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Cuban Music Industry Development and Marketing Plan

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Cuban Music Industry Development and Marketing Plan UNCTAD/WIPO JOINT PR OJECT DEVELOPING COUNTRIES BECOMING A GLOBAL PLAYER: OPPORTUNITIES IN THE MUSIC INDUSTRY Expanding Economic Potential of Developing Countries: the Music Sector in the Caribbean Region Cuban Music Industry Development and Marketing Plan October 2001 All Figures and Other Material Subject to Checking CONTENTS Page No. 1. INTRODUCTION AND BACKGROUND 1 - 2 2. ECONOMIC ISSUES IN DEVELOPING THE CUBAN MUSIC INDUSTRY 3 – 4 3. ECONOMIC ELEMENTS OF TH E CUBAN MUSIC 5 - 19 4. INTERNATIONAL MARKETS FOR MUSIC 20 - 27 5. TOURISM IN CUBA AND ITS POTENTIAL LINKAGES WITH MUSIC 28 - 31 SECTOR 6. RECOMMENDATIONS FOR A PLAN TO EXPAND INTERNATIONAL 32 - 57 REVENUES FROM THE CUBAN MUSIC INDUSTRY TO INCREASE ACCESS TO FOREIGN MARKETS References Glossary/Abbreviations APPENDICES Appendix 1: Programme for Consultants Visit to Cuba in September 2000 Appendix 2: Selected Illustrative Examples of Individuals Interviewed during Pr ogramme Appendix 3: Details re ABDALA Recording Studio Appendix 4: Details re EGREM Appendix 5: Official Database on the Economic Significance of the Cuban Music Industry 1. INTRODUCTION AND BACKGROUND This report on the Cuban Music Industry makes recommendations for a development and marketing plan for this important sector of the Cuban economy. The Cuban Development and Marketing Plan Report is part of the UNCTAD/WIPO research/study project entitled, Developing Countries Becoming a Global Player : Opportunities in the Music Industry: Phase I of Part I: Expanding the Economic Potential of Developing Countries: The Music Sector in the Caribbean Region. Within the framework of this wider study the objectives of this report are as follows: (i) To re view the available information concerning the development of the Cuban music sector, its international marketing and current policies towards the sector; (ii) Based on the above and the field work carried out in Cuba in September 2000, to prepare the inte rnational marketing plan for the Cuban music industry; (iii) Following the mission to Cuba, this report has been prepared and encompasses a plan to expand international revenue from the sector and includes recommendations on how to increase access to fore ign markets. The study is of particular importance given the unique talents in the Cuban music sector which is evident (See Table 1.1). Cuba has developed an impressive international reputation in many forms of music including rhythmic dance music such as Mambo, Changui, Rumba, Chachacha, Son and Danzon as well as in the area of classical music and opera. Table 1.1 Indication of Scale of Musical Talent in Cuba • 12,000 – 15,000 Professional Musicians • 4,000 Subsidised Classical Musicians • 2,300 Musical Groups • 7,000 Registered Composers Source: UNCTAD/WIPO Project, 2001 Forthcoming, Full Reference (Title of Project) to be added. Sources Include: The Institute of Music (Instituto de la Musica), The Ministry of Culture and Information obta ined from UN Field Interviews September 2000 1 Despite the success of Cuban music, major questions remained over its economic significance and ways in which Cuba and the sector could expand international revenues. This is the focus of this report. The report is structured as follows: Section 2 reviews some economic issues in developing the Cuban music industry and in the following section for the first time an overview is presented of the economic elements of the Cuban music sector. This is essential in preparing a marketing plan for the industry which would maximise its economic significance. Section 4 offers a review of aspects of the international markets for music. In the following sector a review of tourism in Cuba and its potential linkages wit h the music sector is presented. This is of particular importance given the analysis of the various areas of market opportunity for the Cuban industry. Finally, section 6 proposes recommendations for consideration by the Cuban authorities for a marketing development plan to expand international revenues. Cuba has historically provided significant support for the music sector. This was part of large investment in the arts and culture which was seen as a public good for the people of Cuba. Support for th e arts and culture has historically represented an important share of Cuba’s national budget. Until recently the economic potential of the music sector was not the focus of policy but this has been changing slowly. 2 2. ECONOMIC ISSUES IN DEVELOPING TH E CUBAN MUSIC INDUSTRY The economic issues which are relevant to the development of the Cuban music industry relate to the challenge of developing a high skilled international export oriented services sector. The practical and marketing issues are dealt with in subsequent chapters but it is necessary to present this within the framework of a wider economic context. The main economic issues in developing such sectors has been examined within the analytical framework of UNCTAD 2001 paper dealing with the expansion of audio - visual services in developing countries. 1 Developing countries could better reap the benefits offered by growing cross -border flows of trade and capital by the development of new trading opportunities based on the development of dynamic comparative advantage. Many of the activities that bring such competitive advantage, tend increasingly to be located in the service sector, and within that, on activities that rely heavily on intellectual property. Among these, the share of cultural industries generally, and the music industry in particular, is growing. Cultural industries sector represent a major new trading opportunity for many developing countries, with new challenges and opportunities for strategic integration into the global economy . The music sector represents a case of a high value, knowledge-based industry, with low initial entry barriers, where developing countries could expand relatively rapidly on a global basis. There are, however, significant barriers to market penetratio n. The purpose of this report is to assist the Cuban industry to implement policies and initiatives to overcome these barriers. 1 See Expanding Audio -Visual Services in Developing Countries Through the Copyright with special reference to The Music Industry in the Caribbean Region by Dr. Zeljka Kozul -Wright of DITE, UNCTAD and Mr. Varius James. 3 It is also important to develop sustainable employment and income in “linked” industries that rely on the use of music products, such as tourism, dance festivals, restaurant selling local cuisine, information technologies, radio, television and other broadcasting activities etc. and some backward linkages could also be strengthened in the supply chain to complementary industrie s that supply resources for the music industry, including the information technology sector. The marketing plan for the sector presented in this report takes account of such linkages particularly in relation to the tourism sector and implicitly in relatio n to IT sector. In developing a marketing plan for the Cuban music industry it is necessary to take account of the economic characteristics of music which is characterised by the following features: (i) Music is an intangible: the music product is base d on musical ideas relying on creativity and talent as the basic resources but its expression is tangible (in sound, recordings, films); (ii) Music is a joint product; it is produced collectively and can be consumed collectively; (iii) The production of music involves significant fixed costs; (iv) The music products have a very short product cycle, implying higher degrees of innovation and hence instability, (UNCTAD,2001). The marketing and development plan presented in this report recognises the need to design institutional approaches which accommodate these special product characteristics. 4 3. ECONOMIC ELEMENTS OF CUBAN MUSIC SECTOR In designing ways to expand international revenues from the Cuban music industry it is essential that all of the components of the sector are identified and that the inter linkages between the sub-sectors of the industry are recognised and are developed. An outline of the main economic components or elements of the Cuban music sector is presented below (See Table 3.1). This focuses on existing and potential sources of foreign exchange. The proposed analytical framework may be of value in developing on-going marketing plans and in planning ways to expand international revenues from the Cuban music sector. A too limit ed consideration of the economic value of the music sector and its linkages would result in a failure to maximise the economic contribution of this sector. Table 3.1 Summary of Main Existing and Potential Economic Components of Cuban Music Sector 1. REVENUE FROM COPYRIGH T MUSICAL WORKS BY CUBAN WRITERS AND COM POSERS 2. INCOME FROM OVERSEAS RECORD COMPANIES 3. REVENUE FROM EXPORTS OF CUBAN RECORDED MUSIC 4. MUSIC RELATED INCOME FROM TOURISTS 5. MUSIC RELATED MANUFAC TURING INCOME 6. OVERSEAS PE RFORMANCE INCOME FOR CUBAN MUSICIANS 7. OVERSEAS INCOME EARNE D BY CUBAN MUSIC CONTRACT WORKERS 8. RENTAL INCOME FOR USE OF CUBAN STUDIOS /FACILITIES 9. OVERSEAS EDUCATIONAL AND TRAINING INCOME Source: UNCTAD/WIPO Project, 2001, Forthcoming 5 Eac h of the main economic components of the Cuban music sector are reviewed in some detail as this is the foundations for any effective marketing development plan for the sector. Revenue from Copyright Musical Works An important untapped source of foreign e xchange for the Cuban economy is the revenue from copyright musical works by Cuban songwriters, lyricists, composers, publishers and performers. The value of IPR -related income has grown significantly for Cuba but is still relatively modest. Consensus holds that there is significant potential for a rapid expansion in this source of revenue. An example of the potential growth in this revenue can be seen from table 3.2 below which shows the growth in intangible royalty income from two markets over a very short period. This shows that royalty income from Spain grew by 743 per cent between 1996 – 1999 and by 303 per cent from Japan over this period.
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