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OMDC, on a Live Music Strategy for Ontario

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OMDC, on a Live Music Strategy for Ontario Introduction The Canadian music industry includes a wide range of artists and entrepreneurs who create, produce and market original Canadian music. The Canadian music industry includes musicians, songwriters, record labels, managers, agents, concert promoters and music publishers. The Canadian market is dominated by the large foreign-owned record and publishing companies but also has a strong independent sector comprising mainly small- to medium-sized record companies, publishers and management firms. The vast majority of Canadian content is commercially released by Canadian-owned and -controlled indie labels. Ontario’s music industry is the largest in Canada with the highest revenues across the board―82% of Canada’s total. These revenues come from music publishing, sound recording studios, record production and distribution.1 Moreover, the Ontario industry produces a huge number of critically acclaimed artists: 2013 Juno award nominees and winners include acts and albums produced by a long list of Ontario labels and distributors like Dine Alone, Anthem, Fontana North and Paper Bag. Ontario artists among the 2013 Juno winners include The Weeknd for Breakthrough Artist of the Year, Metric for Alternative Album of the Year and Rush for Rock Album of the Year. The prestigious Polaris Prize for 2012 was won by Arts & Crafts artist Feist, for Metals. Ontario artists also feature prominently on the shortlist for the 2012 Polaris Prize, including Cold Specks and Drake. Ontario independent labels are well represented, with Arts & Crafts and MapleMusic artists shortlisted. April 2013 saw Ontario band Rush inducted into the Rock and Roll Hall of Fame to the delight of longtime fans over the world. The band, who received their first Juno award in 1975 for Most Promising Group of the Year, won their eighth Juno in 2013 for their 20th studio recording, Clockwork Angels. Along with critical success for their artists, Ontario independent music companies are at the forefront of business innovation, in many cases responding to industry stressors by diversifying their revenue bases. Six Shooter Records is one of Canada’s most respected independent labels, home to lauded artists such as Danny Michel, Luke Doucet and Jenn Grant. The company comprises two arms―the record label proper and an artist management firm; Six Shooter are one of the Canadian pioneers of the so-called “360 deal”, where the artist records with the label and is also represented by the same company. Six Shooter also recently branched out into concert promotion with two music festivals in Toronto and Edmonton.2 Industry Size and Economic Impact The following information on revenue, employment and the consumer market should be considered a snapshot of activity in the industry based on the best available information. Employment and wages Recent research conducted by the Canadian Independent Music Association (CIMA) focusing on the independent, Canadian-owned music industry reports that over 13,400 people are employed by the independent music industry in Canada. This figure includes people employed at record companies, studios, publishers, management firms and also artists; in fact, nearly 70% of people employed by the Canadian independent music industry are artists. When artists are excluded, the number of people employed by businesses such as recording companies, studios, publishers, managers and promoters is just over 4,300. A report commissioned by Music Canada released in 2012 estimates that 78% of national recording industry jobs are in Ontario.3 2 In 2011, Canadian record labels (including foreign-controlled companies) paid $73.8 million in salaries, wages and benefits for their employees. The bulk of these wages, $58.6 million, were paid in Ontario. Both figures are just slightly higher than 2010 levels, and represent a continued increase from 2009.4 Revenues and related figures CIMA’s research on the independent, Canadian-owned music industry reports that this sector generated aproximately $292 million in revenues in 2011, and contributed more than $300 million in GDP to the Canadian economy.5 Music Canada’s economic impact study determined that the Canadian recording industry (including both the foreign- owned and independent, Canadian-owned companies) had a total economic impact output of $400 million in 2010. This includes just over $309 million of impact in Ontario. This economic impact differs from industry revenue, as reported by Statistics Canada, in that it represents only economic impact tied to expenditures, and is an estimation of activity based on input-output multipliers.6 Total operating revenues for the Canadian record production and distribution sector (which include foreign-owned labels operating in Canada) dropped in 2011, falling to $523.9 million from $552.7 million in 2010. Ontario companies experienced a drop as well, with their revenues falling to $429 million in 2011 from $451 million the previous year, following the trend of most provinces. Revenues combined with a reduction in operating expenses (6%) actually resulted in an increase to profit margins for Ontario, from 11.5 to 12.7%.7 In contrast to record production and distribution, total operating revenues for Canada’s music publishing sector rose 2.5% in 2011 for a total value of $152 million. However, operating and employment expenses were up slightly from the previous year, resulting in profit margins holding steady at 10.3% from 2010.8 Percentages may not add to 100 due to rounding. Source: Statistics Canada, “Sound Recording and Music Publishing, 2011,” Table 1. 3 Consumer market 2012 data from the International Federation of the Phonographic Industry (IFPI) shows the first rise in worldwide recorded music revenues since 1999. Overall revenues are up just 0.3 percent―however, IFPI interprets this small growth as a “path to recovery” for the global industry. The revenue growth is being spurred by licensed digital music services, expansion into new international markets and digital sales. IFPI estimates that 8 of the top 20 international markets, including Canada, are also expected to see growth for 2012.9 Source: PwC, Global and Entertainment and Media Outlook, 2012-2016, p. 44 PricewaterhouseCoopers (PwC) estimates that the largest music market in the world in 2012 was EMEA (Europe, Middle East and Africa) while Asia Pacific (excluding Japan) will see the most growth on average in the next several years. Driven by growth in these areas, global spending on digital music is anticipated to overtake spending on physical formats in 2015 worldwide, and also in Canada.10 Recorded music sales in Canada were at US $434 million in 2011. This represents a gain of 2.6% from 2010 levels, mainly driven by a bump in digital sales (31%). This represents 94.2 million single digital tracks sold (up from 67.9 million in 2010) and 8.3 million digital albums (up from 6 million in 2010).11 Source: PwC, Global and Entertainment and Media Outlook, 2012-2016, p. 280 In 2011, physical CD sales in Canada totaled 24.1 million units. When combined with digital album sales, this represents 32.4 million album equivalents. Of all recorded music sales in Canada that year, 59% were from physical formats, while 41% were digital.12 Notably, synchronization or “sync” revenue in Canada, which comes from licensing the use of music in films, television programs and digital media, rose nearly 200% in 2011 from US $5.5 to $16.1 million. Revenue from this activity is expected to continue to grow, helping to offset the decline of recorded music sales. Revenue from performance rights, which are associated with public performances of music, declined slightly from $20 to $19 million in the same period.13 Source: PwC, Global and Entertainment and Media Outlook, 2012-2016, p. 42 4 Trends and Issues Canadian Recording Industry Revenues 2007-2011 This section provides information on industry growth rates, trends and burgeoning issues for the Canadian music industry. Growth rate and industry trends The global recorded music market is valued at US $51.1 billion in 2012, and is anticipated to be valued at US $59.7 billion in 2016, with a compounded annual growth rate during that period of 3.7%.14 Source: Music Canada, Economic Impact Analysis of the Sound Recording Industry in Canada, p. 2 The Canadian recorded music market was valued at US $486 million in 2012, and is anticipated to be valued at US $491 million in 2016, with a compound annual rate of decline between 2012 and 2016 of -9.1% for physical formats, and compound annual rate of growth in the same time period of 12.8% for the digital market.15 A 2013 report from the Ontario Chamber of Commerce (OCC) considers the province’s music industry to represent one of Ontario’s three top competitive advantages, along with mining and manufacturing. The OCC projects that continued public and private investment in the provincial music industry could generate 1,300 new jobs and $300 million in economic output. Currently, the Ontario music industry is working with the provincial government and other partners, including OMDC, on a live music strategy for Ontario. The aim of this strategy is to promote live music in Ontario in order to increase music tourism, boost visitor spending and increase economic impact.16 Global and domestic issues The music subscription model is the fastest growth area in the global music industry; IFPI tracks more than 30 music subscription services worldwide. Subscriber numbers for these services grew 44% in 2012, while revenues grew 59% in the first half of that year. IFPI reports that the migration of users from free to paid services has been central to the success of services such as Spotify, which in 2012 had more than 5 million paid subscribers. Most of the subscription and cloud-based streaming music services, such as Spotify and Pandora, have not yet launched in Canada, however, Rdio launched in both the U.S.
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