN 2016/17 VS 2015/16

GLITCH IN TV REVENUEWhile total broadcasting revenue (television contributing $78.7m and radio adding $46.6m) remains the highest source of income again this year, it should be noted that commercial TV revenue was adversely impacted by Network Ten’s move into voluntary administration in June.

REVENUE2016/17 VS 2015/16

2017

DIGITAL 28.5% $110.3m$67.8m

TELEVISION 20.3% $78.7m$82.3m

PUBLIC PERFORMANCE 20.1% $77.7m$70.7m

RADIO 12.1% $46.6m$45.3m

INTERNATIONAL 11.6% $44.7m$39.1m

EDUCATION 3.5% $13.5m$13.2m

RECORDINGS 3.4% $13.0m$12.4m

OTHER 0.5% $2.1m$2.2m

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VIDEO ON DEMAND (VOD) IN DEMAND

LIVE MUSIC REVENUE STILL STRONG

APRA AMCOS STREAMING REVENUE

$62.2m +127%

APRA LIVE REVENUE

$20.4m+15.9%

APRA AMCOS VIDEO ON DEMAND REVENUE

$14.1m +69.9%

APRA AMCOS STREAMING REVENUE

$62.2m +127%

APRA LIVE REVENUE

$20.4m+15.9%

APRA AMCOS VIDEO ON DEMAND REVENUE

$14.1m +69.9%

While this year was marked by new players (Amazon Prime) and takeovers (Presto and Quickflix), Australians and New Zealanders continued to subscribe to TV and movies on demand at an extraordinary rate. This year subscription video on demand (SVOD) surged, with an estimated 2.7 million subscribers to Netflix alone1, while both Neon and Lightbox in New Zealand nearly doubled their subscribers.APRA AMCOS revenue from VOD, $14.1m, reflects this wave of popularity. Songwriter Dean Lewis is one who has benefited from

the huge audience VOD represents. His song Waves was featured in season one of American teen drama Riverdale and season two of supernatural drama Shadow Hunters - both series screened on Netflix this year. Since its release in late 2016, Waves has spent all year in the top 40 of the ARIA Singles Chart and is certified double platinum.1Roy Morgan Research, Over 1 in 3 Australians now have Netflix as subscriptions jump 20 percent in first quarter of 2017. 8 June 2017. Finding No. 7242

Live music generated $20.4m in revenue this financial year, representing 15.9 per cent growth on the previous year. When considered as part of the $77.7m income from public performances (which also includes music in the workplace, background music in restaurants, cafes, bars, hotels and fitness classes) the lift in live music use driving licensing activity is a healthy sign that performance opportunities abound.

Live revenue had a bumper year, driven largely by major concert tours, resulting in significant royalty earnings for a diverse range of Australasian songwriters supporting international artists, such as:• Thundamentals

(Macklemore & Ryan Lewis)• Twelve Foot Ninja

(Disturbed) • Buchanan

(Keith Urban & Carrie Underwood)• The Necks

(Nick Cave & The Bad Seeds)• Sheppard

(Justin Bieber)• Safia

(Twenty One Pilots)• Diesel, Jet and Marlon Williams

(Bruce Springsteen)• Wolfmother and Rose Tattoo

(Guns N’ Roses)• Avalanche City

(Dixie Chicks)• Nadia Reid

(Ryan Adams)• Eyes No Eyes

(Queens of the Stone Age)• Jess B

(Stormzy)8

BETTER WITH (ONE)MUSICIn 2016 APRA AMCOS and the Phonographic Performance Company of Australia Ltd (PPCA) signed an agreement to launch OneMusic Australia in the second half of 2018.Following the lead of New Zealand, OneMusic Australia will offer a single licence to music customers for the public performance of music across a wide range of industries covering almost 150,000 businesses. This model will provide music customers with a simplified approach to music licensing, making it easier for them to use music, which in turn will help support and allow them to focus on their bottom line. We believe this initiative will be of particular benefit to small businesses, as the OneMusic NZ joint licensing operation has proven to be. The venture (including OneMusic in New Zealand) will be launched with a state-of-the-art eCommerce facility, which will enable business to renew, take out, update and pay their licences online.In November 2016, OneMusic Australia commenced consultation with industry bodies ahead of developing the new licence schemes. This ongoing consultation process, and future updates on the OneMusic Australia launch can be viewed at www.onemusic.com.au.

ONEMUSIC NEW ZEALANDWith a sustained focus on increasing market penetration across multiple industries and operating under the tagline “Better With Music”, OneMusic NZ achieved a 10.2% growth in revenue in the 3rd full year of the joint venture operation. Growth that is driven by the improved compliance that the single licence brings to businesses.This year saw the first broadcast licence established under OneMusic NZ. Bringing together the repertoires of APRA and Recorded Music NZ and making it easier for radio stations to get the permission required to broadcast music, Low Power FM signed up for the licence in July 2016.A new agreement with the New Zealand Association of Registered Hairdressers, and a new 2 year agreement with Retail New Zealand, and ongoing agreements with the Exercise Association and the Restaurant Association of New Zealand contributed to the strong revenue performance, benefitting songwriters, composers, publishers, recording artists and record labels.

NZ APRA AMCOS REVENUE

NZ$47.9m+16.5%

NEW ZEALAND

PUBLIC PERFORMANCE REVENUE

NZ$14.1m+10.2%

DIGITAL REVENUE

+66.7%STREAMING REVENUE

+72.5%

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MEMBER EVENTS

462 events, attended by

8,521 members

MUSIC PROJECTS FUNDED BY APRA MUSIC GRANTS

154

APRA MEMBERS

94,940 +6.2%

ABORIGINAL AND TORRES STRAIT ISLANDER MEMBERS

1,284+7.3%

AMCOS MEMBERS

17,325 +7.8%

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APRA INTERNATIONAL REVENUE

$10m

$20m

$30m

$40m

$50m

20172016201520142013

$21.8m

$27.1m

$34.0m$38.3m

$43.5m

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INTERNATIONAL HITMAKERS AND FIRST-TIME EARNERS APRA AMCOS members have unprecedented access to the global music marketplace as evidenced by the growing profile of both international hitmakers and first-time overseas earners. There are the marquee names writing and fronting the hits: Sia reigns supreme with Cheap Thrills, Vance Joy continues to charm via Riptide, Flume accepts the Grammy for Best Electronic Album, and Lorde gets that Green Light. There are also the songsmiths spanning the globe like long-time Sia collaborator and fellow Adelaide native Samuel Dixon, who nabbed a Grammy for his work on Adele’s 25. “It is an incredibly exciting time to be a songwriter,” says London-based Dixon. “The industry is evolving at a rapid rate, and the volume and quality of emerging new talent is staggering.”Joel Little earned a Grammy in 2014 for his collaboration with the teenaged Lorde, launching him into the international scene. This year saw Little dominate the charts with six tracks on Billboard top 15 albums from Lorde, Khalid and Imagine Dragons.23-year-old Melbourne native Sarah Aarons relocated to LA and achieved her first Billboard #1 in the same year as her first overseas earnings. “It’s pretty amazing what can happen in a year… I have had great support along the way, which has let me focus purely on my songwriting,” says Aarons.Aussie-in-Nashville Kylie Sackley is an avowed “word nerd,” whose credits include Faith Hill, Alan Jackson, Leann Rimes, and a current

US country radio hit with Walker Hayes’ You Broke Up With Me. “I just remember that I’m forever the little girl who came from Australia, I remember that I love what I do and I work like there is someone younger, better and more driven than me trying to take my place. Because, truthfully, there is.”

And some of that heat might be coming from this

year’s class of APRA AMCOS members receiving newfound international attention - and royalties. Melbourne singer-songwriter Ben Abraham co-wrote Kesha’s comeback

anthem Praying with Macklemore counterpart

Ryan Lewis. He touches upon the distinct role geography plays

for members, “…our art is raw, unaffected, and unique, and it’s no wonder people around the world are taking notice.” Timothy Bowen is making inroads in Nashville whilst maintaining a busy Australian touring schedule. Bowen played the Grand Ole Opry and co-wrote a track for the hit TV series Nashville. “Being paid to write music for others - all of this is nothing short of a spectacular privilege.”

HITS HEARD ROUND-THE-WORLD:• Starley’s Call On Me, co-written

with P-Money. #1 Swedish pop charts, 500m+ streams

• French DJ Kungs’ rework of This Girl, originally released by Cookin’ On 3 Burners in 2009 and co- written by Lance Ferguson, Jake Mason, and Ivan Khatchoyan. 1b streams, Euro chart topper, multiple gold and platinum accrediations

• Kiwi songwriting duo Leroy Clampitt and James Wong pen Company, a single off Justin Bieber’s Purpose. Nearly 1b streams, #1 album US, AUS, NZ

• SongHubs alumna Sarah Aarons co-writes Zedd and Alessia Cara’s monster hit Stay. #1 US Billboard Pop chart, 500m+ streams

• Tame Impala’s Kevin Parker co-writes Lady Gaga’s Perfect Illusion single #1 hit in multiple countries

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If you are creating music in 2017, the single or album can often be the means to attracting a live audience. For the more DIY-inclined writer-performer members, the most impactful source of revenue comes via ticket sales, merchandise, and the live performance royalties that they can claim annually. Members file Performance Reports for any ‘non-promoted’ events so they can claim their share of the pool of licence fees collected from venues.• $6.7m = amount distributed to members during FY 16-17

(up from $5.4m in FY15-16).• 12,235 = unpublished members who received live performance

royalties. 88% of 13,884 total.These payments are distributed to the solo artist running the merch desk after a set, the road warrior playing pubs and town halls, and the up-and-coming indie band booking tours without the backing of a promoter. NZ writer-performer Anthonie Tonnon says of his royalties: “That payment has consistently made the difference between me playing music as a hobby, and playing music as a job.” The payments are a monetary springboard for burgeoning acts like The Preatures, Vera Blue, Luca Brasi, WAAX and Electric Fields. “It’s always fulfilling after a long year of touring to come home and find your live performance royalties sitting in the bank. I’m really grateful to APRA AMCOS for all the work they put in, working alongside venues, festivals and, of course, artists, to ensure that we are all aware of the value of songs, songwriting and performing.” says Alex Lahey, who is about to release her highly-anticipated debut album.Troubadors like Liz Stringer, Ben Salter, and Mel Parsons have made careers going to places on the map that don’t always figure in to national tours. Stringer and Parsons are even joining forces for a tour, which seems apt for two of the most prodigious live performer earners in Australasia. As Parsons says, “Are you putting off your Performance Reports? Don’t be a loser! It’s free money!”Salter sums it up “APRA AMCOS are the only bunch I can depend on to pay me for my music and performance, year in, year out.”

LIVE PERFORMANCE ROYALTIES AND THE DIY MUSICIAN

Ben Salter

photo: helen page

Electric Fields

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TACKLING GENDER DISPARITY“It is an ardent truth that so many men in our industry are in a position of privilege. Worse is that many of us don’t even recognise there is a gender bias, and that our friends, partners and sisters face a unique set of unusual and unfair barriers to success as songwriters and performing artists. Women aren’t underrepresented in the music industry because they are less talented or give birth. They are dissuaded by the masculine structures which have existed for hundreds of years. Change is long overdue and we need to acknowledge and make reparations for that.”APRA AMCOS Ambassador Dave Le’aupepe (Gang of Youths)

2016 marked the introduction of ‘The Waltzing Matilda Keynotes’, a program of speakers and panels for APRA AMCOS staff, curated by our female senior managers and spotlighting the achievements of notable women in the music industry.The Waltzing Matilda sessions were the first step in an attempt to address gender disparity within the music industry, by fostering the commitment within our own organisation, before implementing programs that would impact the wider membership.Concurrently, research through RMIT was commissioned in collaboration with screen music composer members, and the resulting report ‘Australian Women Screen Composers: Career Barriers and Pathways Report’ was released in August 2017. Its findings informed a raft of changes, with APRA AMCOS making a firm commitment to the following initiatives:• Goal of 25 per cent increase in female members year on year over

three years• Strict 40 per cent female participation measures• Australasian mentorship program in partnership with industry

organisations• Whole of industry call to action to tackle gender disparity• Further research to be conducted into the wider membership

APRA AMCOS STAFF

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PROTECTING CREATORS’ RIGHTS

APRA AMCOS takes a strategic approach to advocacy. Key in all conversations with government is APRA AMCOS’ role in advocating for creators’ rights and the cultural and economic value of those rights. APRA AMCOS optimistic following Government’s copyright reform announcementThis year APRA AMCOS’ management spent a lot of time in Canberra arguing that the Productivity Commission’s recommendations to expand Australia’s copyright safe harbour provisions and introduce a US-style ‘fair use’ exception into the Copyright Act amounted to a blunt attack on Australia’s creative industries.APRA AMCOS is pleased that the Government has chosen to ignore many of the Productivity Commission’s recommendations and view copyright reform in a holistic context, rather than through a purely economic lens.Consultations on complex issues such as the proposed extension of the existing safe harbour scheme and the introduction of more flexible exceptions remain ongoing. APRA AMCOS is excited to engage in the process and ensure that the outcome is a policy framework which respects the interests of music creators and other copyright owners and is fit for purpose in 2017 and beyond.APRA AMCOS members Rock the House for #PFOAMCanberra’s Parliament House was rocked on 29 March thanks to Australian songwriters Diesel, Montaigne, Ross Wilson, Megan Washington, Kav Temperley and Daryl Braithwaite, who performed in front of more than 300 senators and MPs at the Parliamentary Friends of Australian Music (PFOAM) Rock the House event. The event, presented by APRA AMCOS in partnership with the Australian Hotels Association and supported by ARIA and the wider music industry, stressed the importance of copyright and government support for the contemporary music industry as a major contributor to Australia’s cultural, social and economic prosperity.

photo: Kym Smith (News Corp Australia)

Rock the House #PFOAM

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SUPPORTING THE INDUSTRY

Awards Art Music Fund

Ambassadors

The Waltzing Matildas

Aboriginal & Torres Strait

Islander Music Office

Amplify Divestment

SongHubsParliamentary

Friends of Australian

Music

Member Events &

Education

Music Grants

Professional Development

Awards

Live Music Office

Research

Starting Ground

Sounds Australia

SongMakers

click on each circle for more info

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