METHODOLOGY Contents

METHODOLOGY contents.

methodology. 3 definition. 8 applying methodology to the core definition. 14 music tourism. 26 acknowledgements. 37

This analysis is based on the most recent data that is available. The data sources used are a combination of industry surveys conducted by the UK Music members, Annual Business Survey (ABS) and other music industry bodies. The Music Tourism analysis and methodology was conducted by Oxford Economics. With this report, we have repeated the same methodology as 2019, which has been adapted from the original methodology first used in 2013 and subsequently adapted for the Measuring Music reports 2014 – 2018. methodology. contents. 1 This chapter sets out the methodology that has been followed to quantify the economic contribution of the methodology. 3 UK music industry. It begins by setting out some points of terminology and the methodological steps in the order definition. 8 in which they have been implemented. It then discusses applying methodology to the core definition. 14 some methodological challenges. It concludes by music tourism. 26 providing more detail on how the key indicators – Gross acknowledgements. 37 Value Added (GVA), exports and employment – have been determined.

methodological steps Fifth, having quantified the revenues The methodological steps are as follows: generated by the economic activities of the core music industry, it was necessary First, define the industry. This task to transition from these to an estimate provides the industry’s answer to the of GVA contribution. There are various question: What economic activities make methods for making this transition, which up the core music industry? we discuss below. More detail on the process followed to Finally, we present our results by industry generate the industry’s answer to this segments. This is to say that the GVA, question is provided in the next chapter employment and export contribution of on definition. UK music is presented in terms of the Second, identify and quantify sources different elements of our definition of of revenues. Having established the this industry. This analysis is based on the most recent economic activities that define the music data that is available. The data sources industry, this task involved working with used are a combination of industry the industry to identify and quantify surveys conducted by the UK Music the revenue streams relevant to these members, Annual Business Survey (ABS) economic activities. and other music industry bodies. Third, the export contribution of The Music Tourism analysis and the music industry was measured by methodology was conducted by Oxford identifying and quantifying those Economics. revenue streams that involved transactions between UK businesses With this report, we have repeated or artists and businesses or customers the same methodology as 2019, which outside the UK. has been adapted from the original methodology first used in 2013 and Fourth, the employment contribution subsequently adapted for the Measuring of the music industry was measured Music reports 2014 – 2018. by identifying and quantifying the employment concerned with the economic activities that form the music core industry.

3 terminology report on the GVA contribution of the We define Gross Output, Gross Value creative sectors but not their Gross Added (GVA) and exports in the same Outputs. way as the Office for National Statistics In the UK, three theoretical approaches (ONS) and current accepted economic are used to estimate GDP: ‘production’, convention. This means that the ‘ income’ and ‘expenditure’. The following definitions are used: ‘production’ approach to estimating Gross Output corresponds to the total GDP looks at the contribution of each value of final sales by the company or economic unit by estimating the value industry in the relevant accounting of an output (goods or services) less the period. value of inputs used in that output’s production process. The income GVA1 is the contribution an institution, approach to estimating GDP measures company or industry makes to Gross the incomes earned by individuals (e.g. Domestic Product (GDP). GVA is most wages) and corporations (for example, simply understood as the value of profits) in the production of outputs sales minus the cost of bought in (goods or services). 2 goods and services used up in the production process. For a company, this In Measuring Music, a production is equivalent to the sum of compensation approach is used for all categories of employees (including both salaries of activity except the category and payments in-kind), earnings before encompassing musicians themselves, interest, tax and depreciation (EBITDA), as these are individuals and therefore, and taxes less subsidies on production. their revenues are treated in the same way as wages would be under an income Exports are the value of final sales to approach. purchasers resident overseas. This is consistent with the Annual Trade in Services Survey run by the ONS. GVA measures the contribution to the economy of each individual producer, industry or sector and is used in the estimation of Gross Domestic Product (GDP). GDP is a key indicator of the state of the whole economy. When assessing the economic contribution of sectors or the economic impact of a policy change, it is conventional to refer to the GVA impact. This is, therefore, a more widely recognised and used measure of economic contribution than Gross Output. Department for Digital, Culture, Media & Sport (DCMS), for example,

1 https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/methodologies/glossaryofeconomicterms 2 http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/gva/relationship-gva-and-gdp-gross-value-added-and- 4 gross-domestic-product.html terminology report on the GVA contribution of the methodological data has grown. This includes surveys We define Gross Output, Gross Value creative sectors but not their Gross of individual Music Creators, but also Added (GVA) and exports in the same Outputs. challenges music accountants acting on behalf This project has identified and overcome way as the Office for National Statistics of their clients and all conducted on a In the UK, three theoretical approaches a number of methodological challenges. (ONS) and current accepted economic confidential basis. The MMF continue to are used to estimate GDP: ‘production’, Our research partners, Oxford convention. This means that the provide data of music managers from ‘ income’ and ‘expenditure’. The Economics, have a strong track record of following definitions are used: across the country. ‘production’ approach to estimating studies on broadly comparable sectors Gross Output corresponds to the total GDP looks at the contribution of each – for example, film – and assisted this Our analysis of the live music industry value of final sales by the company or economic unit by estimating the value study by drawing upon the intellectual crucially depends upon accessing industry in the relevant accounting of an output (goods or services) less the capital of these past studies. ticketing data. We are grateful to all period. value of inputs used in that output’s those who have shared their data with us production process. The income Three kinds of challenge have been to enable this analysis. GVA1 is the contribution an institution, approach to estimating GDP measures confronted: The biggest challenge in putting company or industry makes to Gross the incomes earned by individuals (e.g. • Definitional challenges: Have we together the 2020 report, has Domestic Product (GDP). GVA is most wages) and corporations (for example, defined the music industry correctly? been gathering data in the midst simply understood as the value of profits) in the production of outputs • Data challenges: Have we gathered of the COVID-19 pandemic, with all sales minus the cost of bought in 2 (goods or services). the most accurate data possible on goods and services used up in the stakeholders and partners impacted this definition? production process. For a company, this In Measuring Music, a production by locked to varying degrees and many is equivalent to the sum of compensation approach is used for all categories • Technical challenges: Have we used staff furloughed. This was especially of employees (including both salaries of activity except the category the data appropriately to assess challenging in terms of generating and payments in-kind), earnings before encompassing musicians themselves, economic contribution? responses from small and medium sized as these are individuals and therefore, businesses, but also individuals and interest, tax and depreciation (EBITDA), We provide more detail on the process their revenues are treated in the same the self-employed. A significant effort and taxes less subsidies on production. that has been followed to arrive at our way as wages would be under an income was made by everyone involved with definition in the next chapter. Exports are the value of final sales to approach. this project to gather as much reliable purchasers resident overseas. This is This process arrives at core and wider data as possible in these exceptional consistent with the Annual Trade in definitions of the music industry, which circumstances. This meant that we had Services Survey run by the ONS. in providing core and wider elements is to be realistic and flexible with timelines, GVA measures the contribution to the consistent with the approach used by but we also paid careful attention to economy of each individual producer, Oxford Economics in their research on survey design, focusing on data requests industry or sector and is used in the the film industry. that are most relevant to this report (we sometimes ask for additional data for estimation of Gross Domestic Product Gathering data has been challenging background purposes). In some cases, (GDP). GDP is a key indicator of the state as the music industry is made up of a we fell short on the amount of survey of the whole economy. large number of small music enterprises responses achieved last year, but in other (SMEs) and a lot of data is held by When assessing the economic cases we exceeded last years’ response these organisations. Therefore, there is contribution of sectors or the rate. In all cases, we are satisfied that we significant variation between individual economic impact of a policy change, gathered sufficient data for the purposes contracts with complex, cross-border it is conventional to refer to the GVA of calculating the estimates made in this revenue flows, as well as plurality of impact. This is, therefore, a more report. Responses achieved this year are business models and many freelancers. widely recognised and used measure broadly consistent with the response of economic contribution than Gross As this report has become well rates commonly achieved over recent Output. Department for Digital, Culture, established, support from within the years. Media & Sport (DCMS), for example, music industry in terms of supplying

1 https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/methodologies/glossaryofeconomicterms

2 http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/gva/relationship-gva-and-gdp-gross-value-added-and- 5 4 gross-domestic-product.html gva businesses and these reporting unit We have used industry data to quantify numbers were submitted to the VML. the Gross Output of each element In the VML, UK Music could access these of the core music industry. There are reporting unit numbers without being transactions within the music industry able to identify which specific firms they such that revenues that contribute to related to. We could, however, identify output in one part of the industry will entries in the Annual Business Survey in turn contribute to output in another (ABS) corresponding to each of these part of the industry (e.g. record company reporting unit numbers. Each of these revenue will to some extent be passed on entries had a number of data variables to music creators and in turn from music attached to it, including Gross Output creators to their managers). That revenue and GVA. We took a ratio of GVA to Gross derives from transactions internal to the Output for those firms that we could industry does not alter the Gross Output match in the ABS to the reporting unit of various parts of the core industry, numbers supplied to the VML by the which are simply the summed revenues IDBR team. of companies in these parts, irrespective of whether these revenues derive from By taking this ratio, we have a ratio of sales arising from transactions with other GVA to Gross Output for firms which we members of the industry or economic know to be in the music industry. This is, agents external to the industry. therefore, a ratio much better tailored to our industry than that which appears Three possibilities for transitioning from in the published ABS, where the poor gross output to GVA data are: mapping of the SIC codes to the music Revenue data can be applied to the industry means that the ratios of GVA to input-output table to generate GVA Gross Output that might be calculated estimates but this would work poorly would take account of industries other for music as the industrial sectors in the than music. input-output table do not correspond Nonetheless, the ratio averages across accurately to music. firms known to be in the music industry. Another possibility would be to take a Typically, averages contain variation ratio of GVA to Gross Output from the among the numbers that form it. This Annual Business Survey (ABS). However, means that it is likely that the ratio of again, this would be imperfect for GVA to Gross Output that we apply may music due to the way that music maps vary between the different elements poorly on to the Standard Industrial of the core music industry. It is be Classification (SIC) codes spoke to the core as a whole, not to the component parts of the core. Given the poor fit that music has with the SIC codes, a more bespoke methodology Confidentiality procedures meant that was required. We developed this through in the VML we were only able to identify accessing the Virtual Microdata Lab companies as being UK music companies (VML) maintained by the ONS. or not, rather than to the more detailed level of particular parts of the core This bespoke methodology had three industry. steps: In the case of some parts of the core First, UK Music gathered the company - music creators, collecting societies, registration numbers and VAT numbers trade bodies and some parts of the live of a large number of companies sector3 - we were able to accurately belonging to our member bodies. These estimate GVA by drawing upon different details were supplied to the Inter- data sources other than the VML. We Departmental Business Register Team applied these estimates in these cases (IDBR) team at the ONS. and reweighted the GVA to Gross Output The IDBR was able to attach reporting ratio applied to the rest of the core in unit numbers to many of these light of this.

3 The GVA contribution of collecting societies and trade bodies is equal to their wage spend, as they are not-for-profit organisations. These wage spends were inputted directly. Music Creators were treated similarly as sole traders - all revenues being treated as wages and therefore, contributing to GVA. 6 However, we deducted payments to managers and music agents. In respect of the live sector, more accurate estimates of the relation between turnover and GVA were applied, consistent with past research for UK Music by Oxford Economics. gva businesses and these reporting unit employment exports We have used industry data to quantify numbers were submitted to the VML. We have measured the direct Exports are revenues from transactions the Gross Output of each element In the VML, UK Music could access these employment contribution corresponding between sellers in the UK and buyers of the core music industry. There are reporting unit numbers without being to the economic activities within our outside the UK. These kinds of revenues transactions within the music industry able to identify which specific firms they definition. We have not measured the have been identified in our surveying of such that revenues that contribute to related to. We could, however, identify employment that is indirectly sustained UK Music members and others. output in one part of the industry will by these economic activities. entries in the Annual Business Survey In undertaking this survey, we have in turn contribute to output in another (ABS) corresponding to each of these This employment data has been gathered attempted to apply the same standards part of the industry (e.g. record company reporting unit numbers. Each of these by surveying those undertaking the and interpretations that the ONS use revenue will to some extent be passed on entries had a number of data variables economic activities that are contained when undertaking the Annual Trade in to music creators and in turn from music attached to it, including Gross Output within our definition. When undertaking Services Survey. creators to their managers). That revenue and GVA. We took a ratio of GVA to Gross this surveying, we have been careful to derives from transactions internal to the Given the significant heterogeneity by Output for those firms that we could avoid double counting (e.g. someone industry does not alter the Gross Output contract - differences from contract match in the ABS to the reporting unit who works both as a Music Creator and of various parts of the core industry, to contract - that we see in the music numbers supplied to the VML by the a Manager) and to capture the many which are simply the summed revenues industry, an important point that we IDBR team. freelancers in the industry as accurately of companies in these parts, irrespective note is that the Annual Trade in Services as possible. of whether these revenues derive from By taking this ratio, we have a ratio of Survey seeks to gather data at firm level, sales arising from transactions with other GVA to Gross Output for firms which we Where surveys were used, they counted rather than by contract. members of the industry or economic know to be in the music industry. This is, part-time staff and freelance staff as agents external to the industry. therefore, a ratio much better tailored equivalent to half a full-time employee. to our industry than that which appears In some cases, employment data was Three possibilities for transitioning from in the published ABS, where the poor taken from other sources, e.g. BPI and gross output to GVA data are: mapping of the SIC codes to the music MPA provided data on employment by Revenue data can be applied to the industry means that the ratios of GVA to record labels and publishing companies. input-output table to generate GVA Gross Output that might be calculated estimates but this would work poorly would take account of industries other for music as the industrial sectors in the than music. input-output table do not correspond Nonetheless, the ratio averages across accurately to music. firms known to be in the music industry. Another possibility would be to take a Typically, averages contain variation ratio of GVA to Gross Output from the among the numbers that form it. This Annual Business Survey (ABS). However, means that it is likely that the ratio of again, this would be imperfect for GVA to Gross Output that we apply may music due to the way that music maps vary between the different elements poorly on to the Standard Industrial of the core music industry. It is be Classification (SIC) codes spoke to the core as a whole, not to the component parts of the core. Given the poor fit that music has with the SIC codes, a more bespoke methodology Confidentiality procedures meant that was required. We developed this through in the VML we were only able to identify accessing the Virtual Microdata Lab companies as being UK music companies (VML) maintained by the ONS. or not, rather than to the more detailed level of particular parts of the core This bespoke methodology had three industry. steps: In the case of some parts of the core First, UK Music gathered the company - music creators, collecting societies, registration numbers and VAT numbers trade bodies and some parts of the live of a large number of companies sector3 - we were able to accurately belonging to our member bodies. These estimate GVA by drawing upon different details were supplied to the Inter- data sources other than the VML. We Departmental Business Register Team applied these estimates in these cases (IDBR) team at the ONS. and reweighted the GVA to Gross Output The IDBR was able to attach reporting ratio applied to the rest of the core in unit numbers to many of these light of this.

There is no universally agreed definition engaged”.4 of the music industry. Different While the SIC has been subject to various approaches can be taken to define any revisions since it was first introduced, industrial sector. There is no ‘right’ or it is still thought to better capture ‘wrong’ way. Different approaches do, more traditional parts of the economy, however, conceptualise the industry like manufacturing, than parts of the in different ways and take different economy that have since become more characteristics to capture the essence of prominent, like the creative industries. the industry. Nonetheless, the SIC is often used to It is our contention that the industry is divide the economy into its component founded on certain commercial assets industries. and defined by the relationship to these In respect of the SOC the ONS state assets. It is these assets that create that it is “a common classification of the value which enables music to be an occupational information for the United industry, rather than a hobby, craft or Kingdom”5. Thus, while the SIC divides other non-commercial venture. It is the the economy into different industries, business-to-consumer and business-to- the SOC divides the workforce into business transactions and the resulting different occupations. profits that make this a commercial environment and this environment would We have reviewed the SIC and SOC codes not be sustainable without the assets of in detail to assess how different UK the industry. Music members ought to be classified with these systems. It is often difficult to This chapter begins by reviewing the map the activities of UK Music members different ways in which music might neatly on to the SIC and SOC codes. be defined and then moves on to the process that has been followed to Music is also grouped with the visual generate the definition presented and performing arts. These are quite here. It then explains the approach different kinds of activity. They have grounded in commercial assets and the different audiences, workforces and rationale for this approach. It concludes cultural footprints. Yet grouping music by identifying the different elements with them means that the output of contained within the core and wider music is not disaggregated from them in music industries, according to this the data presented by DCMS and ONS. approach. Demos has also commented upon these problems6. different approaches to Due to the difficulties of mapping music defining the music industry industry activities on to the SIC and The SIC and Standard Occupational SOC codes and the lack of a distinct Classification (SOC) codes are used by coding for music, there are limits to the ONS. The ONS note that the SIC “was what can be achieved through the first introduced into the UK in 1948 for current national accounts in terms of use in classifying business establishments accurately describing what is constituted and other statistical units by the type by our sector and what its economic of economic activity in which they are contribution is.

4 https://www.ons.gov.uk/methodology/classificationsandstandards/ukstandardindustrialclassificationofeconomicactivities/uksic2007 5 https://www.ons.gov.uk/methodology/classificationsandstandards/standardoccupationalclassificationsoc/soc2010 8 6 Demos, Risky Business, (2011) process for generating definition We followed a thorough, robust and transparent process for developing a definition of the core, modern music industry. The process that was followed is illustrated in the diagram below.

DIAGRAM 1: PROCESS FOR ARRIVING AT INDUSTRY DEFINITION

RESEARCH Several structured discussions with research steering STEERING group and live music group arrived at definition GROUP

UK MUSIC This definition was presented to the UK Music Board BOARD and it was agreed that we would use it as a basis for proceeding with the project, while taking soundings more broadly

WIDE This definition was subsequently discussed in DISCUSSION meetings with economists and statisticians in government departments and agencies, and further afield

9 why the music industry First, economic activities that create these commercial assets. (An example is defined by commercial is the creative process of composing, assets performing or recording music.) The process illustrated above has led Second, economic activities whose to the view that the UK music industry primary focus is upon the steps necessary consists of a core industry and a wider to bring these assets to a position industry beyond. where they are able to be distributed The inner core is defined by its and transacted with consumers and relationship to the commercial assets of businesses in one way or another. the UK music industry. The commercial assets relate to one These commercial assets are: another in a typically sequential form. • Commercial asset 1: A musical This is illustrated in the diagram below. composition and/or lyrics (the notes Musicians performing in front of live on a page) audiences will typically be performing compositions that either they or another • Commercial asset 2: A (master) artist have recorded, and which they or recording of a musical composition7 another composer or songwriter has • Commercial asset 3: A live musical written. In their exposition of commercial performance assets 1, 2, and 3, the artist can • Commercial asset 4: An artist him also develop their own brand i.e. or herself (as a brand, reputation or commercial asset 4. image) There are two kinds of relationship to these commercial assets that justify inclusion in the core of the music industry:

DIAGRAM 2: TYPICAL RELATIONSHIP BETWEEN COMMERCIAL ASSETS

COMMERICAL ASSET 4: An artist who has developed a brand/image capable of generating value - as a result of musical writing and/or performances COMMERICAL ASSET 3: A musical performance in front of a live audience

COMMERICAL ASSET 2: A (master) recording of a musical composition

COMMERICAL ASSET 1: A musical composition - with lyric and or melody (i.e. the notes on the page)

7 We note that the use of music in audio-visual productions and or by brands will draw upon these master recordings.

10 Some artists may have more commercial judgement calls in how they invest in potential in one or other of the assets. their careers. Live performance is often The Spice Girls, for example, have not critical, not only in terms of live fees released a studio album in 20 years, generated but also the ability to sell however they retain tremendous physical music product such as CDs and capacity to attract huge live audiences vinyl and merchandise items such as (commercial asset 3). Equally, catalogues t-shirts. Direct to Consumer platforms by the likes of the late David Bowie such as Bandcamp can be helpful in and Pink Floyd (commercial assets 1 monetizing the four commercial assets and 2) continue to generate significant for those artists who self-release. revenues in the absence of live It is because these commercial assets are performance (commercial asset 3). fundamental to all revenues generated There are also some artists - for example, by the music industry that we see them those whose professional careers begin as integral to how we define the industry. with TV shows like the The Voice - who have a personal brand (commercial asset core music industry 4) that is disproportionately large as The rationale above defines the UK’s core compared with their success to-date in music industry as being formed by: developing commercial assets 1 and 2. This does not, though, exclusively apply • Composers, songwriters, lyricists to acts coming out of such TV shows. • Music producers, engineers Many of the most commercially • Recording studios and staff successful artists, however, tend to have • Music managers their success in commercial assets 1 and • Record labels 2 build into success in commercial assets • Recorded rights holders 3 and 4, giving them strong commercial potential in respect of all assets. A • Music publishers new album by Little Mix , which would • Publishing rights holders draw upon commercial assets 1 and 2, • Collecting societies is now inevitably a major cultural and • Music trade bodies commercial occasion, as is one of their concerts (commercial asset 3) or the • Music accountants release of one of their fragrances, which • Music lawyers would draw upon commercial asset 4. • Music festival organisers The potential of artists in respect of • Music promoters these commercial assets is consistently • Music agents assessed by those investing and working • Music retail (Shops) in the industry at all stages of the artist’s • Music retail (digital) career. As discussed, artists may have differential potential between these • Retail of Music Instruments commercial assets. But, of course, such Manufacture of musical instruments major acts more than justify the various • Production services for live music investments made which are necessary • Ticketing Agents – the proportion of to bring their products to end customers. their activities involved with live music Less well known artists are more • Concert venues and arenas – the marginal cases. The costs of these proportion of their activities involved investments have to be assessed by with live music labels, publishers, promoters and • Music Distributors – Digital and managers against the likely future Physical returns generated in terms of these four commercial assets. Self-releasing We group these different elements of artists without either a label, publisher the core into various thematic bundles as or manager have to make their own illustrated in Table 1.

11 TABLE 1: THEMATIC GROUPS WITHIN THE CORE MUSIC INDUSTRY

THEMATIC GROUPING ELEMENTS OF THE CORE Music Creators • Artists, Musicians, Singers • Composers, Songwriters, Lyricists • Producers • Engineer Recorded Music • Record labels • Recorded rights holders • Digital music distributors • Recording studios • Physical distribution Live Music • Music festival organisers • Music promoters • Music agents • Production services for live music • Ticketing agents – the proportion of their activities involved with live music • Concert venues and arenas – the proportion of their activities involved with live music Music Publishers • Publishing companies • Publishing rights holders Music Representatives • Collecting societies • Music managers • Music trade bodies • Music accountants • Music lawyers Music Retail • Retail of musical instruments • Manufactrure of musical instruments • Digital music retail • Physical music retail

12 TABLE 1: THEMATIC GROUPS WITHIN THE CORE MUSIC INDUSTRY wider music industry We are reporting only on the economic contribution of this core, not the wider music industry. While the wider music THEMATIC GROUPING ELEMENTS OF THE CORE industry is considered in the chapter Music Creators • Artists, Musicians, Singers on linkages, we have not made • Composers, Songwriters, Lyricists an estimate of its economic contribution. • Producers The UK’s wider music industry is defined • Engineer as those economic agents that trade with Recorded Music • Record labels the core, and so service the core music • Recorded rights holders industry in a variety of ways. • Digital music distributors The rationale above defines the wider • Recording studios music industry as being formed by: • Physical distribution • Other music-based digital services for Live Music • Music festival organisers consumers (streaming, subscription, • Music promoters recommendations, social networks) • Music agents • Music broadcast: radio and television • Production services for live music • Music video production • Ticketing agents – the proportion of their activities involved with live music • Manufacture of audio equipment, and • Concert venues and arenas – the proportion of their music software activities involved with live music • Music photography • Music press (online and print) – Music Publishers • Publishing companies including the proportion of music • Publishing rights holders coverage in non music focused Music Representatives • Collecting societies publications • Music managers • Manufacture, sale, distribution of • Music trade bodies music merchandise • Music accountants • Music teachers (education) • Music lawyers • Music teachers (tuition) Music Retail • Retail of musical instruments • Security, catering and other services • Manufactrure of musical instruments for live music performances/ events • Digital music retail • Music contractors/fixers • Physical music retail

13 12 applying methodology 3to the core definition. This chapter works through our thematic groupings to explain the application of our methodology to each element of our core definition.

music creators anonymised responses from a number of accountants of leading musicians. revenues generated These revenues were treated as wages UK Music worked with Ivors Academy, and therefore, as contributors to GVA. PRS for Music, PPL, MPG, FAC and the However, we substituted from this MU, as the representative bodies of cost incurred by musicians that we are these creative workers, and identified modelling as revenues to elsewhere that they generate the following within the industry (i.e. payments to revenues: managers and music agents). As a • Royalties and rights payments from result, what we report here as their GVA collecting societies (PRS for Music/ contribution is net of these costs. PPL) • Royalties from music publishers and exports publishing rights holders The survey asked them what proportion of their revenues arises from overseas • Session fees from record companies and this proportion was applied to our • Royalties from record companies and measure of total revenues of musicians recording rights holders to come to an export measure. • Payments in association with a ticketed concert employment The survey found the average earnings • Commissions for new works of the respondents given our measure • Sponsorship/brand endorsements of total revenues, implies that there are • Payments for music tuition 142,000 professional music creators as a • Payments for non-ticketed corporate full-time equivalent (FTE) base in the UK. gigs/pub performances/private parties • Session or buy-out fees, e.g. for TV bookings, computer games and film companies • Revenues from online content channels gva We surveyed Ivors Academy, PRS for Music, FAC, MPG, PPL and MU members to gather data on the revenue streams above and then used PPL and PRS for Music data to gross up from the survey to an estimate for the UK as a whole. The survey had 1,000 responses, and in addition we had aggregated and

14 record labels Data is collected on invisible imports and exports, employment, A&R investment revenues generated and marketing and promotion UK Music worked with AIM and BPI, expenditure. In order to represent the which represent record labels, to identify whole recording sector, adjustments are the following revenue streams: made to the survey returns to account • Sales for the remainder of the independent • Physical formats sector. Measurement of the rest of the • Online and mobile downloads independent sector was undertaken by Media Research Publishing Ltd (MRP), • Subscriptions whose estimates are based on company • Ad-supported by company analysis for the leading 30 • Public performance and broadcast labels, utilising accounts disclosures, • Synchronisation published market share data from the Official Charts Company and knowledge • Film/TV/Advertising of the relevant businesses. • Games The total revenue figure reported by the • Premiums BPI was applied to our ratio of GVA-to- • Digital exploitation of audio/visual Gross Output to move to GVA. content, e.g. You Tube channel • Artist Related Income exports These were taken from the BPI measure. • Other – including merchandise, live events employment gva Similarly, employment is as reported the BPI. BPI runs a survey across all kinds of record labels – both majors and independents – which gather data on the revenue above.

15 digital distributors employment Digital Distributors are a vital Employment measures were grossed intermediary between those making up in line with market share held by the sound recordings (commercial asset 2) identified firms, as a proportion of the and online retailers. They provide a niche, marketshare they were thought to hold. business-to-business service ensuring the digital file contains all the metadata to physical manufacturing enable its commoditisation. and distributors Please note that this does not refer to The design and production of physical consumer facing digital service providers product and packaging is necessary to such as Spotify. bring sound recordings (commercial asset 2) to a form in which they can be revenues generated sold to customers. They also tend to Digital Distributors generate revenues develop and reinforce the brand of the from the following activities: artists (commercial asset 4). • Deliver digital content revenues generated • Sales and marketing The revenues of these businesses that gva are relevant to this study are those that Working with the BPI we identified they derive from: firms offering these services and • Production of CDs and records/vinyl produced estimates based on company • Distrbution of CDs and records/vinyl by company analysis for the leading digital distributors, utilising accounts gva disclosures. We estimate that these We worked with the BPI to identify companies are responsible for 90% of businesses providing these services the activity of online music distributors in and calculated the average distributor the UK. commission. These revenues were then grossed up in line with the proportion This is a rapidly evolving area of the of the major and independent albums industry and what falls within scope released in 2019 that could be accounted was subject to some debate. It was for by the activities of our sources. determined that only those operating “pure delivery” models should fall within These total revenues were applied to our scope - those whose business model GVA-to-Gross Output ratio to derive a only involves delivering tracks, not GVA measure. taking ownership of rights. This has the effect of excluding firms that others exports Our research found that physical may consider to be within scope. It is, manufactors and distributors do not therefore, a very narrow interpretation contribute directly to exports. of scope and a conservative estimate of contribution. employment The total revenues estimated were We calculated the ratio of employment applied to the GVA-to-Gross Output ratio to turnover from information. to derive a GVA measure. exports Our research found that digital distributors do not contribute directly to exports.

* Performance income includes royalty payments. * Performance income includes royalty payments. 16 recording studios gva Recording studios play a key role in the The total estimated revenue figure was transition from a musical composition applied to our ratio of GVA-to-Gross (commercial asset 1) to a sound Output to move to GVA. recording (commercial asset 2). exports revenues generated Survey respondents indicated what Recording studios generate revenues proportion of their revenues come from from the following activites: non-UK clients. • Studio hire employment • Equiptment hire Survey respondents provided • Engineering services employment measures, which were • Mastering services grossed up in line with market representation held by respondents and UK Music ran a survey across the cross referenced with analysis based on recording studio community to identify companies house data. these revenues streams. Studios were very severely disrupted during lockdown, but we worked collaboratively with the sector to enable studios to respond in a meaningful way. This is only the second year that recording studios have been surveyed and we shall continue to work to with this sector to encourage more responses from studios and gain a more complete understanding of this often overlooked sector. We calculated the revenues based on the average studio hire price in the UK, based on a studio being active for 261 days within the year during 2019. We are aware that the majority of studios operate outside of traditional hours and commonly are open at the weekends. Some, in fact, operate 24 hours to accommodate clients.

17 live music music promoters Research by Oxford Economics for UK gva Music on music tourism allowed us to Promoters are central to the live music identify: industry, bringing together all the • Total ticket sales for all kinds of live different industry participants needed to music events - both festival and non- put on live music events and tours. While festival precise arrangements vary from firm • Total spend at these live music events to firm, they tend to hire venues, book by attendees acts through music agents, put in place ticket agents and commission production Using these measures of total ticket sales services. for live music events and total spend at live music events, we allocated these Music promoters pay those whom they revenues to each part of the live music contract mainly through ticket sales, sector as we describe below. while aiming to retain a profit from the ticket income for themselves and also music festival organisers gaining revenues through live music revenues generated sponsorship. We worked with the Association of We have worked with the UK Live Music Independent Festivals to identify the Group to collect data on revenues following forms of revenue generation gathered by music promoters, drawing by music festivals: upon the typical form of contracts • Ticket sales that they work to. Major promoters responded to a survey - operators • Food and beverage sales responsible for over 10% of the market • Merchandise replied - that provided data to this • Venue parking picture. • Camping fees The majority of revenues of promoters • GVA derive from ticket sales with the total Total ticket sales for festivals and total value of these revenues being applied to ancillary spend at festivals were allocated our GVA-to-Gross Output ratio to derive to festivals as revenues, as well as a GVA. proportion of the live music sponsorship. exports These revenues were applied to our GVA- The export contribution of promoters to-Gross Output ratio to derive a GVA is taken to be equal to the number of measure. foreigners buying tickets for the live exports music events that they promote, which The research by Oxford Economics for is taken from the Oxford Economics UK Music identified what proportion of research for UK Music. festival attendees were foreigners. Their employment spend on tickets and ancillary items was We calculated a ratio of employment allocated to festivals as their export to turnover from survey responses contribution. from promoters - leading UK promoters employment replied to this survey. We used this ratio We calculated a ratio of employment to to measure total full-time employment turnover from survey responses from AIF for promoters, given our measure of members. We used this ratio to measure their total turnover. total full-time employment for festivals, given our measure of their total turnover for festivals as a whole.

18 live music music promoters music agents production services for Research by Oxford Economics for UK gva gva Music on music tourism allowed us to live music Promoters are central to the live music Music agents earn a percentage of the gva identify: industry, bringing together all the live fees earned by the live music acts The firms that provide production • Total ticket sales for all kinds of live different industry participants needed to that they have secured bookings for. services for live music sometimes do so music events - both festival and non- put on live music events and tours. While The average for this percentage was in relation to non-music performances as festival precise arrangements vary from firm taken from responses to a survey to well (e.g. comedy). We have worked with to firm, they tend to hire venues, book which leading music agents replied. • Total spend at these live music events the Production Services Association (PSA) acts through music agents, put in place This average was then applied to our by attendees to distinguish revenues gained by their ticket agents and commission production measure of total live music ticket sales members for music performances from Using these measures of total ticket sales services. to measure the total domestic revenues other kinds of performance. for live music events and total spend at of music agents. In addition, we added Music promoters pay those whom they live music events, we allocated these their export revenues - discussed below We ran a survey among PSA members contract mainly through ticket sales, revenues to each part of the live music - to the domestic revenues to come to and used the PRS for Music data to while aiming to retain a profit from the sector as we describe below. a measure of total revenues, which was move from these survey responses to a ticket income for themselves and also applied to our GVA-to-Gross Output ratio. picture for the UK as a whole. The PRS gaining revenues through live music music festival organisers for Music data told us the total number sponsorship. revenues generated exports of live music events in the UK in 2016 and We worked with the Association of We have worked with the UK Live Music Respondents to our survey of music our survey of PSA members told us how Independent Festivals to identify the Group to collect data on revenues agents quantified the proportion of their many of these had been serviced by PSA following forms of revenue generation gathered by music promoters, drawing revenues that come from bookings for members, as well as the revenues that by music festivals: upon the typical form of contracts their clients outside the UK. Respondents they derived from these activities. This hold in total a market share of over 15% • Ticket sales that they work to. Major promoters gave us a measure of domestic revenues responded to a survey - operators in the UK music agents market. to which we added export revenues - as • Food and beverage sales responsible for over 10% of the market employment below - and applied our GVA-to-Gross • Merchandise replied - that provided data to this Output ratio to move to a GVA measure. We calculated a ratio of employment to • Venue parking picture. turnover from survey responses from • Camping fees exports The majority of revenues of promoters agents. We used this ratio to measure PSA members quantified the proportion • GVA derive from ticket sales with the total total full-time employment for agents, of their revenues that come from Total ticket sales for festivals and total value of these revenues being applied to given our measure of their total turnover. servicing live music events outside the ancillary spend at festivals were allocated our GVA-to-Gross Output ratio to derive UK. to festivals as revenues, as well as a GVA. employment proportion of the live music sponsorship. exports These revenues were applied to our GVA- We calculated a ratio of employment to The export contribution of promoters turnover from survey responses from to-Gross Output ratio to derive a GVA is taken to be equal to the number of measure. PSA members. We used this ratio to foreigners buying tickets for the live measure total full-time employment for exports music events that they promote, which production services, given our measure The research by Oxford Economics for is taken from the Oxford Economics of their total turnover. UK Music identified what proportion of research for UK Music. festival attendees were foreigners. Their employment spend on tickets and ancillary items was We calculated a ratio of employment allocated to festivals as their export to turnover from survey responses contribution. from promoters - leading UK promoters employment replied to this survey. We used this ratio We calculated a ratio of employment to to measure total full-time employment turnover from survey responses from AIF for promoters, given our measure of members. We used this ratio to measure their total turnover. total full-time employment for festivals, given our measure of their total turnover for festivals as a whole.

19 18 ticketing agents concert venues and revenues generated arenas Ticketing agents generate various kinds revenues generated of revenue: The revenues that concert venues and Development of the in-house box office arenas gain from hosting these live music system gives them certain rights in terms events come from: of numbers of tickets they can access. • Venue hire Commission they charge is added to the • Food and beverage sales ticket price and within that there will be • Merchandise sales fees paid back to the venues. • Venue parking Licensing their box office systems, which • GVA comes in the form of an annual fee, Venues are typically hired for a versus the number of tickets sold or a percentage of ticket sales. An average nominal per ticket royalty. for this percentage was agreed with gva representatives from the UK’s leading We worked with leading ticket agents to concert venues and arenas and our understand revenues to ticketing agents, measure of total ancillary spend at non- given the contractual arrangements festival live music agents was added to typically in place between agents, their revenues, which were then applied promoters, artists and venues. As these to our GVA-to-Gross Output ratio. arrangements typically correspond to exports ticket sales, these were also grossed up Spending by foreigners at music venues in line with data on total ticket sales. This - taken from the Oxford Economics gave us a measure of domestic revenues research for UK Music - is taken as the to which we added export revenues - as export contribution by concert venues below - and applied our GVA-to-Gross and arenas. Output ratio to move to a GVA measure. employment exports We calculated a ratio of employment to The ticket agents that were consulted turnover from information provided by quantified the proportion of their the NAA. We used this ratio to measure revenues that come from servicing live total full-time employment for venues music events outside the UK. and arenas, given our measure of their employment total turnover. We calculated a ratio of employment to turnover from survey responses from the ticket agents consulted. We used this ratio to measure total full-time employment for production services, given our measure of their total turnover.

20 ticketing agents concert venues and music publishing Total PRS for Music and MCPS payments were kindly provided by these revenues generated arenas revenues generated organisations themselves. While PMLL Ticketing agents generate various kinds revenues generated We worked with the MPA to identify the payments we source via analysis of of revenue: The revenues that concert venues and following revenue streams for music companies house. We grossed up the Development of the in-house box office arenas gain from hosting these live music publishers: publisher responses in line with the total system gives them certain rights in terms events come from: a. Payments from collecting societies PRS for Music and MCPS recieved by the of numbers of tickets they can access. market. • Venue hire • Broadcast (radio, TV etc) Commission they charge is added to the • Food and beverage sales • Online (downloads, streaming etc) Once the survey responses from ticket price and within that there will be publishers were grossed up in line with • Merchandise sales • International fees paid back to the venues. these three different methodologies • Venue parking • Public Performance (shops and we had Gross Output, export and Licensing their box office systems, which • GVA businesses etc) employment measures. The GVA comes in the form of an annual fee, Venues are typically hired for a • Live measure derives from applying our GVA- versus the number of tickets sold or a percentage of ticket sales. An average to-Gross Output ratio. nominal per ticket royalty. • Recorded Media (CDs, vinyl etc) for this percentage was agreed with representatives from the UK’s leading b. Direct licensing exports gva MPA members quantified the proportion We worked with leading ticket agents to concert venues and arenas and our • Online (downloads, streaming etc) of their revenues that come from outside understand revenues to ticketing agents, measure of total ancillary spend at non- • Synchronisation licensing (for the use of the uk. given the contractual arrangements festival live music agents was added to of a musical work in visual media) typically in place between agents, their revenues, which were then applied • Grand rights licensing (for the use employment to our GVA-to-Gross Output ratio. promoters, artists and venues. As these of a musical work in a dramatic Survey respondents were asked for their arrangements typically correspond to exports performance) employment contribution and this was ticket sales, these were also grossed up Spending by foreigners at music venues • Print licensing and permissions grossed up in line with the marketshares in line with data on total ticket sales. This - taken from the Oxford Economics of the industry. gave us a measure of domestic revenues • Production music (the licensing of research for UK Music - is taken as the to which we added export revenues - as library music direct to music users) export contribution by concert venues below - and applied our GVA-to-Gross and arenas. c. Other receipts Output ratio to move to a GVA measure. • Affiliates employment • Sub-publishers exports We calculated a ratio of employment to The ticket agents that were consulted turnover from information provided by • Print hire (the hire of scores and parts quantified the proportion of their the NAA. We used this ratio to measure for performance) revenues that come from servicing live total full-time employment for venues • Printed music sales music events outside the UK. and arenas, given our measure of their total turnover. gva employment The MPA ran their annual music census We calculated a ratio of employment to across their membership, which received turnover from survey responses from a high response rate, including from all the ticket agents consulted. We used majors and the largest independents. this ratio to measure total full-time This corresponded to a total market employment for production services, share of over 70% of the UK music given our measure of their total turnover. publishing market. Members of the MPA operate across multiple publishing business models: Pop publishers, printed music/classical and grand rights licensing.

21 20 music representatives gva This is taken to be equal to the wage PRS for music spend of PPL, as it is a not-for-profit revenues generated body. We worked with PRS for Music and identified the following revenue streams exports into PRS for Music: These are the international royalties collected by PPL. • Broadcast • Online employment • International This is an employment measure provided • Public Performance by PPL. • Recorded Media music managers data revenues generated PRS for Music was able to provide full We have established by working with the data on all revenues into PRS for Music Music Managers Forum (MMF), which and payments out by PRS for Music. This represents managers, that managers was vital to understanding, quantifying are paid either as a percentage of the and building up a wider picture of the earnings of artists or sometimes as a industry from the other data that this fixed salary by the artist. project gathered. gva and exports gva The revenues of these managers were This is taken to be equal to the wage estimated by combining the results spend of PRS for Music, as it is a not-for- of the survey conducted by the MMF profit body. with our results on revenues to music creators. We know that managers are exports typically paid a certain proportion of These are the international royalties their clients’ earnings -this proportion collected by PRS for Music. being estimated in the MMF survey - and this proportion was multiplied by employment our estimate of the earnings of music This is an employment measure provided creators as whole. The same method by PRS for Music. was applied to estimate the export contribution of music managers. PPL Total revenues - both domestic and revenues generated international - were applied to our ratio PPL collects the following kinds of of GVA-to-Gross Output. payment on behalf of its members: a. PPL (domestic and international) employment We worked with the MMF who surveyed • Public performance their members. This survey covered • Broadcast revenues the number of workers employed by • Dubbing MMF members. The average number of employees per MMF member was b. VPL (domestic and international) multiplied by the number of music • Public performance of videos managers and organisations advertising • Broadcast of videos in the Music Week Directory to estimate • Dubbing rights for videos the total employment contribution of music managers. data PPL provided data on payments in and music trade bodies out of the society, which allowed us to Music trade bodies are financed by fees understand its work and helped build up paid by their members, largely on a not- a picture of the industry as a whole. for-profit basis. All trade body members of the UK Music and the Live Music Group have shared data with this project.

22 gva GVA ratio using secondary data from ABS This is taken to be equal to the wage “accounting, bookkeeping and auditing spend of the trade bodies, as they are activities; tax consultancy” under SIC not-for-profit bodies. code 69.2* exports exports Our research found that trade bodies do Our research found that music not contribute directly to exports. accountants do not contribute directly to exports. employment This is an employment measure provided music lawyers by the analysis of companies house data. Music lawyers respresent a diverse clientelle from music creators to music accountants large organisations when it comes to Music accountants play a vital role negotiationg terms or representing in managing the finances for various clients on major legal disputes. Most entities in the industry especially for contracts within the industy do not get the freelance and self employed such signed without being reviewed by a legal as music creators, music agents and representative. managers. revenues generated revenues generated Lawyers revenues are generated from Accountants revenues are generated the billings for their services which is from the billings of their services to their common via an hourly rate. clients and can be based on a retainer model or ad hoc basis. analysis on gva and employment analysis on gva and 83 legal entities were identified as firms, employment sole traders promoting legal services With the help of the UK Music within music. We carried out an extensive membership Uk Music was able to survey and audit across these companies identify over 103 accounting companies and grouped them into: promoting music accounting services. We • Independent solicitors carried out an extensive survey and audit across these companies and grouped • music lawfirms - entire companies them into: that operate in music • Independent accountants • Entertainment law firms - that represent music, TV, film, sport • music accountants - entire companies that operate in music • Non music firms • Entertainment accountants - that We were able to quantify the number of represent music, TV, film, sport FTE workers who were either partners, • Non music accountant firms associates or administrative staff at the music firms who soley operate in the Continuing the audit we were able to music space. For the entertainment and quantify the number of FTE workers non music firms we were able to identify who were either partners, associates the FTE lawyers working specifically on or administrative staff at the music music activities at each company. accountants who soley operate in the music space. For the entertainment and We took this final employment figure and non music accountants we were able to converted these to GVA by determining identify the FTE accountants working the appropriate sectoral employment to GVA ratio using secondary data from ABS specifically on music activities at each * company. “legal activities” under SIC code 69.1 We took this final employment figure and exports converted these to GVA by determining Our research found that music lawyers the appropriate sectoral employment to do not contribute directly to exports.

* Annual data on size and growth within the UK non-financial business sectors as measured by the Annual Business Survey, broken down to four-digital Standard Industrial Classification 2007. https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/datasets/uknonfinancialbusinesseconomyannualbusinesssurveysectionsas 25 music tourism. 4 This chapter summarises our approach Our methodology involved estimating to estimating the economic impact of the attendance at live music events live music tourism (both foreign and across a range of entertainment venues domestic) on the UK economy during (festivals, arena concerts, stadium 2019. The results build on previous concerts, park research, commissioned by UK Music, and Concerts, grassroots events and concerts carried out by the International Centre at other venues e.g. nightclubs, theatres for Tourism and Hospitality Research etc). This breakdown was primarily at the University of Bournemouth. The influenced by the existing format of scope with which we are able to outline some of the data that was provided to us this approach is limited, to some extent, (particularly by PRS for Music). by the confidential nature of some of the data obtained from third party sources For both concerts and festivals, two e.g. data provided by PRS for Music on main channels of economic impact were the value of royalty payments collected measured: first, the box office receipts for artists. We also have signed non- generated by foreign and domestic disclosure agreements limiting what we tourists; and, second, ancillary spending an disclose about data sources. of domestic and foreign tourists as a result of attending these events. Doing For the purposes of measuring the so required us to estimate the number numbers of music tourists in the UK, of domestic and foreign tourists at their spending and associated economic within- scope events. For this, data impact, this study counts music goers as from a range of ticket distributors were tourists: used to estimate the proportion of • For overseas visitors, if they book these attendees that were domestic (as their ticket to a music event using a defined in this study) and foreign tourists billing address in a country outside respectively. In total, this gave a sample the UK. size of 29% of the total tickets sold to • For domestic visitors, if they within-scope events during 2019. travel at least three times the In addition, the economic impact average commuting distance in the included estimates of the additional Government Office Region (GOR) in expenditure by foreign tourists during which the event took place in order to the entirety of their stay in the UK. Such attend the event. We also include the an approach was consistent with that following restrictions: used in the previous study and is also • We have examined attendances at all consistent with the method used by the live music events for which suitable Office of National Statistics (ONS) when data exists. This includes all concert assessing the economic contribution of venues, grassroots venues, and all event-driven foreign tourism.1 festivals with capacity over 1,500. This identifies the majority of spending at UK live music events. • Live music must be the primary attraction at the relevant event. Great care has been taken to exclude cases where music is only part of the offering, such as cultural festivals, arts festivals and musical theatre.

26 These expenditure estimates were then transformed into more standard metrics such as Gross Value Added (GVA) and Full Time Equivalent (FTE) employment. The final stage of the analysis was to assess the “multiplier” effects of such an injection of expenditure. Although, many impact studies quantify both the indirect and induced effects of an initial direct stimulus, the analysis in this study is constrained to just the indirect or supply chain effect. Doing so ensures that our estimates are consistent with the official valuation of GDP. The remainder of this section provides further detail on each of these stages as follows: • The methodology used to classify local tourists. • The approach used to estimate the attendance and associated flows of domestic and foreign tourists to live music events. • The estimation of the various channels of expenditure including box office receipts, associated ancillary spending, and wider trip expenditure by foreign tourists. • The methodology used to transform these expenditure values (essentially estimates of direct Gross Output (GO)) into an associated contribution to GDP and FTE employment. • The approach to quantifying the indirect impact of live music tourism spending.

27 classification of a tourist In order to quantify average commuting Domestic visitors were classified as distances across the GOR’s we used data either “locals” or “tourists” based on from the ONS on commuting patterns distance travelled to the venue rather of UK residents across Local Authority than on whether their initial location Districts (LADs) in 2011. For each LAD, a was in a different Government Office postcode was taken to correspond to the Region (GOR). The challenge with using centre of the area. The distance between a “distance” criterion was defining an relevant LADs was then quantified using appropriate threshold for distance mapping software which enabled us travelled. To our knowledge, there is no to produce an estimate of the average official guidance on this issue, with the commuting distance for each LAD. ONS instead defining a domestic tourist These figures were then appropriately as someone who has travelled “outside aggregated to the GOR level. of their natural environment”. Given this phrase, we felt it appropriate to quantify the threshold in terms of the distance of an average “commute” which provides a benchmark of what one might consider a “natural environment”. The decision to multiply this distance by three was, to some extent, arbitrary (multiplying this distance by two would also in our view be entirely defensible) but reflected our aim to retain a relatively conservative approach to estimation.

TABLE 2: ESTIMATED AVERAGE COMMUTING DISTANCE AND ASSOCIATED DISTANCE THRESHOLD FOR CATEGORISATION OF DOMESTIC TOURISM BY GOR

AVERAGE COMMUTING GOR DOMESTIC GOR DISTANCE TOURISM THRESHOLD (MILES) (MILES) East Midlands 12.4 37.2 East of England 13.8 41.5 London 11.5 34.5 North East 13.9 41.6 North West 11.1 33.4 Scotland 15.7 47.2 South East 12.9 38.8 South West 13.3 39.9 Wales 12.2 36.6 West Midlands 12.7 38.1 Yorkshire & the Humber 13.6 40.9 UK 11.8 35.5

28 estimating attendance • As a final step, we attempted to adjust our estimates for the fact and tourism flows that the preceding analysis formed Our method for estimating attendance estimates of the daily capacity/ varied according to the type of event attendance at the various music venue and the associated evidence base festivals despite the majority of that was available. festivals being multi-day events. In order to adjust for this, data was festival attendance collected on the length of festivals. We compiled a database of festivals Where this information was not along with information where possible available, we assumed a length of on capacity and attendance. In order to 2.94 days, equivalent to the average do so, we used the following decision length of festivals for which this rules: information was available. Multiplying • We assume that capacity information the daily attendance by the number of for larger festivals (capacity of at least days would provide an upper bound 30,000) will be more readily available for the number of unique attendees. and hence assume that all festivals However, it is clear that a significant with an unknown capacity are smaller proportion of visitors attend for the than this. entire duration (or at least a period • It also seems reasonable to assume longer than one day) of the festival. that festivals with no capacity Therefore, we assumed that 16% information are smaller on average. of festival goers were day visitors Therefore, we reduce our estimate of with the remainder attending the the number of unknown festivals that whole of the festival. This was based have capacities between 5,000-29,999 on ticketing data made available to and 1,500-4,999 by 25%. us about the breakdown of ticket sales for some of the major UK music • In addition, it is assumed those festivals. festivals for which we have no capacity data but that are thought to The lack of a single source for festivals have capacities greater than 5,000 means that gathering data for festivals have smaller average capacities with capacity below 1500 was not than festivals in our database, so feasible. The high impact of large we reduce the expected capacities festivals means that the addition of of these venues by 33%. A similar small purely music festivals is unlikely assumption is made about festivals to contribute very much on top of the with an assumed capacity of between results presented in this report. 1,500-4,999. • Our evidence base for attendance is much smaller but is applied where available. In line with the previous report, we assume that festivals with a capacity of greater than 30,000 sold out with the remainder of in-scope festivals assumed to have been attended by an audience of 90% of the venue’s capacity.

29 In total, these steps resulted in final other concert attendance estimates for total individual attendance These events were classified into four at within-scope music festivals of 5.2 separate categories: stadium concerts; million in 2019. (See table below.) park concerts; grassroots events; and concerts at other venues such as arena attendance nightclubs, theatres and academies. For In comparison to festivals, estimating each of these categories we used PRS for the attendance at arena concerts was Music data on concert royalty payments more straightforward. We extrapolated to estimate the total box office sales for the results from reports by SEC9 on concerts at these venues in 2018. Based attendance and box office receipts of on this, total attendance at these events concerts at covered venues across the was estimated using an assumed average entire UK arena population. ticket price. The assumed average price For arenas not covered in the SEC was based on the (mean) average price of report we assumed that the venues held the various event types according to the the same number of concerts, were sample of ticketing data made available on average filled to the same level of to us by ticketing agents and box offices. capacity, and charged the same average ticket price. Outliers in data provided by PRS were taken to account in this process. Based on this, we estimate total arena concert attendance in the UK of 7.5 million in 2019.

TABLE 3: ESTIMATED UK MUSIC FESTIVAL CAPACITY AND ATTENDANCE IN 2019 NUMBER OF FESTIVALS AVERAGE PER CAPACITY DAY AVERAGE ATTENDANCE PER DAY TOTAL ATTENDANCE PER DAY TOTAL INDIVIDUAL ATTENDANCE Capacity greater than 30K 27 58,333 58,333 1,574,999 2,167,546 Capacity between 5K and 128 11,179 9,983 1,277,789 2,459,385 29.9K Capacity between 1.5K 48 2,614 2,352 112,914 183,478 and 4.99K Less than 1.5K 39 695 626 24,401 26,734 Unknown Capacity 61 3,906 3,515 214,440 395,695 Imputed between 5K and 27 7,490 6,741 183,609 353,395 29.9K Imputed between 1.5K 10 1,751 1,576 16,098 26,158 and 4.99K Imputed less than 1.5K 24 695 626 14,734 16,142 Total known Capacity 242 72,821 71,294 2,990,103 4,837,142 Total within scope 240 13,946 13,164 3,165,409 5,189,962

30 estimating tourism flows Having generated estimates of total attendance at music festivals and concerts split by the various venue types, we then estimated the respective flows of foreign and domestic tourists to these events using a large sample of ticket data sourced from a variety of agents. Included in the data were details on the number of tickets purchased, the value of the transaction, the first half of the customer postcode and details on the name of the event and venue. Once this dataset had been filtered to exclude events where music was not the sole entertainment offering, we were left with just over 9.8 million ticket sales, equivalent to 29% of total estimated attendance at the various music events. Based on the available ticket sample, we developed estimates of the proportion of ticket sales that were sold to domestic tourists, foreign tourists and locals in different GORs across the five event types. For each domestic transaction, an estimate was generated for the distance travelled by the purchaser using the relevant postcode data, and then compared to the threshold values for a domestic tourist. In instances where our sample size for the specific GOR/ event type combination was less than 5% of estimated total attendance, the relevant tourism penetration flows were estimated based on the average results from other regions.

31 TABLE 4: ASSUMED VISITOR SHARES BY EVENT TYPE AND GOR

CONCERTS FESTIVALS

GOR LOCALS DOMESTIC TOURISTS FOREIGN TOURISTS LOCALS DOMESTIC TOURISTS FOREIGN TOURISTS East Midlands 67% 32% 2% 48% 50% 2% East of England 70% 28% 2% 50% 48% 2% London 62% 34% 4% 48% 50% 2% North East 70% 28% 2% 48% 50% 2% North West 65% 33% 2% 48% 50% 2% Northern Ireland 66% 32% 3% 48% 50% 2% Scotland 67% 31% 2% 48% 50% 2% South East 70% 29% 2% 48% 50% 2% South West 68% 31% 1% 49% 49% 2% Wales 64% 34% 2% 48% 50% 2% West Midlands 65% 33% 2% 49% 49% 2% Yorkshire and the Humber 66% 32% 2% 55% 43% 2% UK 65% 32% 3% 49% 49% 2%

estimating tourism estimate box office receipts at concerts across each GOR. Since royalty payments spending are set as a fixed proportion of box box office receipts office receipts (although the tariff For festivals, we applied an assumed does vary depending on the type of average ticket price to our estimate of events), this method should provide total unique attendees. The assumed an accurate means of estimating total average price was based on the sample box office revenue. Although, it would of ticketing data for festivals across be impossible to produce a “complete” different regions of the UK. estimate for this question, we are confident that the PRS for Music figures For arena concerts, we extrapolated offer the most extensive coverage of any the results from the NAA arena survey available source. These figures are net of on box office receipts across other UK- VAT and do not reflect any booking fees based arenas assuming the same average or other charges by ticket vendors. ticket price of £56.52 in 2019. (See chart below.) For the remainder of concerts (parks, stadiums, grassroots events and other venues), we used data collected by PRS for Music on royalty payments to

32 ancillary expenditure • In order to avoid double counting In general our approach to quantifying of box office revenue (which can associated ancillary expenditure involved include camping costs) we excluded applying information gathered from one quarter of the accommodation survey responses on spending habits to expenditure by foreign and domestic our estimates of the total number of tourists. foreign and domestic tourists or festivals Although it is likely that average ancillary we relied upon the AIF survey for 2019. spending at concerts will be lower These surveys divide respondents into than at festivals, it is fair to assume locals, foreign and domestic tourists that tourists will still need to spend which neatly fitted into our approach. money to travel to the venue and will Respondents are asked a variety of undertake some offsite spending on questions about total on-site and off- accommodation, food and drink etc. site expenditure during their visit to the Therefore, in line with the previous study festival. We categorised this expenditure we assumed that foreign and domestic into five items: accommodation; travel; tourists would spend the same average onsite spending; offsite spending and amount on travel and offsite spending. other. The implied spending patterns are However, reflecting the shorter duration summarised below. We then allocated of a concert, we scale these figures down this expenditure geographically using the to reflect one day’s expenditure. following decision rules, consistent with the previous report: In addition, we were allowed access to an NAA survey of individual members • It was assumed that 50% of the on onsite expenditure at concerts. Due difference between foreign and to issues of confidentiality we are not domestic tourist’s travel expenditure able to share details on the expenditure will leak abroad, with the remainder figures collected in this survey but it does located within the UK. For both mean that our results include estimates domestic and foreign tourists, we of onsite concert expenditure on assumed that 50% of domestic travel merchandise and catering. We assumed expenditure impacts locally. This that these spending levels applied across residual 50% was then split between the other concert venue types (stadiums, the GORs based on their share parks, other). regional total summed to the national estimate.

TABLE 5: EXTRAPOLATED ARENA ATTENDANCE AND BOX OFFICE RECEIPTS

UK ARENAS COVERED BY THE SEC REPORT

Aggregate Capacity 000's 238

Total Attendance 000's 7,473

Average Ticket price (£) 56.52

Total Box Office Receipts (£mns) 422

This year, the SEC report covered all arenas

33 TABLE 6: SUMMARY OF SURVEY RESPONSES ON SURVEY ANCILLARY SPENDING

AVERAGE EXPENDITURE (£) OTHER TRAVEL SAMPLE SIZE ONSITE SPEND OFFSITE SPEND ACCOMMODATION Local 208 39.23 18.72 270.01 34.45 7.09 Foreign Tourists 46 125.17 402.61 308.10 46.59 34.24 Domestic Tourists 2,029 55.37 41.65 267.54 35.65 12.22

wider foreign tourist valuing the contribution spending to gdp and employment In addition to the ancillary expenditure The next stage of our analysis was to by foreign tourists relate to their visit to transform the gross expenditure figures the music event, we have also estimated (effectively an estimate of gross output the wider trip expenditure by visitors to (GO)) into metrics of more interest the UK. In order to do so we used data including the direct contribution to from the latest International Passenger GDP and associated employment. In Surveys (IPS. Compiled by VisitBritain. order to do so, our general approach was to apply a relevant ratio of GVA to According to International Passenger S expenditure (depending on the nature of (2019) the average foreign visitor to the the spending). FTE employment figures UK spent 7.01 nights in the country on were then derived based on estimates of each visit with an average expenditure of regional productivity in that sector. £93.80 per night. We used these figures to extrapolate for foreign music tourists for the remainder of their expected stay in the UK. Therefore, for festival- goers in 2019, it was assumed that they spent an additional 4.1 nights (using the assumption that the average festival lasts 2.9 nights) in the UK spending £93.80 per night etc. This additional expenditure was then broken down sectorally based on the breakdown of tourist expenditure by region classified in the 2011 UK Tourism Satellite Account (TSA) developed by the ONS. This breakdown is summarised in the table below

34 gva of productivity by sector and region. Ratios of sectoral GVA to GO were These were derived based on data sourced from the Annual Business and forecasts from Oxford Economics’ Survey (ABS) produced by the ONS. The regional forecasting model which covers latest available publication relates to GVA and employment across a range of calendar year 2017, so the results from sectors. Since data was not available to this were assumed to hold in 2018. The the same level of disaggregation as the table below documents the ratios that ABS, wider sectors had to be used to were applied for various categories of cover expenditure categories (e.g. rather expenditure including the relevant SIC than passenger transport, transport codes that were used. and storage was used as the relevant sector). In order to adjust for part-time The ratios reported below were used employment, we used data from the for the various categories of ancillary Business Register Employment Survey expenditure identified during the (BRES) by the ONS. This documents analysis. Due to issues of confidentiality, the number of full-time and part-time we cannot provide details on the employees working across different breakdown but the data indicated that sectors of the economy. A scaling factor the ratio of GVA to GO for box office was then developed assuming that a receipts was around 0.595. part-time employee on average works for half the number of hours per week fte employment as his full-time equivalent. Productivity The resulting estimates of direct GVA estimates are summarised overleaf. were used to quantify associated FTE employment using relevant estimates

TABLE 7: FTE JOBS PER £MILLION OF GVA BY REGION AND SECTOR

GOR ACCOMMODATION ACCOMMODATION SERVICES & FOOD ARTS, & ENTERTAINMENT RECREATION TRANSPORT & STORAGE WHOLESALE & TRADE RETAIL WHOLE ECONOMY Scotland 30.3 30.1 18.4 19.7 15.7 Northern Ireland 34.7 27.7 19.0 16.9 17.0 Wales 34.4 36.5 23.0 23.2 18.0 North East 33.8 23.4 23.4 22.9 17.6 North West 32.8 21.0 23.3 20.7 16.6 East Midlands 36.0 27.7 22.8 19.5 17.4 West Midlands 27.0 18.0 24.0 19.9 16.9 Yorkshire & the Humber 32.4 31.8 21.4 19.1 16.2 East of England 30.2 24.4 21.7 18.0 15.7 South East 30.9 22.6 17.5 15.9 14.0 London 26.7 14.5 12.9 15.1 10.9 South West 34.1 43.4 23.1 20.6 16.8

35 TABLE 8: TURNOVER AND GVA BY SECTOR

SECTORS SIC TURNOVER GVA RATIO 49.1; 49.3; Passenger Transport 50.1; 50.3; 58,652 25,739 0.44 51.1 Food and beverage service activities 56 71,544 36,431 0.51 Accommodation 55 26,460 16,035 0.61 Retail trade, except of motor vehicles 47 408,023 90,031 0.22 and motorcycles UK Business Economy 3,843,648 1,259,934 0.33

quantifying the indirect Because the ONS does not disaggregate “input output” tables at the regional impact level, we used a process from the In order to quantify the indirect impact academic economic literature to across the various regions of the UK estimate a table for each GOR. This set we used a “input output” model of the of interdependent regional models UK economy. The model traces the were then linked together to reflect the major spending flows from consumer fact that some regional “leakage” arises and government spending, business because of demand created in other investment and exports to the rest of the parts of the UK. So, for example, an world and what each economic sector isolated regional model would only pick buys from every other sector. It also up demand created for Scottish suppliers estimates how much of that spending by live music tourism activity in Scotland stays within the economy, rather than and would exclude demand created for “leaking” out through imports, and Scottish suppliers by live music tourism the distribution of income between activity in other parts of the UK. employees and businesses. In essence, an “input output” model is a model that It was then possible, using our “input shows who buys what from whom in the output” model, to estimate the indirect economy. economic contribution of live music tourism activity at the regional level across the UK.

36 A company of sector employs DIRECT lots of staff. Its operations IMPACT generate GPD and tax for the authorities.

It also spends money with suppliers INDIRECT who employs staff, generate GPD IMPACT and pay taxes. They use other supplies in turn.

Added together, these two effect TOTAL - direct and indirect - compromise IMPACT the total economic impact of the company or sector.

37 5acknowledgments.

Throughout this project we have received support from all parts of the music industry with this research. Without their collaboration and enthusiasm this report would not be possible. Each member of UK Music has granted us access to their data and permission to survey their own membership directly. In addition, accountants of some of the UK’s leading music acts have provided unprecedented insight into their clients’ earning structures. We would also like to thank the recording studios community for supporting the surveys and provided data into the workings of their businesses. We are grateful for the information from the Entertainment Retail Association (ERA) and the Music Industries Associations data and analysis of the music instrument retail market. We are pleased to continue working with the Intellectual Property Office (IPO), The Department for Digital, Culture, Media and Sport (DCMS) and the Office for National Statistics (ONS) on this project. We are especially grateful to the ONS for allowing us access to the Virtual Microdata Lab (VWL) which has enabled us to apply a bespoke methodology for the calculation of the music industry’s GVA. The project is managed by Andy Edwards, Director of Research and Analysis at UK Music.

UK MUSIC MEMBERS LIVE MUSIC GROUP • AIM (Association of Independent • Association for Electronic Music Music) (AFEM), • Association of Independent • BPI Festivals (AIF) • FAC (Featured ArtistsCoalition) • Concert Promoters Association • Ivors Academy (CPA) • Music Managers Forum (MMF) • Agents Association (TEAA) • British Association of Concert • Music Producers Guild (MPG) Halls (BACH), • Music Publishers • International Live Music Association(MPA) Conference (ILMC) • Musicians Union (MU) • National Arenas Association • PPL (NAA) • Production Services Association • PRS for Music (PSA) • Music Venues Trust (MVT)