Investing in Music: the Essentials
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Contents Introduction: Plácido Domingo ............................................................. 4 Commentary: Frances Moore and Alison Wenham ....................................... 5 Investing in music: The essentials .......................................................... 6 Discovering and signing talent............................................................. 17 Nurturing talent ........................................................................... 24 Promoting talent .......................................................................... 29 CASE STUDIES WEI LI-AN 12 LORDE 22 PHARRELL WILLIAMS 28 NICO & VINZ 16 ED SHEERAN 23 5 SECONDS OF SUMMER 34 MKTO 35 NEGRAMARO 36 4 / Introduction INTRODUCTION Singing the praise of the investors in music Welcome to the Investing in Music The investors in music are vital to the work report, published by IFPI and WIN, of artists. They are the risk-takers who win if two organisations that between an artist is successful, but lose if they are not; them represent many thousands of they provide the financial support in advance record companies worldwide. of recording that others are not prepared to In my long career, I have give; they offer skills and understanding of worked with all the major record how to reach the consumer in all the ways the labels, and even some of the digital age allows; and they provide many other smaller ones. From my experience skills too. This is all part of the work of record Plácido Domingo, in the recording industry, I know companies who, according to this report, invest chairman of IFPI very well what a big difference US$4.3 billion dollars worldwide in the work of a record label can make to the recording artists. success of an artist’s career. To achieve success, Investment in music cannot be taken for of course, means investment by the labels, both granted. Like the creativity of the artist, it is in time and money, in promoting the artist and something that needs to be supported and his or her recordings. protected by a secure legal environment. That is why a safe, adequate copyright framework for ‘It is copyright which underlies artists and labels is so crucial. It is more crucial the endeavours, the risks and than ever before in today’s digital world, where the successes that fill the pages copyright is fighting for its place against those who would have music and culture disseminated of this report.’ for free or who would erode copyright protec- tions in the name of “copyright reform”. This report is about the teamwork and the It is copyright that makes investment in investment that lie behind the success of every music possible. It is copyright that allows the recording artist. It is about how the talent of industry that helps artists gain a return on its the musician combines with all the skills of the investment, and therefore plough back new team working with them to produce recordings funds and resources into the next generation of that inspire audiences around the world. talent. And it is copyright which underlies the It is very important, from time to time, to endeavours, the risks and the successes that fill be reminded of the industry that is working the pages of this report. tirelessly behind the artist. Today, it is easy to Investing in Music is full of information, take for granted the constant supply of new statistics and case studies about the work of music from a huge range of artists, emerging the music industry. I think you will find this an on a weekly basis. In the digital world, it is impressive story about a dynamic and highly so easy to access music, people can forget creative industry. Above all it is an industry the time and effort that goes into creating a whose work depends on copyright. In fact, professional recording, as well as the work instead of calling this report Investing in Music, needed to bring it to the attention of the public. it could also be titled Investing in Copyright. Investing in Music 2014 / 5 COMMENTARY Discovering, nurturing, promoting talent; defining qualities of investing in music Frances Moore, Alison Wenham, CEO of IFPI chairman of WIN Investing in Music illuminates pressured both by piracy and the developed expertise in areas such as something that is often not properly challenges of monetising music on brand partnerships, merchandising and understood – the role that record digital services. synchronisation deals. While all these companies play in helping artists areas can generate income for artists, develop their careers and take their ‘The relationship between and record labels, they are all possible music to the public. This publication because an artist has reached a signifi- also highlights the ways in which labels artists and record labels cant audience through their recorded have adapted their business practices remains the essential music. Only when that is done can to continue to deliver the best possible partnership at the heart the other channels begin to generate support for artists in the digital age. of the modern music income. Behind the performers that we see Investing in Music reveals the multi- both in the charts and among thousands business.’ billion dollar investment in artists made of local musicians around the world, every year by major and independent is a small army of people from small Yet for all these pressures, record record labels. It is estimated that the and large record labels who work to labels continue to invest in the best investment in A&R and marketing over help nurture their talent and promote artistic talent. And most artists who the last five years has totalled more than their music. These behind-the-scenes want to make a career from their US$20 billion. That is an impressive professionals and experts exist for music still seek a recording deal. They measure of the qualities that define the one overwhelming reason – recording may need an advance so they can give music industry, and which give it its artists choose to use their services. up their day jobs and concentrate on unique value. Record companies remain the writing, rehearsing, performing and It is this upfront investment that largest upfront investors in artists’ recording their music. They want to be benefits the wider music industry careers. They shoulder the financial risk introduced to the best producers, sound by developing the stadium fillers of inherent in trying to break a new act. engineers and session musicians in the tomorrow. That is why the relation- They also provide a wealth of experi- business. They need financial support ship between artists and record labels ence, expertise and connections for and professional help to develop mar- remains the essential partnership at the developing artists to tap into. keting and promotional campaigns. heart of the modern music business. Record companies have remained Many artists and labels now partner committed to investing in new talent, across a wider range of commercial even in a highly competitive market activities. Record companies have 6 / Investing in Music: The essentials Investing in music: The essentials he core mission of record companies is There has been a mistaken belief to discover, nurture and promote artists. among some that the role of labels would be Record labels bring together teams with the diminished in the digital age. In fact, on the experience, expertise and dedication to contrary, the internet has generally increased help artists take their music to the widest their importance. While the digital music audience. No other players in the music marketplace has been transformed by the industry offer developing artists such support. growth of new services, artists still turn to No other industry invests in artists on the same record companies to help them cut through scale, with the same focus or by taking the the almost infinite amount of music available same risks. to reach a mass audience. Record companies T Record companies are the primary remain able to reinvest the profits generated by investors in the careers of musicians. In 2013 successful campaigns in the next generation of alone, the industry invested some US$4.3 artistic talent. billion worldwide in artists and repertoire The majority of artists still aspire to be (A&R), marketing and promotion. This signed to a major or independent record represented some 27 per cent of total recorded company. In September 2014, IFPI partnered music industry revenues, an increase on the 26 with The Unsigned Guide, an almanac of per cent invested in 2011 and reported in the information for unsigned artists, to survey last Investing in Music report. performers currently without a record deal. Over the past five years (2009–2013) IFPI The results were clear. Seven in ten of the estimates that record labels have invested over unsigned artists questioned (70%) said they US$20 billion in A&R and marketing. wanted a record deal. The most cited factors for The three major record companies alone wanting a deal included promotional support, had an estimated 7,500 artists on their rosters in tour support and the payment of an advance. 2013, while tens of thousands more are signed to independent labels. New talent remains the lifeblood of the industry with just over one fifth of those artists signed within the last 12 months. Investing in Music 2014 / 7 KEY STATISTICS US$4.3b of record company revenues invested in A&R and marketing in 2013 US$20b+ 27% Amount invested in A&R The proportion of and marketing (2009–2013) record company revenues invested in A&R and marketing 7,500 Seven out of ten unsigned The number of artists artists say they want a on major labels’ recording deal rosters alone US$500,000 – 2,000,000 The cost of breaking a newly signed artist in a major market 8 / Investing in music: The essentials Record the past, we provided A&R, marketing, promo- tion, sales and physical distribution.