The Economist reveals – the music industry is doing great!

The Economist titled ‘Having a ball – In the supposedly benighted music business, a lot of things are making money’.

Wow – that’s a statement worth debating. Problem is, the article is well written and based on profound research. In a nutshell it goes like this:

Lady Gaga’s “Monster Ball” concert costs about $100 – even though you get the big show, it’s over the top. But it’s sold out. The economist comments ‘Welcome to the supposedly doomed music business’.

Well – for the past ten years sales of recorded music have declined in direct proportion to the rise of illegal file-sharing. Sales of CDs, tapes and records have slid by 40% (in the UK) since 2001, in Japan, the world’s biggest CD sales market, the number of discs sold fell by 6% in 2008 and 24% in 2009. Price cuts meant that revenues dropped even more steeply. All rises in digital music-sales cannot compensate this – e.g. customers  tend to buy tracks, not albums any more, and even the digital sales are now stalling, in Japan, mobile and online single-track sales rose only a shade during 2009.

Now the economist brings up some iterating data: Will Page, PRS for Music, (which collects royalties on behalf of writers and publishers), has evaluated the entire British music business: It turned over £3.9 billion ($6.1 billion) in 2009, +5% from 2008, and it was the second consecutive year of growth. Much of the money bypassed the record companies but they pulled in £1.1 billion last year, + 2% from 2008.

Live Music:

Between 1999 and 2009 concert-ticket sales in America tripled in value, from $1.5 billion to $4.6 billion.

In 1996 a ticket to big US show cost $25.81 (Pollstar). If prices had increased in line with inflation, the same ticket would have been $35.30 2009. In fact it was $62.57 – some way more (Madonna $114, Simon & Garfunkel $169!!!)

Merch:

Connected to Live Music is sales of merchandise. “We have grown along with the touring business,” says Tom Bennett, head of Bravado, who’s revenues have more than doubled since 2007, as they expanded distribution from shows only to retail stores.

Bravado is now owned by UMG – so don’t say this money does not go to the music industry.

Sponsoring:

The Rolling Stones led the way in recruiting tour sponsors, from Sprint, a phone company, to Ameriquest, which sold mortgages. The Rascall Flatts, a country music band, featured American Living, a cloth label carried by JCPenney. IEG, a firm that tracks the market, estimates that the value of tour sponsorships in North America will reach $1.74 billion this year, up from $1.38 billion in 2006.

TV (yes – it’s not dead yet):

Music’s best business customer is television. “Watch an evening’s worth of TV and count how many times you hear music in the background,” says Jeremy Lascelles, chief executive of Chrysalis. It’s about every 40 seconds. Plus some of the most popular shows of the past few years—“American Idol”, “Glee” and “The X-Factor”—have been music shows. Royalties! Publishing supplied 29% of EMI’s revenues and 45% of its profits in the year to March 2010.

Streaming:

The free music-streaming services have not yet brought in money. In 2009 ad-supported digital music earned £8.2m for British record companies, less than 1% of total revenues. If Spotify and Vevo are drawing people away from the purchasing CDs and iTunes downloads, they are cannibalizing the industry. If, on the other hand, people are streaming music online rather than downloading it illegally from a BitTorrent site, the industry gains.

The possibility that music-streaming websites will turn CD buyers into illegal file sharers is a concern only in countries where people still buy music. Rampant piracy means just $19m-worth of CDs were sold in China last year—about the same as in Hungary. In such countries it makes sense to give away music, surrounding and interspersing it with advertisements. Websites like Top100.cn and Google are doing that.

Collecting Societies:

The proliferation of FM radio and multichannel television in emerging markets is also driving revenues from copyrights. At the same time, restaurants and clubs are being strong-armed into paying for the music they play. CISAC has reported steady or rising receipts in the past decade.

Future?

In 2002 people aged 12 – 19 accounted for 16.4% of all spending on albums in Britain, according to TNS Worldpanel. That was almost double the share of people aged 60 or over (8.8%). The two groups have now switched positions. By 2008 teenagers accounted for just 12% of spending on albums, whether digital or physical. By contrast, the older fans’ share had gone up to 13.8%. The over-60s do not just spend more on music albums than teenagers. They spend more on pop-music albums.

The consequences can be seen in the pop charts. America’s bestselling album since 2000 is “1”, a collection of Beatles hits from the 1960s. At one point last year four of the top ten albums in Britain were Beatles recordings and the number-one album was a collection of songs by Vera Lynn, who was then 92 years old. The bestselling album worldwide last year was “I Dreamed a Dream” by Susan Boyle, a middle-aged Scot. Universal Music’s bestselling album in Japan in the first half of this year was “Vocalist 4” by Hideaki Tokunaga, Japan’s answer to Harry Connick Jr.

source: http://www.economist.com/node/17199460?story_id=17199460&fsrc=nlwhig10-07-2010editors_highlights#footnote1

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