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Music Industry

Music Industry

Market Review 2010

Second Edition, February 2010 Edited by Katie Hughes

ISBN 978-1-84729-579-8

Music Industry

Music Industry Foreword

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Music Industry Contents

Contents

Executive Summary 1

1. Industry Overview 3

REPORT COVERAGE...... 3 Report Background ...... 3 ECONOMIC TRENDS...... 4 Population ...... 4 Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years 2004-2008 ...... 4 Gross Domestic Product ...... 4 Table 1.2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2004-2008 ...... 5 Inflation ...... 5 Table 1.3: UK Rate of Inflation (%), 2004-2008 ...... 5 Unemployment...... 6 Table 1.4: Actual Number of Unemployed Persons in the UK (million), 2004-2008 ...... 6 Household Disposable Income...... 6 Table 1.5: UK Household Disposable Income Per Capita (£), 2004-2008 ...... 6 MARKET SIZE AND SEGMENTATION...... 7 Table 1.6: The UK Music Market by Sector by Value (£m at rsp), 2005-2009 ...... 7 Figure 1.1: The UK Music Market by Sector by Value (£m at rsp), 2005-2009 ...... 8 INDUSTRY STRUCTURE...... 9 MARKET SHARES...... 9 MARKET POSITION ...... 10 Table 1.7: Popular Leisure Activities in the Home (% of adults), 2008 ...... 10 KEY TRENDS ...... 11 LEGISLATION...... 12 ‘Digital Britain’ ...... 12 KEY TRADE ASSOCIATIONS...... 12 British Recorded Music Industry ...... 12 International Federation of the Phonographic Industry ...... 12 UK Music ...... 13

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2. PEST Analysis 15

POLITICAL FACTORS ...... 15 ECONOMIC FACTORS ...... 15 SOCIAL FACTORS...... 15 TECHNOLOGICAL FACTORS ...... 16

3. Key Note Primary Research 19

ATTITUDES TO MUSIC ...... 19 Table 3.1: Consumer Attitudes to Music and Its Role in Consumer Lifestyles (% of adults), 2006 and 2009 ...... 19 THE CORE MUSIC CONSUMER ...... 21 Table 3.2: Daily Listening to Music at Home or in the Car and Music ‘Hobbyists’ by Sex, Age and Social Grade (% of adults), 2006 and 2009 ...... 21 FAVOURITE ARTISTS ...... 23 Table 3.3: Favourite Artists or for a Desert Island (% of adults), 2006 ...... 23 MUSIC IN HOME LEISURE ...... 25 Table 3.4: Popular Leisure Activities in the Home (% of adults), 2006 and 2008 ...... 25

4. Competitive Structure 27

THE MARKETPLACE ...... 27 RECORDED AND PUBLISHED MUSIC COMPANIES ...... 27 ...... 29 Table 4.1: Universal Music Group Financial Results (€m), Years Ending 31st December 2006-2008 ...... 31 Music ...... 31 EMI Group...... 34 ...... 36 OTHER MAJOR COMPANIES IN THE MUSIC SECTOR...... 38 Apple Inc ...... 38 HMV Group...... 39 Live Nation...... 40 Table 4.2: Live Nation Operations in the UK (number and 000), Years Ending 31st December 2006-2008 ...... 41 Table 4.3: Live Nation Financial Results ($m), Years Ending 31st December 2006-2008 ...... 41 Yamaha Corporation...... 42

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BROADCASTERS ...... 43 British Broadcasting Corporation ...... 43 Other Broadcasters...... 45 British Sky Broadcasting Group PLC ...... 45 ITV PLC ...... 45 Others ...... 45 OUTSIDE SUPPLIERS...... 46 MARKETING ACTIVITY ...... 47

5. Recorded Music Market 49

INTRODUCTION ...... 49 KEY TRENDS ...... 50 MARKET SIZE ...... 50 Table 5.1: The UK Market for Recorded Music by Type of Recording by Value (£m at rsp), 2005-2009 ...... 51 BY MARKET SECTOR...... 52 ...... 52 By Musical Genre ...... 52 Table 5.2: Sales by Musical Genre by Volume (%), 1999-2005, 2006, 2007 and 2008 ...... 52 Pricing, Re-issues and Compilations ...... 54 By Artist Nationality ...... 55 SUPPLY STRUCTURE...... 55 Table 5.3: UK Market Share of Album Sales by Company by Volume (%), 2005-2008 ...... 56 MAJOR PLAYERS ...... 57 The ‘Majors’ ...... 57 Independents or ‘Indies’ ...... 58 Labels and Artists ...... 59 Labels ...... 59 UMG ...... 59 Sony ...... 60 Warner ...... 60 EMI ...... 60 Artists, Albums and Songs ...... 61 Distribution...... 62 Trade Associations...... 62 MARKETING ACTIVITY ...... 62 Table 5.4: Main Media Advertising Expenditure on Recorded Music by Artist and by Compilation (£000), Year Ending September 2009 ...... 63

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BUYING BEHAVIOUR ...... 65 Regular Purchasers ...... 65 Table 5.5: Regular Purchasers of Music CDs (% of adults), 2006 and 2009 ...... 65 Music Downloaders ...... 67 Table 5.6: Purchasers of Music Downloads from the (% of adults), 2006 and 2009 ...... 67 FORECASTS ...... 68 Table 5.7: The Forecast UK Market for Recorded Music by Type of Recording by Value (£m at rsp), 2010-2014 ...... 69

6. Recorded Music Distribution 71

INTRODUCTION ...... 71 KEY TRENDS ...... 71 MARKET SIZE ...... 72 Table 6.1: The UK Market for Recorded Music by Distribution Channel by Value (£m at rsp), 2005-2009 ...... 72 BY MARKET SECTOR...... 73 SUPPLY STRUCTURE...... 74 Table 6.2: Market Shares by Distribution Channel by Music Product by Value (%), 2008 ...... 74 MAJOR PLAYERS ...... 75 MARKETING ACTIVITY ...... 77 BUYING BEHAVIOUR ...... 77 Music Shop Browsers...... 77 Table 6.3: Music Shop Browsers (% of adults), 2006 and 2009 ...... 77 FORECASTS ...... 79 Table 6.4: Forecast Market Shares by Distribution Channel by Value (%), 2010 ...... 79

7. Music in the Media 81

INTRODUCTION ...... 81 KEY TRENDS ...... 81 MARKET SIZE ...... 82 Licensing Statistics...... 82 Music in Consumer Leisure ...... 83 Table 7.1: UK Consumer Expenditure on Selected Home Entertainment at Current Prices (£m), 2005-2009 ...... 83 BY MARKET SECTOR...... 84 Licensing Statistics...... 84

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Table 7.2: PRS for Music Earnings for Rightsholders (£m), 2007 and 2008 ...... 84 Media Sectors ...... 85 Radio ...... 85 ...... 86 Magazines ...... 86 Table 7.3: Leading Music Magazines by Circulation (number of copies sold per issue), January to June 2009 ...... 86 SUPPLY STRUCTURE...... 88 MAJOR PLAYERS ...... 89 Table 7.4: Major Companies and Corporations in UK Broadcasting, 2010 ...... 89 MARKETING ACTIVITY ...... 91 BUYING BEHAVIOUR ...... 91 Radio Listening ...... 91 Table 7.5: Regular Listeners to Music on the Radio (% of adults), 2006 and 2009 ...... 92 Music on Home Computers...... 93 Table 7.6: Users of Computers for Listening to Music (% of adults), 2006 and 2009 ...... 93 Pop Star Competitions on the Television...... 94 Table 7.7: Viewers of Television Pop Star Competitions (% of adults), 2006 and 2009 ..... 95 FORECASTS ...... 96 Table 7.8: Forecast UK Consumer Expenditure on Selected Home Entertainment at Current Prices (£m), 2010-2014 ...... 96

8. Live Music 99

INTRODUCTION ...... 99 KEY TRENDS ...... 99 MARKET SIZE ...... 99 Table 8.1: UK Consumer Expenditure on Entertainment Outside the Home (£m), 2005-2009 ...... 100 BY MARKET SECTOR...... 101 By Type of Music...... 101 By Type of Venue ...... 101 SUPPLY STRUCTURE AND MAJOR PLAYERS ...... 102 Popular Music ...... 102 Ticketing ...... 103 Classical and Specialist Music...... 104 MARKETING ACTIVITY ...... 104 Table 8.2: Main Media Advertising Expenditure on , Plays, and Other Shows (£000), Year Ending September 2009 ...... 105

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BUYING BEHAVIOUR ...... 106 Table 8.3: Regular Listeners to Live Music (% of adults), 2006 and 2009 ...... 106 Table 8.4: Attendance at Concerts by Type of Music (% of adults, any frequency), 2009 ...... 108 Table 8.5: Attendance at Pop/Rock, Classical and Concerts by Sex, Age and Social Grade (% of adults), 2009 ...... 108 FORECASTS ...... 109 Table 8.6: Forecast UK Consumer Expenditure on Entertainment Outside the Home (£m), 2010-2014 ...... 110

9. Amateur Music 111

INTRODUCTION ...... 111 KEY TRENDS ...... 111 MARKET SIZE ...... 111 Musical Instruments ...... 111 Table 9.1: UK Market for Musical Instruments by Value (£m at rsp), 2005-2009 ...... 112 Table 9.2: The Market for Musical Instruments by Type by Value (£m at rsp), 2005 and 2009 ...... 113 Other Spending ...... 114 SUPPLY STRUCTURE...... 114 Musical Instruments ...... 114 MAJOR PLAYERS ...... 115 MARKETING ACTIVITY ...... 117 BUYING BEHAVIOUR ...... 117 Table 9.3: Involvement in Amateur Music (% of adults), 2009 ...... 118 FORECASTS ...... 119 Table 9.4: Forecast UK Market for Musical Instruments by Value (£m at rsp), 2010-2014 ...... 119

10. A Global Perspective 121

RECORDED MUSIC...... 121 Table 10.1: Global Recorded Music Sales by Format ($bn), 2007 and 2008 ...... 121 Table 10.2: Global Top-Selling Albums, 2008 ...... 122 OTHER MUSIC ...... 122

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11. The Future 125

INTRODUCTION ...... 125 The Economy ...... 125 Population ...... 125 Table 11.1: Forecast UK Resident Population by Sex (000), Mid-Years 2009-2013 ...... 125 Gross Domestic Product ...... 126 Table 11.2: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2009-2013 ...... 126 Inflation ...... 126 Table 11.3: Forecast UK Rate of Inflation (%), 2009-2013 ...... 126 Unemployment ...... 127 Table 11.4: Forecast Actual Number of Unemployed Persons in the UK (million), 2009-2013 ...... 127 FORECASTS 2010 TO 2014 ...... 127 Table 11.5: The Forecast UK Music Market by Sector by Value (£m at rsp), 2010-2014 ...... 127 MARKET GROWTH...... 128 Figure 11.1: Growth in the UK Music Market by Sector by Value (£m at rsp), 2005-2014 ...... 128 FUTURE TRENDS ...... 129 Copyrighted Music ...... 129 Tracks Not Albums...... 129 Role of Music ...... 129

12. Further Sources 131

Associations...... 131 General Sources...... 132 Government Sources...... 132 Other Sources ...... 133 Key Note Sources...... 133

Understanding TGI Data 137

Number, Profile, Penetration ...... 137 Social Grade ...... 138 Standard Region...... 138

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Key Note Research 139

The Key Note Range of Reports 141

© Key Note Ltd 2010 Music Industry Executive Summary

Executive Summary

Music is described as a ‘main hobby’ (either playing, watching live or building a collection) by almost one in UK adults, according to a November 2009 NEMS Market Research survey commissioned by Key Note. However, a much higher proportions of the population say that they listen to music every day, listen to it on the radio regularly or enjoy browsing in music shops, and 45.6% of homes contain a (with just over a quarter of adults able to one).

The importance of music in consumer lifestyles is also further emphasised by the results which showed broadening access to music, driven by new technology or other trends:

• slightly more than half of adults like watching ‘pop star’ competitions on the television, such as

• 44.8% listen to music on their computers

• 16.9% go to hear live music in , or clubs at least once a month.

Amateur involvement with music is strengthening thanks to the ‘karaoke’ or ‘have a go’ culture engendered in pubs and clubs, by the peak-time talent shows and, most recently, by a tranche of games such as Guitar Hero, which offer the chance to play along with ‘real bands’. At the professional level, live music is also doing well owing to improved venues, more efficient ticketing (online) and the fact that artists are keen to tour (and bands are keen to reunite) to make up for lost income on recordings.

In contrast to the healthy amateur and live sectors, the recording industry — still the largest part of the music industry — has been in the doldrums because of the transition from easily regulated sales on CDs through record shops to the downloading of music to home computers and mobile phones, much of which is illegal. However, legal downloading is increasing and Key Note forecasts that the recorded market will at least stabilise in value over the next 5 years (at around £1.15bn), although not regaining its previous heights.

Although music retailers such as Woolworths and have fallen by the wayside, the leading retailer, HMV, remains strong and the recording industry is backed by four giants, which have been in place for more than a decade. One of these ‘majors’ is the UK-based EMI Group, a major force for many decades and still reaping the benefits of having in its back catalogue, while the label’s Coldplay had the best-selling album in the US and the UK in 2009. The other majors, all of which are larger than EMI, are Universal, Warner and Sony.

For these majors, a complex pattern of music production and distribution is developing in which a piece of recorded music (or a published song), as an intellectual property (IP), is economically justified through a range of income sources: sales to consumers (CDs or download), live performance and royalties for use in compilations, in the media (old and new), as ringtones, in video games and movies or even in public houses (pubs) and shops.

© Key Note Ltd 2010 1 Executive Summary Music Industry

2 © Key Note Ltd 2010 Music Industry Industry Overview

1. Industry Overview

REPORT COVERAGE

This Key Note Market Review takes a broad view of music as the source of identifiable, commercial markets with a focus on consumer spending. The topics covered are:

• recordings (and their distribution channels)

• live performance

• music in the media

• amateur participation.

The report includes field research specially conducted for Key Note, covering various attitudes and buying habits of UK consumers with regard to music. Other major sources of information are listed under Key Trade Associations later in this chapter.

Coverage is targeted mainly at the UK market, but the global aspects of the music industry are given acknowledgment.

Report Background

This second edition of the Music Industry is published at a time of considerable change in the largest component of music, the recording industry. For nearly 10 years, the industry has been plagued by uncertainty over how to adapt to new technologies which have dramatically changed the traditional methods of selling recorded music — in a nutshell, the transition from ‘physical’ products such as vinyl records or CDs, sold to the consumer as singles or albums, to the downloading of tracks to home computers or mobile phones, often for no payment.

The recording industry goes into 2010 with stronger legitimate systems in place for selling music (and controlling piracy). Meanwhile, the downloading statistics, attendance at live concerts, the success of musical talent shows on television and of musical video games are all reminders of how important music is to society, irrespective of the technology involved or the channels of delivery to the consumer.

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ECONOMIC TRENDS

Population

The UK had an estimated population of 61.4 million in mid-2008. In line with trends in most developed countries, the total population is growing fairly slowly. There are slightly more females than males in the population, owing to women living longer on average than men.

Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years 2004-2008

2004 2005 2006 2007 2008

Female 30,568 30,741 30,893 31,059 31,232 Male 29,278 29,497 29,694 29,916 30,151

Total 59,846 60,238 60,587 60,97561,383 % change year-on-year - 0.7 0.6 0.6 0.7

Source: Monthly Digest of Statistics, November 2009, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Fewer children and teenagers in the population are not beneficial for the music industry, neither is an ageing population. However, the prosperous and numerous ‘baby boomers’, born after World War II, have fuelled demand since the 1980s for buying older music on CDs (with these consumers often replacing their older vinyl and tape collections).

Gross Domestic Product

As Table 1.1 shows, UK gross domestic product (GDP) only grew by 0.6% in 2008 at chain-linked prices, its lowest rise over the review period (2004 to 2008).

The UK music industry is worth around £5bn a year, with exports of products and services worth £1.3bn in 2008.

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Table 1.2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2004-2008

2004 2005 2006 2007 2008

Current prices 1,202,956 1,254,058 1,325,795 1,398,882 1,448,054 % change year-on-year - 4.2 5.7 5.5 3.5

Annual chain- linked GDP 1,227,387 1,254,058 1,289,833 1,322,842 1,330,118 % change year-on-year - 2.2 2.9 2.6 0.6

GDP — gross domestic product

Source: Economic & Labour Market Review, November 2009, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Inflation

Inflation rose to 4.3% in 2007, but the slip back to 4% in 2008 marked the start of the recession.

New technology also tends to reduce prices in many markets, a classic case in music being the ability of MP3-player owners to download tracks for less than 80 pence (p) each — less than the average cost per track of a new CD album. Low inflation has also contributed to lower relative prices for musical instruments and CD prices have also fallen.

Table 1.3: UK Rate of Inflation (%), 2004-2008

2004 2005 2006 2007 2008

Inflation (%) 3.0 2.8 3.2 4.3 4.0 % change year-on-year - -0.2 0.4 1.1 -0.3

Note: inflation is at price index (RPI).

Source: Monthly Digest of Statistics, November 2009, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

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Unemployment

Unemployment fluctuated between 850,000 and 950,000 earlier in the decade, but started to rise in 2008 and is forecast to reach 1.6 million during 2009.

Table 1.4: Actual Number of Unemployed Persons in the UK (million), 2004-2008

2004 2005 2006 2007 2008

Actual number of claimants (million) 0.85 0.86 0.95 0.86 0.91 % change year-on-year - 1.2 10.5 -9.5 5.8

Source: Monthly Digest of Statistics, November 2009, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

The economy’s growth sectors — mainly service industries — are managing to provide enough jobs to keep the unemployment rate to a reasonably low level in historic terms. However, ‘white-collar’ unemployment is a feature of the current recession.

Household Disposable Income

The average household enjoyed a 14.1% increase in disposable income between 2004 and 2008.

High disposable income favours all of the leisure industries, including music. Depending on the household, this may mean being able to buy more ‘unnecessary’ products such as recorded music, or investing in more expensive durables such as top-end hi-fi systems or .

Table 1.5: UK Household Disposable Income Per Capita (£), 2004-2008

2004 2005 2006 2007 2008

Household disposable income (£) 13,078 13,572 13,952 14,331 14,921 % change year-on-year - 3.8 2.8 2.7 4.1

Source: Economic & Labour Market Review, November 2009, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

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MARKET SIZE AND SEGMENTATION

There is no attempt to evaluate institutional or government spending on music in this Key Note Market Review, but there have been broad estimates (by the former government department, UK Trade & Industry, which is the Department for Business Innovation & Skills) that the UK industry is worth around £5bn a year, with exports — products and services — worth £1.3bn in 2008.

Although chapters of this report cover many aspects of music, Table 1.6 can only present those markets for which spending by consumers can be monitored or estimated (.e. for which consistent figures can be supplied). (Amateur musical involvement, such as in a , may be a consumer’s main hobby but costs very little.)

Recorded music still leads the market but expenditure is slipping, owing to the arrival of downloading as a source of free or cheaper music; live music is now worth nearly as much. The musical instruments market has also shown reasonable growth, although once again the £520m value in 2009 only represents consumer spending, not that of institutions.

Table 1.6: The UK Music Market by Sector by Value (£m at rsp), 2005-2009

% Change 2005- 2005 2006 2007 2008 e2009 2009

Recorded music† 1,847 1,634 1,392 1,309 1,275 -31.0 Live musice 600 700 800 900 1,000 66.7 Musical instrumentse 425 450 475 510 520 22.4

Total 2,872 2,784 2,667 2,719 2,795 -2.7 % change year-on-year - -3.1 -4.2 1.9 2.8

rsp — retail selling prices † — BPI data e — Key Note estimates

Source: BPI/Key Note

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Figure 1.1 illustrates the changing value of the UK music market between 2005 and 2009, with the proportion of the market attributable to recorded music clearly losing share, and that of live music making gains.

Figure 1.1: The UK Music Market by Sector by Value (£m at rsp), 2005-2009

3,000

2,500

2,000

1,500

1,000

500

0 2005 2006 2007 2008 2009

Recorded music Live music Musical instruments

rsp — retail selling prices

Note: ‘recorded music’ data for 2005 to 2008 are from the BPI.

Source: BPI/Key Note

Another way of segmenting the music market is by genre, although both musicians and listeners often object to the industry’s ‘pigeon-holing’ of music styles. There is a commonly perceived division between popular and highbrow (mainly classical) music, with popular music dominated by ‘pop’ (mainly singles) and rock (mainly albums), and the numerous sub-categories including heavy metal, folk, , country, ‘’ and so on. is distinct from all the popular types in several ways, relying heavily on public funding (education, , public concert halls, etc.) and sponsorship.

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INDUSTRY STRUCTURE

As covered in this report, music is a cultural concept or an element in consumer lifestyles rather than a single industry, creating various distinct markets with unique structures:

• Recorded music produces the largest market and has the most conventional ‘industry’ structure, in that it divides between production and distribution, although production includes ‘creative’ as well as commercial aspects. The process starts with the discovery and signing of artists, recording them in the studio and distributing their recordings, accompanied by appropriate marketing such as media appearances and live concerts.

• Distribution is in a state of flux, moving from the retail sale of physical recordings (mainly CDs) to downloading (which had achieved 95% of ‘single’ sales by the end of 2009). The decline of the physical channel was harshly emphasised between 2008 and 2010 by the collapse of major retailers; in the same period, companies emerging as important distributors included Apple (through iTunes).

• Live music works closely with the recording industry but the markets operate at arm’s length with different market leaders. A complex market, live music brings in layers of specialists such as venue owners (usually with separate operators), concert promoters and ticketing agencies.

• Musical instruments have another unique manufacturing and distribution structure based on technical specialisation (the need to produce so many different types of instrument). Like recording, the sector is globalised — particularly the production of keyboards and guitars, which are the largest categories — with Japanese and US companies to the fore.

• Music in the media is not a market as such, although music clearly underpins the output of most radio stations and peak-time television has come to be reliant on popular competitions such as Britain’s and The X Factor. Multi-channel television has produced a number of music-only channels (e.g. MTV), while other media linked to music are magazines (specialist titles like Gramophone or Kerrang!) and newspapers (for reviews). Music is also an important component of popular movies and the Internet.

MARKET SHARES

Recorded music is dominated by just four major groups with global operations. One of their strengths is their extensive back catalogues (recordings and published music), enabling them to generate profits in addition to their new music recording. Distribution shares for recorded music are now divided between the physical and virtual (download) channels, each featuring its market leader (HMV and iTunes, respectively).

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Other music sectors are fragmented, but Live Nation has emerged as the live music leader, while has been most successful in harnessing the Internet for ticketing. In the media, the BBC continues to play a crucial role in disseminating music through both television and radio.

MARKET POSITION

A consumer survey conducted by NEMS Market Research for Key Note in September 2008 found that 73.7% of adults regularly listen to recorded music and that 74% listen to the radio (much of which is to music). Watching television is the dominant leisure activity in the home with a weekly penetration of 97.4%, well ahead of any other activities.

Table 1.7: Popular Leisure Activities in the Home (% of adults), 2008

Question: “Which of the following leisure activities do you take part in at least once a week in your home?”

Watching television 97.4 Reading newspapers or magazines 87.7 Reading books 77.7 Listening to the radio 74.0 Listening to recorded music (CD, tape, etc.) 73.7 Entertaining friends or family (e.g. inviting to dinner) 72.0 Surfing the Internet 68.9 Watching recorded movies or programmes (DVD or tape) 65.5 Playing games on a computer or games machine (e.g. Playstation, Game Boy) 37.2

Weighted sample: 1,002 adults aged 15+

Source: Key Note/NEMS Market Research, September 2008

As detailed in Chapter 10 — A Global Perspective — and as already mentioned earlier in this chapter, the UK market has an important position within the global music market. In recordings, this is underlined by the presence of EMI as one of the world’s four ‘majors’, but other members of the big four have also profited from the UK’s succession of artists who sell worldwide.

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KEY TRENDS

• Access to music has broadened out with new technology and the expansion of the media. Chapter 3 — Key Note Primary Research — presents consumer research showing various levels of involvement with music. For , 79.5% of adults listen to music every day, 69.4% listen to it on the radio regularly, 23.3% buy a music CD from a shop at least once a month, 27.2% play an instrument and 19.1% describe music as a their ‘main hobby’ (in terms of either playing, watching live or building a collection).

• Relatively newer consumer involvements with music include watching ‘pop star’ competitions such as The X Factor on the television (50.2% of adults), listening to music on computers (44.8%) and downloading (31%). Young consumers are creating their own, purely personal music collections by downloading or sharing music rather than buying recordings in the conventional manner.

• In recorded music, the main key trend is undoubtedly the shift away from selling and buying music ‘products’ in the shape of CDs towards the distribution of recordings in electronic format. In the home, access to music has spread from the static hi-fi in the living room to the home computer and the mobile phone.

• E-commerce channels for recorded music (home-delivered CDs and downloading) have decimated the retail trade, leaving HMV as the last surviving major specialist, while giving rise to new distributors in the shape of , Apple (iTunes) and Spotify. However, ‘majors’ (Universal, Warner, Sony and EMI) still dominate at the production level on a global basis.

• Talent shows such as The X Factor and Britain’s Got Talent are having an increasing impact on the music market generally — through television viewing, record releases ( and have both sold well in the US as well as in the UK) and even in live music. In the , live music has been buoyant thanks to better venues, ticketing and marketing initiatives (e.g. by Live Nation) and artists are keener than ever to tour to make up for lost income on recordings.

• Amateur music is in a healthy state, with the ‘karaoke culture’ extending from the media (e.g. talent shows and video games such as Guitar Hero) into an interest in singing and performing for fun. The cost of buying instruments is on the decrease and home computers come with software to help amateurs.

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LEGISLATION

The main areas of legislation affecting music are those which relate to broader areas of economic activity, examples being:

• the promotion of national culture (e.g. National Lottery grants for concert halls, etc.)

• education (music in state schools)

• intellectual property (see ‘Digital Britain’, below)

• health and safety (at live events).

‘Digital Britain’

In early 2010, the was debating the Digital Economy Bill, which will legislate on the Government’s plans for a Digital Britain. Proposals include a clampdown on illegal file-sharing.

KEY TRADE ASSOCIATIONS

British Recorded Music Industry

Still using the acronym of BPI (British Phonographic Industry), the British Recorded Music Industry has a membership covering the whole of the recording industry, from majors through to independents (more than 300 companies in total), so that over 90% of the UK industry is represented. There are various committees for handling issues such as rights, public relations (PR) and classical music.

The BPI organises annual awards known as The Brits and the ceremony has grown in importance for the media every year. Another important responsibility is to issue awards for recordings achieving certain levels of sales, such as Platinum.

International Federation of the Phonographic Industry

The IFPI (International Federation of the Phonographic Industry) has its headquarters in , as does the BPI, thus underlining the position of the UK in the global music market. It has around 1,400 members in 66 countries, including regional offices for Europe, Asia and Latin America. Like the BPI, the IFPI sees ‘fighting music piracy’ as one of its main roles, but it also has a remit to promote music more generally in economic and social life.

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UK Music

Launched in September 2008 as an umbrella organisation, UK Music brings together: the BPI; PRS for Music; Phonographic Performance Ltd (PPL [see Chapter 7 — Music in the Media]); the Association of (AIM); the British Academy of Composers & (BAC&S); the Music Managers Forum (MMF); the Music Publishers Association Ltd (MPA); and the Musicians Union (MU).

Headed by Feargal Sharkey, singer with the 1970s The Undertones, UK Music aims to protect:

• the interests of the UK music industry at all levels

• the value of music to society, culture and the economy

• intellectual property rights and how they protect and promote creativity

• the opportunities and challenges for music creators in the digital age.

In December 2008, UK Music launched an online resource for teachers and schools (Sound Rights) and in January 2009 the organisation published its plans for tackling illegal file-sharing.

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14 © Key Note Ltd 2010 Music Industry PEST Analysis

2. PEST Analysis

POLITICAL FACTORS

Generally, music is not a sector of the economy that is directly influenced by political decisions. Public funding does, however, affect the support of in music (e.g. Lottery grants), particularly classical and .

The music industry is currently lobbying governments, at a global level, to introduce strong legislation to curb piracy (illegal downloading).

Some musicians take a ‘political’ stance artistically, although this is rarer than it used to be with younger generations becoming alienated from political parties. A minor protest took place in 2009 when a Facebook campaign persuaded enough people to buy a Rage Against The Machine track to prevent the latest The X Factor winner from taking the ‘ number one’ single spot.

ECONOMIC FACTORS

In general terms, it is difficult to prove any direct connection between the demand for music and the state of the macro-economy. The economics of recorded music are, however, intertwined with those of the broader leisure economy. Essentially, consumers are spending an increasing amount of time on Internet-related activities and the economic base of this technology is very different from the traditional models (e.g. for buying ‘physical’ music products in shops).

SOCIAL FACTORS

In contrast to the political and economic factors, social factors connected to music are very important (although currently less important than those related to technology).

In the UK context, the most important social changes affecting music have stemmed from the youth market. After World War II, the emergence of ‘teenagers’ (as a newly affluent consumer sector) produced a much expanded market for popular music in the 1950s and 1960s.

The 1970s brought a more serious approach (‘progressive’ rock) and albums became the more important medium (including concept albums, some not even including single hits, from the likes of and ). However, in a golden decade for popular music, singles demand was also boosted by glam rock, and punk, producing many of the best-selling (non-charity) singles of all time.

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In the 1980s and 1990s, consumer spending was diverted from music towards video, multi-channel television (cable and Sky TV), video games and, eventually, home computing. However, the UK industry — and its social factor — was boosted by international ‘’ successes such as Oasis, Blur and The .

A social concomitant of the UK market has been the division into ‘youth tribes’, each with their own favoured type of music, giving rise over the following decades to categories such as rock ‘n’ roll, , psychedelic, heavy metal, goth and so forth.

International social influences in the UK have stemmed mainly from the US, particularly influenced by Afro-American culture (from jazz and through to soul and modern R&B and hip-hop). Jamaican has also been influential.

Dancing is a social partner of music and both go through historic phases. Dancehalls went into decline after the arrival of television, recovered with 1970s disco, faded in the 1980s and rebounded with the ‘rave’ culture of the 1990s. (‘Dance’ now refers to a specific category of music.) The 2000s have brought dancing back into prominence through television talent shows (e.g. ).

TECHNOLOGICAL FACTORS

Technology is the key ‘PEST’ factor influencing music in the early 21st century, and its influence crops up in every chapter of this report. However, this report would be incomplete without documenting the technological history of recorded music, at least briefly:

• Thomas Edison patented the first in 1887 and recorded music had become a consumer market by the early 1900s, when some of the familiar ‘labels’ of the 20th century were founded (e.g. His Master’s Voice, Columbia, RCA, Phonogram).

• In the 1950s, vinyl (oil-based polyvinylchloride [PVC]) replaced the inflexible 78-revolutions-per-minute (rpm) records made of shellac. They brought stereo sound and the 45 rpm single, aimed at the charts (and live coverage on television’s Top of The Pops), which ruled supreme as the main unit of sale for recorded music.

• Albums at 33 rpm, called long players (LPs), were initially used for collections of single hits with ‘filler’ tracks, but were used for complete ‘concepts’ by the 1970s, including double and triple albums. Vinyl albums had elaborate artwork covers but competition was posed by tape formats (the cassette, flexible enough for in-car and personal stereos).

• The 1980s brought the transition from analogue to digital, and CD technology was largely used to re-release vinyl albums and hits collections. CDs became the main music format through the 1990s.

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• The 2000s have brought downloading — which was initially illegal, but is becoming increasingly legitimate — and revolutions in consumer behaviour towards recorded music, as detailed later in this report. The MP3 format enabled home computers to share music and Apple Inc has come to dominate trends with its iTunes, iPod and iPhone technologies, letting consumers create and share their personal music collections.

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18 © Key Note Ltd 2010 Music Industry Key Note Primary Research

3. Key Note Primary Research

ATTITUDES TO MUSIC

In November 2009, primary field research was commissioned by Key Note into the general attitudes of UK consumers towards music. The survey was conducted by NEMS Market Research with a UK-representative sample of exactly 1,000 adults. This repeated a February 2006 survey (same sample size), allowing some comparisons to be made over time.

The of the research was to identify the role of music in the lifestyle of the consumer of the early 2000s, including an assessment of new technologies such as downloading. The results from all adults are shown in Table 3.1, while detailed analysis will be given in the relevant chapters that follow (e.g. Amateur Music).

Table 3.1: Consumer Attitudes to Music and Its Role in Consumer Lifestyles (% of adults), 2006 and 2009

Question: “Thinking about music in general, which of these statements applies to you?”

Percentage Point Change 2006 2009 2006-2009

I listen to music at home or in the car every day 80.9 79.5 -1.4 I listen to music on the radio on most days of the week 74.7 69.4 -5.3 I like watching ‘pop star’ competitions on television, like The X Factor 42.4 50.2 7.8 There is a musical instrument in my house 44.2 45.6 1.4 I listen to music on my computer 34.0 44.8 10.8 I enjoy singing (either to myself or in , karaoke, etc.) 45.7 40.7 -5.0 I like browsing in music shops (e.g. HMV or Virgin Megastore) 47.2 39.4 -7.8 I pay to download music from the Internet to my computer 13.5 31.0 17.5 I can play a musical instrument 25.8 27.2 1.4

Table continues...

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Table 3.1: Consumer Attitudes to Music and Its Role in Consumer Lifestyles (% of adults), 2006 and 2009

...table continued

Question: “Thinking about music in general, which of these statements applies to you?”

Percentage Point Change 2006 2009 2006-2009

I buy a music CD from a shop at least once a month 32.9 23.3 -9.6 Music is my main hobby† 21.2 19.1 -2.1 I make sure I go to hear live music (concerts, in pubs or clubs) at least once a month 17.9 16.9 -1.0

† — ‘either playing, watching live or building a collection’ Weighted sample: 1,000 adults aged 16+

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Changes in response levels between 2006 and 2009 of 5 percentage points or less are unlikely to show reliable trends and could be influenced by slight differences in the samples used. This means that overall penetration of listening to music at home or in the car at the ‘every day’ level has been maintained at around 80%: this can be taken as the broadest overall measure of active interest in music as part of the regular lifestyle of UK consumers.

Radio is still the most important music medium, with 69.4% of all adults listening in 2009, showing a marginal fall on 2006 (74.7%). Music on television has benefited from the peak-time talent shows like The X Factor, and this manifestation of music showed a significant increase in penetration from 42.4% to 50.2% between 2006 and 2009.

The most significant changes, not surprisingly, are computer-related, with computers for listening to music (44.8%) and for downloading (31%) having both made quite dramatic gains since 2006, respectively, up from 34% and 13.5%. The concomitant changes for traditional music buying (on CDs) are inevitably downwards, with significantly fewer consumers browsing in music shops or buying a CD regularly (from 32.9% to 23.3%).

Participation in amateur music making has remained broadly at the same level — singing surprisingly went down by 5 percentage points but owning and playing instruments went up — and going to concerts stayed at around 17% of adults. There was a slight, probably not significant, drop in those stating that music is their ‘main hobby’ (either playing, watching live or building a collection), although one in five adults (19.1%) still put this forward as an important lifestyle aspect.

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Demographic analyses of the ‘every day’ and ‘hobby’ responses are given below in this section, while analyses of other statements are in chapters as follows: Chapter 5 — Recorded Music Market (‘I buy a music CD from a shop at least once a month’, ‘I pay to download music from the Internet to my computer’); Chapter 6 — Recorded Music Distribution (‘I like browsing in music shops’); Chapter 7 — Music in the Media (‘I listen to music on the radio on most days of the week’, ‘I listen to music on my computer’, ‘I like watching ‘pop star’ competitions on television’); Chapter 8 — Amateur Music (‘I can play a musical instrument’, ‘There is a musical instrument in my house’, ‘I enjoy singing’); and Chapter 9 — Live Music (‘I make sure I go to hear live music [concerts, in pubs or clubs] at least once a month’).

THE CORE MUSIC CONSUMER

The broadest measures of interest in music are broken down demographically in Table 3.2. Daily listening to music involves slightly more men than women and reaches a peak of 90.8% among those aged between 35 and 44, but falls to 61.1% among the over-65s. By social grade, C2 has the most daily listeners and E the least, although the A group is also below average for daily listening to music. (Some were probably influenced by sample variations in the smaller sub-groups of the population.)

Table 3.2: Daily Listening to Music at Home or in the Car and Music ‘Hobbyists’ by Sex, Age and Social Grade (% of adults), 2006 and 2009

S1: “I listen to music at home or in the car every day” S2: “Music is my main hobby (either playing, watching live or building a collection)”

S1 S2 2006 2009 2006 2009

Total 80.9 79.5 21.2 19.1 Sex Male 83.0 81.6 21.3 17.3 Female 78.9 77.5 21.1 20.9 Age 16-19 94.3 89.0 40.4 26.7 20-24 94.3 82.5 32.7 27.5 25-34 91.3 88.7 29.7 20.7 35-44 87.5 90.8 15.0 22.6

Table continues...

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Table 3.2: Daily Listening to Music at Home or in the Car and Music ‘Hobbyists’ by Sex, Age and Social Grade (% of adults), 2006 and 2009

...table continued

S1: “I listen to music at home or in the car every day” S2: “Music is my main hobby (either playing, watching live or building a collection)”

S1 S2 2006 2009 2006 2009

Age (cont.) 45-54 84.6 79.3 16.1 15.9 55-64 60.7 72.2 12.5 17.9 65+ 65.6 61.1 17.2 11.7 Social Grade A 85.8 64.8 22.5 22.0 B 84.1 87.0 17.0 15.3 C1 80.3 73.1 22.0 16.9 C2 80.2 89.1 20.3 22.1 D 80.0 86.1 26.2 21.7 E 69.7 56.6 26.7 18.5

Weighted sample: 1,000 adults aged 16+

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Looking at the ‘hobbyists’, or those with a proven enthusiasm for music as a lifestyle component, there was a bias towards women in 2009, although in 2006 the genders were equally enthusiastic and too much should not be read into this gender difference. Penetration differences between the ages were fairly limited in 2009 (between 16 and 45 years), but the striking finding is the apparent fall in interest between 2006 and 2009 among the younger adults: there were declines in music ‘hobbyists’ among the 16 to 19 year-olds, the 20 to 24 year-olds and the 25 to 34 year-olds.

It can easily be hypothesised that younger adults are no longer treating music as central to their lifestyles because technology has changed, so that time spent on ‘passive’ leisure is consumed by visual entertainment (multi-channel television, , Internet) while interactive Internet activities (‘Web 2.0’) are on the increase in terms of leisure time (particularly socialising on-line through Facebook, etc.).

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For the older adults, it can be argued that music retains its place at the centre of leisure and entertainment because of three factors. Firstly, the over-35s are less absorbed by new technologies than the under-35s (although this is changing rapidly). Secondly, anyone aged over 35 was brought up surrounded by the music-related youth cults of the sixties, seventies and eighties and remains psychologically committed to those eras and their music. Thirdly, the cost of acquiring music has come down dramatically, both online and in the shops, enabling these older music fans to build and re-build their collections (e.g. buying hits collections of artists they once could not afford), thus renewing their interest in music.

For younger consumers, music has been marginalised by the development of visual and interactive technologies. For many, music is now treated as an adjunct to other leisure pastimes — television (e.g. The X Factor), movie themes, to listen to while playing video games or as part of a night out at a club. Music may be an essential element in their lifestyles, but it is no longer as central as it once was.

FAVOURITE ARTISTS

In 2006, an additional ‘Desert Island Discs’ question was asked of the survey sample, presenting them with a list of recording artists or composers and asking them whose music they would take if they were ‘marooned on a desert island’. Although this question was not repeated in 2009, the findings are still valid since the artists involved are well established. The overall ranking of popularity is shown in Table 3.3.

Table 3.3: Favourite Artists or Composers for a Desert Island (% of adults), 2006

Question: “Imagine you were marooned on a desert island and had to choose from a list of artists. Whose music would you take, either any album of theirs you name or their greatest hits?”

ABBA 27.0 The Beatles 26.6 19.0 17.4 Beethoven 15.1 Bob Marley 15.1 14.0 12.6 Jackson 10.7 Mozart 10.1

Table continues...

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Table 3.3: Favourite Artists or Composers for a Desert Island (% of adults), 2006

...table continued

Bob Dylan 9.2 8.7 Any folk artist 6.3 Any jazz artist 6.2 JS Bach 5.6 None of these 9.6

Source: Key Note/NEMS Market Research, February 2006

The enduring popularity of certain popular artists is born out by the list which, although subjectively chosen, could be linked to commercially measurable success (i.e. or concert tickets sold), longevity and peer recognition (e.g. the number of professional singers who would give credit to Frank Sinatra). Longevity has been reinforced for ABBA since 2006 by the success of the musical Mamma Mia! and its follow-up movie (released in 2008), which became the biggest selling DVD of all time in the UK. In 2009, ‘’ was revived by the re-release of the original Beatles albums, digitally remastered on CD, and a younger generation was attracted by the release of an interactive video , The Beatles Rock Band. Yet another instance of longevity in popular music was provided in 2009 by the death of and the subsequent outpouring of re-releases, tributes, television programmes and books on the artist.

Demographic differences among the artists chosen for a desert island generally followed age group, as might be expected. More than 40% of the over-65s, including equal shares of men and women, would take a Frank Sinatra record to the island, while 22% of 55-64s opted for Elvis Presley. By gender, Madonna maintains a high profile as an iconic female pop star and had a strong appeal to women (23% of which would take Madonna records to the island). In contrast, Bob Marley was chosen by only 8% of women but by 22% of men as their favoured artist.

The ranking of popular artists is useful to contrast, in commercial marketing terms, with the frequently published lists of artist considered ‘the all-time greatest’. These lists are usually biased to the ‘worthy’ or experimental (e.g. or Radiohead) and tend to underestimate the importance of middle-of-the-road (MOR) or adult- or album-oriented rock (AOR) or ‘easy listening’ artists. Hence the popularity in this survey of Celine Dion, who is rarely acknowledged in charts of record-selling success or in opinion polls of greatest artists, but who in this survey outscored Michael Jackson and only scored 1% less than the iconic Elvis Presley.

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In the 2000s, there appears to have been increasing recognition of the musical value of artists whose primary aim was to entertain (e.g. ABBA, Michael Jackson) rather than to experiment. Once again, this trend could be related to music losing its central role in culture and being associated instead with other types of entertainment or creativity (dance, movies, celebrity worship, etc.).

Among classical composers, Beethoven was the most popular of the three composers offered; some Beethoven music would be chosen for a desert island by nearly one third of the over-65s and over a quarter of the A group. Folk and jazz both scored 6% on the basis of respondents choosing ‘any artist’ from these genres. Only 10% of the sample found it impossible to choose any of artists or genres listed.

MUSIC IN HOME LEISURE

Research for Key Note’s Leisure In The Home Market Review found that listening to either the radio or recorded music are significant activities in the home. However, penetration for both these activities declined slightly between 2006 and 2008.

Table 3.4: Popular Leisure Activities in the Home (% of adults), 2006 and 2008

Question: ‘Which of the following leisure activities do you take part in at least once a week a) in the home, and b) outside the home?’

2006 2008

Watching television 96.5 97.4 Reading newspapers or magazines 85.0 87.7 Reading books 73.2 77.7 Listening to the radio 77.3 74.0 Listening to recorded music (CD, tape, etc.) 77.2 73.7 Entertaining friends or family (e.g. inviting to dinner) 71.3 72.0 Surfing the Internet 58.0 68.9 Watching recorded movies or programmes 61.3 65.5

Weighted sample: 1,000 in 2006, and 1,002 in 2008

Source: Key Note/NEMS Market Research, February 2006 and September 2008

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Watching television remains as the number one leisure activity in the home, involving almost all adults (97.4%) on a weekly basis. The second and third most popular activities both involve reading, with book-reading making significant gains. ‘Surfing’ the Internet has proliferated as older consumers have acquired Internet technology, reaching 68.9% of all adults by 2008, although over 90% of the youngest respondents (under-25s) were using the Internet regularly for leisure in 2008.

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4. Competitive Structure

THE MARKETPLACE

A wide range of organisations are involved with music in the UK — both the public and private sectors — but the market overall is characterised by globalisation in the shape of four groups known in recorded music as the ‘majors’. These groups, known in shorthand as Universal, Sony, EMI and Warner, are the main focus of this chapter because they control hundreds of ‘labels’ or companies which produce specific types of music for all major markets. The legacy of the ‘big four’ is such that they not only have extensive back catalogues of 20th century recording artists whose music still sells in the 21st century, but they also own most of the copyrights on published music.

Other major companies in music include (i.e. non-major) recording labels, or ‘indies’, and companies whose role is in licensing or distribution rather than original recordings. The broadcasting and performance markets are smaller than recording and distribution and they are also generally more fragmented, but key roles are played by organisations profiled in this chapter such as HMV (retailing), Live Nation (concerts) and the major broadcasters, the BBC (British Broadcasting Corporation) and Global Radio. Also profiled is Apple Inc, once known simply as a computer manufacturer but now a major force in delivering digital music to the consumer via its iTunes, iPod and iPhone.

Musical instrument manufacturing and distribution are fragmented markets due to specialisation, but Yamaha Corporation of Japan is profiled as the world’s largest manufacturer of instruments.

RECORDED AND PUBLISHED MUSIC COMPANIES

Although Chapter 5 — Recorded Music Market — will provide details of recording in the UK, the competitive structure of recorded music hinges on the evolution of the ‘big four’ profiled in this chapter, and some perspective on their history must be provided here before profiling them in detail. Currently, the four large global groups or ‘majors’ ranked by their recorded music market shares in the UK are:

• Universal Music Group (UMG), based in the US but a subsidiary of , a French media, entertainment and communications giant. Component ‘labels’ from a vast UMG catalogue include MCA, Polydor, Decca, Island, and Deutsche Grammophon.

Entertainment, the music division of Sony, the world’s largest consumer electronics producer (also active in entertainment through PlayStation and ownership of a Hollywood studio). This company, now known simply as Sony Music Entertainment (SME), was jointly owned by Sony and a German company, Bertelsmann, until October 2008.

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• EMI Group, the UK-based ‘major’, owned by a private-equity group (Terra Firma) since 2006.

• Warner Music Group (WMG), independent since 2003 but formerly part of the Time Warner entertainment giant. Globally, Warner is larger than EMI, but EMI has a higher market share within the UK.

In short, the key eras in the development of the ‘majors’ have been:

• The 1950s saw the transition in entertainment from its base in theatres and cinemas to the home — television, radio and buying ‘records’ — with former ‘Hollywood’ movie specialists investing in the music industry. Names like Universal, Warner and United Artists became associated with music as well as movies.

• The 1960s and 1970s were a golden for recorded music as a consumer product in terms of sales, creativity and consumer interest. This was also a corporate era characterised by conglomerates which owned record companies, such as Thorn EMI (electricals, defence, music) and, in the US, Kinney National Services, which diversified into music labels from car parking and cleaning. The 1960s and 1970s were particularly fruitful for UK music, from the signing of The Beatles by EMI through to the groups of the 1970s, bringing success for British artists in the much larger US market (thus turning EMI into a global force).

• The 1980s shifted consumer attention from audio to video, or from music to visual entertainment — multi-channel television, video recording, blockbuster movies — but the invention of the CD (by Sony and Philips) kicked off the digital music era and produced a revival for sales of older music, making the transition from analogue vinyl records and tapes to CD. Sony, Philips and Matsushita all diversified laterally from electronic hardware into entertainment ‘software’ by acquiring record companies and Hollywood studios. The 1980s buzzword was ‘synergy’ between hardware and software, although ultimately only Sony continues to straddle the two types of business.

• The 1990s and early 2000s saw record companies consolidating through mergers and acquisitions, and the majors emerged as specialists in music within appropriate organisations rather than industrial conglomerates. Technology has been the most important feature of the era, with digitisation weakening sales of new music but reinforcing the strength of the majors’ back catalogues. The majors have been adapting to the changes brought by technology in what Sony has called: ‘a challenging time for the music industry, which must manage its evolution from a physical product business to one which capitalises on multiple formats and rights and a host of new digital and mobile business models’ (Sony Corporation, Annual Report, 2009).

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Universal Music Group

Based in the US, with joint headquarters in (Santa Monica) and New York, UMG operates in over 70 countries and has been the world’s largest recorded music company for over a decade. Its share of the global market reached an all-time high of 28.7% in 2008, based on numerous famous labels — many of which retain a distinct identity within UMG — such as Polydor, Decca, MCA, Island, Motown and Deutsche Grammophon.

Among the long-established names in UMG’s back catalogue are ABBA, , , Bob Marley, Nirvana, The Who, Jimi Hendrix and the Motown greats (e.g. ). In 2009, UMG signed and Paul McCartney to its labels. Recent UK successes have been scored with Duffy, and the ABBA-based to Mamma Mia!. An important contributor has been UCJ (Universal Classics and Jazz) with artists such as Jamie Cullum, , Nicola Benedetti and Smith, a star on Britain’s Got Talent.

In the UK market, Universal’s album market share has been much higher than its global average, reaching 35.7% in 2008 on a steady upward projectory since 2005. Its share of the singles market was 30% in 2008.

Company History

Historically, the name ‘Universal’ was associated with movies rather than music, the name referring to the pioneering Hollywood studio — Universal Studios — founded in 1912. In the 1950s and 1960s, when music was thriving but Hollywood was struggling, Universal was owned by (based in the UK) and then by Music Corporation of America (MCA).

Later changes of ownership saw Universal spending time as a subsidiary of Matsushita, the Japanese conglomerate, and of Seagram, originally a Canadian drinks company. In 1998, the biggest expansion of the company’s label roster took place when Polygram, a large European group, was acquired, bringing in labels including Deutsche Grammophon, Polydor, Philips, Mercury and Island.

Under Seagram ownership, MCA was renamed as Universal Music Group (UMG), but Seagram then sold both UMG and Universal Studios to a French conglomerate, Vivendi, in 2000. Vivendi had started life as a water utility (Generale des Eaux) but diversified sideways into European media in the 1990s (notably buying the Canal Plus television business). In 2004, Vivendi separated its US-based and music businesses:

• Universal Studios was merged with NBC, a major US television broadcaster controlled by General Electric (GE). The merged company, NBC Universal, is 80% owned by GE and 20% by Vivendi.

• UMG was kept as a subsidiary of Vivendi Universal.

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Current Structure

Like its three global competitors, UMG is the result of the amalgamation of previously distinct record labels, operating as the music division of Vivendi of France. (Vivendi Universal houses the music subsidiary together with the minority stake in NBC Universal.) Universal Music Group International is the division that manages UMG’s businesses in countries outside of North America.

Historic labels in the group include Decca (once the owner of Universal Studios), MCA, Motown, A&M (not part of the Interscope Geffen A&M Records group) and Island (now part of Island Def Jam Music Group).

In classical music, UMG is the world leader (with a 40% market share) through specialised labels including Deutsche Grammophon, which dates back to the earliest days of phonography (1898). UMG is also a world leader in (Universal Music Latino) and is strong in US (e.g. MCA Nashville) and music by artists such as the Black Eyed Peas, and Jay-Z.

Given the long list of UMG ‘label’ , its back catalogue is very strong and includes a wide variety of perennially popular artists such as ABBA, Louis Armstrong, James Brown, Eric Clapton, Bob Marley, and Edith Piaf. In the modern era, noted successes on UMG labels have included Nirvana, Eminem, U2, and .

Publishing is an important division, with UMG claiming to own the world’s most extensive music catalogue, marketed through UM Enterprises in the US and through UM Strategic Marketing & Commercial Affairs outside its home market.

The UK website for UMG promotes UMTV and four other labels with their own websites: Island, Mercury Polydor and Decca.

Recent Developments

Digital music has obviously been the focus of recent activity for UMG, through its eLabs media and technology division. UMG has a video channel on YouTube and a joint venture with MySpace (owned by News Corporation) described as a ‘fully integrated global music solution’. With Nokia, the mobile phone company, UMG has created Comes With Music (CWM) to bundle a music subscription into the price of some phone models.

Artist management and merchandising are other development areas. In 2007, UMG established Artist Services and Merchandising divisions, the former representing artists including The Who, Elton John and Robert Plant (plus classical music artists since 2008). The merchandising division, branded as Bravado, is said to be ‘the only global, 360° full-service merchandise company’, producing merchandise for the likes of , Beyonce, , Pink and .

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In the UK, UMG TV is the subsidiary which has collaborated since the 1980s with EMI on producing the most successful series of current hit-single compilations, Now That’s What I Call Music. The 74th ‘Now’ compilation, issued in 2009, featured 22 hits including ones by Cheryl Cole, JLS, and The Sugababes. Notable original album successes since 2007 have included Duffy’s , the top-selling album of 2008, and the Mamma Mia! soundtrack. are another success, particularly given the spotlight on one member, Cheryl Cole, during the 2009 run of The X Factor (with Cole as a judge). Snow Patrol is another successful UK act of the ‘noughties’.

In May 2008, UMG shifted its UK distribution to an outsourcer, Arvato, which is part of the Bertelsmann group that, until 2008, was among the music majors (see Sony).

Financial Results

The Vivendi group had revenues of €25.39bn in the year ending December 2008, making earnings before interest, taxes, depreciation and amortisation (EBITDA) of €4.95bn and employing 43,208 in 77 countries. Describing itself as ‘a world leader in communications and entertainment’, Vivendi operates through six divisions (including telecommunications, video games and pay-TV). The Music Worldwide division houses UMG.

Table 4.1: Universal Music Group Financial Results (€m), Years Ending 31st December 2006-2008

2006 2007 2008

Revenues 4,955 4,870 4,650 EBITDA 744 624 686

EBITDA — earnings before interest, taxes, depreciation and amortisation

Source: Vivendi 2008 Annual Report

The UK subsidiary, UMG International Ltd, generated a turnover of £62.1m in the year ending December 2008, but this does not represent the full value of UMG’s presence in the market (estimated at over £450m at retail prices).

Sony Music Entertainment

In October 2008, an important era in recorded music came to an end when Sony of Japan bought out the 50% stake in Sony BMG, the world’s second-largest music major, held by the German company Bertelsmann. The former Sony BMG joint venture now operates as Sony Music Entertainment (SME). SME operates worldwide outside of Japan, where there

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is a separate music company (SMEJ) for the home market, where domestic stars include YUI, JUJU and ikimono-gakari.

Like UMG, Sony BMG had brought together a large number of significant labels in music history, together with a strong roster of recording artists. The labels include RCA, Arista, Columbia and CBS, while the artists have included Elvis Presley, Michael Jackson and Bob Dylan, together with newer contributors such as Beyonce, Pink, Leona Lewis and Kings of Leon.

Sony’s UK position echoes its worldwide position, lying second place behind UMG with a 19.1% share of album sales in 2008 (below UMG’s 35.7%, but well ahead of EMI’s 13.4%). This market share has held fairly steady through the ‘noughties’.

Company History

Sony is famous as Japan’s largest manufacturer of consumer electronic equipment, a position it has held — against rivals such as Matsushita, Mitsubishi and Toshiba — since the 1960s when the Sony brand led the market for portable (‘transistor’) radios and then developed the first personal audio players (). In the 1980s, Sony worked with Philips of the Netherlands on developing CDs to replace tape and vinyl, and this involvement led Sony to invest in both music and movies.

The 1990s and 2000s saw Sony consolidating its leading position in consumer electronics with computer production, video recording () and the PlayStation series of video games. In audio, Sony followed its ‘transistors’ and the Walkman with other miniaturised music systems such as MiniDisc and MP3 players.

Sony entered music in 1988 when it bought CBS Records, including the Columbia label, in the US. The Columbia name had been synonymous with recorded music in the US for many decades, including a boom in the 1950s with artists such as Johnnie Ray, Rosemary Clooney and Johnny Mathis. In fact, dates back to the first ever phonographic recordings, made in the 1880s; its development after World War II into a major label was under the ownership of CBS (Columbia Broadcasting System), a major broadcaster.

For Sony, ownership of CBS Records (not the CBS broadcasting network) also brought in the Epic label, which had started in 1953 as a jazz and classical label but evolved into a major pop and rock label by the 1980s. Epic artists in the US included ABBA, The Clash and The Jackson Five (and, eventually, Michael Jackson as a solo artist).

Running parallel to Sony’s entry into global recording in the 1980s was the entry of Bertelsmann, a German , which bought RCA Victor in 1986. Founded in the 19th century as a publisher, Bertelsmann had expanded by the 1980s into a major European force in books, magazines and broadcasting. In music, the privately owned German company had amassed a division including Ariola Records (from 1958) and (from 1979). The RCA label took the names of Radio Corporation of America (founded in 1919), at one time a GE subsidiary, and Victor Talking Machine Company.

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The RCA label will always be famous for the recordings of Elvis Presley, although it is now part of an RCA Label Group (see below).

In the 1990s, Bertelsmann brought its labels together under a division and BMG was merged with Sony’s music division in 2004.

Current Structure

SME was created in the 1990s as the Japanese company’s music division, but from 2004 to 2008 it was known as Sony BMG. The buyout of Bertelsmann’s share means that SME is now the global name for Sony’s music output although, as with the other music majors, historic labels continue to be used.

Many of the labels are housed under three groups, called Columbia Label Group, RCA Label Group and Epic (created in a 2006/2007 re-organisation). Individual labels of note with a historic role in popular music have included Arista, Rough Trade and Zomba, as well as the group names of Columbia, RCA and Epic.

Naturally, given its history, SME can call on a diverse roster of talent including Bob Dylan, Bruce Springsteen, James Galway, , AC/DC, Aretha Franklin, Whitney , , Pink, , Christina Aguilera and the Foo Fighters. Newer bands signed to an SME label in the UK include Editors, Glasvegas, The View and The Ting Tings. International acts include Julio Iglesias, while US country acts include the perennially popular and Johnny Cash.

Sony’s music publishing is operated by Sony/ATV Music Publishing, whose copyrights include The Beatles and Bob Dylan. Expansion in the ‘noughties’ included purchases of the Leiber-Stoller catalogue.

Recent Developments

The most important recent development at Sony has been the replacement of Sony BMG by the 100% controlled SME. In other developments, RCA won the prize of Record Company of the Year at the MusicWeek awards and SME UK consolidated its London offices at Derry Street, moving from their previous offices in Fulham and .

Particular success for Sony has come from its relationship with , the television producer and presenter whose The X Factor talent shows have produced top-selling records from show winners such as Leona Lewis (recorded on Cowell’s own label, ).

From April 2009, Sony Corporation has reorganised its divisions, merging its Electronics hardware with division. One aim under the ‘Sony United’ initiative is to bring together subsidiaries to work more effectively with others. For example, SME collaborated with SPE ( Entertainment) on the production of the hit James Bond movie, Quantum of Solace.

For , SME has licensing deals with Nokia, Sony Ericsson, Vodafone and MySpace, among others.

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Financial Results

According to Sony’s financial highlights on its website, Sony Corporation recorded global sales and operating revenue of ¥7.7tn in the year ending 31st March 2009, down from ¥8.9tn in 2008. Net income in 2008 was ¥369.4bn, followed by a loss of ¥98.9bn in 2009. The declines were attributed to the global slowdown, the appreciation of the Yen and the decline of the Japanese market. Group turnover is still dominated by its Electronics division (65.1% share in 2009), followed by Game (PlayStation, 12.7%), Pictures (9.3%) and Financial Services (6.8%). The remaining 6.1% of turnover comes from miscellaneous activities, but mainly consists of SME.

Consolidation of Sony BMG in the Sony accounts from October 2008 meant that music revenues rose to ¥539.6bn for 2008/2009, from ¥382.2bn in 2007/2008. This revenue produced an operating income of ¥30.4bn in 2008/2009.

EMI Group

EMI is the British member of the world’s ‘big four’ music majors, sharing with them a long history in music, ownership of numerous labels and a long roster of artists, significant publishing rights and a profitable back catalogue. Above all, rights to the legacy of The Beatles — whose albums were reissued in 2009 — have helped sustain EMI for several decades. However, under private-equity ownership since 2007, EMI has suffered from under-investment and has developed little new talent.

EMI’s UK market share (in album sales) has fluctuated during the ‘noughties’ but has been on a downward slope since 2005, from 20.1% in that year to 13.4% by 2008. Market share in single sales, however, has held steady at 12% to 13%.

Company History

EMI’s no-longer used full name, Electric & Musical Industries, dates back to a merger in the 1930s of The and the Columbia Graphophone Company, the united company gaining rights to distribute US recordings from labels such as Columbia and RCA Victor (now owned by Sony). The Gramophone Company, like UMG’s Deutsche Grammophon and Decca, dated back to the earliest days of recording. The British empire contributed to success for EMI and over 60% of revenues came from outside the UK in the early part of the 20th century.

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Although Columbia and RCA Victor had taken control of their international sales by the 1960s, EMI profited from the British boom in inspired by The Beatles (detailed below) and was able to tackle the US giants in their own market. EMI bought the -based Capitol Records, a major with Frank Sinatra and The Beach Boys among its leading stars. EMI also broadened its portfolio — there had been a bias to classical music — with Cliff Richard and the UK licence for Tamla Motown, then an independent Detroit company. In the 1970s, EMI profited from the worldwide popularity of British progressive rock artists such as Pink Floyd.

Although developing as a music major, EMI was also part of a conglomerate (similar to those in the history of RCA Victor and Columbia) including hardware production. Already involved with products such as radar, radio and television in the 1970s, EMI spent the 1980s as part of Thorn EMI, with Thorn being an industrial electrical and defence supplier.

In 1996, EMI was floated off as a separate, public company specialising in music. Further concentration on core musical activities took place in the early 2000s when EMI spun off various retailing subsidiaries, including HMV (see HMV’s profile later in this chapter).

Current Structure

Having spent 10 years on the Stock Exchange — providing investors with the unusual opportunity to invest in a public music company — EMI was taken off the market in 2007 by Terra Firma, a private-equity group. Led by the well-known City investor, Guy Hands, Terra Firma has a reputation of investing in leisure-sector companies with a view to making them profitable before disposing of them or re-floating them. Among the targets for Guy Hands or Terra Firma have been pubs, cinemas and betting shops, although Terra Firma says it focuses on ‘large, asset-rich businesses with complex structural or regulatory issues’.

The company divides into EMI Music (recording) and EMI Music Publishing, with the latter claiming to be ‘the world’s most creative ’. (Catalogues include CBS Songs, Filmtrax, Virgin and Motown.) Recordings are divided between New Music and Catalogue. Success in the ‘noughties’ for the New Music output has been provided for by the likes of , , Coldplay and . However, it is the back catalogue that sustains EMI as a global music major.

The signing of The Beatles was historically crucial and in 2009 the ‘fab four’ continue to support EMI with the original albums having been re-launched as digital re-masters, priced at £9.99 each. (As in the past, this still represents a premium price above typical album prices in the shops.) Licensing income from the Rock Band has also provided a useful income stream.

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EMI Catalogue is also able to draw on other historic recordings from perennially popular artists, and the company itself can highlight albums in its catalogue that feature permanently among the most influential of all time, including Sergeant Pepper’s Lonely Hearts Club Band (and other Beatles albums), Pet Sounds (Beach Boys), Hunky Dory (), Dark Side of The Moon (and other Pink Floyd albums), A Night at the Opera (Queen), and OK Computer (Radiohead). The Catalogue division also owns the studios in London and Capitol Studios in Los Angeles. Labels owned or used by EMI (in addition to EMI Records) include Blue Note (jazz), Capitol, Mute, Parlophone and Virgin. Artists signed to EMI are backed by EMI Music Services for licensing, distribution and merchandising.

Recent Developments

At the time of writing (early 2010), there was speculation over the company’s future given a large debt burden and its private-equity owners — led by Guy Hands — were engaged in a major lawsuit.

Among artists, The Beatles’ back catalogue was once again to the fore in 2009, while the biggest success of 2008 was Coldplay’s Viva La Vida.

Financial Results

The filed accounts for EMI Group Ltd do not reveal a turnover for the year ending March 2008, but the company declared a loss before taxation of £255.4m against a loss of £263.6m for the previous year (2006/2007), in which turnover came to £1.81bn. The 2006/2007 turnover was down from £2.08bn in 2005/2006 (along with a pre-tax profit of £118.1m), the last year of EMI Group PLC as a public company.

Warner Music Group

Although the Warner name has a long history in connection with music (along with Hollywood movies and US television programmes), the current Warner Music Group (WMG) company only dates back to 2003. In that year, the music division of the much larger Time Warner Inc (including Warner Bros movies and television) was bought out as an independent, quoted (New York exchange) company under a team headed by Edgar Bronfman Junior.

As the Company History will reveal, however, WMG is similar to the other majors in dating back many decades in the history of popular recorded music. A variety of labels and businesses make up WMG, giving it over 20% of the market, in third place behind UMG and Sony. Among Warner’s back-catalogue assets are rock stars (Eagles, REM, Neil Young, , Led Zeppelin, Eric Clapton), jazz greats (Frank Sinatra, Count Basie, Duke Ellington, Miles Davis) and country legends (, Randy Travis, Emmylou Harris). Successes in the 2000s have included Madonna, Green Day and .

WMG had a 10.5% share of UK album sales in 2008, slightly lower than its historic average (11% to 13% between 2001 and 2006), but keeping it in fourth place in the UK market. Single sales have done well, reaching a 10-year peak share of 14.6% in 2008 from under 10% for most of the 2000s.

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Company History

Just as the names Universal, Columbia and RCA are all used as record labels, the name Warner dates back to the early years of Hollywood and the creation of a major studio by the Warner brothers, whose The Jazz Singer (1927) was the first major ‘talkie’ movie. Having struggled with the transition from cinema to television — along with the other Hollywood studios — Warner Bros eventually emerged from the 1950s as a diverse entertainment company including Warner Bros Records, created in 1958 by the movie studio.

Like the other Hollywood and music majors, Warner passed through several owners from the 1960s to the 1980s, eventually emerging (in 1989) as the music division of Time Warner Inc, the world’s largest multi-media company of the time with movies, cartoons, cable television, music and magazines in its portfolio. In 2000, Time Warner was acquired by AOL (America On Line) during the first ‘dotcom’ boom (i.e. the first flowering of Internet companies), but after the dotcom collapse Time Warner reverted largely to its original strategy as an ‘old media’ giant.

Current Structure

In 2003, Time Warner accepted an offer of $2.6bn for its music business from a consortium headed by Edgar Bronfman Jr, an executive with many years experience of the music business (e.g. with MCA and Universal). WMG was floated on the stock market in May 2005. Under Time Warner, there had been attempts to merge Warner Bros Records with EMI, but the regulatory hurdles were too high; nevertheless, the prospects of a merger between the world’s third and fourth ‘majors’ are still discussed in the trade.

As a pure music company, WMG has a legacy which, like the other majors, stands it in good stead in of multiple uses of music in the media. Since 1970, WEA has stood for the merged strengths of Warner, Elektra and Atlantic Records, the last of these having been a legendary independent label of the 1960s straddling rock (e.g. Rolling Stones) and ‘Atlantic’ soul. Other famous labels operated by WMG include Asylum, East West, Nonesuch, Reprise and Rhino.

In publishing, Warner/Chappell Music is among the world’s leading publishers with a one-million song catalogue.

Back-catalogue strengths for WMG include the Eagles, whose Their Greatest Hits 1971-1975 (on Elektra) was ranked by the RIAA up to 2008 as the top-selling album of all time (with over 28 million copies sold, ahead of by Michael Jackson). Madonna was the company’s outstanding success of the 1980s and 1990s, but the ‘retro’ trends of more recent years — re-releases, new media licences, etc. — have highlighted the catalogue’s strengths in rock, jazz, soul and country. Successes in this decade have included James Blunt, Basshunter, Michael Buble and Nickelback.

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Recent Developments

In the UK, Warner Music UK has extended its activities across music in 2009 by offering ticket-booking facilities for its artists. This enables fans to book tickets from an artist’s own website rather than a third-party site. The same facility allows purchasing of specific band or singer merchandise, fan-club membership and digital or physical music.

Financial Results

According to WMG’s Annual Report 2009, global revenues for WMG were down by 9% in the year ending 30th September 2009 to $3.18bn (but only falling by 3% excluding currency fluctuations). Digital revenue contributed $703m (22% of the total) in 2009.

OTHER MAJOR COMPANIES IN THE MUSIC SECTOR

Apple Inc

Traditionally known in computer manufacture as the main rival to IBM-based personal computers (PC) operated (almost invariably) using Microsoft software, Apple has developed over the last 10 years as a major force in home computing, mobile phones and, for the purposes of this report, in the supply and delivery of music.

Apple had struggled to compete with PC/Microsoft until, in the late 1990s, the company launched the iMac series of desktops. iMac set new standards in desktop design and took the appeal of the brand beyond its traditional markets (where Apple had been mainly favoured in design, architecture and media businesses). The MacBook series of notebooks, in a computer market moving towards portability, helped build Apple’s market share and reputation.

In competition with traditional personal music players (the Sony Walkman series and other MP3 file players), Apple launched the iPod series of personal recorder-players to great acclaim in the early 2000s. In contrast to existing personal players, the iPod was created not only as a portable device for listening to music but as an accessory to either Apple computers (iMac series) or PCs. Plugged into the home computer, could interface directly with Apple’s other major innovation of the early 2000s, the iTunes website — a music ‘store’ of thousands of tracks for iTunes or iPod users to buy.

Taken together, iTunes and iPods were a winning combination, but Apple ensured their even greater success with ease of use and elegant design, giving the iPod an iconic design status throughout the decade. The impact of Apple on music was dramatic (together with, to a lesser extent, other MP3 systems and websites). Apart from driving down demand for physical recordings (i.e. CDs), the Apple system enabled music consumers to create their own, personal libraries of individual ‘tracks’ (or songs) rather than buying whole albums. (However, the integrity of the album has largely been maintained and there are substantial discounts available for downloading a whole album rather than a few tracks from it.)

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Since 2006, Apple has broadened its marketing appeal by launching a range of smaller and cheaper versions of the iPod (iPod Mini, iPod Shuffle, etc.) and the company has also strengthened its position through vertical integration — the opening of Apple Store retail outlets in major cities. These act as one-stop stores for all Apple products and services, although ‘Apple Store’ also trades as a website. The retail stores offer personal advice from well-trained consultants who also can provide Personal Shopping appointments and paid-for training sessions.

Apple’s other major diversification, the iPhone, has arguably had more impact on the consumer than either the iMac or the iPod. Launched in 2006, the iPhone benefited from the design credentials established by the Apple computers and music players but it combined the music and video capabilities of the iPod to provide consumers needing a new phone with communication and entertainment on the move.

Since the iPhone, Apple has moved onto the margins of the broadcasting and television equipment markets with its Apple TV decoding box (connecting digital television sets via wi-fi to iMacs or iPods) but 2009 was the year of the ‘Apps’ — software applications created for Apple hardware, particularly targeting the iPhone. The company’s App Store claimed to have handled over two billion App downloads globally by the end of 2009, with more than 100,000 individual pieces of software available. Apps have shifted Internet functions from computer to iPhone for many consumers. However, the App craze may have detracted attention from music temporarily. Although there are Apps available for downloading or managing music collections, the top-selling Apps in 2009, according to Apple, did not include any music-related Apps. (The range covered by the top ten Apps included navigation software, games and National Rail Inquiries.)

HMV Group

The HMV chain is the UK’s largest specialist retailer of music, DVDs and computer games or home entertainment ‘software’. The Group includes Waterstone’s, the UK’s largest physical book retailer with 314 stores. In 2009, there were 272 HMV stores in the UK & business. Globally, the Group has nearly 700 stores in seven countries.

HMV stands for His Master’s Voice, a brand associated with the earliest years of recording in the UK, with its logo featuring a dog listening to an old-fashioned phonograph. HMV became a label — it is still owned by EMI — and the first store bearing the name opened in in 1921. The retail chain was out from EMI Group in 1999 and went on to acquire Waterstone’s, also becoming the largest chain of home entertainment superstores.

The HMV brand has been fortunate during the recession which started in 2008, benefiting from the collapse of Woolworths and Zavvi (formerly ), two other high-street retailers. HMV bought 19 of the Zavvi sites in early 2009. The largest stores, including the original Oxford Street branch, operate from huge premises on several floors dedicated to different media, offering up to 150,000 music titles per store. Naturally, HMV is also an important retailer online where Amazon is its chief competitor.

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In 2007, a major rival, , selling through more than 80 smaller stores, went into administration and HMV acquired six of the larger Fopp stores under their original brand.

According to the HMV Group PLC Annual Report and Accounts 2009, the HMV UK & Ireland division (excluding International) generated a turnover of £1.15bn in the year ending April 2009 (compared with a turnover of £1.08bn in the previous year), of which music represented a 28% share (i.e. around £325m at retail prices). DVDs contributed 45% and games and technology accounted for 24% of the total. In total, nearly 100 million CD and DVD units are sold annually.

Live Nation

Claiming to be ‘the largest producer of live concerts in the world’, Live Nation operates as a concert , ticket retailer (for its own and third-party events) and venue owner.

Based in the US, Live Nation has a strong presence in the UK. This was originally based on the entry into the UK theatre market of Clear Channel Communications, a diverse US-based media (particularly radio) and marketing group. (Live Nation was spun off from Clear Channel in 2005 as a separate, quoted company focused on live entertainment.) In 1999, a Clear Channel subsidiary, SFX, had bought Apollo Leisure, a group of venues including cinemas, theatres, concert halls, cinemas and bingo clubs. Some of these were subsequently sold but others are retained, either as ‘theatrical theatres’ (in Live Nation terminology) or as music venues (see Chapter 8 — Live Music for details).

Prior to the creation of Live Nation, Clear Channel had added to its UK commitment in 2005 with the purchase of Mean Fiddler PLC, a long-established concert promoter and music-venue owner; the purchase gave Live Nation rights to the Reading Festival and involvements in other outdoor festivals, but the seven London clubs owned by Mean Fiddler were later sold. Mean Fiddler was acquired as a joint venture between Live Nation (with a 50.1% share) and Gaiety Investments, a concert promoter based in the (and the corporate vehicle for promoter, Dennis Desmond).

In 2007, the Live Nation/Desmond joint venture took control of the Academy chain of venues. (Academy Music Holdings was jointly owned by private-equity investors and several concert companies.) In 2008, the venture took a majority stake in DF Concerts — already controlled by Desmond — which organises T in the Park, Scotland’s largest rock festival. (DF also launched the Hydro Connect festival in Inveraray, Argyll, in 2008.) Further details of the Mean Fiddler, Academy and DF operations are given in the Chapter 8 — Live Music.

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Live Nation has also managed , a major venue for concerts and events situated next to the redeveloped national football of the same name in north London, since 2006. As a result, the company now operates across the spectrum of popular music venues and festivals in the UK. Live Nation either operates a range of leases for these venues (e.g. the Wembley Arena lease until 2021) or owns them outright (e.g. Apollo).

The Live Nation Annual Report 2008 provides the following record of UK operations.

Table 4.2: Live Nation Operations in the UK (number and 000), Years Ending 31st December 2006-2008

2006 2007 2008 Promotions (number) — promotions 714 971 225 — theater third-party rentals† 4,972 4,704 4,532

Audience Total (000) — own promotions 756 949 239 — theater third-party rentals† 4,757 4,836 4,906

† — promoted concerts at venues owned or leased by Live Nation

Source: Live Nation 2008 Annual Report

The financial results for Live Nation separate out UK operations, showing revenues of $557m in 2008, or 13.4% of group revenues.

Table 4.3: Live Nation Financial Results ($m), Years Ending 31st December 2006-2008

2006 2007 2008

Revenues ($m) 3,294.5 3,755.5 4,166.8 — of which: the UK 534.5 575.2 557.0

Net income/loss ($m) -31.4 -15.2 -239.4

Source: Live Nation 2008 Annual Report

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Live Nation also valued its ‘identifiable assets’ in the UK at $453.8m at the end of 2008.

A loss of $239.4m was made by Live Nation in 2008, but this was attributable to ongoing changes at the company, including the disposal of non-core assets (e.g. nearly all the US theatres) and investment in ticketing operations. Global figures showed that 22,000 concerts were promoted or hosted by Live Nation in 2008 in 33 countries, attended by 52 million fans (12% up on 2007) with major contributions from Madonna, U2, AC/DC, Bruce Springsteen and Coldplay. Moving into 2009, Livenation.com was a ‘full-service ticketing site’ with its own ticketing platform, but by the end of the year Live Nation had merged its ticketing operations with Ticketmaster, the world’s largest ticketing company.

Yamaha Corporation

Based in Japan but with worldwide operations, Yamaha is the world’s largest manufacturer of musical instruments, in addition to owning 20% of Yamaha Motor, a sister company manufacturing motorcycles. The electronics range, in addition to musical instruments, includes both amateur and professional products (such as home hi-fi and recording studio equipment).

Yamaha originated as a reed organ manufacturer (Nippon Gakki) at end of the 19th century, steadily diversifying into other instruments through the 20th century (e.g. guitars in the 1940s, wind in the 1960s). Since the first PortaSound portable keyboard was produced in the 1970s, Yamaha has dominated the market for entry-level, quality keyboard instruments, particularly for schools.

The instruments range is now comprehensive, covering pianos and keyboards, string, brass, woodwind and percussion. The ‘music production tools’ category includes recorders, computer interfaces, mixing equipment and live performance products (e.g. stage pianos). The keyboards sub-category is where Yamaha is most dominant, including the sub-brand Clavinova, which had its own website launched in December 2009.

In the UK and many other countries, Yamaha is vertically integrated in addition to its ‘horizontal’ integration across the music production industry. The brand is only sold through licensed dealers, which also house the Yamaha Music School system. Providing lessons in the stores, the system is part of an altruistic investment, the Yamaha Music Foundation of Europe, which provides grants for students.

In the UK, Yamaha also owns Kemble & Co, which, until 2009, was the last remaining manufacturer of complete acoustic pianos in the country (and Europe’s largest). In October 2009, the British factory was closed and production shifted to Indonesia where, as Managing Director (MD) Brian Kemble pointed out (as stated in a Kemble press release on 22nd September 2009), lower labour costs allow workers to spend longer on ‘voicing’ in the production. When Kemble was founded in 1911, there were more than 200 piano manufacturers in the UK.

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Yamaha had originally been represented in the UK (until 1984) by Kemble and then traded as Yamaha-Kemble Music until 2007, when the name changed to Yamaha Music UK Ltd. This company had a turnover of £62.4m in the year to March 2008, making a pre-tax profit of £3.7m. Turnover hovered between £61m and £63m between the years ending March 2006 and 2008.

BROADCASTERS

British Broadcasting Corporation

A public corporation, rather than a company as such (although it has trading subsidiaries), the BBC is as dominant as ever in UK broadcasting and plays a major role in bringing music to the public.

The Corporation’s 10-year Royal Charter was renewed in 2006. The BBC is funded by the Licence Fee, a tax paid by television-owning households, and is not allowed to sell advertising time. Financial accounts published for the Corporation show that around three-quarters of income is from the Licence Fee, with the rest derived from trading by BBC divisions. The BBC spends more than its income each year and makes an annual deficit (in 2007/2008, this was just under £100m).

Despite deregulation in the broadcasting markets and additional competition from new technologies, the BBC retains a dominant position in UK broadcasting. The most significant services, in terms of audience size, are:

• BBC1 — still the most popular channel of all with more than a 20% share of viewing hours

• BBC2 — a major channel offering more highbrow and special-interest programming than BBC1

• four national radio stations, accounting for more than 40% of radio listening hours (detailed below) and several digital-only (digital audio broadcasting [DAB]) stations. Radio 4 and Radio 5 Live are spoken-word (current affairs, sport, etc.) stations, while the others focus on music.

• digital television channels on Freeview, which is partly BBC-controlled, including: BBC3 (light entertainment, youth-oriented); BBC4 (highbrow culture, with echoes of Radio 3 and Radio 4); BBC News 24; and two children’s channels, CBBC and CBeebies. The BBC has also invested in .

• digital radio stations, which have led the DAB market, including: BBC1Xtra (urban music); BBC6 Music (independent music); BBC 7 (speech, similar format to Radio 4); BBC 5 Live Sports Extra (additional live sports coverage); and BBC Asian Network.

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.co.uk is the most popular content website developed within the UK, ranking alongside international sites such as and MSN. The BBC has invested to ensure that it keeps pace with Internet development, and in 2007 it created a new division, Future Media and Technology, with a £400m budget and 1,500 staff.

BBC Worldwide, the commercial arm, is responsible for programme sales and licensing, magazines, books and recorded music.

The BBC’s influence on music in the UK has extended across radio, television and live music (e.g. by funding its own orchestras and ‘’).

BBC Radio has three analogue, national music stations together with digital stations. Radio 2 is for light entertainment including comedy, but it mainly broadcasts popular music of interest to adults, making it the most popular station in the UK. (The creation of Radio 5 Live, offering 24-hour news, discussion and sport, freed Radio 2 to broadcast more music). There are many music-themed programmes on Radio 2 — jazz, country, light classics, organ, — and regular radio documentaries about the history of popular music.

Radio 1’s focus is popular music and youth interest; as such, the station has been responsible for introducing a young audience to new music since its launch in 1967 (when it replaced the illegal ‘pirates’ such as Radio Caroline). In contrast, classical music is the staple of Radio 3, which includes other ‘highbrow’ broadcasting. Digital radio has allowed the BBC to launch new minority-interest stations such as BBC1Xtra (urban music), BBC6 Music (independent music) and BBC Asian Network.

The BBC therefore continues to play a crucial role for all types of music, both mainstream and minority. In popular music, listeners who grew up in the heyday of pop and rock (the 1960s and 1970s) watched BBC1’s Top of the Pops as the main weekly chart show, and this was almost a ritual for young viewers. However, the TOTP format had lost its broad audience appeal by the 1990s and was dropped in 2006. (Christmas shows continue, together with occasional TOTP2 programmes showing archive performances.)

Current regular programming includes the Later with Jools Holland series on BBC2 — there have been 25 series — offering eclectic live performances and, for classical music, the major feature of every year is the Promenade Concerts. Organised since 1927 by the BBC itself, the ‘Proms’ are broadcast mainly from the on BBC television (increasingly, on BBC4) and Radio 3. Another long-running show is the Song Contest which, despite its detractors, enjoys viewing figures of up to 9 million every year.

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Other Broadcasters

The BBC’s main competitors in television and radio, funded by advertising and sponsorship, are:

British Sky Broadcasting Group PLC

The main activity of the British Sky Broadcasting Group PLC (BSkyB) is the Sky television channels broadcast direct by satellite to UK homes, and the company is referred to informally as ‘Sky’. Following 10 years of analogue broadcasting, digital satellites were launched in the late 1990s and by 2001 Sky had completed its transition from analogue to digital broadcasting. The digital switch enabled Sky to increase its subscription levels faster in the 2000s than in its first 10 years, reaching 9 million homes by 2008.

Although a quoted UK company, BSkyB is controlled by Rupert Murdoch’s News Corporation, which is also a major book and newspaper publisher in the UK and owns 21st Century Fox (Hollywood movies and US television). BSkyB also has stakes in Freeview and Freesat.

ITV PLC

ITV is the largest commercial, terrestrial television broadcaster within the UK, owning all the regional licences in and for the third channel (or channel 3, also known traditionally as the ‘ITV’ channel). ITV also controls GMTV, the national breakfast-time franchise on channel 3. Other franchises are held by STV Group PLC in Scotland and UTV Media in . ITV also has digital channels and an Internet presence (ITV.com, Friends Reunited).

ITV was previously the acronym for Independent Television, the network of advertising-funded regional channels launched to compete with the BBC in the 1950s. (Originally, all the channels had different owners.) Deregulation allowed the two largest regional companies to merge and acquire other regional licences and ITV PLC floated on the London stock market in 2004.

Despite a loss of advertising revenue to new media, ITV has had some of its most significant successes in terms of winning viewers by focusing on talent shows. In 2008, ITV won the Saturday evening ‘ratings battle’ with the BBC by achieving 14.4 million viewers for the final of Britain’s Got Talent, ahead of the BBC’s ‘I’d Do Anything’ ratings. In 2009, The X Factor dominated Saturday evening viewing, although the BBC had a strong competitor with Strictly Come Dancing. Music is a strong element in both these shows.

Others

and Five (owned by Bertelsmann) are the other terrestrial television channels. Freeview is the main terrestrial, digital service, jointly owned by the major broadcasters; a Freesat service was launched in 2008. UKTV is jointly owned by (see below) and BBC Worldwide.

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• Virgin Media is the leading cable television provider, its revenues including telephony and Internet services. The Virgin name has been connected to media and entertainment for many years under the leadership of the famous entrepreneur, Sir . In 1992, Branson sold the Virgin to EMI and it survives as a major label on the UK market; in 1996, Branson launched V2, a completely separate record label from the , but it was acquired in 2007 by UMG.

Virgin Megastore was once the UK’s second-largest home entertainment retailer (after HMV), but in 2007 the chain was bought out by management and became Zavvi, before collapsing with the onset of recession (the last Zavvi store closed in February 2009). Branson was also a pioneer in commercial radio, but went through several owners in the 1990s to early 2000s (see , below) and the name is no longer used in the UK.

• Radio listening is dominated by the BBC. Commercial radio is headed by Global Radio Holdings Ltd, with a market share of 45% of commercial radio listening hours (i.e. listening to non-BBC stations). Founded in 2007, Global incorporates the lucrative Radio stations in London and the leading national commercial station, Classic FM, together with more than 100 provincial stations (originally part of GCap Media, GWR or ). Global is backed by Lydian Capital Partners, a Swiss private-equity firm.

The second-largest commercial radio broadcaster is , operator since 2008 of the former Emap stations, and also a magazine publisher (as part of a German media group, Heinrich Bauer Verlag). Emap had launched music stations such as , Q and Heat on the back of successful youth or celebrity magazines. Bauer also owns The Hits channel.

GMG Radio, part of the newspaper publisher , owns stations such as Real Radio, Rock Radio and Smooth (originally Saga) Radio. Absolute Radio is a new brand from September 2008, replacing Virgin Radio (see Virgin Media), the UK’s only nationally broadcast, commercial pop music station. Absolute is owned by TIML, an Indian company.

OUTSIDE SUPPLIERS

An endless list of companies could be considered as ‘outside suppliers’ to the music industry; these are too numerous to detail, but several broad categories can be listed:

• Media — several media giants were profiled earlier in this chapter, but the full list includes nearly all radio stations, which rely on a music output, together with independent television production companies (see Chapter 7 — Music in the Media). Publishers also act as outside suppliers, including publishers of music magazines, newspapers as concert and recording reviewers, and book publishers offering biographies of musicians, etc. (Published music, in manuscript form, is dominated by the ‘majors’, together with specialist classical music publishers. Now considered as an ‘outside supply’ to the music industry, published songs were once the basis of regular bestseller charts.)

46 © Key Note Ltd 2010 Music Industry Competitive Structure

• Venues, promoters and agents — Clear Channel was mentioned above, but Chapter 8 — Live Music — lists other owners and operators of venues, usually involving more than one company. Promoters of concerts and agents representing artists may overlap but are usually separate companies (or individual managers). Other key suppliers involved in staging live music events include sponsors and those providing a wide range of products and services (e.g. merchandise, catering, ticketing and security printers). ‘Title sponsorship’ is increasingly common, both for venues and events and for concert tours (e.g. Academies).

• Manufacturers and distributors of audio equipment — these are outside suppliers, although Apple has already been profiled as an equipment company with a particularly pervasive influence. The audio market now splits into conventional hardware for listening to radio or CDs (hi-fi, portable players) and hardware for downloading, led by Apple’s iPod (and, increasingly, by the iPhone and other advanced mobiles). Apart from the US-based Apple products, audio hardware is dominated by Far East brands — the extensive list includes Sony (also a music major), JVC, Toshiba, Sharp, Hitachi, etc., with European competition led by Philips (the major European mass-market producer) and upmarket specialists such as Bang & Olufsen of Denmark and the UK’s Pure Digital (for DAB, or digital radios).

• The recording studio sector — this divides between the corporate studio complexes owned by the major record companies and numerous independents, although the need to invest heavily in new technology (and to upgrade regularly) means that there are fewer famous independents than in the past. EMI Group, the UK’s own ‘major’, is particularly important in studios, including the Olympic Studios in London and Abbey Road. In the US, Hit Factory is a famous independent name in studios. One of the famous sites owned by the majors is the EMI’s circular Capitol Records building in Los Angeles, housing both corporate offices and studios.

MARKETING ACTIVITY

Marketing strategies vary according to the manifestation of music — recordings, live performance, instruments for sale — and these are described in the relevant product chapters. In terms of the most traditional type of marketing (advertising in the main media), recorded music is outstanding although budgets have been reduced from a total of £129.3m in the year ending September 2005 to £75.2m in the year ending September 2009, according to Nielsen Media Research (NMR). A total of £60.8m was spent advertising all theatre, plays and concerts (not sub-divided by NMR), of which the largest advertiser was Live Nation, spending £3.1m in the main media.

Media advertising itself includes music-related promotions such as that of MTV, but only £414,000 was spent on that channel within £121.1m spent by on all cable and satellite channels. The £12.4m spent advertising on radio is more relevant, since music is radio’s staple diet. HMV is the leading retailer (£15.2m) advertising in the media, but its general campaigns are intended to draw in customers for its full product range, now lead by DVDs rather than CDs.

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New media are now crucial for music, not only because of their marketing potential but because they are themselves the distribution mechanism (real or potential) for delivering music. Individual websites are crucial for bands, recording companies, ticketing agents and e-commerce retailers. YouTube alone has made a massive difference to consumers searching for ‘live’ music, and iTunes has been equally revolutionary in delivering music. MySpace went one step further, acting as a social networking site with a bias to musicians wanting to share their music online. A key event of the ‘noughties’ was the success of the first Arctic Monkeys album, demonstrating the impact of ‘viral’ marketing on music.

The Internet has, therefore, had a major impact on each type of musical manifestation — the ability to download recordings (and personalise collections), to watch old pop or music on television, to buy concert tickets, and to communicate with like-minded fans or fellow musicians.

48 © Key Note Ltd 2010 Music Industry Recorded Music Market

5. Recorded Music Market

INTRODUCTION

This chapter covers the ‘production’ side of audio recordings, while Chapter 6 — Recorded Music Distribution — and Chapter 8 — Live Music — are also relevant to the recorded music market. The main trade association (and source of detailed information) is the British Recorded Music Industry, formerly the British Phonographic Industry, which is still called the BPI.

Recordings divide up by type of music, but the method of delivery is now the focus of attention, and the BPI divides the market between:

• ‘Physical’ recordings of albums or singles, the vast majority bought on CD with a residual market for vinyl records remaining. Albums divide between ‘artist albums’ — original or concept albums, or retrospective hits collections (e.g. ‘Greatest Hits’ or ‘Best of’ albums) — and compilations (more than one artist). Singles are released individually to the public, whereas songs on an album are ‘tracks’ (possibly also released as singles).

• Non-physical music — downloading is used in this report in preference to the BPI’s term ‘digital’, which can refer to a digitally produced CD.

Recording technology, and the music industry itself, uses a wide range of acronyms, including the following:

• A&R — and recording personnel (may also ‘scout’ for new talent to sign)

• AOR/MOR — adult-oriented rock/middle of the road (bland styles of pop or )

• DRM — digital rights management, describing a technology which restricts access to and use of digital content (e.g. a track can only be downloaded once)

• rpm — revolutions per minute, the speeds at which vinyl records turned (78 rpm for older records, 33 rpm for albums or long players (LPs), and 45 rpm for singles)

• MP3 — a digital standard for compressing audio-visual files to make them small enough to download (the MP being part of ‘MPEG1 audio layer’, the MPEG standing for Moving Picture Experts Group)

• R&B — rhythm and blues. Originally, black music of the 1950s featuring electrified versions of the ‘country blues’, but now used more widely for soulful black music of US origin (excluding hip-hop/rap).

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KEY TRENDS

• Recorded music remains pivotal to music at all levels, despite a decline in its market value in this decade due to ‘free’ downloading (including illegal peer-to-peer file-sharing or ‘piracy’ worth an estimated £200m in 2009).

• In addition to the replacement of physical media (CDs, cassettes and vinyl) by downloading, technology has changed the recorded music in other important ways. Using online services such as iTunes or Spotify, music lovers can organise their own collections of tracks rather than owning albums and music is increasingly stored, and listened to, on mobile devices (e.g. iPhones and other mobiles).

• CD sales have been maintained in part because prices have dropped, enabling older consumers to build collections of their favourite artists at low cost, particularly of older music. This fits in with a general ‘retro’ trend with styles of pop and rock from the past being recycled by artists old and new. One of the most popular acts of 2009, for example, was the re-born Take That boy band.

• Recording is very much a globalised business with only four ‘majors’ dominating the world market, of which one (EMI Group) is British. (The others are Universal, with a French parent; the independent Warner Music; and Sony Music, the Japanese giant having bought out its German partner, BMG, in 2008.)

• Globalisation has long been a part of the UK industry in that US recordings have often dominated the UK music charts, although the long tradition for UK acts to succeed in the US (most notably by The Beatles but also by progressive rock in the 1970s) continues with artists such as Coldplay and Leona Lewis having ‘broken America’.

• Talent-show winners from shows such as The X Factor and Britain’s Got Talent are making an increasing impact on the charts, even if they often end up as ‘one-hit wonders’.

MARKET SIZE

Table 5.1 shows both total sales for recording music and the type of recording purchased. Although this breakdown could also be treated under the ‘By Market Sector’ heading which follows, it is also important to introduce the purchasing ‘format’ breakdown early on in order to understand overall trends.

Total sales of music are evaluated by the BPI for 2008 at £1.3bn, down from £1.85bn in 2005 and from the all-time record of £2.13bn created in 2001. Within the 29.1% decline between 2005 and 2008, album sales (almost all on CD) were down by 35.2%, while physical single sales dropped in value by 80.3%.

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Total sales have not, therefore, been sustained by the rise of downloading, although this sector — almost five times larger in 2008 than it was in 2005 — is expected to continue to grow for many years to come, replacing physical formats. Furthermore, the retail figures clearly exclude free downloads and music copied from other people’s collections, so they say little about the overall volume of uptake of recorded music by the consumer.

Table 5.1: The UK Market for Recorded Music by Type of Recording by Value (£m at rsp), 2005-2009

% Change 2005- 2005 2006 2007 2008 e2009 2009

Albums† 1,640.0 1,430.0 1,184.4 1,063.3 975.0 -40.5 Singles† 66.6 40.8 22.4 13.1 10.0 -85.0 Total album and singles† 1,706.6 1,470.8 1,206.8 1,076.4 985.0 -42.3

Music DVDs 102.6 93.5 60.5 48.8 40.0 -61.0 Downloads 38.0 70.0 124.4 184.0 250.0 557.9

Total 1,847.2 1,634.3 1,391.7 1,309.2 1,275.0 -31.0 % change year-on-year - -11.5 -14.8 -5.9 -2.6

rsp — retail selling prices e — Key Note estimates † — physical format (on CD, cassette or vinyl)

Source: BPI/Key Note

Cutting across the formats shown is the trend, driven by downloading possibilities, towards buying individual tracks rather than whole albums. (There is an important distinction between buying singles, released as such, and individual tracks, which may be either singles or tracks taken from albums, not released individually.) However, BPI figures for downloading (detailed in the Chapter 6 — Recorded Music Distribution) claim that download purchases of albums rose by 65% in 2008, ahead of the 45% growth for individual tracks.

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Downloading accounted for 14.1% of the market in 2008 and, based on likely future trends, this will reach 65% by 2012 and 87% by 2014 (around the share held by physical formats [86%] in 2008). This will bring an end to the era of the physical formats which, for historic interest, were described in Chapter 2 — PEST Analysis.

Music sales on DVDs peaked mid-decade and halved in value by 2008; there is no doubt that online video, particularly YouTube, is largely responsible for this trend.

BY MARKET SECTOR

One traditional way of segmenting the recorded music market is by format presented to the consumer. The basic breakdown was shown in Table 5.1 and this section will concentrate on types of music and pricing differentials.

Albums

By Musical Genre

For albums only, the BPI produces the rankings shown in Table 5.2 with ‘market share’ by genre of music. Pigeon-holing music in this way is obviously controversial outside the more obvious categories of spoken word, children’s or classical. It can be argued that the most significant artists are those who ‘break the mould’ or whose music straddles genres in terms of influences.

Table 5.2: Album Sales by Musical Genre by Volume (%), 1999-2005, 2006, 2007 and 2008

†1999-2005 2006 2007 2008

Rock 30 41.5 37.2 35.7 Pop 30 20.8 22.3 25.3 R&B 8 8.7 10.3 10.5 Dance 10 7.7 8.1 7.9 MOR/easy listening 6 6.9 7.0 7.2 Classical 4 3.4 3.6 3.7 Hip hop/rap 5 3.2 2.7 2.2 Country 2 2.2 2.4 1.8 Jazz 2 1.9 2.4 1.7 Folk 1 1.2 1.2 1.2

Table continues...

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Table 5.2: Album Sales by Musical Genre by Volume (%), 1999-2005, 2006, 2007 and 2008

...table continued †1999-2005 2006 2007 2008

Reggae 1 0.7 0.8 0.8 Other‡ 1 1.8 2.0 2.0

Total 100 100.0 100.0 100.0

† — average R&B — rhythm and blues MOR — middle of the road ‡ — including world, blues, children’s (all of which achieved 0.5% of the market i n 2008), new age and spoken word

Source: BPI

In broad terms, most listeners, either as consumers or within the music industry, would agree that rock is the dominant format, examples of those in the category in 2008 including Coldplay, Kings of Leon and The Killers. The long-term trend is for rock to increase its share (from a mere 22.4% in 1999) and 2006 marked an all-time peak share for the genre, at 41.5%. (Even more subjective are the subdivisions of rock into contemporary, metal/punk, AOR and progressive rock segments. The contemporary segment accounted for 24% of rock sales in 2008; ironically, this segment included greatest hits for Oasis and , bands which originated in the early 1990s.)

Pop was the largest albums genre up to the early 2000s (this excludes its influence on the singles market) with more than 30% of the market, but it fell to an all-time low of 19.8% in 2005 before recovering strongly in subsequent years. The boy- and girl-bands of the 1990s to early 2000s have been a factor in this change, losing their appeal in mid-decade but recovering since 2005 through success for Girls Aloud and Take That, in particular. (Pop has sometimes been subdivided into categories such as teen and rock ‘n’ roll, but artists such as Pink and Duffy could easily object to a pop classification, their music ‘crossing over’ with rock or even R&B.) The pop category includes the important singles collections, such as the ‘Now That’s What I Call Music’ series, which brings together chart hits although they may be of various genres.

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Rock and Pop, including their crossovers, combined to a 61% share in 2008, close to their 60% average since 2009. Among the smaller popular music categories, R&B has steadily increased in importance to an all-time high of 10.5% in 2008 although, once again, genre definitions come into play. R&B artists in 2008 included Leona Lewis, the winner of The X Factor whose Spirit album was the fastest-selling debut album ever in the UK, although the album contained numbers in the talent-show ‘big ballad’ style and both pop and R&B tunes, according to various reviewers. This is a long way from the harder, soul-inspired R&B of the past and very different from hip hop/rap or reggae, the other major ‘music of black origin’ (‘MOBO’ has its own annual awards from the industry) genres in the table.

The dance category has ebbed away from its peak 12% to 13% market share in the 1990s to 7% to 8% currently, with the club scene having shifted towards more eclectic play-lists with customers quite happy to use rock, pop or R&B tracks as their ‘dance’ music. MOR or easy listening is a permanent fixture in charts with 6% to 7% of sales, and classical usually has 3% to 4%; crossovers include highly commercial releases from artists such as Katherine Jenkins and . There is also a vague boundary between jazz’s contemporary sub-genre and MOR, with Norah Jones having featured in both.

Pricing, Re-issues and Compilations

The BPI could once classify more than 85% of albums sold (by value) as being designated full price, with sub-categories of mid price and budget, but the impact of downloading on prices means that there is now a broad spread of prices for CDs or online, even among albums which are first-time releases by new artists. Average prices have steadily declined, with only 24% sold at prices of more than £10 in 2008, from 61% in 2000. In 2000, 37% of albums cost £12 or more; that ratio had fallen to 13% by 2008.

The ‘new’ albums on the market in any given year also divide into first-time releases (two-thirds of the total) and re-releases or ‘back catalogue’, sometimes on new formats. In the wake of the Mamma Mia! soundtrack release, ABBA’s Gold collection was re-promoted to reach cumulative sales of 4.6 million copies, while albums from Queen and Michael Jackson have benefited, respectively, from the popular and long-running We Will Rock You stage show and the dramatic death of Jackson in 2009.

Compilations of tracks from different artists have been a staple of the industry since the 1960s, but they are less meaningful now that consumers can compile their own favourite playlists on computer or burned to CD.

Since the 1980s, the top-selling compilation series in every year has been Now That’s What I Call Music, compiling current hit singles from several labels.

54 © Key Note Ltd 2010 Music Industry Recorded Music Market

By Artist Nationality

Nationality is another yardstick used by BPI. The division of UK sales has been fairly stable over the last 10 years — although countries fluctuate from year to year — with UK and US sales usually combining to between 85% and 90% of the albums market. (Canada, the Republic of Ireland and are other regular contributors, but with minor shares.) UK artists have averaged 50% of the market since 2005, historically a strong position fuelled by artists such as James Blunt, Kaiser Chiefs, Coldplay, Duffy and Take That. The X Factor artists, all UK-based, are now adding to the strength of domestic releases.

For the majors, UK nationality share is generally less important than global market share and this depends heavily on the tradition of UK artists ‘breaking America’, as the US is by far the largest market (see also Chapter 10 — A Global Perspective). In recent years (2007 to 2009), UK successes in the US — hence, global success — have included Coldplay and Leona Lewis.

SUPPLY STRUCTURE

Chapter 4 — Competitive Structure — describes the globalised structure of recorded music, which has produced four major groups (the ‘majors’) in terms of signing, developing and recording artists and, in many cases, retaining copyrights on their output. The EMI Group is a UK-based multinational, while the other three are based in the US but are ultimately owned by companies registered in the US (Warner Music Group [WMG]), France (Universal Music Group [UMG], owned by Vivendi) and Japan (Sony Music).

Globalisation of production and consolidation of label ownership means that the majors accounted for 78.7% of the album market in 2008 (and a similar annual share of the declining singles market) and UMG has considerably strengthened its position at the top since 2005, taking an extra 10% of market share. This growth for UMG has been mainly at the expense of the other majors, with the independents (‘Others’ in Table 5.3) retaining just over one fifth (21.3%) of the market.

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Table 5.3: UK Market Share of Album Sales by Company by Volume (%), 2005-2008

2005 2006 2005 2008 Company† Universal Music Group 25.5 30.0 32.7 35.7 Sony‡ 21.2 20.1 19.0 19.1 EMI Group 20.1 17.9 15.7 13.4 Warner Music Group 12.3 11.4 10.4 10.5 Others 20.9 20.6 22.2 21.3 — Demon 2.5 2.6 3.3 4.1 — MSHK§ 1.4 2.0 2.4 3.2 — Beggars Group 1.4 0.8 0.8 1.5 — Union Square 0.5 0.7 0.7 0.8 — Domino 0.6 0.9 0.6 0.4 — Apace 0.1 0.2 0.3 0.4 — others 14.4 13.4 14.1 10.9

Total 100.0 100.0 100.0 100.0

† — listed by international group name ‡ — Sony BMG until October 2009 § — /Hed Kandi

Source: BPI

Despite the concentration of power among the majors (profiled in Chapter 4 — Competitive Structure), the role of independent record companies or ‘labels’ must be given credit. They continue to offer more artistic freedom to new artists, as they have done since the 1960s; outstanding recent examples include Domino, which has launched the Arctic Monkeys and Franz Ferdinand to great acclaim since 2005, and Dramatico, which had a major breakthrough with Katie Melua. In a particular year, these breakthrough artists can give an independent label up to 0.5% of the total market.

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The BPI figures for 2008 show the majors having 78.7% of the UK market and the top five independents together taking a further 10%, but this still leaves a ‘long tail’ of smaller labels: the BPI lists 30 companies with 0.1% to 0.3% of the market in 2008. These are not all ‘indies’ committed to launching new music, however, since there is scope for smaller companies to sign older artists no longer wanted by the majors (in the reverse of the traditional process whereby budding artists on independents sign to a major for stronger support). Some independents may buy limited rights to an artist’s catalogue (e.g. Demon — see the Major Players section below) and these companies are effectively marketing and distribution operations which do not, like the majors, employ A&R staff to discover and sign new talent.

Another structural aspect of the supply is distribution at the wholesale level (the retail level is covered in the next chapter — Recorded Music Distribution). BPI figures show that Arvato, a subsidiary of Bertelsmann of Germany, became the UK’s largest album distributor in 2008 (with a 46.4% distributor market share) when it gained the contract to distribute many Universal releases. (Bertelsmann ceased to operate as a recording company later in 2008, selling its share in Sony BMG to Sony [see Chapter 4 — Competitive Structure]). Other major distributors are EMI Group (14.4% share), Universal (other than Arvato, 10.8%), Cinram (10.7%) and PIAS/Sony DADC (9.7%), giving the largest distributors over 90% of the market. This efficient, centralised distribution structure is utilised by independents to give them distribution access to the market (although this only relates to physical distribution of CDs, in decline against the completely different downloading distribution structure).

Outsourcing of other functions is also common in the recording business. The ‘majors’ have steadily shifted away from the role of manufacturing (or even physical distribution, in some cases) to concentrate instead on finding, developing, marketing and representing their rosters of artists and their labels. Several CD plants in the UK have been disposed of in the 2000s.

MAJOR PLAYERS

The ‘Majors’

The four international ‘majors’, as profiled in detail in Chapter 4 — Competitive Structure, are:

• UMG — US-based but owned by Vivendi, a French media group, bringing together many of the major names of recorded music of the last century including MCA, PolyGram, Decca, Deutsche Grammophon, Motown and Island.

• Sony Music Entertainment (SME) — the music division of the world’s largest consumer electronics producer. Sony was a 50% partner in Sony BMG until October 2008, when it bought out its German partner, Bertelsmann. The joint venture was created in 2004; historic labels in the group include Columbia, RCA and Arista.

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• WMG — a public US company which gained independence from the much larger Time Warner media group in 2003. Labels include Warner Bros, WEA (Warner Elektra Atlantic) and Zomba.

• EMI Group — the UK-based member of the ‘big four’, although it makes much of its income in the US and from US acts (through the Priority and Capitol labels). British labels include EMI and Parlophone, on which The Beatles, one of EMI’s major long-term assets, recorded in the 1960s; also on Parlophone are Coldplay and Lily Allen.

Independents or ‘Indies’

Some leading independents, as listed in Table 5.3, are:

• Demon Music Group — currently the UK’s largest independent with 16 labels ‘spanning all genres, formats and price points’. Demon uses the traditional independent compiler route of television-advertised albums and also sells through catalogues. DMG is part of 2 entertain (which has a group turnover of £240m) which also handles VCI Video and BBC Video. Sales are spread across many artists, one prominent artist on Demon being Daniel O’Donnell, the Irish singer.

• MSHK stands for Ministry of Sound (see also Chapter 8 — Live Music) and Hed Kandi, two of several labels for (mainly television-advertised compilations) promoted by the group. Controlled by James Palumbo, MSHK has offices in London, New York, and Berlin. Major releases have included the Chilled series, Anthems and the long-running Ministry Annual, compiling the summer’s most popular ‘house’ dance tracks.

• Beggars Group — this has its roots in the independent ‘punk’ spirit of the late 1970s, whereas MSHK was inspired by 1980s . Founded by Martin Mills, the Group expanded to take control (of shareholdings, or act as distributor) for labels such as 4AD, Rough Trade and XL, in addition to the Beggars Banquet label. (Beggars Banquet started as a 1970s record-shop chain and is also the name of a Rolling Stones album.) XL is currently a successful dance label, while the other labels have a long roster of famous ‘indie’ recordings.

• Union Square Music is a re-issue, compilations and sub-licensing specialist in operation for 10 years with several labels including Metro and Essentials, each tied to a specific album price.

• Domino, unlike many current independents, is committed to new music. Although established for years, the breakthrough came in 2003 with Franz Ferdinand, putting Domino in a position to ‘beat off intense competition’ to sign Arctic Monkeys in 2006. (The young Sheffield band became famous on the Internet before even considering signing a .)

• Apace Music produces themed compilations under a range of labels or titles such as Pure (Pure Country Moods, Pure Classical Chillout), Mastercuts (MC Regga, MC Soul) and de Lune (Asian Lounge, Arabic Beats).

58 © Key Note Ltd 2010 Music Industry Recorded Music Market

The licensees, re-issuers and compilers have contributed to the steady growth in the number of CD albums released, despite the trend to download. In 2008, a new all-time high was registered by BPI at 33,685 albums, up from 32,459 in 2007 (and 19,312 in 2000). BPI statistics show that the top 100 releases usually only account for less than one third of sales in a given year, so the market is driven as much by sales in small quantities of numerous back-catalogue re-releases as by the much-publicised best-sellers.

Labels and Artists

A meaningful discussion of ‘major players’ in recorded music needs to go beyond the basic corporate structure to analyse the leading labels and artists. (Distributors can also be seen as major players, ranging from HMV stores to Google’s YouTube and Apple’s iTunes, but these are profiled in Chapter 6 — Recorded Music Distribution).

Labels

The majors own the majority of labels which are familiar to the public and many labels continue to be operated, not just as ‘imprints’ (as in book publishing) but as subsidiaries which are managed at arm’s length from the ultimate owning company, the multinational ‘major’ group. Public familiarity with labels has decreased with the move from labelled vinyl records to CD and now to downloading, but they still carry resonance for some types of music or major artists (particularly those on independent labels, such as Arctic Monkeys on Domino). Some famous labels historically (by current major owner) have included:

UMG

, historic jazz label

• Decca, historic British label (e.g. early Rolling Stones), revived as a general UK label in the 2000s

• Deutsche Grammophon, historic German label for classical music

• Island, founded 1959 by Chris Blackwell. Reggae pioneer (Bob Marley), also rock (e.g. U2); still used

• MCA, US major from 1926 mostly associated with country music

• Mercury, includes Elton John and Shania Twain

• Motown, originally ’s Tamla Motown

• Polydor, once the largest European label with ABBA, Bee Gees, Julio Iglesias, etc.

• 2010 artists include and the Black Eyed Peas on Interscope, Florence + The Machine on Island, Snow Patrol and Take That on Polydor, and Katherine Jenkins on UCJ (Universal Classics and Jazz).

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Sony

• Arista, formerly owned by Bertelsmann; artists included Aretha Franklin, Westlife, and Whitney Houston

• Columbia, founded 1888; artists included Pink Floyd (US releases) and Simon & Garfunkel

• Epic, formed under Columbia; artists include Michael Jackson (the label is still used in the UK)

• RCA (originally Radio Corporation of America), still a major label group and the main Elvis Presley label

• 2010 artists include the Foo Fighters on RCA, JLS on Epic, Kings of Leon on Hand Me Down, and Kasabian and Beyonce on Columbia.

Warner

• Atlantic, formed in 1947 by Ahmet Ertegun as a soul label; as a broader pop/rock label, artists included ABBA and Phil Collins (it is part of WEA [Warner Elektra Atlantic])

• WEA, label and distribution group

• Zomba, a former independent, which is now a group for smaller labels

• Syco, created by Simon Cowell (The X Factor)

• 2010 artists include Susan Boyle and Leona Lewis on Syco, Paolo Nutini on Atlantic and Michael Buble on Reprise.

EMI

• Capitol, US label famous for the Beach Boys and its LA studios (part of Priority group since 2001)

• Chrysalis and Virgin, 1970s progressive rock labels

• Parlophone (EMI label since 1926), features The Beatles, Cliff Richard and Coldplay

• 2010 artists include Robbie Williams on Virgin and Lily Allen on Virgin/Regal.

The majors have handled these labels in different ways, sometimes keeping them as arm’s-length subsidiaries (perhaps appearing ‘independent’ to the public), sometimes grouping them together (e.g. UMG’s Interscope and Warner’s Zomba have been umbrella subsidiaries for labels), or in some cases dispensing with them or closing them down. Sony now operates in the UK mainly through Columbia Label Group and RCA Label Group, but retains Epic separately, while Universal maintains Decca, Island, Mercury and Polydor (among others) for UK releases. Warner’s individual labels in the UK include Warner Bros, Atlantic, Reprise and Rhino.

60 © Key Note Ltd 2010 Music Industry Recorded Music Market

The majors also have separate labels for back-catalogue and new music. EMI currently uses Parlophone and for new music; in the trade press in January 2010, EMI took full-page advertisements for the Virgin label, listing its full roster which ranges from Bryan Ferry and Peter Gabriel through to Doves, KT Tunstall, and latest signing, You Me At Six.

Artists, Albums and Songs

Artists can be considered as major players either over the long term (e.g. the longevity proven by The Beatles, Eagles, Michael Jackson, ABBA, Queen) or through a short-term burst of popularity (e.g. the current best-selling first albums from The X Factor winners) with longevity yet to be proven. Artists may make a long-term impact through hits collections — e.g. the Eagles’ Greatest Hits, ABBA’s Gold — or with concept albums — e.g. Pink Floyd’s Dark Side of the Moon, Fleetwood Mac’s Rumours and most of The Beatles releases.

All-time top-sellers in the UK include Queen’s Greatest Hits (two volumes), The Beatles’ Sergeant Pepper’s Lonely Hearts Club Band (along with other Beatles original albums or collections, such as ‘1’), Oasis’ What’s the Story?, Madonna’s The Immaculate Collection, Dire Straits’ Brothers in Arms and Michael Jackson’s Thriller and . There are also artists who have made most of their impact within the UK, such as (Stars album) and Cliff Richard, the artist with the most hit singles ever in this country. Equally, major sales have been notched up globally by artists with minor UK sales: James Last , Julio Eglesias, Garth Brooks, et al.

The top artists tend to have a ‘crossover’ appeal which guarantees them sales across a broad audience by musical taste and also by age. A mixture of pop and rock influences is a likely characteristic of the top albums, currently epitomised by Coldplay and Snow Patrol.

Famous big-selling hit singles over the decades (excluding charity hits [see below]) have included: Mull Of Kintyre (Paul McCartney’s Wings); Rivers Of Babylon (Boney M); You’re That I Want (from the musical Grease) and Bohemian Rhapsody (Queen). Bohemian Rhapsody often also tops lists of favourite or ‘greatest’ singles; the song was launched accompanied by one of the first major pop-video promotions. More recent best-sellers have included Love is All Around (1994, featured in the movie Four Weddings and a Funeral) by Wet Wet Wet, who famously tired of hearing the song in the media and withdrew it from stores. ’s Evergreen, the top-seller of the ‘noughties’ by some distance, set a pattern for talent competition winners to achieve chart success (Young won the first ).

In addition to individual artists, other well-established generators of record sales are charity records and multi-artist compilations of hits. Major charity singles have included Candle in the Wind in 1997 (a tribute to Diana, Princess of Wales), Do They Know It’s Christmas? for Band Aid (two separate versions) and, more recently, charity releases by The X Factor finalists (e.g. Hero in 2008 and in 2009).

© Key Note Ltd 2010 61 Recorded Music Market Music Industry

Compilation best-sellers have been dominated since the 1980s by the Now That’s What I Call Music series (EMI and UMG), re-releasing recent hit singles every few months. These require labels to work together in order to produce a reasonable representation of the charts. Ministry of Sound regularly releases ‘annuals’ of its dance anthems.

Live music on DVD represents another category with its own best-sellers, mainly established on DVD because performances recorded on video tape were never very satisfactory. EMI is particularly strong in DVDs because of popular releases of domestic concert footage from popular live artists such as Robbie Williams and Queen.

Individual songs can also be ranked as important aspects of recorded music when they are recorded successfully by more than one artist. (Musicians then refer to these as ‘standards’.) Yesterday, by the Beatles, has had more than 3,000 covers recorded, while other popular modern songs for re-recording have been White Christmas, Summertime, I Fought The Law, No Woman No Cry and We Will Rock You. Another measure of popularity is ‘’ on radio or television. According to PPL, the organisation which collects royalties for public performance (see Chapter 7 — Music in the Media), the most frequently played tracks of the last 75 years have been A Whiter Shade of Pale (Procol Harum), Bohemian Rhapsody (Queen), All I Have To Do Is (Everly Brothers), Love Is All Around (Wet Wet Wet), Everything I Do (Bryan Adams) and Angels (Robbie Williams).

Distribution

Distribution of recorded music is detailed in Chapter 6 — Recorded Music Distribution.

Trade Associations

As detailed in Chapter 1 — Industry Overview — the main association for recorded music is the BPI (known as the British Recorded Music Industry but retaining the BPI acronym, originally for Phonographic).

MARKETING ACTIVITY

In line with declining physical sales, the record industry has cut its budgets for conventional advertising and promotion, although other ways of spending money on new music have obviously developed with new media. Historically, the BPI notes that advertising as a proportion of industry revenues increased steadily from the mid-1990s to 2005, when it reached a peak of 11.2% (£131.6m), but has since declined to well under £100m a year. In the year ending September 2009, Nielsen Media Research (NMR) recorded a spend of £75.2m.

Until the mid-decade, budgets were supported by large retailers’ joint campaigns (e.g. buy ‘X’s Greatest Hits at Woolworths’) but this support has almost disappeared.

62 © Key Note Ltd 2010 Music Industry Recorded Music Market

Although the market is concentrated among four majors, the advertising is spread widely across new releases and re-releases so that relatively small amounts are spent on individual record advertising.

NMR lists hundreds of individual, named campaigns for record releases in addition to some 3,000 unquantified campaigns. Table 5.4 shows some of the larger campaigns by release in a fragmented market.

Table 5.4: Main Media Advertising Expenditure on Recorded Music by Artist and by Compilation (£000), Year Ending September 2009

Expenditure (£000) By Artist Label Bette Midler Rhino 795 Oasis Big Brother/Sony 764 Kings of Leon RCA/Columbia† 756 Priests Epic 682 Katie Melua Dramatico 638 Sash Hard2Beat 536 Simply Red EMI 531 Katherine Jenkins UCJ 526 AC/DC Epic 467 Il Divo Sony 458 Will Young RCA 456 Celine Dion Epic 447 Cliff Richard EMI 435 Bruce Springsteen Columbia 425 The Script RCA 423 Pink Arista 415 Snow Patrol Polydor 401 Rhydian Syco/Sony 372 Take That RCA 308 Decca 358

Table continues...

© Key Note Ltd 2010 63 Recorded Music Market Music Industry

Table 5.4: Main Media Advertising Expenditure on Recorded Music by Artist and by Compilation (£000), Year Ending September 2009

...table continued Expenditure (£000) By Compilation Label Now 71 EMI/UMG 1,167 Now 72 EMI/UMG 872 Now 73 EMI/UMG 838 Dreamboats & Petticoats UMG 714 Anthems Vol 2 Ministry of Sound 706 Motown ‘50 UMG 644

† — artist released on more than one label

Source: Nielsen Media Research

The reduction in advertising budgets is illustrated by the decreasing spend on the ‘Now’ compilation releases in 2008 and 2009. A comparison with 2005 advertising (the last edition of this Key Note Market Review) shows much larger budgets in that year for individual albums (e.g. £2.1m on KT Tunstall’s Eye To The Telescope, £1.4m on Katie Melua’s Call Off The Search and £1.3m on James Blunt’s Back to Bedlam).

Heavily advertised albums are noticeably different from the make-up of the current charts, because some anticipated releases are guaranteed to do well without advertising and broad-brush campaigns may not affect the target market. Campaigns may launch after the album or its singles have had a chance to establish themselves in the charts — to broaden the appeal — or alternatively to boost sales of an album which has failed to reach early targets. Overall, however, advertising is dominated by campaigns targeted at MOR and light classical listeners (e.g. in the Table 5.4, Bette Midler, The Priests, Katie Melua, Simply Red, Katherine Jenkins, etc.).

64 © Key Note Ltd 2010 Music Industry Recorded Music Market

BUYING BEHAVIOUR

The primary research for this report included two questions on consumer involvement in buying music.

Asked whether they bought CDs regularly (at least once a month), only 23.3% of adults gave a positive response in 2009, down from 32.9% in 2006. The simple reason for this was revealed in the second question: 31% of adults were downloading music regularly by late 2009, from a mere 13.5% in 2006. (Although the samples overlap, it is interesting that the total for both methods in 2009 was 54.3%, from 46.4% in 2006, indicating at the least that there has not been a decline in demand for acquiring music.)

A further question regarding ‘browsing in record shops’ is analysed in Chapter 6 — Recorded Music Distribution; this activity went down from 47.2% to 39.4%, a less steep fall than the rate for buying CDs.

Regular Purchasers

The decline in CD buying has naturally been led by an exodus of young people. In 2006, 55.6% of 16 to 19 year-olds were still buying CDs, but this plunged to 12% in 2009. Buying is being maintained by older groups (even among 20 to 24 year-olds) who are less fully committed to ditching old technology and who are taking advantage of much lower prices for CDs to build their physical collections. Men show a stronger tendency towards buying a music CD at least once a month.

Table 5.5: Regular Purchasers of Music CDs (% of adults), 2006 and 2009

Statement: “I buy a music CD from a shop at least once a month.”

2006 2009

All adults 32.9 23.3 Sex Male 32.9 30.0 Female 32.9 16.7 Age 16 to 19 55.6 12.0 20 to 24 64.4 53.7 25 to 34 48.0 41.6 35 to 44 30.0 25.1

Table continues...

© Key Note Ltd 2010 65 Recorded Music Market Music Industry

Table 5.5: Regular Purchasers of Music CDs (% of adults), 2006 and 2009

...table continued

Statement: “I buy a music CD from a shop at least once a month.”

2006 2009

Age (cont.) 45 to 54 33.8 20.5 55 to 64 11.5 10.3 65+ 15.2 8.4 Social Grade A 33.3 7.8 B 28.7 30.4 C1 34.5 27.2 C2 32.7 25.5 D 33.5 18.9 E 47.2 6.5 Presence of Children Aged 0 to 4 41.3 28.7 Aged 5 to 9 48.4 33.1 Aged 10 to 15 40.1 36.7 No children 29.1 19.8

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Music-buying traditionally has a ‘flat’ demographic in terms of social grade, with around a quarter of most groups buying a CD regularly. However, there was a slump in A and E group purchasing of CDs, suggesting that the most affluent and educated see the advantages of downloading.

Family households are more likely than those with no children to buy music regularly.

66 © Key Note Ltd 2010 Music Industry Recorded Music Market

Music Downloaders

A small proportion of adults were buying music over the Internet (13.5%) as recently as 2006, but this rose to 31% by 2009. For men, there was an increase to 34.3%, even though they are still buying CDs in quantity. Predictably, 16 to 19 year-olds are the most likely downloaders, but not by such a great margin in 2009, when more than 50% of 20 to 34 year-olds were also acquiring music in this way.

Table 5.6: Purchasers of Music Downloads from the Internet (% of adults), 2006 and 2009

“I pay to download music from the Internet to my computer.”

2006 2009

All adults 13.5 31.0 Sex Male 17.0 34.3 Female 10.2 27.6 Age 16 to 19 41.4 59.7 20 to 24 22.1 57.4 25 to 34 25.6 53.8 35 to 44 12.8 35.9 45 to 54 6.1 21.8 55 to 64 4.0 16.4 65+ 0.9 1.9 Social Grade A 18.4 35.8 B 14.8 35.2 C1 17.0 33.7 C2 10.0 34.7 D 14.3 31.6 E 5.5 7.3

Table continues...

© Key Note Ltd 2010 67 Recorded Music Market Music Industry

Table 5.6: Purchasers of Music Downloads from the Internet (% of adults), 2006 and 2009

...table continued

“I pay to download music from the Internet to my computer.”

2006 2009

Presence of Children Aged 0 to 4 20.0 47.0 Aged 5 to 9 21.5 61.1 Aged 10 to 15 22.2 45.1 No children 8.8 24.1

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

The social profile once again reveals a strength of music as a democratic market. Downloading, like record buying used to be, is popular across all occupation groups except those in the E social grade (who are mainly older women). Households with children aged between 5 and 9 are the most likely to download.

FORECASTS

Key Note’s previous forecasts for this market (made in 2006) slightly under-estimated the decline of CD albums by 2009, but over-estimated the rise of legal downloads. Competition in the download market, combined with declining prices for CDs, is likely to restrict growth up to 2014, although downloads should gain enough momentum to regenerate modest overall growth by 2013.

The challenge facing the recordings market is less to do with the internal mechanism of delivering music to the consumer than it is the consumer being distracted by new technology. At present, attention (and spending) has been diverted from music by social networking and organising download collections of music already owned, so a slow period of growth must be anticipated.

68 © Key Note Ltd 2010 Music Industry Recorded Music Market

Table 5.7: The Forecast UK Market for Recorded Music by Type of Recording by Value (£m at rsp), 2010-2014

% Change 2010- 2010 2011 2012 2013 2014 2014

Physical format† 850 525 350 250 150 -82.4 Downloads 325 475 650 825 1,000 207.7

Total 1,175 1,000 1,000 1,075 1,150 -2.1 % change year-on-year -7.8 -14.9 0.0 7.5 7.0

rsp — retail selling prices † — on CD, cassette or vinyl

Source: Key Note

© Key Note Ltd 2010 69 Recorded Music Market Music Industry

70 © Key Note Ltd 2010 Music Industry Recorded Music Distribution

6. Recorded Music Distribution

INTRODUCTION

The introduction to the previous chapter is also relevant here, including the abbreviations and definitions relating to recorded music.

Distribution has divided up, during the 2000s, into three channels:

• traditional stores for buying ‘physical products’ (mainly CDs)

• home delivery of CDs ordered online (this channel including traditional mail order)

• downloading.

In assessing the impact of the Internet, it is important to distinguish between the second of these two channels, both driven by Internet technology but very different by final product.

KEY TRENDS

Key trends in the distribution, or ‘delivery’, of recorded music are largely the same as those covered in the previous chapter: the shift from physical formats to downloading; the use of music management software for building collections of tracks rather than buying albums; the move to mobile music devices; the ‘retro’ trend; and the globalisation of production.

More specific trends for distribution are:

• The arrival of two e-commerce channels for recorded music: buying CDs via the Internet (for home delivery), and downloading. The long-term future lies with downloading or a ‘virtual’ retailing system.

• The strength of independent companies, new to the sector, such as Amazon, Apple and Spotify, whose innovations have driven downloading, although established companies are now making their presence felt online (e.g. HMV, the major grocers and the record companies themselves).

• The surprising collapse of major players in the high street (not solely due to difficulties in the music market), such as Woolworths and Zavvi. Woolworths, a variety chain, collapsed due to insurance problems in the early recession and this also dragged down Zavvi, although ultimately the high street was becoming over-saturated with stores selling home entertainment.

• Young consumers coming into the music market are creating their own, purely personal music collections by downloading or sharing music rather than buying recordings in the conventional manner.

© Key Note Ltd 2010 71 Recorded Music Distribution Music Industry

MARKET SIZE

The recorded music market was analysed in the previous chapter, so Table 6.1 provides a summary of growth trends, including the impact of downloading.

Table 6.1: The UK Market for Recorded Music by Distribution Channel by Value (£m at rsp), 2005-2009

% Change 2005- 2005 2006 2007 2008 e2009 2009 Physical products Albums and singles† 1,707 1,471 1,207 1,076 985 -42.3 Music DVDs 103 93 60 49 40 -61.2 Total physical products 1,810 1,564 1,267 1,125 1,025 -43.4

Downloads 38 70 124 184 250 557.9

Total 1,848 1,634 1,391 1,309 1,275 -31.0

Downloads as a % of total 2.1 4.3 8.9 14.1 19.6

rsp — retail selling prices e — Key Note estimates † — physical format (on CD, cassette or vinyl)

Source: BPI/Key Note

Only the legitimate channels for distributing and acquiring music are shown in Table 6.1. Efforts to prevent piracy will continue and there is little doubt that legal streaming (downloads) will become the main way of acquiring music, with Key Note estimating the download market share rising from 14.1% in 2008 to 65% by 2012 and 87% by 2014 (see Forecasts later in this chapter). Accordingly, the market for physical products, which has already shrunk from £1.8bn to £1.1bn between 2005 and 2008, is likely to be worth £350m by 2012.

72 © Key Note Ltd 2010 Music Industry Recorded Music Distribution

BY MARKET SECTOR

The two principal sectors of the distribution market were shown in Table 6.1 (physical versus downloading), and these are analysed in detail under the Supply Structure section of this chapter. However, as distribution is in a transitional phase in 2010, it is worth recalling the other ways of segmenting the recordings market, but from the distributor’s perspective, rather than that of the producer of music.

• Specialist ‘record shops’ dominated the market until the 1960s, operating mainly as local independents until the advent of multiple specialists such as and Virgin, which succeeded by bulk-buying current chart records. This kind of operation — multiple music specialisation — has all but disappeared at national level; in 2007, the largest such chain, Fopp, went into administration and put over 80 stores up for sale. (HMV, the current market leader, acquired and has maintained six of the larger Fopp stores under their original brand.)

• Generalist retailing of music started with the ‘variety stores’, with Woolworths and WH Smith coming to dominate by the 1970s (with department stores also offering record outlets). Woolworths disappeared in 2009 (see Supply Structure). WH Smith, essentially a book store, newsagent and stationery retailer, took over both Our Price and Virgin to build a market share in selling music through both general and specialist outlets, but sold its specialist division in the 1990s and had only a 1% share of the music market by 2008.

• Home entertainment superstores emerged in the 1990s, selling a mixture of music (mainly on CDs), videos and games together with entertainment- related products such as books and posters. Richard Branson’s Virgin Group, which had started life as a record retailer, was the main pioneer through the Virgin Megastores (later rebranded, temporarily, as Zavvi). Other competitors were , from the US, and HMV, which was bought out from the EMI Group in 1999 (profiled in Chapter 4 — Competitive Structure).

• Multiple grocers expanded into the music market in the 1990s as they built larger superstores with the space to sell most types of consumer goods, albeit with a focus on discounting the current chart and a limited stock of back-catalogue releases.

The main bricks-and-mortar outlets for physical-product music by the early 2000s were, therefore, the home-entertainment superstores (e.g. HMV) and the grocers or variety stores. However, mail order by catalogue was an established channel — it had been another of Richard Branson’s early businesses — and the mail order principle was modernised by Amazon (initially an online book specialist [see Major Players later in this chapter]) using the Internet to take orders for CDs. Amazon was joined by online specialists such as Play.com and CD-Wow, but bricks-and-mortar retailers (both specialists, such as HMV, and the grocers) have prevented online-only companies from cornering the market by developing their own online systems.

© Key Note Ltd 2010 73 Recorded Music Distribution Music Industry

While e-commerce started with the conventional way of delivering music (‘physical’ products ordered online but delivered to home via Royal Mail or private delivery firms), the true power of the Internet lies in delivering downloaded music. MP3 technology dates back to the late 1980s, but it took the intervention of a computing specialist, Apple, to harness the technology in 2003 with its iTunes system. (An early pioneer of MP3 sharing was Napster, which ran into legal trouble for illegal re-selling in 2001; the Napster brand has traded since September 2008 as a legal music retailer owned by Best Buy Inc.) Apple’s innovations are described in Chapter 4 — Competitive Structure — and under Supply Structure in this chapter. Other legal download sites have followed iTunes, notably Spotify, but legal downloading — the future shape of music retailing — is now available from a range of specialists and generalists such as Amazon and, in competition with Apple’s iPhone, other mobile phone companies (both hardware, such as Nokia, and service providers, such as Orange).

SUPPLY STRUCTURE

Table 6.2 shows market shares in 2008 in terms of the type of music product and the distribution channel. Albums account for 85% of the market (on CD or downloaded) and this dictates the channels’ overall rankings.

Table 6.2: Market Shares by Distribution Channel by Music Product by Value (%), 2008

Albums Singles Music DVDs Physical Products Bricks-and-Mortar Outlets Specialist stores (e.g. HMV) 38 7 36 Grocers’ stores (e.g. Tesco) 23 3 17 Other stores 13 2 6 Total bricks-and-mortar outlets 74 12 59

Home delivery/mail order† (e.g. Amazon) 19 1 41

Total physical products 93 13 100

Download (e.g. iTunes) 787-

Total 100 100 100

† — physical products sold online or by traditional mail order/direct sell Note: market breakdown: albums 85%; singles 11%; music DVDs 4%.

Source: Kantar Worldpanel/BPI

74 © Key Note Ltd 2010 Music Industry Recorded Music Distribution

The market breakdown shown in Table 6.2 is a snapshot of a market in transition in several respects:

• The specialist share, which is dominated by multiples (although it includes a small share for independent, single-outlet companies) has since devolved almost entirely on to HMV, the main survivor following the demise of Zavvi (formerly Virgin Megastore) in 2009. (The Zavvi online business was bought by , an e-commerce specialist that also provides ‘’ websites on behalf of major retailers.)

• The ‘other stores’ share has contracted considerably with the demise of its main player up to 2008, Woolworths. The grocers have gained share within bricks-and-mortar retailing thanks to the demise of Woolworths and Zavvi, but their overall share is losing out to downloads (although they have download services such as Tesco Entertainment).

• Downloading is still dominated by iTunes, but the channel has broadened out to take in downloading from high-street specialists such as HMV, the grocers, Amazon and mobile-phone companies. Mobile phones (with 3G technology) have the potential to outsell the conventional online retailers, because mobiles have reached far higher consumer penetration levels than download-enabled MP3 players or computers equipped with the technology for quick downloading. Phone users are already accustomed to buying ringtones online, a market worth over £100m a year.

A further transition is breaking up the traditional pattern shown in Table 6.2 between albums, singles and music DVDs. The growth of downloading means that consumers can buy individual tracks from albums rather than the whole album (while singles are bought as separate releases) although, to complicate matters, the discounting of whole album prices is persuading consumers to buy an album rather than select tracks. For example, Tesco Entertainment sells new singles for 67 pence (p), but buying the album containing the single could work out at less than 30p per track.

MAJOR PLAYERS

The two major players, as profiled in Chapter 4 — Competitive Structure, are HMV and Apple.

• HMV Group is now the dominant specialist high-street retailer of music following the demise of Woolworths and Zavvi, completed in 2009. The UK has 272 stores branded as HMV and owns the six-strong Fopp brand. 19 of the HMV branches are former Zavvi sites (and before that, Virgin Megastores). The Group includes the book retailer Waterstone’s and international branches of HMV. Within the HMV business, sales of DVDs now account for a much higher share than music and sales of video games are also important. However, HMV is estimated (in 2010) to account for more than 75% of music sold through high-street music specialists.

© Key Note Ltd 2010 75 Recorded Music Distribution Music Industry

• Apple has diversified dramatically from its core business of manufacturing computers and software (the brand is the main rival to Microsoft-based personal computer [PC] systems) into music and other entertainment. Apple’s iTunes is the leading download site and the iPod series leads in personal music players. Since 2006, Apple has also led the mobile phone (hardware) market with its iPhone. An integrated system for acquiring, organising and playing music is offered by Apple through the iMac computers, iTunes website, iPod and iPhone. Apart from technological integration, the Apple range also offers iconic design status.

The fragmentation of music delivery across several platforms means that other major players are now represented by categories of company, rather than outstanding individual companies:

• Multiple grocery— led by the four large superstore operators: Tesco, ASDA, Sainsbury’s and . Within this elite group, Tesco is the dominant operator. For 2008, BPI credited Tesco with a 10.5% share of album sales (only covering physical CD sales through stores, not CD home delivery or downloads), followed by ASDA (7.3%), Sainsbury’s (2.7%) and Morrisons (2.4%); these four account for 99% of music sales in grocers.

• Home delivery — includes HMV and the grocers as competitors, but the BPI credits the pioneer, Amazon, with a 33% share of albums sold in this way in 2008, followed by Play.com with 20% and HMV.com with 19%. Amazon is the quoted US company, set up in 1995 by Jeff Bezos, which started out as an online bookseller and has gone on to be the world’s largest e-commerce business (if travel and eBay are excluded). Once the website was established for selling books, it was a logical step into other entertainment products, such as music, and the hardware to deliver home entertainment. Amazon was a pioneer in using software which tracks its customers’ preferences and then suggesting other products of interest via a personal web page or email. Interactivity includes space for users’ lists of favourites, reviews, etc. Play, based in New Jersey, has operated in the UK for 10 years as a retailer of home entertainment with a broadening range of other consumer products. Additional services include online auctioning (PlayTrade) and a Play credit card, launched in 2009.

• Downloading is still dominated by iTunes but 2009 saw the arrival of competition in the shape of Spotify and Nokia’s Comes With Music. Spotify uses streaming software to allow music to be heard instantly on home computers (without a wait for buffering), with links to online retailers to buy the music. The site, developed in Sweden and launched in the UK in October 2008, is financed by audio-only commercials to which site users must agree to play between songs. Spotify users can avoid the commercials by paying to become premium subscribers. (This innovation of offering a choice between advertising and subscription has wide implications for the Web.) Since September 2009, Spotify has also retailed tracks itself. Nokia’s Comes With Music, from the world’s largest mobile phone manufacturer, mimics the Apple system by offering a website to access free downloads (Nokia ) and (Nokia Ovi Player) for managing the music and downloading it from a PC to a Nokia phone.

76 © Key Note Ltd 2010 Music Industry Recorded Music Distribution

Other music services in the mobile phone sector include Orange (Music Store), O2 (Blueroom and a link to Napster), and Vodafone Music (‘Take your pick from over 1.6 million tracks. Put them on your phone, your PC or even burn them to CD.’) The search-engine company Google may launch its own mobile phone in 2010.

MARKETING ACTIVITY

The demise of major multiple specialists means that advertising has dwindled substantially for this sector. In the year ending September 2009, according to NMR, £24.7m was spent in the main media by ‘record and video stores’, but this included advertising by video specialists such as Blockbuster. HMV spent £15.2m, of which only £3.1m was directly related to music (although £1.7m was spent on the whole HMV product range).

As the Supply Structure section of this chapter indicated, however, any proper assessment of the marketing of music distribution would have to take into account the marketing of appliances such as the iPhone or Nokia’s Comes With Music, the downloading websites and even the multiple grocers.

BUYING BEHAVIOUR

The previous chapter, Recorded Music Market, analysed buying behaviour for consumers buying CDs and downloading. In summary, regular CD buying has declined from 32.9% to 23.3% since 2006, while 31% of adults were downloading music regularly by late 2009 (from 13.5% in 2006).

Music Shop Browsers

While music shops have clearly lost trade, Key Note’s research finds that 39.4% of adults still enjoy browsing in record shops for enjoyment, with penetration down only modestly — considering the appeal of downloading — from 47.2% in 2006.

Table 6.3: Music Shop Browsers (% of adults), 2006 and 2009

Statement: “I like browsing in music shops.” 2006 2009

All adults 47.2 39.4 Sex Male 49.8 45.2 Female 44.7 33.7

Table continues...

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Table 6.3: Music Shop Browsers (% of adults), 2006 and 2009

...table continued

Statement: “I like browsing in music shops.” 2006 2009

Age 16 to 19 81.0 62.2 20 to 24 83.6 79.8 25 to 34 63.6 45.2 35 to 44 47.2 42.1 45 to 54 42.8 36.9 55 to 64 28.0 29.1 65+ 21.9 16.1 Social Grade A 46.8 13.2 B 48.7 45.5 C1 44.9 39.7 C2 43.6 40.5 D 57.6 49.3 E 52.9 22.2 Presence of Children Aged 0 to 4 58.5 30.3 Aged 5 to 9 53.3 43.3 Aged 10 to 15 54.1 52.2 No children 43.0 37.9

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Although youth are more likely to download than their elders, they still enjoy browsing; however, the most common browsers are now aged between 20 and 24, not between 16 and 19. In addition to the youth bias, there is now a strong bias to men among the ‘browsers’ — much more pronounced than in 2006 — but the music market is democratic in terms of the occupational status groups.

78 © Key Note Ltd 2010 Music Industry Recorded Music Distribution

FORECASTS

Forecasts for the value of the recorded music market were shown in Table 5.7 in the previous chapter, predicting that downloads will account for 87% of a £1.15bn market by 2014. For retailers selling physical products, the shrinkage of the market will be dramatic, although the retail structure has itself been reduced in scale dramatically by the closure of Woolworths and Zavvi. The demise of these competitors left HMV as the company to watch for the immediate future (although the grocers are keen to build their presence in music retailing, both physical and download).

HMV is trialling ‘next generation’ store models which include a social hub (multi-player games zones, transactional kiosks), increasing emphasis on movies, games and software (these are not as yet open to downloading as music) and the sale of MP3/MP4 players. For music specifically, .com now offers users the option to buy either physical products or download music from one shopping basket.

Based on the market changes described in the Supply Structure section of this chapter, Key Note has estimated the music retail market share for 2010, as shown in Table 6.4. These estimates cover music products as one (i.e. the combination of albums, ‘tracks’ whether single releases or not, and the minor contribution of music DVDs). Retailers of physical products will retain a 70% share of the market, while downloads will account for the remaining 30%.

Table 6.4: Forecast Market Shares by Distribution Channel by Value (%), 2010

Physical Products Bricks-and-Mortar Outlets Specialist stores (e.g. HMV) 33 Grocers’ stores (e.g. Tesco) 20 Other stores 5 Total bricks-and-mortar outlets 58

Home delivery/mail order (e.g. Amazon)† 12

Total physical products 70

Download (e.g. iTunes) 30

Total 100

† — physical products sold online or by traditional mail order/direct sell

Source: Key Note

© Key Note Ltd 2010 79 Recorded Music Distribution Music Industry

80 © Key Note Ltd 2010 Music Industry Music in the Media

7. Music in the Media

INTRODUCTION

This chapter covers music as an aspect of the mass media, broadly defined to cover television, radio, newspapers and magazines, but also extending to new media where appropriate. Music as a component of movie culture is also important for disseminating music.

The market for music in the media can be divided broadly into two:

• specific music media — television channels devoted to music (e.g. MTV), television programmes on general broadcast (e.g. The X Factor, Later with Jools Holland), the vast majority of radio stations, and music magazines (e.g. Q or NME)

• use of music by the general media — theme tunes, music with advertising, acts performing on general entertainment shows (e.g. chat shows).

KEY TRENDS

• Music continues to be vitally important for all the media, old and new, in contrast to the decline in sales of recorded music. New statistics on royalties collected back this up: PRS For Music collected more than £600m worth of royalties for its members in 2008, distributed for use of copyrighted music in broadcasting, online, pubs and clubs, workplaces, etc.

• The BBC’s role is as important as ever. The main public-service broadcaster dominates radio — national stations One, Two and Three cover all types of music — and the BBC now has digital (DAB) stations and a thriving Web presence. Commercial radio is mainly local, with Global Radio the major new player, while Classic FM (owned by Global) is the outstanding national commercial station

• Television has a limited role for music but talent shows have grown into big business, dominating viewing figures in 2009 (half the population watch them). Shows such as The X Factor and Pop Idol have launched major recording stars. The final The X Factor show in 2009 was watched by 19.1 million compared with 14.6 million for the 2008 final. The Britain’s Got Talent final in 2009 had 19.2 million viewers.

• Television broadcasts are also moving closer to Internet use through services such as iPlayer, bringing forward the age of the integrated, home entertainment set-up in which music is a crucial element. In 2009, 44.8% of adults said that they regularly listened to music through their computers, up from 34% in 2006.

© Key Note Ltd 2010 81 Music in the Media Music Industry

MARKET SIZE

Licensing Statistics

Given the broad definitions used in the introduction, it is impossible to give a comprehensive or clear-cut valuation of the ‘media music’ market, but efficient collection of royalties (i.e. licence fees) for using copyrighted music is now producing an insight into market values. The two organisations involved in this are PPL (for performers and record companies) and PRS For Music (for both publishers and composers, including song writers).

• PPL is the music licensing company which licenses recorded music on behalf of 42,000 performers and 5,000 record companies. In addition, the company has 45 bilateral agreements with similar organisations around the world, representing a further 4,000 record companies and 31,000 performers. This enables television and radio stations, online streaming services and hundreds of thousands of shops, pubs and others using music in their business to obtain a single licence comprising millions of recordings. As a music industry service, the company does not retain any profit for itself. The costs of collecting, processing and distributing the licence fees are taken from the gross revenues that the company collects. All these revenues are distributed and paid to all PPL's record company and performer members, and to those represented under the bilateral agreements. These include featured artists, as well as session musicians, ranging from orchestral players to percussionists and singers. There is no joining fee or administration charge and the company actively seeks members. The cost-to revenue ratio has remained at the 2007 levels of 14.6%, despite increasing investment in technology. PPL's role and remit increases year on year given the increasing amount of data. For example the company receives details electronically on a weekly basis for, on average, 6,500 new recordings. Once this data has been fed into its own databases, that data is then passed on to PRS for Music for it to administer the relevant copying rights on behalf of the songwriters, composers and publishers. PPL also provides that data on to the for the purpose of the charts, and also to the BPI (British Phonographic Industry) and IFPI (International Federation of Phonographic Industry) for anti-piracy purposes. PPL's other areas of operations include VPL, and PPL Video Store.

• PRS (Performing Rights Society) for Music has 60,000 members, for which royalties are collected for ‘any public performance of music, whether live or recorded, and from radio and television broadcasts and online’. In 2008, royalty collections rose by 13%, which PRS for Music claims was in line with the growth in use of copyrighted music, estimated by PRS at £1.28bn in that year. In 2008, PRS for Music collected £608.2m for members, up by 8% (see the By Market Sector section of this chapter).

82 © Key Note Ltd 2010 Music Industry Music in the Media

Music in Consumer Leisure

Although the full value of the media is impossible to calculate, broadcasting and newspapers or magazines can be placed in the context of consumer leisure activities. These activities can be measured as markets to a certain extent, although media markets are difficult to evaluate because there are various types of income (see Supply Structure in this chapter). Consumer spending related to the media is shown in Table 7.1, again in the broader context of leisure spending.

Table 7.1: UK Consumer Expenditure on Selected Home Entertainment at Current Prices (£m), 2005-2009

% Change 2005- 2005 2006 2007 2008 2009 2009

Home viewing† 8,050 8,500 8,875 9,200 10,100 25.5 Reading materials 7,765 8,025 8,115 8,100 8,050 3.7 Recorded media‡ 5,036 4,644 4,191 4,300 4,200 -16.6 Toys and games 2,637 2,728 2,910 2,975 3,015 14.3 Traditional hobbies 3,125 3,125 3,075 2,975 2,950 -5.6 Home computers 1,715 1,730 1,800 1,750 1,710 -0.3 Home listening† 1,215 1,225 1,200 1,200 1,150 -5.3

Total 29,543 29,977 30,166 30,500 31,175 5.5

† — excluding recorded media (pre-recorded DVDs, CDs, etc.) ‡ — CDs, DVDs (physical) or downloads; not included under ‘home viewing’ and ‘home listening’ totals

Source: Key Note

Home viewing divides between equipment (, recorders, receivers) and services (the Licence Fee for owning a television set, subscriptions to multi-channel television). This sector has enjoyed relatively strong growth in the ‘noughties’ and the prospects for higher spending on viewing are still good, with the market moving towards fully digital broadcasting.

Home listening, at £1.2bn, is small-scale because recordings are classified in the table with all recorded media, of which around £3bn consists of video recordings and £1.2bn is accounted for by audio (mainly music). Listening to the radio costs the consumer nothing once the radio has been purchased. Audio equipment divides between household equipment (hi-fi, portable players, etc.) and the main growth segment, personal audio, spearheaded by the iconic iPod from Apple.

© Key Note Ltd 2010 83 Music in the Media Music Industry

Reading materials comprise books as well as newspapers (£2.5bn annually) and magazines (£1.8bn). Traditional hobbies range widely but the two largest markets are for photography (and home movies) and making music. Home computers is a surprisingly small market given the importance of leisure activities that cluster around the personal computer (PC) or iMac; the market evaluation here only covers basic hardware, excluding purchases such as downloaded music and service providers.

BY MARKET SECTOR

Licensing Statistics

Figures from PRS for Music (royalties for composers and publishers) now give a detailed breakdown of how licensing fees are collected based on the type of media using the copyrighted music. All categories grew in 2008 — online fees by 81.4% — but this could represent greater efficiency in collection, not only market growth.

Table 7.2: PRS for Music Earnings for Rightsholders (£m), 2007 and 2008

% of 2008 Total UK Earnings for 2007 2008 Rightsholders

Broadcasting and Online Television 89.9 105.1 Radio 49.5 51.8 Online 9.7 17.6 Ringtones 6.4 5.7 Total broadcasting and online 155.5 180.2 38.5

Public Performance Pubs and clubs 40.4 39.7 Live concerts 19.1 21.5 Hotels and 15.6 18.0 Shops 15.2 17.3 Industrial premises 9.0 12.8 Cinemas 5.4 6.3 Other 28.9 31.0 Total public performance 133.6 146.6 31.3

Table continues...

84 © Key Note Ltd 2010 Music Industry Music in the Media

Table 7.2: PRS for Music Earnings for Rightsholders (£m), 2007 and 2008

...table continued % of 2008 Total UK Earnings for 2007 2008 Rightsholders

Recorded Media (Physical) Audio products 118.9 103.1 General entertainment DVD 12.4 16.5 Cover mounts† 5.0 4.7 Other 15.5 17.3 Total recorded media (physical) 151.8 141.6 30.2

Total UK 440.9 468.4 100.0

International 121.2 139.8

Total 562.1 608.2

† — free music CD or DVD with magazines or newspapers

Source: © PRS for Music, Adding Up The Music Industry for 2008 www.prsformusic.com/economics

The media (broadcasting and online) account for 38.5% of music royalties collected by PRS but public performance and the use of copyrighted material in making other physical recorded media also contribute to earnings. Within the media usage, television had a 58.3% share in 2008, radio 28.7% and online grew to a 9.8% share (from 6.2% in 2007).

Media Sectors

Although home viewing is a much larger market than home listening, this section first analyses radio as the most important medium for music, although music also plays a role in television broadcasting.

Radio

Radio listening remains important to consumers, with 69.4% of adults listening on most days of the week, particularly at certain times of day: the early morning when consumers want music plus news, weather or traffic information while preparing for the day or commuting, and also in the early evening, or ‘drive-time’.

© Key Note Ltd 2010 85 Music in the Media Music Industry

For the music industry, radio is vital for promoting new recordings and broadcasting live concerts, ranging from pop and rock — the main fare on the vast majority of stations — through to classical (BBC Radio 3, Classic FM).

Television

Watching television is easily the most important leisure pursuit for the typical UK household when the leisure market is measured in terms of time spent per activity, and Table 7.1 shows that home viewing can be regarded as the largest in-home leisure sector. However, home viewing has been saturated for many years (in terms of time spent watching) and other leisure activities which compete for this time include screen-based entertainment such as video games and using home computers.

Progress in viewing technology has passed through phases such as the arrival of home-recording in the 1980s, of pre-recorded tapes and discs (DVDs), and of multi-channel, digital television (a current phase). However, a major current manifestation of music on television is in talent shows (see Key Trends earlier in this chapter) which dominate peak-time viewing.

Magazines

Magazines such as NME (New Musical Express) and Gramophone have a long history of covering music, both recorded and live. The 1990s brought a proliferation of magazine titles as printing costs went down, enabling publishers to satisfy segmented consumer demands by type of music (e.g. heavy metal, dance, hip-hop). Some long-established general titles closed down (e.g. Melody Maker) and Smash Hits, a great success as a pop magazine for pre-teens in 1980s, also folded in 2006. Youth-oriented magazines have generally struggled for readership, whereas titles aimed at older, mainly male audiences — favouring rock rather than pop — have fared relatively well, this group including Mojo and Q.

Table 7.3: Leading Music Magazines by Circulation (number of copies sold per issue), January to June 2009

UK Sales Total Sales Title (Publisher) Mojo (Bauer) 43,269 78,855 Q (Bauer) 63,326 78,588 Uncut (IPC) 41,887 76,526 Kerrang! (Bauer) 41,856 73,253 Classic Rock (Future Publishing) 47,214 70,301 BBC Music 24,790 45,144

Table continues...

86 © Key Note Ltd 2010 Music Industry Music in the Media

Table 7.3: Leading Music Magazines by Circulation (number of copies sold per issue), January to June 2009

...table continued UK Sales Total Sales Title (Publisher) Total Guitar (Future Publishing) 33,350 42,171 NME (IPC) 36,942 40,948 Classic FM (Haymarket) 33,229 35,751 Gramophone (Haymarket) 16,734 34,628 Guitarist (Future Publishing) 23,861 31,917

Source: Audit Bureau of Circulation (ABC)

The magazines are ranked strictly by total sales in Table 7.3 — note that Q is the top seller within the UK — without reference to their categories in ABC, some of which are clearer than others. BBC Music, Gramophone and Classic FM Magazine cover classical music, while the others are rock-themed. (The NME, the longest-running popular music title, started life as a pop magazine but shifted to championing independent rock in the 1970s.) Total Guitar and Guitarist are aimed at active guitar players.

Excluded from the list above are free-circulation publications such as The Fly, of which over 100,000 copies are distributed at live music venues or with purchases in various music and clothing stores.

The change in the magazine market from a youth-oriented one to an adult orientation is summed up by the BBC’s Top of the Pops magazine. Taking its name from the long-running (but axed) television show, TOTP magazine now advertises itself as a ‘teen gossip’ magazine with ‘shocking celeb scandal plus loads of cool stuff all about you’.

Music is an important component of movies, whether seen at the cinema, on television or on DVD, and a strong soundtrack is important for modern cinema-goers, irrespective of the theme of the movie. Of themselves, most movie do not generate significant sales in terms of all music bought — under 5% by volume of all albums sold annually — but some soundtracks have been very influential. Movie soundtracks were, in fact, the main type of best-selling album released in the 1950s and early 1960s, producing big sellers such as The Sound of Music and My Fair Lady. Successes since then have included soundtracks from Saturday Night Fever, Grease, Dirty Dancing, High School Musical and Mamma Mia! (the latter also ranking as the UK’s all-time best-selling DVD).

© Key Note Ltd 2010 87 Music in the Media Music Industry

SUPPLY STRUCTURE

Although the media divide and sub-divide into numerous categories, one theme in common is their reliance on a range of sources of income. This funding structure is key to understanding the British media, particularly broadcasting:

• The Licence Fee, paid annually by owners of television sets, supports the public broadcasting infrastructure and directly funds the BBC, the main public-service broadcaster. The BBC is a major television broadcaster but also dominates radio broadcasting by listening hours. (Channel 4 is also publicly owned but funded by advertising, sponsorship and other commercial activities; other terrestrial broadcasters, such as ITV, also have some public-service commitments under their licences, such as to broadcast news and current affairs.)

• Advertising and sponsorship revenues are the sources of income for commercial (non-BBC) broadcasting and contribute over half of the revenues made by newspapers and magazines, which also rely on copy sales.

• Subscriptions to television services (predominantly Sky TV for satellite and Virgin Media for cable) are the main form of direct spending by the consumer, although households obviously have to buy or rent the hardware to receive broadcasts (see Table 7.1).

Radio still delivers music to the consumer more regularly, and in greater quantity, than television, even though the television set supplanted the radio set as the focus of media in the home in the 1950s. The BBC was the monopoly radio broadcaster (apart from ‘pirate’ stations) until the 1970s when deregulation began, proceeding in several phases to allow local commercial radio stations followed by a small number of national commercial stations.

The main successes nationally have been Classic FM and Virgin Radio (now Absolute Radio). The latest wave of deregulatory change, related to new technology, is embodied in the Communications Act 2003, which allows cross-ownership between commercial television and radio companies and laid out the framework for digital audio broadcasting (DAB).

The BBC’s television monopoly was broken in the late 1950s with the launch of ITV, further deregulation producing three more terrestrial channels (including BBC2) and leading eventually to multi-channel or digital television. Digital includes a number of music channels but music is generally under-developed on television — the demand for music is mainly satisfied by radio and recordings — and music on television tends to focus on a light entertainment role.

88 © Key Note Ltd 2010 Music Industry Music in the Media

Publications involving music fall into several distinct categories: published music (manuscripts); books with a music theme, particularly biographies; magazines dedicated to music; and newspapers, offering record and concert reviews. One Sunday newspaper, , has a high-quality colour supplement devoted to music once a month, and this has taken the newspaper and its parent, Guardian Media Group, into direct competition with publishers of music magazines.

MAJOR PLAYERS

The BBC is profiled in Chapter 5 — Recorded Music Market — along with the other leading broadcasters, but this chapter would be incomplete without listing the outstanding companies and public corporations involved directly in UK broadcasting.

Table 7.4: Major Companies and Corporations in UK Broadcasting, 2010

Activities Company† Bauer Commercial radio; parent in magazine publishing BBC PSB TV and radio; publishing; Internet Bertelsmann Television (Five channels); parent in publishing, music et al BSkyB Satellite television; parent in publishing, movies et al Channel 4 PSB television DTV Services Operator of Freeview; joint venture of other broadcasters Global Radio Commercial radio Guardian Media Group Commercial radio; newspapers; exhibitions ITV Commercial television (third channel in England/Wales); Internet STV Group Commercial television (third channel in Scotland); marketing Virgin Media Cable (telephony, digital channels, Internet)

Table continues...

© Key Note Ltd 2010 89 Music in the Media Music Industry

Table 7.4: Major Companies and Corporations in UK Broadcasting, 2010

...table continued Activities Company† UTV Media Commercial television (third channel in Northern Ireland; radio

† — see profiles in Chapter 5 — Recorded Music Market — for full company names

Source: Key Note

In digital commercial television (for music), the major player is Inc, a broadly spread US entertainment group that owns MTV and VH1. MTV (for ) was highly influential from the earliest days of music on video and ‘pop promos’ in the 1980s, growing alongside multi-channel television, either on cable or satellite. MTV was a pioneer in multi-channel television and remains the most-viewed digital music channel. (MTV UK in fact operates a group of channels including MTV2, MTV Base, MTV Dance, etc).

Viacom later added VH1, another important music channel. Viacom is controlled by the family of entrepreneur Sumner Redstone, whose businesses include CBS Corporation and the Paramount and Dreamworks film studios.

Other music channels include The Box, Chart Show TV and Rockworld TV. The Box, jointly owned by Bauer and Channel 4, was mentioned under Radio.

Commercial radio is more fragmented, although rules on ownership have been relaxed in this decade. In 2004, the two largest ILR groups (Capital Radio and GWR Group) were allowed to merge into GCap Media, which was then acquired by a new company, Global Radio Holdings Ltd, in 2007. Global has a market share of some 45% of commercial radio (i.e. non-BBC) listening hours; it incorporates the lucrative Capital Radio stations in London, the leading national commercial station, Classic FM, and the regional stations.

Bauer Radio is the second-largest commercial radio company, a position taken in March 2008 when the German group paid £422m for the radio and consumer magazine divisions of Emap, a major media group which is now dissolved. Emap had launched Smash Hits and Q stations as radio versions of successful consumer magazines. Among the local stations now owned by Bauer are Kiss FM, Radio City and Magic FM. Bauer Media has a joint venture with Channel 4 called The Box, offering six digital music television channels (, Kerrang!, Kiss, 4 Music, smashhits1! and Q).

90 © Key Note Ltd 2010 Music Industry Music in the Media

The leading publishers (as identified in Table 7.3) are Bauer, IPC, Future Publishing and Haymarket. Bauer Media, also the second-largest radio broadcaster, entered UK magazines in the 1980s with women’s titles (Take a Break, Bella) but its 2008 acquisitions from Emap gave it a range of celebrity and specialist titles including Mojo, Q and Kerrang!, all adult-oriented rock titles. (Mojo focuses on fans of blues or soul-influenced rock, Q is general rock and Kerrang! is for metal fans.)

IPC Media is part of Time Warner, the US media group which, until 2003, was also a major music company. The historic role of IPC in music magazines includes ownership of NME (and, until it closed in 2000, Melody Maker). IPC claims that NME.com is ‘Europe’s biggest and most popular music news website’. Other IPC music titles include Uncut (movies and music).

Future Publishing has a number of titles focused on musicians rather than passive music buyers (Guitarist, Total Guitar, Guitar Techniques, Computer Music, Future Music) but it also publishes Classic Rock and Metal Hammer. Haymarket Publishing is responsible for two major classical titles, Classic FM magazine (for the Global radio station) and Gramophone.

MARKETING ACTIVITY

The Nielsen Media Research (NMR) advertising statistics refer to advertising expenditure in the media by media companies themselves, not their income from advertising. Only a small proportion of the spending is relevant to music. For example, in the year ending September 2009, cable and satellite channels spent £121.1m advertising themselves, with only an MTV campaign worth £414,000 highlighted by NMR.

Radio broadcaster advertising is more relevant to music, and radio companies spent £12.4m in the year ending September 2009, including significant campaigns for Heart (£3.5m), Absolute (formerly Virgin, £1.5m) and Smooth (£1.4m).

BUYING BEHAVIOUR

Radio Listening

Radio remains crucial for the music market with 69.4% of adults listening to music on the radio regularly, according to the primary research for this report.

© Key Note Ltd 2010 91 Music in the Media Music Industry

Table 7.5: Regular Listeners to Music on the Radio (% of adults), 2006 and 2009

Statement: “I listen to music on the radio on most days of the week.”

2006 2009

All adults 74.7 69.4 Sex Male 76.2 69.9 Female 73.4 69.0 Age 16 to 19 88.7 68.6 20 to 24 80.7 73.1 25 to 34 84.5 76.8 35 to 44 79.5 77.2 45 to 54 76.4 69.1 55 to 64 56.1 61.1 65+ 64.6 60.4 Social Grade A 64.5 51.3 B 75.2 71.7 C1 73.9 70.5 C2 78.4 75.5 D 70.6 67.9 E 69.4 53.6 Presence of Children Aged 0 to 4 82.6 78.9 Aged 5 to 9 80.6 70.4 Aged 10 to 15 82.4 69.6 No children 71.5 68.2

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Radio listening has a high rate of penetration across almost all social groups, rarely falling to less than 60%. The 51.3% response among those in the A social grade in 2009 is probably a sample-related anomaly, although the As also had a lower rate in 2006, which may be influenced by their tending to listen to speech-based rather than music stations, particularly BBC Radio 4.

92 © Key Note Ltd 2010 Music Industry Music in the Media

Music on Home Computers

In the November 2009 survey, consumers were asked whether they listen to music on their computers to assess a media-related, lifestyle choice. The 2006 survey found what was described then as ‘a surprisingly high penetration’ for listening to music on computers and the rate has gone up to 44.8% of adults, soaring up to 81.7% of 20 to 24 year-olds. (Those aged between 16 and 24 as a whole now listen to music on computer more than on radio.) This presents a challenge to radio broadcasters, as well as those selling conventional audio equipment.

Table 7.6: Users of Computers for Listening to Music (% of adults), 2006 and 2009

Statement: “I listen to music on my computer.”

2006 2009

All adults 34.0 44.8 Sex Male 43.4 48.3 Female 25.1 41.3 Age 16 to 19 90.7 69.4 20 to 24 49.8 81.7 25 to 34 56.6 63.7 35 to 44 34.0 53.7 45 to 54 27.2 38.0 55 to 64 12.7 33.9 65+ 4.2 8.4 Social Grade A 50.5 †24.3 B 39.4 49.9 C1 36.0 44.8 C2 27.7 53.8 D 36.8 49.7 E 19.1 13.3

Table continues...

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Table 7.6: Users of Computers for Listening to Music (% of adults), 2006 and 2009

...table continued

Statement: “I listen to music on my computer.” 2006 2009

Presence of Children Aged 0 to 4 46.4 65.2 Aged 5 to 9 45.6 77.8 Aged 10 to 15 41.4 64.9 No children 29.1 35.9

† — unreliable due to sample variation Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

The rate of penetration among men is still higher than among women, but the gap closed between 2006 and 2009. Apart from the unreliable figure for those in the A social grade, listening on a computer is common in most social grades, although it drops among Es.

Pop Star Competitions on the Television

Rather than ask for a vague connection between music and watching television generally, the survey attempts to put into context the media significance of shows such as The X Factor. By audience size, this is easily the most likely exposure to music provided by television (see the Key Trends section earlier in this chapter).

The 2006 survey found that 42.4% of adults watch these shows and this figure rose to 50.2% in 2009. For women, the penetration rate is 59.6%, but 40.6% of men have also become talent-show followers, from 27.3% in 2006. There has also been a strong increase in penetration among those aged 16 to 19, from 44.6% to 69.8%.

94 © Key Note Ltd 2010 Music Industry Music in the Media

Table 7.7: Viewers of Television Pop Star Competitions (% of adults), 2006 and 2009

Statement: “I like watching ‘pop star’ competitions on TV, e.g. The X Factor.”

2006 2009

All adults 42.4 50.2 Sex Male 27.3 40.6 Female 56.9 59.6 Age 16 to 19 44.6 69.8 20 to 24 62.3 56.4 25 to 34 52.4 64.8 35 to 44 45.9 59.7 45 to 54 43.6 44.8 55 to 64 31.5 39.8 65+ 28.7 29.6 Social Grade A 39.3 48.9 B 35.0 46.8 C1 45.3 47.0 C2 43.7 58.9 D 47.4 55.9 E 33.6 33.9 Presence of Children Aged 0 to 4 56.8 64.7 Aged 5 to 9 51.9 66.8 Aged 10 to 15 49.0 64.0 No children 39.2 44.2

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

Tendency to watch ‘pop star’ competitions peaks among C2Ds, although nearly half of ABC1s also enjoy the shows. Having children in the home increases the appeal of watching these shows.

© Key Note Ltd 2010 95 Music in the Media Music Industry

FORECASTS

The broad figures for consumer spending on media-related products and services do not suggest dramatic growth for these markets in the next 5 years. This is mainly due to consumers needing to spend less than before for home entertainment provided they have Internet connections and suitable telecommunications services (e.g. contracts for iPhones), this new type of set-up providing hours of enjoyment just using the Internet for social networking, downloading (free) music, watching other people’s videos on YouTube, etc.

The ‘listening’ market as a whole has been undergoing a more profound revolution than home viewing, with downloadable music and sales of the necessary equipment, such as the Apple iPod, having a major impact on market values. Sales of music reproduction hardware have been static for several years, despite record sales of MP3 players and iPods. This is because personal players — even iPods — are relatively cheap next to hi-fi systems, which younger consumers are unlikely to buy if the systems do not play downloaded music.

The big change occurring in broadcasting is the full switch over from analogue to digital services, but from the evidence of what most consumers watch or listen to currently, the demand for the programming itself is very traditional and digital channels will make little difference to this. Convergence will bring together both goods and services into home entertainment systems that combine, or ‘converge’, previously separate activities such as listening to music, computing, playing games, e-mailing and gambling with traditional, passive viewing.

Table 7.8: Forecast UK Consumer Expenditure on Selected Home Entertainment at Current Prices (£m), 2010-2014

% Change 2010- 2010 2011 2012 2013 2014 2014

Home viewing† 10,250 10,475 10,500 10,000 9,500 -7.3 Reading materials 8,125 8,060 8,250 8,300 8,000 -1.5 Recorded media‡ 4,150 4,200 4,250 4,250 4,500 8.4 Toys and games 3,193 3,285 3,289 3,325 3,300 3.4 Traditional hobbies 3,025 3,075 3,000 2,950 2,900 -4.1

Table continues...

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Table 7.8: Forecast UK Consumer Expenditure on Selected Home Entertainment at Current Prices (£m), 2010-2014

...table continued % Change 2010- 2010 2011 2012 2013 2014 2014

Home computers 1,690 1,675 1,650 1,700 1,750 3.6 Home listening† 1,075 1,000 1,000 950 900 -16.3

Total 31,508 31,770 31,939 31,475 30,850 -2.1

† — excluding recorded media (pre-recorded DVDs, CDs, etc.) ‡ — CDs, DVDs (physical) or downloads; not included under ‘home viewing’ and ‘home listening’ totals

Source: Key Note

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98 © Key Note Ltd 2010 Music Industry Live Music

8. Live Music

INTRODUCTION

The coverage of this chapter is self-explanatory in the title, although the importance of music being performed live permeates other aspects of the music business (e.g. the sale of recorded concerts and soundtracks from theatrical musicals, live performance on television). The live event is particularly important to classical music and some minority categories of music.

Some aspects of live music were also covered in Chapter 7 — Music in the Media.

KEY TRENDS

Live music (concerts) has been on a high in the ‘noughties’ for several different reasons:

• Artists are keener to tour than ever because their income from recordings has fallen. This has fuelled the number of ‘reunited’ bands on tour, attracting large, mixed audiences of older fans and curious younger fans.

• Venues have been improved through investment, particularly by incoming US companies led by Live Nation (operator of over 40 concert venues) and AEG (at the very successful O2 Arena in London).

• Obtaining tickets, or just finding out ‘what’s on’, has been made many times easier by the Internet.

• Consumers brought up on television, blockbuster movies and pop videos have come to expect a spectacular show, not just a concert.

MARKET SIZE

Live music, like music in the media, is another difficult market to monitor accurately. Using broad consumer expenditure figures, which are also published in Key Note’s Leisure In the Home and Leisure Out of the Home Market Reviews, Table 8.1 puts live music in the context of entertainment outside the home.

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Table 8.1: UK Consumer Expenditure on Entertainment Outside the Home (£m), 2005-2009

% Change 2005- 2005 2006 2007 2008 2009 2009

Theatre and shows† 1,125 1,175 1,125 1,100 1,000 -11.1 Live music† 600 700 800 900 1,000 66.7 Cinema admissions 870 900 890 975 980 12.6 Spectator sport 725 800 775 750 775 6.9 Other‡ 1,500 1,550 1,700 1,800 1,875 25.0

Total 4,820 5,125 5,290 5,525 5,630 16.8

†— professional, commercial events only ‡ — including amateur concerts/shows, day visits (museums, galleries, theme parks, exhibitions, etc.), indoor games (e.g. tenpin bowling, snooker), social events (e.g. school fairs)

Source: Key Note

Consumer expenditure on live music, valued at £1bn in 2009, is higher than forecast by Key Note in previous reports, with the market having shown strong growth since 2005. According to the Office of Fair Trading (OFT), investigating Live Nation and Ticketmaster (see Supply Structure later in this chapter), ‘in recent years, the live music industry has grown rapidly with both growing attendances at live music events and higher ticket prices’.

The OFT study of the market produced more reliable figures than previously available, partly due to more efficient monitoring and collection of fees by PRS for Music.

The value shown for live music only consists of ticket sales (including commissions) and excludes other consumer spending at concerts, such as drink or merchandise (which generate a further £300m). Live music has outperformed other leisure markets outside the home such as sport or cinema for the following reasons:

• More venues have opened up and there has been investment in improving them by companies such as Live Nation. (The Competition Commission report noted that ‘the number of live music venues and the number of festivals in the UK have both increased in recent years’.)

• Popular artists have toured more often to make up for lower income from recordings (also an incentive for their managers and record companies)

100 © Key Note Ltd 2010 Music Industry Live Music

• Television talent shows and ‘celebrity culture’ have generally increased interest in live performances.

• The age range of consumers attending concerts has been broadened by the retro/nostalgia trend (e.g. for Queen or ABBA) and bands reuniting (e.g. Take That, Eagles).

• Outdoor festivals have grown in importance and commercial success.

The most important factor affecting the market is the fact that it is now easier than before to find and buy concert tickets online. Before online access to tickets, distribution was fragmented through venues, fan clubs, travel agents or record shops.

BY MARKET SECTOR

The live music sector can be segmented in several ways.

By Type of Music

Table 8.4 in the Buying Behaviour section of this chapter shows a basic breakdown of attendance at concerts in 2009: pop or rock concerts were attended by 37.5% of adults, while 17.3% attended a classical concert or recital and 11.6% went to a jazz concert or performance. In practice, the weighting towards pop and rock is somewhat heavier (due to frequency of attendance and typical prices) and similar to the breakdown of recorded music sales in Chapter 5 — Recorded Music Market — which gave rock and pop 61% of the market in 2008. (Classical only had a 3.7% share of recorded sales in 2008, but is undoubtedly more significant in the live market.) Clearly, each broad type of music offers numerous sub-categories of concert experience.

By Type of Venue

The market leader in concert promotion, Live Nation, segments the market according to venues which it either owns or operates, covering the whole of the concert market:

— the largest venues, ‘typically have 30,000 or more seats’, designed mainly for sport. UK stadiums used for concerts have included Wembley (London), the () and Hampden ().

— ‘outdoor venues with 5,000 to 30,000 seats, used primarily in the summer’. They are designed specifically for concert events (‘lines of sight and acoustics’).

• Arenas — indoor venues, which ‘typically have 5,000 to 20,000 seats’ used as multi-purpose facilities. in Greenwich was the first purpose-built major built in London since the Royal Albert Hall in 1871. Live Nation believes that arenas are more popular for higher priced concerts.

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• Music theatres — also commonly called concert halls, typically with 1,000 to 6,500 seats. In the UK, concert halls are typically owned by local authorities or trusts but may be operated by commercial companies, such as Live Nation with its interest in the Academy chain. Local authorities are also involved in modern arts centres, often developed with Lottery funding, offering performance facilities as part of a cultural complex. Live Nation points out that, although theatres have a lower capacity than arenas or amphitheatres (offering less ‘economic upside on a per show basis’), they are used year-round, have lower fixed costs and are suitable for a wide range of performers who could not fill a larger venue.

• ‘Theatrical theatres’ — originally developed for theatre, or possibly as cinemas, with some in the UK dating back to the pre-cinema years of music hall or vaudeville. According to Live Nation, they may have ‘substantial aesthetic and acoustic consideration’ and this can suit performers with a more intimate approach (to audiences of less than 5,000). The UK ‘theatrical theatre’ sector divides clearly between London’s West End venues, which rely on musicals and spectaculars (and substantial sales to visiting tourists), and the provincial theatres, which may be used for concerts.

• Clubs — venues built ‘primarily for music events’ but also suitable for stand-up comedy or , seating less than 1,000, possibly with flexible seating capacity. More common in the US than in the UK, Live Nation has had success with its House of Blues brand, which offers live music and dining.

• Festival sites — the most important development of the decade, with capacities from 10,000 to 120,000, providing a weekend or day-trip experience as much as the music and offering good value for money, despite risking the weather.

SUPPLY STRUCTURE AND MAJOR PLAYERS

Popular Music

Live music is supplied by a complicated combination of performers, their managers or agents, concert promoters and venue owners. In addition to these companies or individuals, a successful tour or concert depends on the services of merchandisers, caterers, ticketing agents and, increasingly, sponsors. PRS for Music estimates that sponsorship of UK live music events was worth £89m in 2008.

These elements make for a traditionally fragmented industry and the provision of concert facilities itself remains localised and fragmented (according to the types of venue listed under the By Market Sector section of this chapter). However, the 2000s have brought a fairly dramatic change from the rise of Live Nation to become the leading promoter and a strong influence across the market.

102 © Key Note Ltd 2010 Music Industry Live Music

Profiled in Chapter 4 — Competitive Structure — Live Nation was estimated by the Competition Commission in 2009 to lead the market with ‘a market share of between 15% and 20%’ (although there are ‘other large and well-established promoters in the market and many small promoters). Live Nation promotes concerts at more than 40 UK venues, ranging from festival sites and major venues such as Wembley Arena and Cardiff International Arena, through to a dozen ‘music theatres’ sponsored and branded as O2 Academy (in Birmingham, Brighton, , , etc.) and smaller venues for cutting-edge music such as King Tut’s Wah Wah Hut in Glasgow. The company also retains 17 traditional ‘theatrical’ theatres available for concerts, such as the Hippodrome, the Liverpool Empire, the Dominion (London) and the Playhouse.

SJM Concerts Ltd is estimated to have at least 15% of the live market and other large promoters are AEG Live, Scriptograph — which trades as Metropolis Music — and 3A Entertainment. AEG Live is part of Anschutz Entertainment Group, one of the world’s leading sports and entertainment presenters. AEG converted the into the O2 Arena and also operates the London Arena.

In terms of venues, major players can also be ranked by capacity — assuming they fill their capacity — and the O2 Arena alone has made a significant difference to the market. With a capacity of 20,000, it is the UK’s largest indoor venue for live music, selling 2 million tickets a year. For classical music, major venues are usually controlled by non-profit organisations or trusts, including the Royal Albert Hall, the Barbican and the South Bank complex (all in London).

Outdoor festival venues also offer performances on a large scale and some are now permanent sites.

Ticketing

Ticketing improvements have contributed to the growth of live music and produced specialists such as Ticketmaster, the world’s largest ticketing company, although Live Nation sells its own and other promoters’ concert tickets through Livenation.com. (During 2010, Livenation.com will merge ownership with Ticketmaster if government approval is forthcoming.)

The Competition Commission estimated that Ticketmaster had a 40% to 50% market share in 2008, followed by See Group with around 20%, and other suppliers are relatively small. However, the Competition Commission found that at least 50% of tickets for most concerts are still sold by the venue itself. Some major venues also act as ticket agents for other venues (e.g. the National Exhibition Centre [NEC] in Birmingham’s Ticketfactory).

In addition to Live Nation and AEG involvement in the industry, other major operators of venues include:

• SMG Europe, whose eight large European venues include the Arena, Metro Radio Arena (Newcastle), (Glasgow) and Odyssey ().

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• 3A Entertainment, an affiliate of Worldwide Entertainment (WWE), controlled by the US promoter Jack Utsick.

• AKA Promotions, based in Shaftesbury Avenue.

Classical and Specialist Music

Classical music and minority music rely heavily on public subsidy. The National Lottery has made a major impact on funding the arts and funding from central government is also available every year. The funded music organisations include national companies such as the Royal (including Royal Ballet), and the South Bank Centre (including the Royal Festival Hall). Major provincial organisations include Opera North, Welsh National Opera (WNO), City of Birmingham Symphony Orchestra, Royal Liverpool Philharmonic Society, Halle Concerts Society and Ulster Orchestra.

The BBC has long supported live music by financing its own orchestras and groups, including the Concert Orchestra, a Philharmonic and the BBC Symphony Orchestra. The BBC also funds the National Orchestra of Wales and the Scottish Symphony Orchestra.

A wide range of smaller organisations are funded, examples including British Youth Opera, the Buxton Festival, the African and Caribbean Music Circuit (ACMC) and Asian Dub Foundation.

In addition to the well-known rock festivals, which are now heavily promoted and televised (Glastonbury, Reading, Leeds, T in the Park), there are specialist festivals such as the Folk Festival. Around 30 classical music festivals are held annually — indoor or outdoor — including the BBC Promenade Concerts, focused on the Royal Albert Hall, and music as part of the Edinburgh International Festival. Other international festivals of note are held at Bath, Cheltenham, Harrogate and Bournemouth.

The BBC (also profiled in Chapter 4 — Competitive Structure) is a major concert promoter, particularly for classical music (including the Proms) and also through Radio 1’s One Big Weekend free outdoor festivals.

MARKETING ACTIVITY

Live Nation is the leading advertiser of concerts, but the advertising is spread widely across both concerts and theatre according to Nielsen Media Research (NMR) statistics. The data shown in Table 8.2 only list the concert campaigns, not the theatre promotions.

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Table 8.2: Main Media Advertising Expenditure on Theatres, Plays, Concerts and Other Shows (£000), Year Ending September 2009

Expenditure (£000) Promoter or Venue Concerts Included Live Nation U2, Cliff Richard, Eagles, Girls Aloud, Madonna, etc. 3,111 SJM Take That, Coldplay 1,948 Orange Rockcorps See text below 1,674 AEG Beyonce, Britney Spears, Michael Jackson 914 Glasgow Royal Concert Hall Big Band Show 610 Raymond Gubbay Various 558 Metropolis Music Various 397 Marshall Arts Elton John, Tina Turner 236 Other 51,384

Total 60,832

Source: Nielsen Media Research

The broad range of entertainment advertised is illustrated by the large ‘other’ category, which represented 84.5% of main media advertising expenditure for ‘shows’ of all types.

The West End theatre campaigns are not shown in Table 8.2, but many of them currently have a strong musical theme and major budgets, these including — in the year ending September 2009 — Jersey Boys (musical about the Four Seasons singing group, promoted by Delfont Mackintosh, £998,000); We Will Rock You (Queen-based musical, Phil McIntyre, £989,000); and Mamma Mia! (£1.8m spent by venue and promoters).

Orange Rockcorps is a charitable event sponsored by the Orange mobile network, in which anyone contributing their time to a local self-help community project qualifies for a free gig ticket.

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BUYING BEHAVIOUR

Going out to concerts is much less popular than other ways of enjoying music such as listening at home, browsing in record shops, etc. (see Chapter 3 — Key Note Primary Research), but the 16.9% of adults who go regularly represent a market of 8 million adults (far more if children under 16 were included).

A slight drop in concert-going appeared to take place between Key Note’s surveys in 2006 and 2009, but this has not affected the market value — and may have been the result of sample differences — in a period of growth for live music. There was a gulf between men and women as concert-goers in 2006 and this seems to have been remedied, with an increase in the percentage of women choosing concerts by 2009.

Table 8.3: Regular Listeners to Live Music (% of adults), 2006 and 2009

Statement: “I make sure I go to hear live music (concerts, in pubs or clubs) at least once a month”. 2006 2009

All adults 17.9 16.9 Sex Male 23.6 18.5 Female 12.4 15.3 Age 16 to 19 33.1 24.6 20 to 24 24.9 11.9 25 to 34 18.3 23.1 35 to 44 14.9 18.3 45 to 54 19.6 10.3 55 to 64 11.0 15.5 65+ 14.5 15.4 Social Grade A 16.0 18.3 B 18.2 18.3 C1 19.0 16.5 C2 15.1 14.7 D 22.9 26.6 E 19.8 10.5

Table continues...

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Table 8.3: Regular Listeners to Live Music (% of adults), 2006 and 2009

...table continued

Statement: “I make sure I go to hear live music (concerts, in pubs or clubs) at least once a month”. 2006 2009

Presence of Children Aged 0 to 4 14.2 18.1 Aged 5 to 9 9.2 14.7 Aged 10 to 15 17.1 19.0 No children 17.8 15.9

Weighted sample: 1,000

Source: Key Note/NEMS Market Research, February 2006 and November 2009

The youth bias to concert-going registered in 2006 — when penetration declined through successive age groups from 33.1% of 16 to 19 year-olds to 14.9% of those aged between 35 and 44 — is another aspect, like the shortage of women, which seems to have been changing. Attendance by age group was much more even in 2009, reflecting the improvement in access to tickets and the move to family-friendly concerts (there was a strong rise in attendance by parents with 5 to 9 year-old children).

By social grade, the Ds persisted as those most likely to go to concerts, although this may reflect the inclusion in the prompt of hearing free live music in pubs and clubs, not just large venues.

In other research, BMRB International Ltd’s Target Group Index (TGI) measured any frequency of concert going in 2009, rather than regularity. This is useful for dividing up the types of concert attended. Pop/rock concerts are easily the most popular, attended at some time by 37.5% of adults in 2009.

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Table 8.4: Attendance at Concerts by Type of Music (% of adults, any frequency), 2009

Concerts Pop/rock 37.5 Classical concert or recitals 17.3 Jazz concert or performance 11.6

Other Performances with Music Ballet 10.2 Opera 9.0 Contemporary dance 8.6

Source: Target Group Index (TGI) © BMRB International Ltd, 2009

TGI data has shown a steady increase in penetration for attending concerts, with pop/rock having risen from 25% of adults in the early 2000s to 37.5% by 2009, while classical and jazz concerts also have gained popularity. (The same applies to visiting the theatre, whereas live sport [the other live entertainment researched by TGI] has remained more static.)

Table 8.5 shows the demographic breakdowns for the main music types. It is most notable that pop/rock concerts are not most popular among the youngest age groups, peaking among 25 to 34 year-olds and remaining at a high level among those aged 45 to 54 (45.1%, higher than the national average). This underlines the ‘retro’ nature of the concert scene, commented on earlier.

Table 8.5: Attendance at Pop/Rock, Classical and Jazz Concerts by Sex, Age and Social Grade (% of adults), 2009

Pop/Rock Classical Jazz

All adults 37.5 17.3 11.6 Sex Male 39.5 16.5 13.2 Female 35.7 18.0 10.0

Table continues...

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Table 8.5: Attendance at Pop/Rock, Classical and Jazz Concerts by Sex, Age and Social Grade (% of adults), 2009

...table continued Pop/Rock Classical Jazz

Age 15 to 19 48.0 10.6 9.7 20 to 24 48.8 15.6 15.0 25 to 34 53.8 15.3 13.6 35 to 44 52.8 15.4 10.2 45 to 54 45.1 18.6 13.3 55 to 64 25.3 21.0 11.9 65+ 4.6 20.3 8.8 Social Grade A 39.6 40.3 20.3 B 46.3 30.1 18.8 C1 44.1 18.1 13.0 C2 36.1 9.4 7.6 D 25.0 7.0 5.1 E 15.7 7.1 4.5

Source: Target Group Index (TGI) © BMRB International Ltd, 2009

As might be expected, classical music increases in popularity with age but, more dramatically, with social grade, involving 40.3% of the As but only around 7% to 7.1% of DEs. Jazz has a similar bias to ABs, but attracts interest from most age groups.

FORECASTS

The outlook for concerts is still positive, with capacity at good venues being increased based on the evidence of the ‘noughties’ — that more consumers will seek out live music providing the infrastructure is in place. Ticketing will become more competitive but more sophisticated with the types of special offers available on other consumer services (e.g. , holidays).

In contrast, Key Note forecasts for other entertainment are more modest; indeed, the entertainment budget will shift to music (and to sport, during the Olympics and Commonwealth Games).

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Table 8.6: Forecast UK Consumer Expenditure on Entertainment Outside the Home (£m), 2010-2014

% Change 2010- 2010 2011 2012 2013 2014 2014

Live music† 1,100 1,150 1,200 1,200 1,250 13.6 Cinema admissions 1,025 1,050 1,100 1,150 1,150 12.2 Spectator sport 825 900 1,000 950 950 15.2 Theatre and shows† 900 950 900 850 850 -5.6 Other‡ 1,900 1,850 1,800 1,750 1,750 7.9

Total 5,750 5,900 6,000 5,900 5,950 3.5

† — professional, commercial events only ‡ — including amateur concerts/shows, day visits (museums, galleries, theme parks, exhibitions, etc.), indoor games (e.g. tenpin bowling, snooker), social events (e.g. school fairs)

Source: Key Note

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9. Amateur Music

INTRODUCTION

The final, distinct ‘market’ for music examines amateur participation in music, whereas previous chapters were all concerned with professional musical output and performance. Consumers may spend little money on their musical hobby — especially if their preference is singing — but making music can occupy a great deal of their time, making it important to examine in the context of the overall music market.

From the hobby point of view, the consumer data in the Buying Behaviour section of this chapter provide the best insight, while the Market Size and Supply Structure sections focus on the market for musical instruments.

KEY TRENDS

• The whole idea of participating in music-making as an amateur has been boosted in the ‘noughties’ by the talent-show phenomenon on television, although this has been restricted in the main to singers. (Although pop music takes centre stage, competitions in classical and choral music have also been popular.)

• The musical instrument market has been boosted, separately, by the craze for realistic video games in which players can join the band on guitar or drums (e.g. Guitar Hero).

• The relative cost of buying a good instrument is on the decrease thanks to cheaper imports.

• Modern computers come with cheap software to help recording, playback and mixing.

MARKET SIZE

Musical Instruments

The retail market for instruments is not monitored regularly by industry sources, but Key Note bases its evaluation on National Statistics’ Family Spending series and consumer data together with imports trends in a market dominated by imports. Family Spending has shown a rise on average spend on musical instruments per household from £15 to £21 over the last 10 years, which now equates to a market worth £520m.

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Table 9.1: UK Market for Musical Instruments by Value (£m at rsp), 2005-2009

% Change 2005- 2005 2006 2007 2008 2009 2009

Value (£m at rsp) 425 450 475 510 520 22.4

rsp — retail selling prices

Source: Key Note

Table 9.1 only represents household expenditure on instruments at retail prices and will include spending by professional and semi-professional musicians and music teachers, but it excludes spending by institutions such as schools, colleges and orchestras, which is broadly estimated to be worth at least £100m a year.

The market has been buoyant in this decade. Imports reached an all-time record value of £195m in 2008 but value growth has been much slower than volumes imported, due to declining producer prices (e.g. a shift to imports from the People’s Republic of China [PRC] and India). For example, imports of electric guitars (the leading individual instrument) rose in volume from 388,000 to nearly 500,000 between 2004 and 2008, but the average price per imported guitar fell from £87 to £60.

In Key Note surveys (see Buying Behaviour later in this chapter), the proportion of adults saying that they owned an instrument rose from 44.2% in 2006 to 45.6% in 2009, while those claiming to be able to pay one went up from 25.8% to 27.2%. The feeling in the trade is that computers with software such as Garage Band, together with video games such as Guitar Hero and Rock Band, have stimulated young consumers to move on to ‘real’ instruments. (By mid-2009, Activision was claiming to have sold $2bn worth of Guitar Hero in the US, making it ‘the third-largest video game franchise after the Mario and Madden NFL series’.)

Although the instruments market is diverse, the two most important groups of instrument are guitars and keyboard instruments; each group divides clearly between acoustic and electrically amplified (nowadays, invariably ‘electronic’) instruments.

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Table 9.2: The Market for Musical Instruments by Type by Value (£m at rsp), 2005 and 2009

Value (£m at rsp) % of Total

2005 2009 2005 2009 Guitars Electric 75 100 17.6 19.2 Acoustic 35 40 8.2 7.7 Accessories† 35 45 8.2 8.7 Total guitars 145 185 ‡34.1 35.6

Keyboard Instruments Fixed electronic keyboard§ 45 60 10.6 11.5 Portable electronic keyboards 40 50 9.4 9.6 Acoustic pianos/organs 30 30 7.1 5.8 Total keyboard instruments 115 140 27.1 26.9

Other Instruments Percussion 35 45 8.2 8.7 Wind 25 25 5.9 4.8 Violins, cellos (including strings) 18 20 4.2 3.8 Brass 15 15 3.5 2.9 Other instruments 7101.61.9 Total other instruments 100 115 ‡23.4 22.1

Accessories†† 65 80 15.3 15.4

Total 425 520 ‡100.0 100.0

† — includes guitar-specific amplification (e.g. practise amps, leads), pedals, straps, plectrums, etc. ‡ — does not sum due to rounding § — keyboards including synthesisers, controllers, etc. †† — including recording accessories (e.g. microphones, midi cables), music stands, stools, etc; excluding guitar accessories and violin strings

Source: Key Note

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The long-term trend has been away from traditional, acoustic instruments and towards electronic instruments, with school students more likely to form rock bands rather than join traditional orchestras, wind or brass groups. Guitars and their accessories now account for 34.1% of the consumer market, from 25% in the late 1990s. The keyboard sector has lost some share (from 33% to 27.1% over 10 years), while sales of other instruments are fairly stable, with percussion growing in importance.

Other Spending

In addition to buying instruments, the other main items involved in amateur music (not included in Table 9.1) are lessons, evening classes and printed music, but it is virtually impossible to quantify this is as a market. As with other hobbies or leisure activities, such as sport, a full assessment of amateur music spending would have to take account of travel, catering and socialising costs (e.g. for choir participants on tours), and these costs might actually outweigh the more music-specific spend on instruments and lessons.

SUPPLY STRUCTURE

Generally, the supply of facilities for amateur music outside the home relies mainly on the public sector: schools and colleges, community centres, etc. and these, in turn, rely heavily on support for music in leisure by individual local authorities.

The breadth of the music-making industry is reflected in the make-up of the Music Industries Association (MIA), the UK’s trade association which covers ‘manufacturers, importers, publishers, retailers and supporting businesses’ and whose mantra is ‘Making More Musicians’ when lobbying the Government. The Government introduced a Music Standards Fund in 1999 to help local authorities’ music services, now known as the Music Manifesto through regional Music Partnership Projects. For 2009/2010, the regions selected are Wiltshire, Northamptonshire, Hertfordshire, Birmingham and East London (led by the Barbican).

Musical Instruments

The market structure in Table 9.2 revealed a fairly fragmented market by type of instrument, coupled with demand for numerous accessories, and manufacturing is intrinsically specialised and highly skilled. This means that economies of scale are rare in producing instruments with the exception of guitars and keyboards for learners. Harmony Central, a comprehensive website for musicians, lists over 1,400 different brands of guitar and guitar accessory and around 150 makers of keyboard instruments.

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UK output of musical instruments is monitored in National Statistics’ Product Sales & Trade series, which shows a decline in manufacturing from £43m to £32m between 2004 and 2007. Symbolic of this decline, the world’s leading instrument manufacturer, Yamaha (profiled in Chapter 4 — Competitive Structure) ceased UK production of its Kemble acoustic pianos in 2009, shifting the manufacturing to the lower costs available in Indonesia. However, specialised UK manufacturers — mainly of smaller instruments and accessories — are themselves strongly geared to export markets, with two-thirds of output destined for international markets.

Imports therefore drive the UK market and have risen steadily in value. From the 1960s onwards, Japan emerged as the major international producer, partly due to its expertise in electronics, but also because the Far East countries have strong domestic markets for instruments of all kinds. Since the 1990s, production of cheaper instruments at higher volume levels has been a feature in the PRC.

MAJOR PLAYERS

Yamaha Corporation, which emerged as the world leader in the 1980s, is profiled in Chapter 4 — Competitive Structure. In brief, the company’s role includes:

• worldwide operations in musical instruments with sister companies in consumer and professional electronics (e.g. recording studio equipment) and motorcycles

• dominance of entry-level keyboard production and production across all types of keyboards (including the Clavinova sub-brand) and orchestral instruments

• involvement in teaching music through the Yamaha Music School system based in retail dealers and a Foundation offering grants to musicians.

Yamaha’s leading international rival is Samick Music Corporation (SMC) of , which produces a range of branded instruments. Having started as an upright piano maker in 1958, Samick branched out into grand pianos and then digital pianos before adding guitars (mainly under the Greg Bennett and Silvertone brands) and orchestral instruments (e.g. Hazelton). In acoustic pianos, Samick bought a stake in the famous German brand, Bechstein, in 2002, and in 2008 it fully acquired Seiler Pianofortefabrik, also in Germany. In guitars, the group now makes over 1 million units a year in four countries and also claims to be the world’s leading stringed instrument producer.

The main competition to Yamaha and Samick in keyboards comes from two Japanese rivals, Roland and Casio. Founded in 1972, Roland operates a Roland Foundation to promote musical excellence and runs Roland music schools with a UK subsidiary based in . Casio has been best known in the UK for its electronic accessories (calculators, watches) but has developed electronic instruments, from entry-level keyboards through to guitars and wind instruments.

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Kawai and Korg are other Japanese competitors in the market for pianos, both acoustic and electronic, and synthesisers.

Steinway is a famous piano name, but Steinway & Sons evolved into Steinway Musical Instruments making a range of instruments at 11 factories in the US and Europe (three have closed since 2005). The group’s numerous brands in band and orchestra instruments include Selmer, CG Conn and Emerson. In 2008, Steinway diversified by buying ArkivMusic, an online retailer of classical music.

The famous Ludwig percussion brand is owned by Steinway. Other North American percussion specialists are Vic Firth (drumsticks and mallets), Avedis Zildjian Company (cymbals, drumsticks, mallets) and Sabian of Canada. The world’s best-known brand, however, is Pearl, owned by Pearl Corporation of Japan (founded 1946). All kinds of percussion have been made and exported by the company since the 1950s, with production mainly in Taiwan.

In guitars, competition is intense on the global market, although serious musicians aspire to own famous branded guitars such as Fender or Gibson, rather than imitations (of which there are many). Claiming to be the US’s leading manufacturer of stringed instruments, Fender is most famous for its electric, solid-body ‘lead’ guitars in famous designs such as Stratocaster and Telecaster. However, the group also makes basses, acoustic guitars, violins and banjos, while a separate division produces amplification equipment and other music electronics. Gibson’s sub-brands include the famous Les Paul guitars plus Epiphone, Steinberger and Kramer guitars, while pianos are made by the Baldwin subsidiary, the largest US acoustic piano builder. Other Gibson group products include amplification equipment and the historic Wurlitzer juke-box brand.

Chinese companies making an impact on the world market include Hebei Shenglun, claiming a turnover of more than $1bn in 2009, making a full range of instruments including the Tercel guitar brand. The company claims that all of its products are ‘of lower price but excellent quality’. Hengshui Xinxing makes quality woodwind instruments and has a capacity to make up to 80,000 clarinets, 40,000 flutes and 15,000 saxophones a year.

European manufacturing, in a generally fragmented market, is led by the following companies, listed alphabetically:

• AMATI Denak (Czech Republic), a long-established, formerly state-owned Czech company which makes wind instruments — both brass and woodwind.

• Borgani of , a professional saxophone specialist.

• Buffet Crampon, a French manufacturing group that owns famous brands in woodwind and brass including Tosca, Antoine Courtois and Besson. Turnover reached €60m in 2007, of which 90% was exported.

• Höfner, a German brand of string instruments, owned by its management since 2005. Although making a broad range, UK rock fans are most familiar with the ‘violin bass’ played by Paul McCartney since his Beatles days.

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• Schreiber & Keilwerth Musical Instruments, a German woodwind specialist with two factories in Germany; famous for its saxophones.

The UK’s largest indigenous instrument group was Boosey & Hawkes (B&H), famous for its brass but also the owner, during its history, of brands such as Höfner, Schreiber and Buffet Crampon. Having divested its instruments in the early 2000s, B&H is now ‘the largest specialist classical music publisher in the world’; its copyrights include Bartok, Britten, Copland, Prokoviev, Rachmaninov and Stravinsky. There are B&H offices in New York, London and Berlin.

MARKETING ACTIVITY

Less than £2m was spent on advertising musical instruments in the year ending September 2009, and the year was noted for the absence of keyboard brands such as Yamaha or Casio. The advertising as analysed by Nielsen Media Research (NMR) is characteristically fragmented (spread across nearly 700 brands) and only one campaign, for Thomann Cyberstore’s product range, was highlighted (worth £150,000). Thomann is an online dealer in music equipment based in Germany, also selling studio, lighting and public audio (PA) equipment.

BUYING BEHAVIOUR

Key Note’s field research has paid particular attention to amateur music because it is an under-researched topic. Three questions were asked to ascertain practical aspects of amateur music, covering instrument ownership, playing and singing. (Chapter 3 — Key Note Primary Research — also analysed those who consider music to be their ‘main hobby’, but these may just be collectors of records, not amateur performers.)

In terms of actual playing, 27.2% of adults say they can play a musical instrument, with a slight excess of women over men. By age group, those aged 25 to 44 are most likely to play, suggesting that learning music in school has decreased its penetration, but these figures are for adults aged 16 and over and would not take into account the more recent surge in children playing instruments. Playing an instrument is far more common among those in the AB social grades than the others.

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Table 9.3: Involvement in Amateur Music (% of adults), 2009

S1: “I can play a musical instrument.” S2: “There is a musical instrument in my house (guitar, piano, etc.).” S3: “I enjoy singing, either to myself or in choirs, karaoke, etc.”

S1 S2 S3§

All adults 27.2 45.6 40.7 Sex Male 24.6 46.1 33.1 Female 29.7 45.1 48.2 Age 16 to 19 24.4 50.8 39.2 20 to 24 26.6 60.7 49.2 25 to 34 41.2 55.6 34.7 35 to 44 30.1 57.3 39.0 45 to 54 24.7 46.9 38.7 55 to 64 24.0 34.1 44.4 65+ 17.0 24.3 44.3 Social Grade A 42.0 53.4 33.9 B 43.7 57.4 43.7 C1 28.3 42.5 41.7 C2 25.6 56.0 35.7 D 16.7 42.3 42.1 E 15.2 12.9 47.0 Presence of Children Aged 0 to 4 35.8 57.9 37.5 Aged 5 to 9 32.5 72.9 42.0 Aged 10 to 15 35.0 69.0 41.9 No children 24.9 36.9 40.5

Source: Key Note/NEMS Market Research, November 2009

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Key Note also ascertained how many homes contained musical instruments and found an overall penetration level of 45.6%. Ownership is quite evenly spread by age of respondent, although one might expect to find more upright pianos than electrical guitars or synthesisers in the homes of the over-65s, and vice versa for the 16 to 19 year-olds. Instruments are obviously acquired and then disposed of by many householders and the peak penetration is found in homes with children aged 5 to 15.

Respondents were asked whether they enjoyed singing with a broad definition: ‘either to myself or in choirs, karaoke, etc’. Outstanding social groups for singing include women and those aged 20 to 24, but this is one aspect of music that retains its importance into old age and many local choirs (church or other voluntary choirs) rely heavily on the over-50s, for whom choir practice is a welcome social activity.

All social grades of people enjoy singing and the preponderance of elderly women in the E social grade (it contains all older people relying on state pensions) means that, unusually, E has the highest penetration (47%).

FORECASTS

Key Note is forecasting modest value growth for the amateur instruments market, largely because the price competition will restrain prices (benefiting the consumer but producing slow market growth). More generally, amateur has the attributes to grow well as a consumer hobby in this century. Consumers are looking for more active or interactive hobbies, helped by their computers, and there is arguably a less snobbish approach to playing or singing (alone or in a choir) than there used to be. This is underpinned by the growth of a ‘karaoke culture’, from pubs and clubs to television programmes such as The X Factor.

Table 9.4: Forecast UK Market for Musical Instruments by Value (£m at rsp), 2010-2014

% Change 2010- 2010 2011 2012 2013 2014 2014

Value (£m at rsp) 500 525 500 525 550 10.0

rsp — retail selling prices

Source: Key Note

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120 © Key Note Ltd 2010 Music Industry A Global Perspective

10. A Global Perspective

RECORDED MUSIC

The IFPI (International Federation of the Phonographic Industry), based in London, brings together trade associations in 44 countries and, in total, has around 1,400 member companies in 66 countries. For 2008, IFPI reported global music sales (at wholesale prices) of $18.4bn (around $28bn at retail prices).

Table 10.1: Global Recorded Music Sales by Format ($bn), 2007 and 2008

Value ($bn) % of Total 2007 2008 2008

Physical 15.9 13.8 75.0 Digital 2.9 3.8 20.7 Performance rights 0.6 0.8 4.3

Total 19.4 18.4 100.0

Source: IFPI (International Federation of the Phonographic Industry)

Across the world, as in the UK, recorded music revenues have been declining and suffered a $1bn drop in 2008, but digital sales (downloads) were still modest up to 2008 and the world is on the cusp of a major shift in formats. Revenues collected for performance rights are also burgeoning worldwide, as in the UK, moving towards presenting a more realistic picture of the economic contribution of music across all platforms and manifestations in the media.

Regionally, the US alone accounts for a 27% share of global revenues from recorded music. Japan is second with 22.3% and the UK is third, and Europe’s largest market, with 10% (followed by Germany [8.8%] and France [5.7%]), meaning that the UK market ‘punches above its weight’ in this market.

Other ways in which the global market is similar to the UK include the downloading of tracks rather than albums, but the album download market is also growing fast (up by more than a third in 2008). The dominance of the US is reflected in a high proportion of sales by US artists, not only in the home market but globally. Among the world’s 30 top-selling albums in 2008, 20 were by US artists, although UK artists also featured strongly at the top of the chart.

© Key Note Ltd 2010 121 A Global Perspective Music Industry

Table 10.2: Global Top-Selling Albums, 2008

Album (Label) Artist (Country) 1 — Coldplay (UK) Viva La Vida (EMI) 2 — AC/DC (US) Black Ice (Sony) 3 — Various Artists (US) Mamma Mia! (Universal) 4 — Duffy (UK) Rockferry (Universal) 5 — Metallica (US) (Universal/Warner) 6 — Leona Lewis (UK) Spirit (Sony) 7 — Amy Winehouse (UK) Back To Black (Universal) 8 — Various Artists (US) High School Musical 3: Senior Year (Walt Disney/Universal/EMI) 9 — (US) Tha Carter III (Universal) 10 — Rihanna (US) Good Girl Gone Bad (Universal)

Source: IFPI (International Federation of the Phonographic Industry)

Japan is significant in several respects. It is home to Sony, one of the global majors; the domestic market for Japanese-origin music is strong but international artists also sell well. The market is also ahead of the world technologically, as it is ‘a predominantly mobile market’ according to the IFPI, with a high download proportion. France is said to be ‘at the forefront of experiments with new music access models’, with its government intent on curbing Internet piracy.

In corporate terms, Universal continued to lead the world with 28.7% of sales in 2008, followed by Sony with 21.2%, Warner with 14.9%, EMI with 9.6% and all others accounting for the remaining 25.6%.

OTHER MUSIC

It is impossible in a UK report to provide details of the live music market globally — hard data is scarce, even for a major market such as the UK — but every country has its major venues for live music, including stadiums and concert halls which host a combination of domestic acts and touring international stars. Some famous festivals of music attracting visitors to host countries include the Salzburg festival in Austria and the Montreux Jazz Festival in Switzerland. It is significant, however, that growth in live music in the UK has been encouraged by US-based companies (Live Nation and AEG), as stated earlier in this report.

122 © Key Note Ltd 2010 Music Industry A Global Perspective

Media markets are also predominantly national, usually with a combination of public-service broadcasting (PSB) and commercial elements. Notably, the major media company in France, Vivendi, is owner of one of the music majors, Universal, while Sony is involved in both movies and music at a global level.

The globalised structure of the instrument industry means that it has already been detailed in Chapter 9 — Amateur Music — in terms of major players. Essential characteristics of the global supply include:

• demand for similar ranges of equipment in all developed countries, both acoustic and electric/electronic

• the leading position of Yamaha, together with other prominent Japanese manufacturers

• a major US presence in the guitar market (e.g. Fender, Gibson)

• a growing influence of production in the People’s Republic of China (PRC).

© Key Note Ltd 2010 123 A Global Perspective Music Industry

124 © Key Note Ltd 2010 Music Industry The Future

11. The Future

INTRODUCTION

The Economy

Population

The UK population will grow gradually over the next 5 years, climbing to 63.5 million by 2013, and will not have a direct influence on market growth for music.

Table 11.1: Forecast UK Resident Population by Sex (000), Mid-Years 2009-2013

2009 2010 2011 2012 2013

Female 31,420 31,614 31,807 32,001 32,196 Male 30,374 30,609 30,842 31,073 31,302

Total 61,794 †62,222 62,649 63,074 63,498 % change year-on-year 0.7 0.7 0.70.7 0.7

† — does not sum due to rounding by source

Source: Population Projections Database (2008-based projections), National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

The balance will continue to rest in favour of females (50.8% of the 2009 population). The ageing of the population means that there could be opportunities for sustaining or reviving older types of music (e.g. for the ‘baby boomer’ generation).

© Key Note Ltd 2010 125 The Future Music Industry

Gross Domestic Product

The Treasury forecasts a recovery of gross domestic product (GDP) growth to start in 2010. Assuming GDP growth is maintained, the music business should not be affected either adversely or positively by this macro-economic factor. UK artists will continue to contribute positively to GDP.

Table 11.2: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2009-2013

2009 2010 2011 2012 2013

Gross domestic product growth (%) -4.5 1.1 2.0 2.3 2.7 % change year-on-year - 5.6 0.9 0.3 0.4

Source: Forecasts for the UK Economy, November 2009, Treasury Independent Average © Crown copyright

Inflation

The Government forecasts net deflation for 2009 of 0.7%, but a return to inflation in 2010.

In terms of pricing, music’s technological revolution will have far more complex parameters than simple UK inflation. Record companies have to come to terms with the new structure of buying music by downloading, which is much cheaper than traditional record-buying to the consumer.

Table 11.3: Forecast UK Rate of Inflation (%), 2009-2013

2009 2010 2011 2012 2013

Inflation (%) -0.7 2.5 2.5 2.9 3.1 % change year-on-year -4.7 3.2 0.0 0.4 0.2

Note: inflation is at retail price index (RPI).

Source: Forecasts for the UK Economy, November 2009, Treasury Independent Average © Crown copyright

126 © Key Note Ltd 2010 Music Industry The Future

Unemployment

Unemployment is forecast to climb to 1.9 million in 2010 and 2011, before declining again to 1.6 million by 2013. Music in all its forms will continue to contribute, as a service/leisure industry, to low unemployment in the UK.

Table 11.4: Forecast Actual Number of Unemployed Persons in the UK (million), 2009-2013

2009 2010 2011 2012 2013

Actual number of claimants (million) 1.57 1.90 1.90 1.79 1.63 % change year-on-year 72.5 21.0 0.0 -5.7 -8.9

Source: Forecasts for the UK Economy, November 2009, Treasury Independent Average © Crown copyright

FORECASTS 2010 TO 2014

Table 11.5 presents forecasts for the markets in the music industry for which spending by consumers can be monitored or estimated. Growth in spending is expected to be modest at 6.3% over the forecast period, but this compares with a downturn in spending recorded for the earlier review period (2005 to 2009, as shown in Chapter 1 — Industry Overview). The recorded music market will stabilise at around £1bn to £1.2bn as downloading approaches maturity, while the prospects for live music and musical instruments are still reasonably good.

Table 11.5: The Forecast UK Music Market by Sector by Value (£m at rsp), 2010-2014

% Change 2010- 2010 2011 2012 2013 2014 2014

Recorded music 1,175 1,000 1,000 1,075 1,150 -2.1 Live music 1,100 1,150 1,200 1,200 1,250 13.6 Musical instruments 500 525 500 525 550 10.0

Total 2,775 2,675 2,700 2,800 2,950 6.3

rsp — retail selling prices

Source: Key Note

© Key Note Ltd 2010 127 The Future Music Industry

As in other chapters, it is worth reinforcing that the figures above only represent direct consumer spending, the broader music markets being much larger due to public-sector involvement (e.g. subsidies for classic music) and the payment of rights for using copyrighted music. (‘Live music’ here only represents consumer purchases of tickets: the industry also generates sales from catering and merchandise and makes payments to copyright holders for performance rights.)

MARKET GROWTH

Figure 11.1 illustrates the fluctuating value of the UK music market between 2005 and 2014. Overall, the market is expected to grow by 2.7% over the period, with live music making significant gains in market share at the expense of recorded music.

Figure 11.1: Growth in the UK Music Market by Sector by Value (£m at rsp), 2005-2014

3,500

3,000

2,500

2,000

1,500

1,000

500

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Recorded music Live music Musical instruments

rsp — retail selling prices

Note: ‘recorded music’ data for 2005 to 2008 are from the BPI.

Source: BPI/Key Note

128 © Key Note Ltd 2010 Music Industry The Future

FUTURE TRENDS

Copyrighted Music

Both in the UK and globally, it is anticipated that more vigorous collection of licensing fees for performing music will be a feature of the next 5 years, partly because the industry (and artists and composers) need to make up a shortfall from lower sales of recordings. An interesting feature on the horizon is the 50-year limit on copyrights pertaining in the UK (and the EU). Unless this is lengthened, from 2010 onwards, the first recordings made in the 1960s will go out of copyright. This would eventually mean a loss of current income for the majors, which rely on royalties from 1960s and 1970s recordings to a heavy extent (e.g. The Beatles, ABBA or Pink Floyd, which are still selling well in the 21st century).

Tracks Not Albums

The processes involved in recording music for commercial sale will continue to follow their traditional pattern, but it is obviously distribution — the route to the consumer — that is changing most dramatically. In historic terms, for those brought up either with vinyl or CD as the main delivery mechanism for music, the major change is the downloading of tracks into personal collections, rather than the purchase of albums.

Taken to its logical conclusion, this could benefit the recording industry by taking away the necessity of ensuring that an artist has a dozen good songs together for an album and then booking long studio sessions. There could be a move towards recording and sales on a track-by-track basis and this would speed up the releasing process. Inevitably, future artists may have a short-term impact and be more ‘disposable’, but it could be argued that this has already started happening with more and more one- or two-hit wonders in the charts and the temporary fame of most talent-show winners.

Role of Music

Compared with the late 20th century, when acquiring a hi-fi, Walkman and albums of music was a top priority for most young consumer, the 21st century is bringing distraction from new technologies, which are increasingly visual rather than aural (the Internet, mobile phones, ). Although music permeates the products and services from these new technologies, it no longer holds the central role it once had.

However, the mere fact that music accompanies television programmes, movies and websites and is loaded onto computers and mobile telephones means that the live, physical experience of music will become more important. This will continue to manifest itself in two ways: growth for attending live concerts, and involvement in amateur music — if only at the level of role-playing video games. In fact, the technology which has threatened the traditional structure of music is also responsible for these growth trends: the spectacular live concert, the video game and the ability to make a ‘studio’ recording on a home computer.

© Key Note Ltd 2010 129 The Future Music Industry

Technology is, by its nature, futuristic, but the other ongoing aspect of the music market is the appeal of very traditional forms of music making. Classical music is, by definition, a permanent fixture of the industry and there are millions of consumers who are content, on a daily basis, to listen to pre-20th-century classical music, mid-20th-century jazz or late 20th-century rock music. Outlets for simple human expression will, therefore, continue to underpin music making and listening into the 21st century, even if the mechanisms for delivery (and the economics of the music industry) continue to evolve with new technologies.

In 2009, nothing encapsulated this interface between the old and new, the human and the technological, better than the dramatic success of the talent-show winner, Susan Boyle. As summarised by on 13th January 2010, no one could have predicted that, in 2010, ‘the biggest-selling star in the world would be a frumpy, middle-aged spinster singing showtunes’. Boyle is also a product of a medium (television), which has moved towards more ‘reality’ shows featuring ordinary people which, however despised by the critics, underline an understandable consumer demand for simplicity.

130 © Key Note Ltd 2010 Music Industry Further Sources

12. Further Sources

Associations

Association of Independent Music Music Managers Forum Lamb House British Music House Church Street 26 Berners Street Chiswick London, W1T 3LR London, W4 2PD Telephone: 020-7306 4888 Telephone: 020-8994 5599 E-mail: [email protected] Fax: 020-8994 5222 http://www.themmf.net E-mail: [email protected] http://www.musicindie.com Music Publishers Association Ltd 6th Floor, British Music House BPI 26 Berners Street Riverside Building London, W1T 3LR County Hall Telephone: 020-7580 0126 Westminster Bridge Road Fax: 020-7637 3929 London, SE1 7JA E-mail: [email protected] Telephone: 020-7803 1300 http://www.mpaonline.org.uk Fax: 020-7803 1310 http://www.bpi.co.uk Musicians Union 60–62 Clapham Road British Academy of Songwriters, London, SW9 0JJ Composers & Authors Telephone: 020-7582 5566 British Music House E-mail: [email protected] 26 Berners Street http://www.musiciansunion.org.uk London, W1T 3LR http://www.britishacademy.com Phonographic Performance Ltd 1 Upper James Street IFPI (International Federation London, W1R 3HG of the Phonographic Industry) Telephone: 020-7534 1000 10 Piccadilly Fax: 020-7534 1111 London, W1J 0DD E-mail: [email protected] Telephone: 020-7878 7900 http://www.ppluk.com Fax: 020-7878 7950 E-mail: [email protected] PRS for Music http://www.ifpi.org 29-33 Berners Street London, W1T 3AB Music Industries Association Telephone: 020-7580 5544 Ivy Cottage Offices Fax: 020-7306 4455 Finch's Yard http://www.prsformusic.com Eastwick Road Great Bookham UK Music Surrey, KT23 4BA British Music House Telephone: 01372-750 600 26 Berners Street Fax: 01372-750 515 London, W1T 3LR http://www.mia.org.uk Telephone: 020-7306 4449 Fax: 020-7306 4446 E-mail: [email protected] http://www.ukmusic.org

© Key Note Ltd 2010 131 Further Sources Music Industry

General Sources

BMRB International The data include: Gateway 26-30 Uxbridge Road • access to over 370 million original Ealing document images London W5 2BP • information on individual directors, Telephone: 020 8433 4000 shareholders, stakeholders Fax: 020 8433 4001 and consumers http://www.bmrb.co.uk • information on limited and non-limited companies ICC Ltd • analysed financial, risk and Telephone: 020-8481 8800 business information reports Fax: 020-8941 6014 • industry information for E-mail: [email protected] benchmarking. http://www.icc.co.uk http://www.icc-credit.co.uk NEMS Market Research 22-23 Manor Way ICC provides in-depth, Belasis Hall Technology Park business-critical information for risk Billingham, TS23 4HN and credit decision-making. A range Telephone: 01642-373 355 of flexible online tools provide access Fax: 01642-373 350 to the most comprehensive content http://www.nemsmr.co.uk on all UK and Irish businesses. Nielsen Media Research ICC offers access to information Atrium Court through high-speed online The Ring delivery tools: Bracknell Berkshire, RG12 1BZ • my ICC Telephone: 01344-469 100 • my ICC credit management Fax: 01344-469 102 • Plum. E-mail: mediacommunicationuk @nielsen.com http://www.nielsenmedia.co.uk

Government Sources

HM Treasury National Statistics 1 Horse Guards Road 1 Drummond Gate London, SW1A 2HQ London, SW1V 2QQ Telephone: 020-7270 4558 Telephone: 020-7533 5888 Fax: 020-7270 4861 Fax: 01633-812 599 http://www.hm-treasury.gov.uk http://www.statistics.gov.uk • Forecasts for the UK Economy — • Economic & Labour Market Review Treasury Independent Average • Monthly Digest of Statistics • Population Projections Database (2008-based projections) • Product Sales & Trade

132 © Key Note Ltd 2010 Music Industry Further Sources

Other Sources

Competition Commission Office of Fair Trading Victoria House Fleetbank House Southampton Row 2-6 Salisbury Square London, WC1B 4AD London, EC4Y 8JX Telephone: 020-7271 0100 Telephone: 020-7211 8000 E-mail: [email protected] http://www.oft.gov.uk http://www.competition- commission.org.uk

Kantar Worldpanel UK Westgate Hanger Lane London, W5 1UA Telephone: 020-8967 0007 Fax: 020-8967 4339 http://www.kantarworldpanel.com

Key Note Sources

Key Note Ltd Key Note Market Reviews Telephone: 020-8481 8750 • Film Market Fax: 020-8783 0049 • Leisure in the Home E-mail: [email protected] • Leisure Outside the Home http://www.keynote.co.uk £750 each

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© Key Note Ltd 2010 133 Further Sources Music Industry

Key Note Market Focus Reports Key Note Business Ratio Reports • Market Forecasts • Commercial Radio Stations • Top Markets • Film & TV Producers & Distributors £699 each/£999 set of 10 volumes • Mail Order & Catalogue Houses • The Record Industry Please contact [email protected] • The Retail Industry for sector-specific individual volume £365 each prices. Over 148 titles evaluating each UK Top Markets and Market Forecasts industry sector. They compare, add a further dimension to the Key contrast, analyse and comment on Note range, providing an in-depth, the financial performance of the strategic and global view of key leading companies in each industries. Compiled using Key Note marketplace. Market Reports, Market Report Plus and Market Assessments published Key Note UKplc Report in the previous year, Top Markets and Market Forecasts are an UKplc is an indispensable guide for indispensable and authoritative managers and for those interested in mini business library, providing a gaining a greater insight into the one-stop shop for all your research financial performance of an average needs. company operating in each of the main industries in the UK. Providing Other Market Focus reports are up-to-date information and analysis, created in conjunction with specialist the publication will allow the reader authors, consultancies and industry to gain a greater level of market experts whose wealth of knowledge intelligence as well as a good is vital in publishing this type knowledge of the current state of UK of report. industry. Key Note Financial Survey Key Note Regional Leads Reports Reports £420 • Film & Television Industry For each region of Great Britain, • Music Trade there is a detailed Regional Leads • Video & Audiovisual Industry Report, bringing you invaluable £420 each financial information and contact details for thousands of companies, For each key industry sector, there is a which are profiled in each report. detailed Financial Survey report, bringing you invaluable financial information and contact details. You can choose from approximately 90 industry sectors where thousands of companies are profiled in each report.

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You can also choose from these Key Note Carnet further services: A service that offers a discount on Key Note Bespoke Data Service multiple report purchases. As well as choosing the companies Contact us for further details: you want to analyse, you can also [email protected] choose exactly what performance information you need on them — Key Note Research Consultancy with our Bespoke Data Service. We We can offer a full-service bespoke will be able to provide you with solution for any research information covering the companies, requirements not covered by the sectors, performance figures, ratios published report range. Our and other data items specific to your comprehensive market research and individual requirements alone. Even information consultancy service is historical figures can be provided. managed in house. Contact us for more information: Contact us for more information: [email protected] [email protected]

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136 © Key Note Ltd 2010 Music Industry Understanding TGI Data

Understanding TGI Data

TGI Tables, produced by BMRB International Ltd, are generally based on one of the following groups:

• Households — a private household consists of either one person living alone or a group of people, usually, but not always, members of one family, who live together and whose food and other household expenses are managed as one unit.

• Adults — any person aged 15 or over.

• Housewives — a member of a private household who is solely or mainly responsible for the household duties.

Number, Profile, Penetration

Tables used in Key Note reports may give figures for the Number, Profile, and/or Penetration. These terms are explained in the following Table.

The total Across number of adults, The % of 15-19 housewives, years-olds who are households, Table Heading users. etc

Population Number (000) Profile (%) Penetration (%)

All housewives 20,371 13,535 100.0 66.4

Age

15-24 1,045 7.7 0.03 This is the 25-34 projected 2,697 19.9 12.1 number of people in each Social Grade Down subgroup who The % of each use the product AB subgroup who are .0 61.5 users. Each sub- C1 group should .0 71.9 total 100% Region vertically.

Greater

London 2,557 10.4 55.2

Source: Target Group Index, © BMRB International, 1995

TGI data used in Key Note reports are broken down by age, social grade and standard region.

© Key Note Ltd 2010 137 Understanding TGI Data Music Industry

Social Grade

This is normally based on the occupation of the Head of the Household, or if the Head of the Household is retired, their former occupation. If this information is not available social grade is based on environmental factors such as type of dwelling, amenities in the home, presence of domestic help etc.

Social grade is assessed by the interviewer when collecting the information and is, therefore, based on information given personally and verbally by the respondent. Social grade is checked by BMRB’s coding and editing office.

The following table broadly defines the six social grades used. The relationship between social grade and net income of the Head of the Household is a complex one and readers should note that income is not determinant of social grade.

Social Grade Social Status Head of Household’s Occupation A Upper middle class Higher managerial, administrative or professional B Middle class Intermediate managerial, administrative or professional C1 Lower middle class Supervisory or clerical and junior managerial, administrative or professional C2 Skilled working Skilled manual workers class D Working class Semi and unskilled workers E Those at lowest State pensioners or widows levels of subsistence (no other earner)

Standard Region

This is as defined by the Registrar-General.

138 © Key Note Ltd 2010 Music Industry Key Note Research

Key Note Research

Key Note is a leading supplier of market information, publishing an extensive range of consumer, industrial, business-to-business and services titles. With over 25 years’ experience, Key Note represents clear, concise, quality market information.

For all reports, Key Note undertakes various types of research:

Online searching is carried out by product code or free search method, and covers the period from the last edition of the report to the current day.

The ‘my ICC’ service is used to select company information relevant to the particular report. The financial information extracted may then be backed up by further online searching on particular companies.

Trade sources, such as trade associations, trade journals and specific company contacts, are invaluable to the Key Note research process.

Secondary data are provided by BMRB International (TGI) and Nielsen Media Research for consumer/demographic information and advertising expenditure respectively. In addition, various official publications published by National Statistics, etc. are used for essential background data and market trends.

Interviews are undertaken by Key Note for various reports, either face-to-face or by telephone. This provides qualitative data (‘industry comment’) to enhance the statistics in reports; questionnaires may also be used.

Field research is commissioned for various consumer reports and market reviews, and is carried out by NEMS Market Research.

Key Note estimates are derived from statistical analysis and trade research carried out by experienced research analysts. Up-to-date figures are inserted where possible, although there will be some instances where: a realistic estimate cannot be made; or external sources request that we do not update their figures.

Key Note Editorial, 2010

© Key Note Ltd 2010 139 Key Note Research Music Industry

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© Key Note Ltd 2010 143 Music Industry The Key Note Range of Reports

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DIY & Home Improvements B2B Marketing 2008 Industry 11 2009 Business Travel Market 2008 Drinks Market 19 2009 C Energy Industry 7 2008 Cable and Satellite Services 2002 Film Market 2 2009 Charity Funding 2005 Food Industry 19 2009 Childcare 2008 Healthcare Market 10 2005 Children’s Publishing 2008 Insurance Industry 10 2009 Clothing Retailers 2000 The Legal Services Market 1 2005 Coffee & Sandwich Shops 2009 Leisure & Recreation Commercial Dynamics in Market 15 2005 Financial Services 2005 Leisure in the Home 2 2008 Commercial Insurance for Leisure Outside the Home 2 2008 Small Businesses 2009 Local Government Services 3 2010 Condiments and Sauces 2008 Mechanical Handling 1 2001 Consumer Credit & Debt 2007 Motor Industry 12 2008 Contact Centres 2010 Music Industry 2 2010 Contraception 2002 Office Equipment Industry 8 2006 Cooking & Eating 2009 Packaging (Food & Drink) Cross-Border Shopping 2000 Industry 1 2003 Cruise Market 2008 Passenger Travel in the UK 5 2007 Customer Loyalty in Financial Services 2000 Pharmaceuticals Industry 6 2008 Customer Magazines & Contract Process Plant Industry 1 2000 Publishing 2009 Publishing Industry 12 2008 Customer Relationship Management 2008 Railway Industry 2 2006 Customer Services in Security Industry 12 2009 Financial Organisations 2007 Sports Market 12 2008 C2DE Consumer 2008 Travel & Market 16 2009 D UK Internet Market 1 2009 Diet Foods 2009 DINKY Market 2007 Market Assessment Reports Direct Insurance 2010 A Direct Mortgages 2008 ABC1 Consumer 2008 Domestic Lighting and Activity Holidays 2009 Electrical Products 2000 Advertising Agencies 2007 Domestic Telecommunications 2006 All-Inclusive Holidays 2000 E Alternative Healthcare 2008 E-Commerce: The Internet Audio-Visual Retailing 2000 Grocery Market 2009 B E-Commerce: The Internet Leisure & Entertainment Market 2008 Baby Foods 2006 Electronic Banking 2008 Baby Products 2008 EMU — The Impact on the UK Baths and Showers 2000 Financial Services Industry 2003 Beds, Bedrooms and Upholstered Furniture 2000 E-Recruitment 2006 Betting and Gaming 2002 E-Shopping 2002 Book Retailing on the Internet 2007 Estate Agents and Services 2007 Bottled Water 2003 Ethnic Foods 2002 Bridalwear 2002 European Electricity Industry 2007 Business Postal Services 2008 European Gas Industry 2007

144 © Key Note Ltd 2010 Music Industry The Key Note Range of Reports

Title Edition Published Title Edition Published

European Long-Term Insurance 2008 Internet Service Providers 2005 European Oil & Gas Industry 2007 Issues and Challenges in the UK Life European Renewable 2008 Assurance Market 2002 Energy Industry Issues in Higher Education Funding 2006 IT Recruitment 2010 European Short Breaks 2008 L European Telecommunications 2002 European Tourist Attractions 2009 Lifestyle Magazines 2008 European Trends in Food Shopping 2009 Low-Fat & Reduced-Sugar Foods 2008 European Water Industry 2007 The Luggage Market 2000 Extended Financial Families 2005 M F Marketing to Children 4-11 2003 Financial Services Marketing to ABs 2006 Marketing in the Digital Age 2009 Financial Services Marketing to ABC1s 2000 Medical & Health Insurance 2007 Financial Services Marketing to BCs 2009 Men and Women’s Buying Habits 2008 Financial Services Marketing to C1C2DEs 2006 Men’s Toiletries & Fragrances 2008 Financial Services Marketing to DEs 2009 Millennium Youth 2002 Financial Services Mobile Marketing 2009 Marketing to Over 60s 2004 Motor Finance 2008 Financial Services Marketing N to the Affluent 2009 The Newspaper Industry 2005 Financial Services Marketing to the Non-Food Sales in Supermarkets 2008 Retired and Elderly 2007 Nutraceuticals 2008 Financial Services Marketing to Start-Up Businesses and the O Self-Employed 2003 Off-Trade Spirits 2004 Financial Services Organisations on Opticians & Optical Goods 2010 the Internet 2009 Organic Baby & Toddler The Fish Industry 2001 Care 2007 Forecourt Retailing 2010 Organic Food & Drink 2010 Functional Foods 2008 OTC Pharmaceuticals 2000 Funding in Higher Education 2002 Over-40s Consumer 2005 G Over-50s Consumer 2009 General Insurance 2010 P Generation Y 2007 Pay TV 2004 Global Waste Management 2007 Pension Extenders 2002 Green and Ethical Consumer 2008 Pensions 2009 Grey Consumer 2009 Personal Banking 2003 H Personal Lines Insurance 2007 Healthy Eating 2008 Personal Loans 2008 Holiday Purchasing Patterns 2009 Pet Market 2009 Home Entertainment 2008 Planning for Retirement 2008 Hot Beverages 2009 Plastic Cards in Europe 2005 I Plus-Size Fashion 2009 In-Car Entertainment 2000 Private Sector Opportunities in Independent Financial Advisers 2008 Education 2001 Individual Savings Accounts 2005 Public Relations Industry 2007 Insurance Prospects 2008 Public Transport 2001 Internet Advertising 2009

© Key Note Ltd 2010 145 The Key Note Range of Reports Music Industry

Title Edition Published Title Edition Published

R T The Railway Industry 2004 Teenage Fashionwear 2008 Ready Meals 2001 Teenage & Pre-Teen Magazines 2009 Recycling and the Environment 2000 Teleworking 2003 Retail Credit 2000 Trends in Food Shopping 2008 Retail Development 2001 Trends in Leisure Activities 2007 Rural Economy 2009 Tweenagers 2005 S U Savings & Investments 2007 Utilities 2007 Saving Trends in the Eurozone 2002 V Singles Market 2009 Vegetarian Foods 2009 Shopping Centres 2008 Vehicle Breakdown Services 2008 Short Breaks 2004 Vitamins, Minerals & Supplements 2009 Slimming Market 2009 W Small Businesses & Banks 2002 White Goods 2000 Small Office Home Office Consumer 2001 Women Over 45 2007 Small Office Home Office Products 2001 Working Women 2009 The Soup Market 2001 Sponsorship 2000 Supermarket Own Labels 2009 Supermarket Services 2007 Sweet & Salty Snacks 2009

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