Despite what is seen as a general downturn for record labels worldwide, forcing major mergers that have reduced some of the world’s biggest music companies to join forces in the wake of the global financial crisis, a new report suggests that record companies have injected billions into new music.
The report comes following some major moving and shaking in the industry, including a deal that saw Sony/ATV Music Publishing auctioning off its Virgin Music and Famous publishing catalogues – including those of Iggy Pop, Culture Club and Lenny Kravitz, along with Warner’s and EMI’s CEOs abruptly stepping down in light of the recent Universal/EMI merger, a move that Australia’s Independent body, AIR, criticised the ACCC for letting go through unimpeded.
The new Investment In Music report released yesetrday by the International Federation of the Phonographic Inudstry (IFPI) in association with Worldwide Independent Music Industry Network (WIN) has confirmed that despite these changes, record companies spent US $4.5 billion last year in A&R and marketing of new music.
Additionally, the report demonstrates that it costs an average $US 1 million to ‘break’ a new artist in major markets, while 70% of unsigned artists would like a recording contract, according to two internationally conducted surveys.
As The Music Network points out, the detailed report represents a major proportion of the music industry, including the IFPI’s 1,400 members across 66 countries; and WIN representing independent labels through 21 international bodies. Including Australia’s own AIR, as well as major bodies like the UK’s Association of Independent Music and the American Association of Independent Music (A2IM).
So there’s little doubting the Investment In Music report’s impact and veracity when it demonstrates that while the global music industry’s sales have fallen from a booming $US 28.6 billion in 1999 down to $US 16.6 billion last year – companies ares till investing in new talent, refuting the perception that they’re clinging to their older acts and scared of the digital revolution.“Behind the highly visible world of artists who touch people’s lives there is a less visible industry of enormous diversity, creativity and economic value.”
Among the many statistics on offer, the report showed that record labels spent $US 2.7 billion on A&R, with one in four artists being new signings (on average), with that figure representing 16% of a combined global music revenue.
By contrast, that’s a bigger investment figure than the research and development sectors of the software and computing industry (at 9.6%) and the pharmaceutical and biotech sector (15.3%), according to the European Commissoin’s 2011 EU Industrial R&D Investment Scoreboard.
Which basically means, that the music industry is spending more on new developments than science and IT industries are.
Frances Moore, chief executive of IFPI, said that the Investment In Music report “highlights a simple truth,” specifically “that behind the highly visible world of artists who touch people’s lives there is a less visible industry of enormous diversity, creativity and economic value.”
“This report shows the role record companies, major and independent, play around the world in discovering, nurturing and promoting artistic talent,” said Moore.
WIN’s Chair, Alison Wenham, added that: ““Today, the relationship between the artists performing music and the investors supporting them has subtly changed and is continuing to evolve.”
“The traditional model of significant advances and marketing support from larger record companies to artists remains widely in place, but there is now a greater emphasis on partnership, shared skills and shared revenues,” Wenham said.
You can view some other noteworthy stats from the report below:
- Unsigned artists want a record deal. Research conducted with The Unsigned Guide in the UK found 71 per cent of unsigned acts wanted a recording contract. BVMI research in Germany found that 80 per cent of unsigned artists wanted a recording contract. Marketing support is the most valued form of investment (with over 70% of artists citing this in both surveys), followed by tour support and the payment of an advance.
- The costs of breaking an artist in a major market remain substantial at up to US$1.4 million. The cost typically breaks down as payment of an advance (US$200,000), recording costs (US$200,000-300,000), video production costs (US$50,000-300,000), tour support (US$100,000) and marketing and promotional costs (US$200,000-500,000).
- Live performance has not replaced recordings as the driver of the music industry. While record companies invest US$2.7 billion in A&R, there is little evidence of such substantial investment in new music coming from any other source. The top five global live acts of 2011 – U2, Bon Jovi, Take That, Roger Waters and Taylor Swift – all have substantial back catalogues of recorded material.
- Brand partnerships and synch deals have grown in importance. A recording deal unlocks a range of different revenue streams for artists and labels. These include a new generation of brand partnership and synchronisation deals, involving the use of recordings in TV, film, games and adverts. Synch income has increased from negligible figures in 2008 to US$342 million globally by 2011. The report highlights the case study of Ellie Goulding, whose cover of Your Song was used in an advertising campaign, generating direct income and also helping lift the sales of her album by an additional 400,000 copies
- Record companies invest in local talent and break it to a global audience. Domestic repertoire accounts for the majority of the Top 100 physical format album sales in all the industry’s major markets: USA (62%), Japan (77%), Germany (55%), UK (53%) and France (54%). Industry executives believe the industry will widen its revenue base in the future, expanding beyond the 10 countries where it currently makes 80 per cent of its revenues into new markets such as Brazil, China, India and Russia.
