Archive for the ‘International’ Category

The hitmakers: why music pluggers are thriving in the digital age

April 30, 2018

Ludovic Hunter-Tilney 4/27/18

The hitmakers: why music pluggers are thriving in the digital age

Business is brisk for the men and women who hustle for radio airtime
My parents are never able to understand what I do,” James Passmore of Plugged In PR says before attempting the same feat of explication for the FT.
We are in his company’s office in Soho, central London. The room contains two desks. The other is occupied by Mr Passmore’s colleague, Mikey Lloyd. There are gold and platinum discs on the wall, a stereo and a cheerful dog called Rocky, named after A$AP Rocky, a US rapper and one of Plugged In’s former clients.
Mr Passmore, 33, and Mr Lloyd, 31, are record pluggers. “We take an artist’s music to radio stations on behalf of record labels or management and try to convince them to support that artist,” Mr Passmore says. The ultimate aim is to get a song on to the roster of 30 to 40 songs that play throughout the day on national UK broadcasters, such as BBC Radio 1 or Capital FM.
“At the start of an artist’s career it can just be ‘spot plays’, which are like one-off plays on specialist DJ shows,” Mr Passmore explains. “But as you build an artist’s career it becomes more strategic. You’re building towards playlist support and playlist rotation increase, trying to get from a C-list song to an A-list.”
Plugging is still a vibrant niche for entrepreneurs, relatively unscathed by the upheaval that has affected the rest of the music industry. This pivotal role in popular music goes back to the early days of radio in the 1920s, when big bands were feted acts.
Today it is a key strand in the promotional tactics used by record labels to drive a hit song. Digital teams target social media and street teams pound the pavements. Online and print press offices deal with websites and publications. All plug acts in the wider sense. But in the music industry the term refers to those who lobby for radio and television airtime.
Plugged In, which Mr Passmore set up in 2007, focuses on UK national radio (regional radio has its own network of specialist pluggers). Clients range from indie band Haim to rap group Migos. Among its current campaigns is up-and-coming singer Alice Merton, who is trying to crack the UK market with her single “No Roots”. Today, Mr Passmore and Mr Lloyd are waiting to learn if she has been playlisted by Radio 1. It turns out she has, which almost automatically guarantees a chart placing: the station has an audience reach of nearly 10m.
Their office is within walking distance of most of the UK’s national radio broadcasters. The stations usually hold formal meetings for pluggers to pitch songs to the producers and music teams who decide the weekly playlist.
“There might be something poignant to tell them,” says Mr Passmore. “Or it could be they’ve never heard of that artist but he or she has just sold out a large venue in their home town.”
Pluggers can pitch one or more songs in their 10-minute slot, one eye on the clock, the other on the pitchees’ reaction. It sounds pretty brutal. “Yeah!” Mr Passmore and Mr Lloyd say in unison.
They estimate there are about 20 other independent UK plugging companies working on national radio, as well as in-house plugging teams at record labels. “There is plenty of work to go around,” Mr Passmore says. “We turn down more than we take on.”
He came to the industry through work experience at a regional radio plugging company while studying for a commercial music degree. Mr Lloyd has a background in regional radio.
Much of a plugger’s daily routine is spent at the computer. But the core activity of meeting radio stations and persuading them to play a song is a throwback to a world of face-to-face business dealings.
“You’re basically trying to gain the trust of producers, DJs and programme controllers at record stations, so that when you bring in a brand new artist they’re going to take notice of it,” Mr Passmore says.
James Curran is director of music for national broadcasters Magic and Absolute Radio and their stable of nine subsidiary stations. Together they have a reach of 8.6m listeners. Like Radio 1, Absolute has decided to play “No Roots”.
Mr Curran’s music team sees pluggers on Monday afternoons in 15-minute appointments. “The whole process is about instilling confidence in the music programmer that a song has legs,” he says. “We want to be confident there is a story behind it. What makes it stand out from the crowd?”
A short walk away, Mel Rudder is sitting at a table in a stylish Soho café with a laptop and empty cup of coffee. Formerly a plugger at Atlantic Records, a subsidiary of the major label Warner Music, she set up her own company, Three Thirty Music, in 2016.
Whereas Plugged In pays about £2,500 each month for its Soho address, Ms Rudder is a nomad: “My job’s not nine to five so I’ve got to find places as and where I can. Wherever’s good WiFi, I’m there.”
Specialising in hip-hop, R&B and reggae, she has almost 30 campaigns on the go. “I’m super busy, it’s ridiculous,” she says. She left Atlantic because she wanted to work outside its roster of performers, a decision spurred by urban music’s entrepreneurial culture: “In the genres in which I work, a lot of artists are going out on their own.”
Ms Rudder works across radio and television. Live sessions are organised for acts to play in person for radio producers and music teams, a calling card with a personal touch.
The biggest change to plugging this decade is the rise of streaming services such as Spotify and Apple Music. Last year songs were streamed 68.1bn times in the UK, representing more than half the consumption of all recorded music.
In the pre-streaming age, the plugger’s job was to create an appetite for a song before it arrived in shops. Now they operate in a climate of instant availability. Following US practice, the industry has agreed a common code whereby songs are promoted on a so-called “day-and-date” basis. “The day that you put the record out to media is the day that it should be available,” says Ms Rudder. “People now, as soon as they hear a record they want it straight away.”
Music is the most technologically disrupted of the creative industries. Record labels are no longer the only route to releasing music. Acts can promote themselves on social media and get songs on to SoundCloud and Spotify. But Ms Rudder believes the plugger’s role will remain vital.
“There are a lot of artists that can do certain bits by themselves. But for a proper radio campaign, pluggers are still very much relevant. It’s probably one of the most standard things that happens. I don’t think plugging will change.”
‘Payola’ and plugging in the 21st century
Streaming is the new frontier for music promotion. “There are a lot of radio pluggers who are going into streaming plugging as well,” Mel Rudder of Three Thirty Music says.
The goal is to get songs on the playlists used by the likes of Spotify to present new music to listeners. With many employees at streaming services having radio backgrounds, pluggers know who to approach.
But this is a murky area. “It’s because it’s so new,” Ms Rudder says. “There isn’t a full process of how things work at the moment.”
Plugged In PR’s James Passmore is dubious. “I’ve heard of companies that claim they have streaming plugging departments, but I’ve also heard that streaming plugging is not a service that Spotify will acknowledge exists.
“We saw it as an opportunity when streaming happened so we’ve maintained those relationships, but we’re not about to risk upsetting Spotify by charging for a service that doesn’t exist.”

“Payola” — the practice of pluggers paying for songs to be played on the radio — was banned in the UK after a scandal in the late 1950s.
Streaming services fall outside laws prohibiting it. Spotify took a lead by banning playlist payments in 2015, but there are whispers of its persistence elsewhere in the world of music promotion. Spotify declined to comment on its policy towards pluggers, nor the effectiveness of its ban.
“I’ve heard rumours from the US that there’s still a little bit going on,” Mr Passmore says. Plugging’s new frontier has something of the Wild West to it.


How Countries Around the World Fund Music—and Why It Matters

June 27, 2017

by Marc Hogan 6/26/17

Courtney Barnett is a wise-cracking, guitar-mangling embodiment of what taxpayer support can do for a musician. In 2013, the Melbourne-based singer-songwriter was able to travel across the globe to play New York City for the first time thanks to support from the Australia Council for the Arts, a government agency. A year later, she was one of the first recipients of a new, state-sponsored grant that helped her record her debut album. When it came time to promote the results, 2015’s Sometimes I Sit and Think, and Sometimes I Just Sit, government money also went toward financing her South by Southwest showcase and a European tour. Along with gracing critics’ year-end lists and international charts, the record led to a Best New Artist nomination at the 2016 Grammy Awards.

Barnett counts herself lucky to have received these early fiscal shots in the arm. “Government grants gave me creative independence when I was starting out, because it meant I was worrying less about impressing for label and publishing advances, and I was less reliant on taking some big-company sponsorship to fund a tour,” she says. As well as nurturing Barnett’s artistic growth, the benefits were also deeply practical. Without government grants, she wouldn’t have been able to take advantage of offers to play Coachella and American late-night TV shows.

Barnett played SXSW 2015 under the banner of Sounds Australia, a nonprofit founded several years earlier to spread the word about music from Down Under. Sounds Australia has organized events with more than 500 Aussie acts, including Nick Murphy, Hiatus Kaiyote, and the Preatures. Its funding sources are a hodgepodge of public and private, federal and state. The goal isn’t charity: The Australian Trade Commission has a decades-long history of championing musical exports right alongside natural resources like coal or uranium, and researchers are currently investigating the value of the music Australia sends abroad.

Like Australia, many rich countries use public funds to nurture homegrown musical talent. The amounts are often paid out by federal arts councils that tend to prioritize traditional fine arts like painting and opera, while contemporary music frequently draws funds from public-private partnerships. Regional and municipal governments contribute, too. Though these webs of financial assistance for music can be complex, and unique from country to country, the overall impression is of a funding landscape increasingly driven by market forces as much as cultural ones. And the threat of an ax to these budgets is nearly always an election away.

Under President Trump, the relatively modest U.S. budget for arts spending—of the National Endowment for the Arts’ $148 million budget in 2016, only $8 million went to programs for music, including opera—is now on the chopping block. The downturn isn’t just happening in the States: More countries with generally higher levels of cultural spending seem to be acting more like America. It can seem more trivial than ever to worry about music spending when so many other issues are at stake. But in the countries with the strongest reputations for funding the arts, cultural expression, like other basic needs, is considered a universal right, not a privilege for the wealthy.

Sweden, which allocated nearly $220 million in funding to the arts last year—including at least $7.8 million for music—passed a law in 2009 that states: “Culture is to be a dynamic, challenging and independent force based on the freedom of expression. Everyone is to have the opportunity to participate in cultural life. Creativity, diversity and artistic quality are to be integral parts of society’s development.” The dozens of artists who received Swedish Arts Council funding for recordings the past few years include melancholic art-pop project El Perro Del Mar, cosmic groove explorer Atelje, and free jazz saxophonist Mats Gustafsson. And in Sweden, federal money accounts for only 45 percent of all public spending on culture; the rest comes from regional, local, and municipal governments. When they say everyone should be able to participate, they follow through with cash.

Scandinavia also shows that a rightward turn politically doesn’t have to lead to less arts funding. Norway, for instance, has been led the past four years by a center-right coalition government that includes, for the first time, a nationalist party of the type that has been on the rise in Europe lately. And yet Arts Council Norway’s funding for music has soared, from less than $19 million in 2011 to nearly $47 million in 2017, which is impressive for a country with only about 5 million people. Total government spending on music in Norway also grew, from $117 million to around $140 million.

“Whether we have a right or left government, there seems to be a consistency in the culture politics,” says space-disco luminary Hans-Peter Lindstrøm, who started receiving grants later in his career, once he had a team to help him apply for them. “Norway is one of the best countries in the world to live in, and the arts funding is an important part of the social democracy.” There’s no guarantee of funding from year to year, so Lindstrøm uses the money mainly to scale up a current project, whether by making a video, pressing more records, or doing better marketing. Other musicians receiving Arts Council Norway grants range from avant-garde experimentalist Jenny Hval to postmodern metal explorers Kvelertak.

Scratch the surface of these admirably lofty ideals, however, and economic interests aren’t far beneath. From ABBA to Max Martin, Sweden exports pop music like no other country, and its neighbors have surely taken notice. In Norway, there’s now more talk of supporting music as an industry according to Joakim Haugland, whose Smalltown Supertown label releases Lindstrøm’s records. Haugland welcomes more jobs being created in music and hopes the spending will also benefit more niche-oriented labels like his. Given Norway’s small population, Smalltown Supersound relies on exporting its music to bigger markets. “The funding that we have might look good for you guys,” Haugland says, referring to Americans. “But I would rather have the home market that you have instead of the funding.”

Some 1,000 miles to the west of Norway, Iceland is a curious case. With only about 330,000 people—roughly half the population of Vermont—the tiny island nation has long punched above its weight culturally, thanks to phenomena like Björk and Sigur Rós. And yet in 2014, Iceland’s parliament slashed its budget for the national body that funds art projects from $45 million to $25 million, spurring intense criticism from people across the creative spectrum. Still, total government spending on music in Iceland is around $9 million a year according to Sigtryggur Baldursson, a founding member of the Sugarcubes who now runs Iceland Music Export, a public-private partnership. Noting that newer Icelandic bands are more pop-oriented than its previous indie and experimental music staples, he says, “We’re trying to have music projects thought of more in the vein of startups.”

Surely the biggest of Iceland’s current batch of musical exports are pop-folk act Of Monsters and Men, whose 2011 album My Head Is Animal went platinum in America, among several other countries, and spawned the Top 20 hit “Little Talks.” The group never took grant money from the government, but to support its first North American tour, it did receive a financial boost of about $8,000 from the Kraumur Music Fund, which was underwritten by a private foundation and now exists as an annual prize for best album made in Iceland. “It wasn’t a ton of money when you’re talking about touring a foreign band in another country,” recalls Heather Kolker, Of Monsters and Men’s longtime manager, “but it helped.” Artists from Iceland, after all, can’t just hop in a van and hit the road. Kolker, who lived there for four years, says the country’s music really does play a part in boosting tourism. “The government should take it seriously.”

In North America, it’s hard to imagine a government-supported artist more prominent right now than Abel Tesfaye, the Canadian pop lothario best known as the Weeknd. Now a multiplatinum artist who has worked with everyone from Daft Punk to Kendrick Lamar, in August 2013 the Weeknd was already booked in overseas arenas ahead of his proper major-label debut album, Kiss Land. That’s when his management received almost $150,000 for marketing, promotion, and more. (Neither the Weeknd nor his management would comment for this story.)

The money came from FACTOR, a public-private partnership geared toward advancing the Canadian music industry. The Canada Council for the Arts, which funds classical music, awarded almost $21 million in music grants and prizes last year, as Prime Minister Justin Trudeau’s government sharply increased federal arts spending. FACTOR, with funds from the Department of Canadian Heritage and Canada’s private radio broadcasters, provided only about $11 million in funding, but that was mainly classified under folk, alternative, rock, and pop. A FACTOR grant financed the showcase gig that brought Majical Cloudz to the attention of Lorde, who later brought the Montreal duo on her North American tour. FACTOR also supported the making of Grimes’s Art Angels, as well as recent projects by Carly Rae Jepsen, White Lung, and U.S. Girls. In recent years, two of the larger Canadian provinces, Ontario and British Columbia, have also rolled out their own music funds.

If Scandinavian governments treat art as a right, Canadian officials seem to be buying into the idea that music creates economic value. “That’s been the big shift in thinking, from a cultural activity to an investment,” FACTOR president Duncan McKie explains. Likewise, and unlike the Canada Council, FACTOR is admittedly oriented toward commercial success. Where FACTOR is at least partly taxpayer funded, Canadian musicians have another, wholly private source of money available to them, too. Radio Starmaker, funded by the major commercial broadcasting companies, awarded about $6.6 million in grants last year, to Grimes, Majical Cloudz, Purity Ring, Fucked Up, and many other artists considered “rising stars.”

With so much funding available, and so much of an emphasis on sales potential, some grumbling about the Canadian process is inevitable. FACTOR alone has been criticized as insular and supportive of mediocrity, while Canada Council’s recent rollout of a new online grant platform was beset with glitches. But for many artists, even an imperfect system of funding would still be far better than no funding at all.

“If I didn’t get it I’d be making synth-pop,” jokes Owen Pallett, the violin-looping singer-songwriter, recurring Arcade Fire collaborator, and Oscar-nominated film composer. More seriously, Pallett contends that trickle-down economics, at least in artistic communities, actually works. Even when he has been playing to smaller crowds in out-of-the-way towns, he says, he has been able to pay his band what he considers a living wage: What they’d make if they were working in a bar at home. “Government funding for the arts is a mark of a successful civilization and should be maximized,” Pallett emphasizes. He’s less interested in nitpicking FACTOR’s funding choices than expanding them.

Grants can also keep artists afloat as they navigate the new economic realities of streaming. “Now the concept of putting even $10,000 into making a record is an expensive investment on something that probably isn’t going to return that much,” says Preoccupations guitarist and synth player Scott Munro, whose Calgary-based band has received FACTOR funding. “You’ll make money off radio play, but it’s definitely not like it was even 10 years ago. The granting system helps to ease that transition.” For a band on Preoccupations’ level—critically respected and able to play festivals worldwide, but not a presence on major charts—that money might mean being able to record in a better studio without going deep into debt or having to go back to holding down a regular job.

In country after country, government support for music, when not weathering cutbacks, seems to be growing more purely economically motivated. On the economic side is South Korea, which started a $1 billion investment fund for its pop industry in 2005. That led to the K-pop boom that reached cultural ubiquity with PSY’s “Gangnam Style.” Official documents show that the Ministry of Culture, Sports, and Tourism has allocated at least $6.7 million for music in 2017. However, the agency also found itself ensnared in the influence-peddling scandal that led to the impeachment of President Park Geun-hye; its CEO, Song Sung-gak, resigned last November amid embezzlement charges. And Chinese consumers have recently been boycotting Korean pop culture out of objection to a new missile-defense system.

Spain, on top of about $106 million in national funding for the music and dance industries, budgets about $5.5 million, at the national and regional level, for sending its music abroad. France, along with its $315 million in federal music funding, promotes acts like Christine and the Queens, Amadou & Mariam, Justice, Charlotte Gainsbourg, and more overseas (but not Daft Punk, who wanted to do things without state support). Portugal, a newcomer to music funding, recently set up the WHY Portugal export group as a public-private partnership.

As for cuts, Arts Council England had its overall budget slashed by 30 percent under austerity policies in 2010, though it has rebounded slightly since. That same year, the once-prolific Scottish Arts Council was replaced by Creative Scotland, an agency with a broader remit. But earlier this year, Creative Scotland’s current leadership warned of budget cuts.

America, in all this, is like an outlying planet with a powerful gravitational pull. Lacking grant funding, its music industry is inherently market-driven—and, despite the bottom falling out in the early 2000s thanks to digitization, hugely dominant: With $7.7 billion in U.S. sales last year, the domestic record business still accounts for almost half of the $15.7 billion global industry. Then there are the cuts: In March, as expected, Trump called for defunding the National Endowment for the Arts.

In response to the planned cutbacks, the artistic community has resorted to the cold logic of business. In an April essay called “What Good Are the Arts?,” David Byrne invoked the economic argument for arts funding: “Investment in the arts doesn’t cost us money—it makes us money!” Sure enough, New York City mayor Bill de Blasio’s office recently issued a report declaring that the city’s “music ecosystem” generated $21 billion in economic output in 2015. But an ecosystem can’t truly be measured in dollars; Byrne didn’t create the Talking Heads’ classic Remain in Light simply out of concern for Warner Bros. Records’ shareholder value.

When President John F. Kennedy championed public support for the arts, in a 1962 Look magazine article, he wrote that “the life of the arts, far from being an interruption, a distraction, in the life of a nation, is very close to the center of a nation’s purpose—and is a test of the quality of a nation’s civilization.” And when a song rewires how we see the world, makes us cry or helps us fall in love, music lovers don’t usually wonder if they should have put their time and money toward a well-diversified portfolio instead.

Funding the arts makes more sense if supporters acknowledge what it’s really about—being the type of country where basic rights, including free creative expression, are assured—rather than couching it in economic language that may only bore its intended target while alienating the cause’s natural backers. Advocacy for the arts could at least be artful.

“Even if cultural industries did not generate significant economic benefits—and they do—we would still argue the state should be funding art and culture,” says Don Wilkie, co-founder of Montreal’s venerable Constellation Records label. “In the western world at least, vast sums are continuously reallocated by the state in the service of corporate shareholders, but the culture industries arguably serve far greater numbers of citizens and surely are as worthy?”

All told, American musicians have advantages that artists in other countries don’t. And there are certain benefits human beings everywhere should enjoy. Music is one. The profit motive has of course resulted in plenty of profoundly great music, as fans of the Beatles and the Rolling Stones, Michael Jackson and Madonna, Rihanna and Kanye West—or, truth be told, most of today’s grant-funded musical exports—can attest. But public spending on art, for art’s sake? It’s still a test of the quality of a nation’s so-called civilization. As Courtney Barnett says: “Whoever pays the piper calls the tune, you know?”

U2 Producer’s Other Job: Selling CDs in Indonesia’s KFCs

April 4, 2017

By JON REGEN 4/03/17

Steve Lillywhite knows a thing or two about making music that sells. That six-time Grammy winning producer has worked on multiplatinum recordings with artists including U2, the Killers and the Rolling Stones.

Now Mr. Lillywhite is proving he knows how to sell music, too, although in a very unexpected way. He is the chief executive of Jagonya Music & Sport Indonesia, a company in Jakarta, Indonesia, that bundles recorded CDs with fast food at Kentucky Fried Chicken restaurants throughout that country.

At a time when the United States music industry has seen physical CD sales in free-fall — according to the latest report from the Recording Industry Association of America, 99.4 million full-length discs were sold in the United States in 2016, the fewest since 1986 — Mr. Lillywhite’s company, a subsidiary of KFC in Indonesia, sells 500,000 CDs a month alongside menu items like the Chick ’N Fillet sandwich and the Colonel Yakiniku Rice box.

“My job is basically like running a record label, except this record label also happens to sell chicken,” said Mr. Lillywhite, 62, who acts as a curator, choosing the music that goes into the Indonesian KFCs. (At the moment, the songs come exclusively from Indonesian artists, though he hopes to expand.) “Record companies pitch artists to me and I’ll say either ‘yes’ or ‘no.’ Or I’ll approach an unsigned artist and say, ‘I will guarantee you a slot in KFC if you sign directly with us,’” he said in an interview at Electric Lady Studios in Manhattan, while listening to a new U2 song he’s producing. The company orders CDs from a distributor and pays a percentage of the sales to KFC, as well as royalties to the artists.

Mr. Lillywhite’s journey from Englishman known for championing soaring choruses to creative guru of the Indonesian fried-chicken music market began six years ago, when he was asked to give a speech at a 2011 music festival in Singapore. He met some people who later invited him to produce music for the Indonesian band Noah. When he traveled to the band’s home to work on songs with them, “I immediately fell in love with the country,” he said.

“I loved the food, the people and the way they saw music as an experience. My synapses were overloading,” he added. “I imagined I would stay a year. I had nothing planned — I just thought I’d investigate the music.”

Mr. Lillywhite moved from Hollywood to Jakarta in 2014, and produced albums for artists like Iwan Fals, whose music he describes as “a mix of Springsteen and Dylan.” In March 2016, a mutual friend introduced him to Ricardo Gelael, director of PT Fast Food Indonesia, which owns 570 KFC outlets throughout Indonesia, as well as Jagonya Music & Sport, the company that places music in those restaurants. “He was looking to solidify and expand his company’s connection between CDs and chicken, as he realized he had become the new king of music distribution,” Mr. Lillywhite explained. When Mr. Gelael offered him a job to run and expand the company, Mr. Lillywhite immediately accepted.

“Steve has a proven track record in music as well as a love of Indonesia,” Mr. Gelael said in a text message. “So I thought he’d be the perfect person for the job.”

“CDs are still the No. 1 way to get music in Indonesia,” Mr. Lillywhite said, noting that a small percentage of the population has credit cards and internet connections are slow, hindering streaming. “In Indonesia, CDs are $4,” he continued. “And since nearly all of the record stores have closed down due to the cheap influx of pirated CDs, KFC is really the only place to buy them these days. People no longer go out to buy CDs on their own, but they do go out to buy chicken. And now buying a CD has become part of that experience. We even do concerts at KFC with some of our artists. So music and chicken have become intertwined.”

KFC has a more upscale reputation in Indonesia, where the flagship restaurants “are more like Hard Rock Cafes than fast food outlets,” Mr. Lillywhite said. Stores keep a display featuring 10 to 15 CDs on hand for browsing, and the cashier asks customers if they want a CD bundled with their meal. Mr. Lillywhite estimates that 98 percent of their music sales “are to people who go in to buy chicken but see the CDs and say, ‘Ooh, I’ll have a CD too!’”

When selecting music for KFC, Mr. Lillywhite draws on what he has learned “makes people’s emotions go wild.” He explained: “They love ballads, they love smooth jazz and they love to cry. I also always offer a kids’ album, as well as releases by big Indonesian artists like 19-year-old pop singer Rizky Fabian, the legendary rock band Slank and compilation albums too.”

He is considering a “duets” album pairing Indonesian and Western artists and a venture into streaming is also in the works. A smartphone app is starting this year.

Kasey Mathes of KFC public relations in Louisville, Ky., said that the company “doesn’t have any plans to bring this to the U.S. at this time.”

Whether or not this business model would work stateside is up for debate. “This is reminiscent of when quick service restaurants in the U.S. sold CDs of popular artists and compilations at a value price,” said Larry Katz, a music industry lawyer and the former senior vice president for business affairs at EMI Records, who once brokered a deal between EMI and McDonald’s that sold millions of CDs over a 30-day period in the mid-1990s. Considering the dominance of streaming in the United States, “Selling CDs at fast food restaurants here is likely a thing of the past,” he said, “but it’s not surprising that it still works in other areas of the world.”

John Burk, president of Concord Records — a company that experimented with placing CDs in Starbucks — said the concept “certainly has worked,” but also cited the rise of digital music as a deterrent now. “If you want to buy an album and put it on your phone, which is what most people want to do, it’s easier just to download it,” he said.

These days, while Mr. Lillywhite still takes the occasional trip to produce bands like U2, he is content in his new surroundings. “When I go into something, I go in feet first, with all my enthusiasm,” he said.

And what do the members of U2 think of his new venture?

“They think I’m barking mad,” he said. “Bono is obsessed with it. He’s always telling people: ‘Do you know what Lillywhite’s doing? He’s working for KFC!’”

Why Norway and the UK produce the world’s most valuable music fans

September 11, 2015

By Tim Ingham 9/10/15

Ask those in the record business about the markets that really matter to the global industry’s bottom line, and they’ll tell you about ‘the big three’.

A few years ago, that would have meant the US, Japan and the UK.

But these days, it’s the US, Japan and Germany – the outstanding trio in terms of annual cash spent on music.

Last year, across record sales, sync and performance rights, these nations generated $8.9bn between them, according to the IFPI.

To put this dominance in context, let’s look at the US alone.

In 2014, says the IFPI, the country’s record business attracted US $4.9bn – a third of the global business’s entire revenue.

The US haul was close to double the $2.63bn pulled in by Japan in 2014 and not far off quadruple Germany’s $1.4bn.

But here’s a bit of a shocker – the US market also turned over more than all of the following markets combined:
South Korea

[If you want to go really in-depth on the figures, MBW recommends picking up the IFPI’s Recording Industry In Numbers 2015 book.]

However, sheer brute size possibly isn’t the best way at evaluating the true value of these countries for the record business.

Another way to slice the pie is actually to investigate how much per person in each market is spending on music each year.

MBW has crunched the numbers of this per capita spend- dividing 2014 recorded music income in the IFPI’s Top 20 markets by the size of their population.

This tells us which music fans are really spending the most on records.

And it makes for a quite surprising list:
1.Norway: $23.58 per person
2.UK: $20.81
3.Japan: $20.64
4.Sweden: $19.75
5.Germany: $17.42
6.Australia: $16.26
7.USA: $15.36
8.Austria: $13.56
9.Switzerland: $13.39
10.France: $12.76

As you can see, Norway’s population, on average, shelled out US $23.58 on recorded music in 2014.

According to the IFPI, the Scandinavian country generated $119.9m from records last year – a spend driven by a population of just 5.084m people.

Brits can feel pretty chuffed with themselves, too. The UK market generated $1.334bn in 2014 – from a population of 64.1m people.

Germany may have overtaken the UK market in terms of revenue generation in 2011, but in terms of per-consumer spend, it’s more than $3 behind at $17.42.

And then there’s the other side of the story.

Those countries whose population – for a variety of economic, cultural and legal reasons – just aren’t pulling their commercial weight for the record business.

Below, you’ll find the sin bin of markets (in the world’s Top 20 biggest recorded music territories) whose per capita spend is the lowest.

It’s led by China; according to the IFPI, the 19th biggest recorded music market in the world, generating $105.2m in 2014.

But China also has the world’s largest population at 1.357bn people.

It’s a similar story in India (1.252bn people).

(Here’s an especially miserable stat about India, which generated just over $100m last year: according to the IFPI, subscription streaming revenue fell 42% in the country to $12.37m in 2014. Cash from free streaming? That grew 108% to $22.72m. Problematic.)
1.China: $0.07
2.India: $0.08
3.Mexico: $1.07
4.Brazil: $1.23
5.Spain: $3.87
6.Italy: $3.93
7.South Korea: $5.29
8.Canada: $9.74
9.Belgium: $9.93
10.Netherlands: $12.19

Note: All local currencies translated into US dollars at 2014 exchange rates

Apple makes more money every 3 weeks than the entire recorded music industry does in a year

January 30, 2015

Tim Ingham 1/29/15

As the world comes to terms with Apple posting the biggest quarterly profits in Wall Street’s history, it’s surely worth asking this question: just how much bigger is the iPhone giant than companies which the music industry considers ‘major’?

First, though, let’s explain that headline. Apple turned over US $75bn in its fiscal Q1, in the three months to December 27, 2014.

[Just take a moment to digest that. $75bn. That’s roughly the annual GDP of Jamaica, Iceland and Slovenia combined.]

Back to business… that gives Apple a mean average monthly turnover of $25bn.

According to the IFPI, the entire global recorded music business generated $15bn in 2013 – the last year we currently have on record.

In other words, Apple is making more money every three weeks than Universal Music, Sony Music, Warner Music, Beggars etc. combined manage to generate each year.

Let’s take a look at how Apple’s latest quarter stacks up against music’s biggest companies.

Universal Music group

Universal Music Group’s latest public quarterly results came in parent Vivendi’s Q3.

The French conglomerate reported the numbers by covering the nine months to the end of September 2014.

UMG – which owns Universal Music and Universal Music Publishing – posted revenues of €3.01bn, or $3.4bn, in the nine-month period, which averages out at a clean €1bn ($1.1bn) per quarter.

That means Apple’s turnover – wait for it – is around 75 TIMES that of recorded music’s biggest company.

It’s fair to note that because Apple’s results are hot off the press, they’re for the busiest consumer period of the year – the three months before Christmas – while Vivendi’s latest results cover quieter spring/summer/autumn months.

But as a rough guide, it certainly paints a telling picture. (Universal’s revenues in the whole of 2013 were €4.9bn, so its quarterly average income is slightly higher at around €1.2bn.)

In terms of net profits, I hope you’re sitting comfortably.

Vivendi posted a €442m net income in the first nine months of its latest fiscal year. That works out at around €147m ($166m) each quarter.

Apple notoriously posted a ginormous $18bn net profit for its Q1 this week, making its take-home quarterly income 108 times as big as the Universal parent’s average in 2014 so far.

One hundred. And eight. Times.

SONY MUSIC entertainment

We’re used to writing ‘Japanese technology giant’ or ‘Japanese entertainment giant’ when referring to Sony.

But, in reality, Apple now makes it look pretty weeny.

Let’s first look specifically at Sony Music. According to Sony Corp’s Q2 fiscal results for the three months to the end of September, 2014, Sony Music Entertainment – including Sony’s record company and its share of the world’s biggest music publisher, Sony/ATV – turned over $1.07bn in the quarter.

Handily, that’s basically the same as Universal.

Looking at Sony Corp as an entire entity – PlayStation, mobile phones, music, TVs and all – it turned over an impressive $17.5bn in its Q2.

Impressive, that is, until you realise that’s a tenth of the size of Apple’s revenues in its latest quarter.

Some ‘giant’…

And let’s have a look at the balance sheet. Apple, remember, posted that whopping $18bn net profit in its Q1.

In Sony’s Q2? A $1.24bn loss.



Warner Music Group is technically a private company, owned by Len Blavatnik’s Access Industries – who bought it in 2011 for $3.3bn.

But it still reports its quarterly figures publicly, giving us an insight into its fiscal health.

In its latest public quarter – its Q4, the three months to end of September 2014 – WMG turned over $771m.

That makes its quarterly revenue slightly smaller than both UMG and Sony Music Entertainment. And a LOT smaller than Apple’s record-breaking Q1.

97 times smaller, in fact.

As for profit/loss, Warner posted a net loss of $24m in its Q4 2014 (narrowed compared to Q4 2013’s $57m).

That might sound like loose change to Apple, but it still makes Warner’s latest balance sheet $18.02bn behind the Cupertino company’s.

Live Nation

Ah, we hear you say. But that’s all records and publishing. Everyone knows they’ve been hurting for more than a decade.

Live music. That’s what will give Apple a hiding. That’s where the big money is.

Well, yes, it is true that in Live Nation’s latest quarter – its Q3, in the three months to end of September 2014 – it did turn over more than double that of any major label group, with $2.5bn on its books.

Even relatively speaking, that hardly cuts Apple down to size.

The iPhone company’s quarterly revenue is still 30 times as big as Live Nation’s.

As for what’s left after expenses, Live Nation’s net profit in its Q3 stood at a healthy-sounding $115.8m.

We don’t need to tell you how far behind Apple that is.

How far behind Apple everybody is.

85 Percent of Music Sales in Japan are CDs

September 21, 2014

Hugh McIntyre 9/21/14
It’s a well known fact that CD sales have been going down, and fast, for some time now. Ever since people got the internet in their homes and learned what it could do, the downfall of the physical disc has been on it’s way, whether it be by piracy or iTunes. However, it appears that in an increasingly digital business, there is one place in the world where the physical still reigns supreme.

Japan, the world’s second largest music market, is completely obsessed with CDs. In fact, of all music sales in the country, 85% are CDs, whereas in other countries, digital is the leader, or in progressive spots where streaming has now taken over, such as Sweden. If that wasn’t enough of a surprise, digital sales in the country have actually been receding for years now, which is the opposite for much of the world (though not for the US, where digital sales dropped for the first time ever this past year). In fact, while online sales reached $1 billion in 2009, just four years later they raked in only $400 million—a massive fall in such a short time frame.

While it’s odd seeing almost anyone buying a compact disc these days, it is particularly strange that Japan would be leading the world in CD sales, as they are typically an early adopter when it comes to new technology. The country is often years ahead of other markets when it comes to new phones, computers, and the like.

The New York Times reports that there are perhaps two main reasons why this phenomenon is happening: a “protectionist business climate” in the music industry and a cultural love of collecting things.

The Japanese public seems to be wary of digital sales when it comes to music, and it’s hard to say completely why. It may stem from a lack of options in the sphere, which are being held back by big businesses. Not only is rights management very confusing in the country, making licensing deals difficult, but companies also aren’t too worried about venturing into the digital space at the moment. Spotify and Rdio, two of the biggest streaming options in the world, don’t have a presence in the country yet.

In countries like the US, the move to selling music digitally happened out of necessity. That’s where people had gone to find their music for free, and it was seen as the only hope for an industry bleeding profits. In Japan however, while CD sales are declining, they aren’t going down anywhere near as fast as they did elsewhere, and they still bring in big bucks.

On top of that, the Japanese have a true love of collecting things, and this can help spur sales. Many stores and artists run promotions that encourage fans to buy more than one copy of an album, such as including tickets or special artwork. Deluxe editions and greatest hits do especially well in Japan, compared to the US where they usually only convince a few die hards to spend the extra money.

Tower Records, one of many mighty CD store chains that disappeared as digital grew, is still alive and well in Japan, with all locations bringing in a combined $500 million in sales a year. In fact, when the brand filed for bankruptcy and went out of business in the US in 2006, there were 89 locations. In Japan, there are still 85 in business, and no end in sight.

CDs may be on their way out, but they aren’t dead yet. The discs still account for 41% of recorded music sales around the world, which total around $15 billion. Like vinyl, there may always be a subset of the market that wants what only CDs can offer: a plastic case, a disc, and a booklet to go with their music.

CD-Loving Japan Resists Move to Online Music

September 17, 2014


TOKYO — Around the world, the music business has shifted toward downloads and streaming. But in Japan, the compact disc is still king.

On a drizzly Sunday afternoon recently, Tower Records’ nine-level flagship store here was packed with customers like Kimiaki Koinuma. A 23-year-old engineer in a Dee Dee Ramone T-shirt, Mr. Koinuma said that, unlike most men his age around the world, he spends little time with digital services and prefers his music on disc.

“I buy around three CDs a month,” he said, showing off a haul of six new albums, including the Rolling Stones’ classic “Exile on Main St.” and an assortment of the latest Japanese pop hits.

Japan may be one of the world’s perennial early adopters of new technologies, but its continuing attachment to the CD puts it sharply at odds with the rest of the global music industry. While CD sales are falling worldwide, including in Japan, they still account for about 85 percent of sales here, compared with as little as 20 percent in some countries, like Sweden, where online streaming is dominant.

Kimiaki Koinuma, an engineer, with CDs he bought at Tower Records in Tokyo. “I buy around three CDs a month,” he said. Credit Hiroyuki Ito for The New York Times
“Japan is utterly, totally unique,” said Lucian Grainge, the chairman of the Universal Music Group, the world’s largest music conglomerate.

That uniqueness has the rest of the music business worried. Despite its robust CD market, sales in Japan — the world’s second-largest music market, after the United States — have been sliding for a decade, and last year they dropped 17 percent, dragging worldwide results down 3.9 percent.

Digital sales — rising in every other top market — are quickly eroding in Japan, going from almost $1 billion in 2009 to just $400 million last year, according to the Recording Industry Association of Japan.

Turning Japan around has become a priority for the global music business, which has struggled to regain its footing after losing about half its value since 2000, when digital technology began to disrupt the album-based business model.

But accomplishing change has been difficult, according to analysts and music executives in Japan and the West, in part because of a protectionist business climate in Japan that still views the digital business with suspicion.

Streaming music services like Spotify and Rdio, widely seen as the industry’s best new hope for new revenue, have stalled in efforts to enter Japan. Spotify, the biggest such player, has been stuck for two years in licensing negotiations with music companies in Japan, where homegrown pop idols by far outsell Western acts.

Ken Parks, Spotify’s chief content officer, said he was optimistic about his company’s prospects, and noted that the negotiating process was slow wherever it went. Spotify, which has more than 10 million customers in 57 markets around the world, negotiated with labels for almost two years before it arrived in the United States in 2011, for example.

“When the decision makers finally feel that the heat is intense enough that they have to do something different, they will,” Mr. Parks said. “I think we are approaching that moment in Japan.”
Others have doubts, pointing to the Japanese market’s devotion to the CD, which remains a primary source of revenue for record labels in the country, and an indispensable promotional tool.

Peculiarities of Japan’s business climate have shaped its attachment to the CD, but cultural factors may also be at play, like Japanese consumers’ love for collectible goods. Greatest hits albums, for example, do particularly well in Japan, perhaps because of the elaborate, artist-focused packaging. The hugely popular girl group AKB48 pioneered the sale of CDs containing tickets that can be redeemed for access to live events — a strategy credited with propping up CD sales, because it can lead the biggest fans to buy multiple copies of an album.

Tower Records closed its 89 American outlets in 2006, but the Japanese branch of the chain — controlled by NTT DoCoMo, Japan’s largest phone carrier — still has 85 outlets, doing $500 million in business a year.

At Tower’s flagship store, in the heart of the skyscraper-lined shopping district of Shibuya, a group of preteen girls called Kokepiyo performed for fans and autographed CDs one afternoon last month, while their mother-managers watched protectively. Outside, an 18-year-old student who gave her name as Yuria had come to Tower to see her favorite band, the Lotus. She carried a bag full of merchandise she had bought at the store, and said that she frequently buys multiple collectible copies of CDs.

“Each store has its own freebies to give away to sell more CDs,” Yuria said. “So it all depends on how good they are.”

In the United States, digital sales have long since overtaken physical ones. But CDs still account for 41 percent of the $15 billion recorded music market worldwide, and, in addition to Japan, some big markets like Germany remain reliant on CD sales. That attachment worries some analysts, who contend that if those countries do not embrace online music, an inevitable decline in CD sales will further damage the industry.

“If Japan sneezes and Germany catches a cold, that’s it — we’re done,” said Alice Enders, a media analyst with Enders Analysis in London.

A distinctive business ecosystem in Japan has kept CD sales lucrative for music companies. Pricing restrictions on retailers keep the cost of most new CDs at more than $20. In the mid-2000s, a nascent download service, Recochoku, was tethered to Japan’s expansive cellphone market, but that system collapsed once the country moved on to smartphones like the iPhone.

Part of the problem, executives say, is the complex array of companies that control rights to the most popular music in Japan, which have been very slow to license new services.

Sony’s Music Unlimited, for example, is the largest available streaming service in Japan, but it lacks the most popular hits there. (Sony declines to say how many subscribers it has to Music Unlimited, in Japan or elsewhere.) Apple’s iTunes store arrived in Japan in 2005, but only in 2012 did it begin to sell the Japanese music titles of its hardware rival Sony.

Executives in Japan and the West blame an overly cautious Japanese music industry for not adapting, and serious worries remain about Japan’s ability to recover from its losses last year.

“A substantial amount of senior management is worried about what happens on their watch, but not necessarily worried about what happens after that,” Shigeo Maruyama, the former president of Sony Music Entertainment Japan, said in an interview.

This year, things in Japan are looking slightly better. In 2013, there were no million-selling albums, but this year there have been two: a Japanese version of Disney’s “Frozen” soundtrack and the latest release by AKB48. Yet in the first half of the year sales were still down an additional 3 percent compared with a year earlier.

“The Japanese record companies’ hope is to maintain the current size of the physical market, and to try to make the digital market grow again by licensing new digital services,” said Yoichiro Hata a director of the Recording Industry Association of Japan.

For the rest of the struggling global recording industry, that growth cannot come soon enough.

“It’s inevitable that this market comes back to growth,” said Mr. Grainge, of Universal. “What I’m not going to predict is when.”

Mexico is undergoing a streaming music revolution

September 2, 2014

Tim Ingham 8/29/14

Mexico is undergoing a streaming music revolution

Revenues generated by streaming music services in Mexico have exploded in the past 12 months – up a staggering 130% year-on-year in the first half of 2014.

According to new figures from the Mexican Association of Phonographic Producers (Amprofon), analysed by Music Week, income to the local record industry from streaming services more than doubled to around 175 million Pesos (£8.0 million) in the six months to June 30.

That was enough to claim a 41% share of total digital music sales, which were up 14% on H1 2013, pulling in 428 million Pesos (£19.7m) overall.

Streaming services legally available in the territory include Spotify, Deezer and Rdio.

In total, the Mexican record industry generated revenues of 724 million Pesos (£33.3 million) in the six months, of which 59% were digital.

In turn, 59% of those digital revenues were accrued from sales. Of these, single tracks claimed 29%, albums 15%, mobile content 8%, ringtones 5% and music videos 1%.

That means 41% of record music’s overall revenues were claimed by physical formats, showing the continued strong position of the sector in Mexico.

83% of these sales of physical music were on CD; 12% were on DVD audio; 4% on DVD video; 1% was claimed by a combination of vinyl, cassettes, mini discs and Blu Ray.

More than a third (34%) of physical sales were claimed by Mexican artists. Just 29% were made up of ‘international anglo’ – i.e. non-Mexican English speaking artists.

Previously notorious as a hotbed of piracy, according to IFPI figures the Mexican record market increased in value by 17% between 2008 and 2012.

However, the annual market in Mexico fell by 4.4% in 2013 to total $135 million (1.76bn Pesos; £81.28m).

Taking into account the territory’s worth in the first half of 2014 – 724 million Peso (£33.3m) – would suggest the country’s overall 12-month value is once again likely to slip slightly this year.

The machine behind Taylor Swift

January 21, 2014

Paul Sexton Financial Times 01/20/14

Country music has sometimes ignored international markets. When Scott Borchetta signed up the 15-year-old Taylor Swift, however, he envisaged her winning fans thousands of miles beyond Nashville.

“I was always fascinated by artists that could appeal globally,” he says. “So my goal with Taylor from the beginning was that she was going to be a global superstar.”

Almost a decade later, Mr Borchetta, president and chief executive of Big Machine Label Group, has very much achieved this ambition. Ms Swift, now 24, is now one of music’s biggest stars, having sold almost 30m albums of country-tinged pop, more than 6.5m of these outside the US.

Her latest world tour, which involved nearly 70 North American performances, arrives in London for five arena shows next month, with a further night in Berlin. She is also nominated in four categories at next Sunday’s Grammy Awards.

“We started the label in 2005, and Taylor was my first signing, so that was a good day,” Mr Borchetta says, with some understatement.

The success of Ms Swift and other signings such as The Band Perry and Rascal Flatts has made the innovative Big Machine one of the most successful independent music groups in the US, at a time when the domestic market share of “indies” has risen to almost 35 per cent in spite of broader record company consolidation.

Mr Borchetta says: “We were able to attain momentum quickly, and to add great executives and great artists. We have three labels in the group, a publishing company and merchandising, and there’s a lot of other branding opportunities. But if we don’t have great music, nothing else matters.”

Born in Burbank, California, 51-year-old Mr Borchetta has the music business in his blood. He followed his father into record promotion, moving to Nashville and progressing to MCA Records, where he marketed such artists as Reba McEntire and Trisha Yearwood.

Even when he moved to an executive role at another big label, DreamWorks, he continued a parallel passion for car racing, even becoming a Nascar truck champion.

Off the track, Mr Borchetta has shown a similar boldness in the outspoken position he has taken on one of the most sensitive industry issues.

Most labels embrace, or at least accept, the now palpable swing away from track and album downloading towards streaming, via services such as Spotify and Deezer.
“I have real concerns with the biggest companies licensing their catalogues to any streaming service that switches on”

Mr Borchetta, however, is wary that they might be cannibalising sales, and is not shy of acting accordingly.

When Ms Swift’s most recent studio album Red was released in the autumn of 2012, it remained unavailable on streaming services for well over six months.

The decision was described as “flat out stupid” on one technology website, and some of her fans, already immersed in streaming culture, were similarly upset.

The decision looked substantially less questionable when Red sold 1.21m copies in its first week in America alone, the biggest opening tally there for more than a decade.

“I have real concerns with the biggest companies licensing their catalogues to any streaming service that switches on,” says Mr Borchetta. “I think that devalues music, and so it’s really important that record companies and content providers around the world make sure that we’re holding on to . . . value. It takes a lot of time and effort and money and talent to do this, and if we start giving it all away for fractions of pennies, we’re not going to be able to do it any more.”

Ms Swift’s pre-eminence in the market enabled her label to withhold those digital rights from the streaming services. Why rush to embrace Spotify when tracking company Nielsen SoundScan reports that digital sales of her tracks in the US now total 68m?

Nevertheless, Big Machine’s decision to stream or not to stream is taken on a case-by-case basis. Its newer breakthroughs, such as the pop-leaning country duo Florida Georgia Line, have enjoyed massive US success in streams, as well as downloads and CD sales.

Mr Borchetta made another bold move in 2012, when he agreed a groundbreaking deal with the largest owner of radio stations in the US, Clear Channel.

US radio stations have traditionally paid a royalty to songwriters and the music publishers that represent them for using their music, but performers received nothing, unless it was played online.

Ms Swift writes all of her material, occasionally in partnership with other composers, so was earning the songwriter royalty but nothing as the recording artist.

The deal with Clear Channel means that Big Machine and its performers are now paid a proportion of the broadcaster’s advertising revenue when it plays their music through conventional radio too.

Clear Channel’s concession on a point that has long been controversial for musicians was seen as a way of limiting the royalties incurred by its growing online business at the cost of paying more for its traditional broadcasting.

Other label owners, including Warner Music, have since made similar pacts with Clear Channel to secure these performance royalties.

The trendsetting Big Machine, meanwhile, has persuaded other radio groups to follow Clear Channel’s example. “I believe most broadcasters know that performance royalties are part of the future, as more and more are or will be broadcasting digitally,” says Mr Borchetta.

Some commentators have interpreted the more pop-flavoured recordings in Ms Swift’s output as an attempt to outgrow country music. Mr Borchetta denies the allegation, but makes no apologies for attempting to reach the widest possible audience with all of his artists.

“While her music has definitely become more worldly, she lives in Nashville and there’s always going to be a sense of that running through her music. I encourage her to make what she wants to make, so the next record could be anything from pure pop to bluegrass, who knows.”

Big Machine’s three labels enjoy the benefits of a distribution deal with Universal Music, whose chairman and chief executive Lucian Grainge praises Mr Borchetta effusively.

“Scott is that rare executive who combines great creative instincts with the focus and discipline of a successful entrepreneur,” he says.

But even as it straddles the divide between indies and majors, the company is the frequent subject of rumours that it will be sold. Mr Borchetta declares that this would only happen for “an outrageous sum which also absolutely guaranteed our independence operationally”. He adds: “I don’t see that offer coming in.”

Country roads lead overseas for Nashville signings

Scott Borchetta, Big Machine’s president and chief executive, says it became obvious to him in 2008 that cracking foreign markets would require a big commitment by the label and its star act, Taylor Swift.

The realisation came when he visited London that year to strike an international distribution deal with Universal Music Group. Ms Swift has subsequently gone abroad at least three to four times a year.

That deal was overseen by Lucian Grainge, now chairman and CEO of UMG, and by Max Hole, now chairman and CEO of UMG’s international division. Mr Grainge says Mr Borchetta has “transformed Big Machine into a global music powerhouse”.

As The Band Perry and Rascal Flatts prepare to return to Europe, Mr Borchetta is targeting an international audience for another Big Machine signing, a Southern rock band called the Cadillac Three.

“We have a mantra here that we’re right until proven wrong,” he says. “I want to give [international] listeners a chance to decide, and if they tell us, ‘You know what, we don’t like that,’ then OK, we’ve got it. I tell my artists all the time: ‘If you want to go just once, go on vacation. If you’re not going to come back, they’re going to forget about you.’”

CDs Rule Japan’s Music Market, Thanks to Girl Groups and Add-Ons

July 4, 2013

Mariko Yasu Bloomberg 07/03/13

Ritsuhiko Tajima has about 100 CDs by his favorite artist, Japanese girl group AKB48, many of them copies of the same disc. The attraction? The CDs often include tickets to events where he can briefly meet his idols. “I don’t think I’ll ever get tired of them,” the 28-year-old nursing assistant says as he waits at the group’s Tokyo theater for a monthly sale of limited-edition photos of its members. “They’re pop stars that I can come visit.”

Fans such as Tajima helped increase music sales to consumers in Japan by 3 percent last year, to $4.3 billion, surpassing the U.S. to become the world’s biggest market, according to the Recording Industry Association of Japan. Japanese consumer music revenue rose in 2012 for the first time in five years, led by tunes delivered on CDs and other physical media, bucking a trend in the U.S. and other Western markets as cheaper downloads gain ground.

Physical media—preferred by some music companies because they’re less subject to pirating than digital downloads—made up 80 percent of Japanese music sales last year, vs. 34 percent in the U.S., according to the International Federation of the Phonographic Industry. Japan’s record companies boost sales with add-ons, and revenue gets a further lift from artist-related tchotchkes such as posters, key chains, and tote bags. “Japanese people tend to want to possess goods,” says Shigeto Shoji, a director in the recording association’s planning department. “CD jackets and lyrics add value for domestic consumers.”

Much of Japan’s strength can be attributed to acts such as AKB48, whose miniskirted members perform in three groups of about 20 each at the 250-seat theater above a discount store in Tokyo’s Akihabara district. Formed in 2005, AKB48 is the nation’s top-selling girl group, spawning three sister acts in Japan and two abroad. Sony (SNE), which has the second-largest share of Japan’s music market, started a rival group called Nogizaka 46 last year to compete with AKB48, a Sony act before leaving in 2008 for King Record. “Sony Music is betting its future to grow this idol group,” Yasushi Akimoto, the lyricist and producer for Nogizaka 46, and producer of AKB48, says on the Nogizaka website.

Behind the success of Japan’s girl groups is “a drastic change in relationships with fans by involving them in the star-making process,” says Hideki Take, a music commentator and disc jockey in Tokyo. After being chosen in amateur auditions, prospective members perform in small theaters where fans vote on who will be featured, à la American Idol. “Unlike most stars selected by executives at recording companies, it’s a fan-centered system,” Take says. “The fans feel they are part of the success.”

One fan, Yuka Kimura, traveled more than an hour from Tokyo for an AKB48 handshake event in Chiba prefecture. She had 10 tickets from 10 identical CDs that she bought for 1,000 yen ($10) each, which let her line up multiple times to meet her favorite singers—though each encounter lasts less than five seconds, and no photos or autographs are allowed. “It’s worth paying the price,” Kimura says. “Even just for a few seconds, I get to meet my favorite member, and that’s fun.”

The girl group AKB48 has become a cultural phenomenon, with its own theater and plenty of swagPhotograph by The Yomiuri Shimbun/AP ImagesThe girl group AKB48 has become a cultural phenomenon, with its own theater and plenty of swag

AKB48’s singing and dancing teens are divided into three teams—A, K, and B—that rotate performances every evening. Several times a year they also do tours where thousands of followers gather at convention halls across Japan for a chance to briefly meet their girl-band idols.

Nogizaka 46 is following a similar script, part of an effort by Sony to shore up domestic sales that have fallen in spite of the industry’s strength. Sony says its Japan music revenue dropped to 167 billion yen ($1.7 billion) in the year ended March 31, from 174 billion yen a year earlier. The company had a 14.4 percent share of the country’s music market last year, 0.5 points behind Avex Group Holdings (7860), according to researcher Oricon (4800).

Analysts warn that the revival of Japan’s music market could be short-lived. Sales of music delivered on physical media dropped 6 percent in the first five months of 2013 from a year earlier, according to the Recording Industry Association. And the U.S. still accounts for more total music-related revenue when the data include subscription and streaming service fees and licensing for films and ads. “We may appear to be in better shape than other markets, but music companies here aren’t feeling optimistic,” says Yusuke Nakagawa, president of Asobisystem, a talent agency.

The challenge for Japanese music companies is creating fan loyalty elsewhere, says Damian Thong, an analyst at Macquarie Group (MQBKY) in Tokyo. AKB48’s backers have launched groups in Shanghai (SNH48) and Jakarta (JKT48) to extend the franchise. “AKB48’s innovation was not, in a sense, making new music but in creating a new kind of immediacy and new kind of connection to the fan base,” Thong says.

Nogizaka 46 still has a long way to go before catching AKB48. Sony’s group sold 303,474 CD singles of its biggest hit, Seifuku no Mannequin, or Mannequin in Uniform, in the first half of this year. That was dwarfed by AKB48’s Sayonara Crawl, the No. 1 release, which sold 1.9 million copies. (That’s almost double the total number of CD singles sold in the U.S. in all of 2012, according to data from the Recording Industry Association of America.)

Sony auditioned 38,934 girls to select 33 members for the Nogizaka group. The company is adding 13 new members this year after a second round of auditions in May. Among the stars fans can meet is 16-year-old Erika Ikuta, a front-line performer who says she enjoys shaking thousands of hands a day. “At these events, I learn my fans are paying so much more attention to me than I could ever imagine,” Ikuta says before the group’s dance practice at Sony Music’s Japan headquarters. “It gives me a supportive push.”

The bottom line: With girl-group fans buying multiple copies of CDs, music sales in Japan grew 3 percent last year, to $4.3 billion.