The changing landscape of the Kenyan music industry

While Nigerian fans of Davido and Wizkid may continue to disagree over who is the better, bigger and richer artist between the two music superstars, music lovers in Kenya have an entirely different issue to deal with – a changing music landscape that is punctuated with lawsuits, telcos, money and more. In this guest post, Kenya-based Chinasa Udeala who is the Head of Business Development and A&R Kenya at AFRICORI, takes a closer look at the changing landscape of the music industry in Kenya. According to him, it’s not just about the music…

As you may or may not be aware there is currently a legal tug of war in Kenya between collective management organisations (CMOs) and premium rate service providers(PRSPs).

This was caused by an amendment to section 30A of the Kenya Copyright Law that gives CMOs more powers to collect monies on behalf of copyright owners. Once this was placed in gazette (officially made law) the collective CMOs in Kenya this includes MCSK, PRISK and KAMP carved out a deal  between Safaricom – the country’s most dominant telecommunications provider with 67.4% of Kenya’s mobile phone user base .

The crust of the deal means that music for the safaricom Skiza CRBT service will be supplied to the telecoms giant directly by the CMOs thus effectively cutting off the middle man (PRSPs).  This means that instead of the middle man taking 50% of artists earnings from digitally distribution via CRBTs (after tax , administration costs and Telco revenue share)  as has traditionally been the case, the artists now gets 90% with 10% shared amongst the CMOs for their administration of the service.

Pretty straight forward eh? however this has kicked off a storm as unbelievable as a Nigerian Nollywood movie with alleged cases of bribery, intimidation, officials of the music societies in Kenya being arrested by the Kenyan CID on what will later be revealed to be unfounded charges and a court case with an injunction placed on artists earnings from this service till further notice.

Lets break down the amount of money involved  so as to get a better understanding of what is at stake.

The safaricom CRBT service is known as Skiza tunes. When you call someone who has subscribed to Skiza tunes in Kenya, instead of the traditional “Ring, Ring” you will hear music playing in the background – a way to entertain your caller as they wait for you to pick up the phone – much like  an elevator with music. However there is a subscription cost to this service which I shall break down to you.

It costs a subscriber 5Ksh or  $0.05 for each song a week to have those tunes , which is taken from the subscribers airtime, there are also subscribers with multiple songs on this service meaning that each week they are charged a multiple of the songs they have on the service. The figures involved might sound like peanuts but let’s do the math’s;

It is estimated that safaricom has slightly over 8million subscribers on its skiza service, using the assumption of 1 song a week per subscriber amounting to $0.20 a month. A calculation of $.20 x 8000,000 brings it to a total of  $1.6m a month.

It is calculated that the average skiza subscriber has at least 4 songs on the service at any given time – this places the possible  monthly revenue from Skiza at an estimated value of $4.7m USD  a month after deduction of government tax of 26%. The amount after tax is then shared amongst safaricom and the various content providers (PRSPs) according to revenue share deals. The PRSPs in turn keep 50% after their “administrative costs” and give the rest to the artists.

Most of these PRSPs with the exception of the likes of Cellulant have exclusively  made the Safaricom Skiza service their business model. This means that with the rug being pulled from under them as a result of the deal between the CMOs and Safaricom most will have to close shop – in other words, the tap has effectively been turned off. Hence the court case  and all the drama in between.

Looking  at this whole deal from a rational point of view I can only see positives for the artist and content rights holders.

This deal means that

1. Artists can cut out the middle man and have a more transparent way of calculating their digital revenue.
2. With the PRSPs (Middle Men) out of the way, International content right owners can now go directly to Safaricom.
3. The music industry in Kenya as a whole will see a boost of creativity as artists will realize that higher sales is directly tagged on to consistent release of higher quality content.

So as the CMOs and PRSPs meet in court next week, I shall keep my fingers crossed that common sense prevails and a ruling in favour of the Kenyan music industry and the well being of its artists is made.