EMI’s Roger Faxon speaks…..

Matt Hartley 3/30/11 Financial Post/Canada

In the eyes of Roger Faxon, rumours about the death of the music industry have been greatly exaggerated.

On the one hand, the chief executive of EMI Group Ltd. understands the music business is in dire straits. In the Internet age, revenue for major labels such as London-based EMI are down across the board, record stores are closing and digital sales aren’t growing fast enough to keep pace.

On the other hand, new music production and sharing technologies have ushered in a golden age for music, one in which almost anyone can record a song and share it with the world. Quite simply, the integration of music into people’s lives has never been higher.

“Music isn’t dying; one way that the music business has operated is dying,” Mr. Faxon said in an interview during a visit to Toronto last weekend.

For the man who once served as chief operating officer of Lucasfilm — he oversaw the production of such films as Raiders of the Lost Ark, Return of the Jedi and Indiana Jones and the Temple of Doom — the  seismic changes afoot in the world of recorded music are nothing short of an adventure.

It wasn’t that long ago that the music business was dominated by four major record labels — EMI, Universal Music Group, Sony Music Entertainment and Warner Music Group — which controlled virtually all access to retail channels, radio play and effectively determined which artists and songwriters rose to the top of the charts.

But in a world where bands can gain a following on MySpace, where Facebook buzz speaks louder than any ad in Billboard Magazine, where labels are still wrestling with online file sharing and where an independent act such as The Arcade Fire can win the Grammy for Album of the Year, major record companies are finding out they now occupy a different role in the industry.

“It used to be that music was a scarce resource, that’s why people had to go and buy it” Mr. Faxon said.

“You bought it so that you could listen to it when you wanted to listen to it, so it became this collectible. It was precious. Now it’s ubiquitous … distribution is infinite in the digital age. The access to music is infinite.

“We can be the guideposts, but we can’t restrict the access. We used to be able to do that. That was a predicate of the old model. The world has changed and it’s been a difficult transition for the music business, but I actually think it’s for the better.”

While revenue from digital music sales grew to US$4.6-billion globally in 2010, digital still represents only 29% of total revenue for the music industry, according to data from the IFPI, the trade group representing the music industry. Making matters worse, less than 17% of the U.S. online population actually pays for digital.

Unfortunately for the music business, the digital revolution has cut the industry out of many of the value transactions that take place when music fans actually listen to Katy Perry or Drake. The challenge for the industry will be to convince other businesses — including Internet service providers and technology companies that generate revenue by offering products and services that allow fans to access music — to cut artists in on the action.

“The issue is whether or not the creators of that music participate in that economic activity,” he said.

“In my view, it’s government’s responsibility that those singular interests become a common interest. So you can create an environment where technological innovation is encouraged and there is broad and open access and there is the incentive for the creation of the content.”

While artists and record labels continue to experiment with various distribution methods and business models — including everything from online streaming services to promotions in which fans get digital downloads for free when buying vinyl records — Mr. Faxon is confident that as rate structures and compensation models work themselves out, music fans will have greater access to new services.

“One can see in a streaming world sufficient value for there to be a great business for the service providers, a great business for the underlying distribution structure and a great business for the people who create music,” Mr. Faxon said.

“There’s enough of a pie, if you will. That’s why I’m pretty optimistic. There is an economic model that works, and we’re in the transition to that. But there’s proof around the world that the pie is big enough.”


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