Despite the rise of internet self-promotion, the record industry is in rude health, says Frances Moore.
Frances Moore The Telegraph 11/12/12
How has the internet changed the role of record companies? To many, it seemed the digital world would render record labels obsolete, in an age when artists could self-publish and self-promote their work. However, a new report we have published at IFPI today suggests a very different story. Far from marginalising labels, the internet has actually made them more important.
The core business of record companies is investing in artists in order to break them to large audiences. Globally, our industry spends $4.5 billion (£2.8 billion) annually on developing and promoting acts. Our report, entitled Investing in Music, outlines dozens of case studies with major artists including David Guetta, One Direction and Bruno Mars. It shows that, although the nature of the investment is fast-evolving, the backing of record companies is as vital to the careers of artists as it ever was.
How have labels stayed not just relevant but essential in the DIY age? First, they have refused to compromise on their core mission – developing new acts. Investment in A and R – artists and repertoire – has defied a declining world market, its share growing in 2011 to 16 per cent of global industry turnover. That is a higher percentage than the famously research-intensive pharmaceuticals industry spends on research and development, according to EU data.
Second, the role filled by record companies is skilled, costly and one which no other sector is prepared to play. It typically costs £1 million to break a new artist in a major market. This includes the advance, recording costs, tour support, video production and promotional campaigns. For all the success of the live music sector, there is no evidence of other parties than record labels willing to step forward and risk investing this kind of sum in an unknown artist.
There is another simple reason why labels are still healthily in business – artists continue to want record deals. They may have the tools to record, publish and distribute their own work, but they still want record labels as partners to support their professional careers. Of course the exact shape of the “deal” is evolving. Larger advances to new signings are harder to find, but at the same time labels have adapted their services to new areas such as brand partnerships, merchandising and live music where they share revenues with artists.
In our report we publish two surveys of unsigned artists, in the UK and Germany. Over 70 per cent say they want a recording deal. Most cite marketing support as the reason why – a powerful reminder of just how important the role of marketing is in the incredibly crowded market place of the internet.
One of the most significant trends highlighted in our report is the shift from mass media advertising to consumer-focused, digital-led marketing. Gone are the days when marketing campaigns were only about TV and print advertising. Labels today give artists the tools and support they need to develop deeper and more engaging relationships with their fans.
Finally, record companies have not just reinvented their relationship with the artist. They have done so with their consumers as well. Having long grappled with internet piracy, the music industry is now offering a fantastic range of high quality music services.
This, in turn, appears to be driving a much better outlook for the global market. Global revenues in the first nine months of 2012 were down 1 per cent – our smallest annual revenue decline in eight years. Spotify and other subscription services are drawing in millions of new customers each year. In Sweden, Spotify has helped fuel booming music sales. According to a Swedish independent producer quoted in our report, the music industry there is becoming a “a happy place to work again”.
The positive message from our report is that, for the music industry, the age of self-publishing has been more an opportunity than a threat. The partnership between artists who touch audiences with their talent and the labels that invest in them has evolved and endured.
As Keith Harris, manager of the great Stevie Wonder, captures it in our report: “There is an invisible line in this business between amateur and professional. Until someone has invested time and money in you – it could be an agent, manager or record company – you are on the amateur side of the line. And the truth is, no one is interested in an amateur. They’re interested in a professional”.
At the centre of this positive story, and underpinning all that record companies do, is copyright. Record labels’ continued investment in music reflects confidence in the future of the value of copyright. That is why we, and other creative industries, go to such lengths to ensure that copyright is properly respected and protected.
Frances Moore is the Chief Executive of IFPI, representing the recording industry worldwide