UK Music Biz Kept Growing Before The Digital Economy Act; So Why Was It Needed?

from the does-that-make-the-IFPI-sad? dept

Last year, we were one of the only ones to report on Will Page and Chris Carey’s analysis of the UK music market, which showed (contrary to all the whining and complaining out there) that the music industry was actually growing, if you stopped focusing in on just recorded music, and looked at the overall industry. This was a point we’d been making for years, and it was great to see some economists — especially economists who work for the industry make that point. This year, they’ve updated the report and it’s getting a lot more attention, because it continues to show that the music industry (in the UK, at least) continues to rise — including highlighting that even recorded music sales are doing okay. Note, of course, that this is looking at 2009, so the Digital Economy Act has nothing to do with this.

The report notes that live music continues to grow nicely, suggesting again that for all the doom and gloom of “file sharing” out there, it may have driven more people to live shows. Of course, this year there has been a lot of concern about the live industry, as some of the bigger festivals and arena tours have had some trouble, but a lot of indications are that this may be more of a problem of how some of these big tours were set up and organized. Smaller shows appear to be doing well. Page and Carey also note that they’ve improved their methodology for measuring live revenue, going beyond just ticket sales, since they point out, quite importantly, that some bands play for a cut of the bar tab or through other forms of revenue. They also note the reports of 2010 decline, but warn not to read too much into it, as there is plenty of innovation happening in the market. They point out that while the “growth” of live may be slower, it’s still growing.

That said, it is impossible to ignore the innovation taking place in this space, be it ongoing renovations and improvements in venues, better production facilities and food & beverage offerings, VIP suites and upgrade packages, sophisticated data management, or the close forging of fan relationships, all of which combine to increase the concert going population and hence demand.

In addition, we also need to appreciate the positive impact of services like Songkick which are akin to Facebook for live music fans with the end result being more awareness, more recommendations, and consequently more fans going to more shows. The Songkick business model looks to improve on a very simple observation from Sean Moriarty, former CEO of Ticketmaster, who said: “Nearly 35% of [ticket] inventory goes unsold and if you ask fans why they didn’t go to shows, one of the more popular reasons is ‘I didn’t know about it’.”

Hence, a balanced view for the outlook of this sector is to accept that live music revenues may well be moving onto a lower growth trajectory than during the boom years — but please acknowledge that (i) it’s still growth and (ii) that the sector is innovating in ways that are arguably just as impressive as those in the digital music sector.

On top of that, it’s nice to see them spend some time specifically discussing the ad and sponsor revenue in the music business. This is a large part of the business that gets widely ignored by many. But it really is yet another case of selling the scarcity — in this case, attention.

The report does spend some time noting that there are some significant differences in the US and UK markets, so it probably doesn’t make sense to directly extrapolate out the results. However, this certainly does call into serious question the reasoning of BPI and others for the Digital Economy Act. What it shows, quite clearly, is that the industry was doing a very good job adapting on its own. It even makes you wonder if the BPI/IFPI/RIAA lobbyists are actually upset about this report, which sort of takes away the entire crux of their “help us politicians, you’re our only hope” claim.

One final point on all of this: the last page of the report is given over to (soon to be knighted) Feargal Sharkey who has long led the “something must be done about the pirates!” charge in the UK, and has supported three strikes legislation. I find two things about his input interesting. First, there’s no more talk about evil pirates and how something must be done. Now the story has flipped, so that it’s “see how great the music business is… if the government helped us even more, we could help lead the UK economy out of its doldrums.” It’s as if we were always at war with Eurasia. Secondly, Sharkey notes that with the rise in live music, the government can help by “lifting the bureaucratic licensing restrictions that are stifling music performances in smaller venues.” Now, I don’t disagree. Lifting such licensing restrictions would certainly be a big help… but it’s a bit surprising to see this in a PRS report, as it could just as easily be pointed out that “lifting the bureaucratic PRS fees that are stifling music performances in small venues.”

Either way, we’ve already promised another interview with Will Page, author of this report, (you can see our last interview with him here) and we’re still planning to do that, where we’ll spend some time discussing this report as well. If anyone has specific questions you’d like us to discuss with Will, let me know.

Filed Under: economics, growth, music industry, uk