Consumers spent less on recorded music, down 6% since 2007, but concert ticket sales have grown by some 13% as the industry as whole slowly evolves and adapts to digital distribution.
Record labels and others in the music industry frequently lament that they can no longer make money, that piracy and illegal file-sharing has all but made their industry extinct, or so they would have you believe.
So when Will Page, the Chief Economist for PRS for Music, a UK-based royalty collecting group for music writers, composers, and publishers, publishes a study concluding total music industry revenues are up 4.7% since 2007 it corroborates what many studies have shown, that P2P actually increases music consumption.
Page said: “The aim of this report was to not only add up the revenues generated by the UK music industry, but also to show how it all hangs together. In particular, this helps us have a better understanding of business to business revenues, which now make up a quarter of the total. Reading beneath the top line, recorded is down and live is up â€” reflecting the success of so-called â€śheritageâ€ť acts like the Police and Neil Young on the road. Historically record companies have been the primary investor in new acts so the question the industry should ask is this: who will invest in developing the â€śheritageâ€ť acts of tomorrow?”
According to “Adding up the Music Industry for 2008” the music industry is growing increasingly diverse as music fans enjoy a wide range of platforms to hear and consume music.
Sales of recorded music fell 6% for example, digital was up 50% while physical dropped 10%, but concert ticket sales grew by 13%. In terms of what consumers spent on music as a whole last year, this surprisingly grew by 3%.
Some of the other areas that the music industry saw dramatic growth was in licensing and advertising and sponsorship deals.
Here’s a few highlights:
- The UK Music Industry was worth ÂŁ3.6bn ($5.9bn USD) in 2008, up 4.7% on 2007.Â Combined business to consumer revenues (live industry and recorded music retail) grew 3%, making up 75% of total industry value;
- More complex business to business revenues (from collective and direct licensing, advertising, sponsorship) grew by 10%, reaching ÂŁ925 million and contributing 25% of total industry value;
- This report highlights the importance of diversification, or finding new places and new ways to generate revenues. By understanding the ecosystem, it enables more cooperation to grow the market going forward.
Funny it mentions the importance of “understanding the ecosystem,” for recently I mentioned how investors in the US have by in large written off any further ventures in the digital music sphere thanks to the difficulties in trying to get record labels to cooperate. They’ve left for other areas like Twitter or Facebook where they’re able to build a viable platform around the core product.
“What the music industry never encouraged or even allowed was building an ecosystem around its product,â€ť noted one venture capitalist.
“â€śThis research helps us understand whatâ€™s at stake and appreciate how the industry currently works,” adds Jeremy Fabinyi, Acting CEO PRS for Music. “That not only helps our industry work together to overcome some of the common hurdles we currently face, but also increase cooperation across all segments to grow the overall market. And while the economic outlook for 2009 remains challenging, PRS for Music is confident that UK musical talent will continue to succeed, both at home and abroad.â€ť
Notice his emphasis on growing the market. There’s none of the usual cries for govt intervention to fight piracy before it’s too late. I suppose it helps when it’s part of a report saying that business is good.
One good point that Page makes is that we need to figure out who’ll make the investments oftentimes necessary to make a band succeed.
“Historically record companies have been the primary investor in new acts so the question the industry should ask is this: who will invest in developing the ‘heritage’ acts of tomorrow?”
He has a point here. Sure the Internet and readily available studio software has empowered budding musicians like never before, but this isn’t always enough. We do have to figure out a way to make sure that record labels recoup their investments, the only question is to what length are we willing to go to make sure that happens.
Moreover, the music industry says that the UK urgently needs for ISPs and govt regulators to step in and address the problem of illegal file-sharing because they aren’t making enough money, so if the opposite is true, as this study suggests, then it’s high time the govt stepped back and reconsidered any increased regulation of the Internet.
If the music industry’s own economist says things are looking good it really makes them look even worse than they already do.