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UK Music Industry’s Own Economist Says Revenue Up 4.7%!

UK Music Industry’s Own Economist Says Revenue Up 4.7%!

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 ” reflecting the success of so-called “heritage” 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 “heritage” 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 £3.6bn ($5.9bn USD) in 2008, up 4.7% on 2007.  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 £925 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,” noted one venture capitalist.

““This research helps us understand what’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.”

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.

Staytuned.

[email protected]

Jared Moya
I've been interested in P2P since the early, high-flying days of Napster and KaZaA. I believe that analog copyright laws are ill-suited to the digital age, and that art and culture shouldn't be subject to the whims of international entertainment industry conglomerates. Twitter | Google Plus
MCH
MCH

yah really interesting comments. Maybe its also important that digital distribution is coming up, and not everybody has some credit card to pay online, i think easy payment would facilitate the sells, but lots of people dont trust in digital payment. Also the point of the economic crisis is also a very important point i think, couse music cost the same, if people earnig 2000 bucks a month or if people earning 900 bucks a month. Industries dont want the goverments get into theyre sells? So hey have to do the work of the goverments and ajusting the price to the economic situation. That is the point the industries have to learn if they wanna survive. Where is no money to take, it couldn't be taken, maybe one time with some credit, but its no reliable for future issues. Another point is the one with upcoming artists. The musicsoftware is good, but there is no one to show how to handle it, and if, theyr are charging mounts of money for showing. So the potencial artists have to spent lots of years just to find out how to make the beats. the modern economy is trappet in her own inflexibility,they dont want to share theyr sells so they cant wonder why nobody wants nothing to have to do with them. A proove for this is the fact that the very own artist are pro file sharing.

Craig Jones
Craig Jones

Interesting read, it really does prove that their is no real money in recorded Music. Live Music is the future for revenue in the UK Music Industry.

Peter Gilespe
Peter Gilespe

Muscians could be a lot better off not carrying the Suits at the label on their backs. If they adopt the approach of the Grateful Dead and Phish. Both bands allowed their fans to record their concerts and copy and trade them. Consequently they have huge bodies of recorded work that cost them nothing to record distribute or promote. They built a huge base of fans who live for their music, many of whom have attended 30 or 40 shows. Both bands built their own organizations and control the entire production of their shows. Neither of them is doing heartfelt renditions of "You Don't have to Live Like a Refugee" or following Destiny's Children down bankruptcy lane. Hey musicians watch out for the parasuits! They'll suck all the green right out of your act.

Jordan
Jordan

There's a lot more here than meets the eye. The music industry would prefer to think they're the centre of the world and the centre of the economy, but that's simply not true. Other variables that need to be considered are any rise in the cost of living, mobile phone bills, bills in general and the global financial crisis, maybe you've heard of it? I'll tell you for free that just as companies must shed employees, so must families shed expenses, and music/DVD purchases unfortunately is one of the first things to go. It doesn't matter if P2P and the mp3 format evaporated tomorrow, we can't just suddenly go to the money tree in the backyard if we want someone's album. Anyone who treats music and movies as bread and milk is gravely in error.

rob tist
rob tist

You picked up Will wrong. Most Labels are being caned, distribution companies & retail likewise. Publishing is now seeing declines, the live industry is in doing better than everyone else, but their success mainly benefits the top 5% of artists. The vast majority of the music industry are not heritage acts. Heritage acts are the artist that are benefitting most from filesharing "promotion", but they dont sell that many records once theyve peaked anyway.~And more importantly they dont put any money back into the system to promote the next generation. Digital companies will not invest in artist's because their job (so far) is to leech of existing content companies & artists. and the profile built up and paid for by existing content companies & artists. Existing music companies are finding it harder to invest, and artists wonder why bother as more ppl steal their produce. you pay peanuts you get monkeys. @Shrinivas: As to investing in live production, your investing in your own company / club.... your doing zilch for the artist. how many artists do you promote that haven't already been promoted / built up by someone else?

Michael
Michael

Your analysis is off. What's the connection between live music and recordings? Sales of recorded music are still down (the 50% increase in digital is way off compensating for this). Live music is the revenue driver. The problem is that live music operators do not invest in music production. So that leaves a combination of DIY, publishers and managers to invest in the acts in the early days. To build a major act requires major cash. So there is a serious risk that when the current biggies retire, there will be a giant gap that won't be filled by the likes of Lily Allen or Lady Gaga. Having said that, the reluctance of investors to get involved in online music is an issue (I say this as someone that helped set up one of the first European MP3 sites over ten years ago). One of the problems I have with analyses of the music industry is that people think it is a one-headed beast. It's not, it's a sprawling web of individuals that occasionally work in synergy, or at least symbiosis. The fact that someone is making money selling Celine Dion tickets does not help an indie label or publisher in any way whatsoever. Making a parallel, lots of the comments sound a bit like this: Why would I give 10p to my local kid's football club when I know how much David Beckham earns per month?

shrinivas kanchi
shrinivas kanchi

Hey Michael, You made some very valid points. Have some thoughts on what you said - Firstly about the relationship between recorded and live music - and lets see how that evolved - Back in the hey days - live events used to be the catalyst to sell platinum records - today records are ONE of the catalysts to sell live events. One of the first things people do now before going to any event is check the band out on myspace/youtube/facebook etc...I can say that backed up with data as well, because our club runs live events and we get thousands of clicks on our homepage which has samples of the performing band embedded, I agree that digital sales can never compensate for the drop in physical sales. But at the same time consider the point of the "addition effect" which Will talks about. If his data indicates a 4% growth overall since 2007, there is something there. Your point about the occasional symbiosis makes for the perfect explanation here, maybe some players have understood how to use all the available digital platforms and evolved their offline platforms (licensing, publishing etc) to suit the changing environment and feed off it instead of fighting against it..... Now to your point - "The problem is that live music operators do not invest in music production." - I can say with conviction that this might be wrong, because my own club has invested heavily in the right lighting, sound engineers, right live sound mixing board, we have installed 10 projection screens and play visuals (synchronized to the music) over the band (we have hired professional VJ's to do this), infact I notice that even a developing country like India has been able to witness bands which have "grown up" a lot in production - thanks to the knowledge bank on google! To your point "there is a serious risk that when the current biggies retire, there will be a giant gap that won’t be filled by the likes of Lily Allen or Lady Gaga" AND "the reluctance of investors to get involved in online music is an issue (I say this as someone that helped set up one of the first European MP3 sites over ten years ago)." - you are definitely more experienced in this field than me and therefore I respect your opinion a lot, but I can't help but feel optimistic. Sometimes we just can't see the future as well as we think we can....we can go into several examples like the earth being flat, or people thinking that steam engines were the peak of innovation etc.... so this point an open ended assumption what do you think is the future of music? Where do revenues lie?

shrinivas Kanchi
shrinivas Kanchi

I fully agree with what WILL says, i think the key points in your analysis, which have been excellently presented are, The music industry is pressing the panic button too soon, without understanding the new ecosystem and the need to adapt - you cant fight an inevitable revolution too long & The music business started with the art of creating these so called "Heritage acts" which are being milked even today. Somewhere the industry has lost that art because the entire socio-legal-economic-cultural environment calls for a great innovation. It's renaissance time! My take on the lower quality of acts hitting the scene with no promises of becoming the "Heritage acts" of tomorrow is the proliferation of so many artists, literally mushrooming around the corner with semi-professional sound. Production has taken precedence over stage acts and the message behind the music. This combined with the fact that increasing choices (of possible artists to invest in) lead to imperfect, impulsive decisions (check > youtube>TED talks > Paradox of choice, and you will get the drift), as today in the high-speed lifestyle, there are pressures to make quick decisions, sometimes based on something as intangible/in-experiential factor as the band's video on youtube. (it is almost never an indicator of a band's versatility or how good the band is LIVE) It was a pleasure reading this, opens up many opportunities. thanks



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