It took some work to get there. Gyms that offer in-person classes don’t need more than blanket licenses from ASCAP and other performing rights organizations, but offering music with video online almost always requires a synch license as well, just as the use of music in a movie or TV show does. In 2019, when the National Music Publishers’ Association filed what would escalate to a $370 million copyright infringement lawsuit against Peloton, it “scared a lot of people” in the fitness space, says 7digital CEO Paul Langworthy, whose company manages music rights for clients like Barry’s Bootcamp. After the two sides settled in February 2020, however, “it was absolutely a driver for getting commercially licensed music into fitness.”
The agreement drove Peloton to sign licensing agreements with both publishers and labels. That occurred just as the coronavirus pandemic spurred the $100 billion fitness business to go virtual — and the connected apps that found an audience seem to be keeping it as gyms reopen. The exercise app business was worth $4.4 billion last year — a 53% increase from 2019, according to Grand View Research, which expects it to climb to $15.5 billion by 2028.
That could be a big boost for the music business, because fitness app companies now spend between 20% and 50% of their annual revenue on licensing, according to multiple sources. A February Macquarie Research report estimated that such companies could eventually spend $300 million a year on music.
Peloton, and many other companies, sell both hardware and a subscription service that offers video classes for which they need to license music. Many of them pay rights holders by setting aside a percentage of overall revenue for music, then dividing that up by aggregate usage the way Spotify and other streaming services do. (Endorsements and branded content deals require artists’ permission.) Unlike streaming services, however, this revenue in most cases is divided evenly among recording and publishing rights holders, much like it would be for other video uses.
That revenue is arriving just as streaming services are starting to run out of potential U.S. subscribers. (The United States now has over 110 million music streaming service subscribers in a country with 110 million households, and many executives expect growth to slow, although it’s hard to tell how much or when.) And it points to a promising future. Sony Music Entertainment CEO Rob Stringer says the company last year generated nearly $400 million in recording and publishing revenue from new sources, including fitness, plus social media and gaming, the two other areas executives are most excited about. And in September, Warner …….