In an Age of Piracy, The Music Industry is Thriving

Written by Herra Honkonen on Tuesday, July 28th, 2009

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If you follow the news about music industry, by now you must already KNOW that the pirates are killing music. Surprise surprise, while the industry is suing single moms for millions, they are also making more money out of paying customers.

You don’t have to believe us, you can ask Will Page, who claims that the revenues of the music industry in UK went up by 4,7% in 2007-2008 in spite of the recession and increase in p2p downloads. Who is this guy? Another copyright activist who tries to justify his piracy by babbling about online distribution, long tail and such crap? Not quite. Will Page is the Chief Economist of PRS for Music, which is a royalty collecting group for music writers, composers and publishers in UK. His study titled “Adding up the Music Industry for 2008” reveals that the music industry is diversifying and the consumers use a variety of different platforms to enjoy their music.

All in all the retail sales of music fell by six percent, which the report states is “actually quite an achievement, given the harsh economic conditions and turbulent events on the high street towards the year end”. The sales of physical records fell by 10%, but at the same time digital distribution was up by 50% and the sale of concert tickets by 13%. The net gain for the music industry over this was three percent. Additionally the industry saw dramatic growth in licensing, advertising and sponsorship deals.

The news article in Zeropaid made a nice summary of a key trend revealed by the report:

This report highlights the importance of diversification, or finding new places and new ways to generate revenues. By understanding the ecosystem, it enables more cooperation to grow the market going forward.

According to Zeropaid in the US investors have started to shy away from new innovations in digital distribution of music, because the biggest obstacle is getting the record labels to cooperate. At the same time the labels are whining about the declining sales, they seem to make it as difficult as possible to develop and adopt new revenue models. They seem to be either completely out of touch with what the modern consumers want, or somehow wilfully opposed to renewing their model just on principle. A good example of the former is Finnish Johanna Kustannus, which is a label for many well known major Finnish artists. In the beginning of the year they pulled most of their catalog out of Spotify, and what was the reason:

“We are a bit unsure about what Spotify is, so we wanted to pull our artists out of there.” -CEO Sini Perho (Kaleva)

Yes, because that information is so incredibly difficult to dig out…

So, what is the bottom line of this (and many other) surveys? It’s what us filthy pirates who want the artists to starve have been saying for some time: P2P is the new radio. People use to get to know new artists, then go to their gigs and buy both merchandise and their albums – the latter not necessarily as traditional CDs, but as downloads or song packs for music games, and so on. The same applies to YouTube with its numerous fan videos, which is in excellent way to get free publicity.

Make no mistake; the live music industry grew in 2008. More events, more bands, more tickets and importantly, higher ticket prices. Breaking it down to basic supply and demand economics, and given the scarcity embedded in its model, the live music industry is somewhere you really want to be right now. However, the distribution of wealth in live music represents a trend that economists at PRS for Music have also established in digital music – a perverse and paradoxical effect of the ‘long tail’. – Adding up the music industry for 2008

Music is doing just fine and so is the music industry – as long as the latter has the common goddamn sense to adapt to the times.

And how might that table look by the end of 2009? Factors outside the industry’s control will have a major say, especially as the effects of a ‘deleveraging’ economic downturn work through the system. Jeremy Fabinyi, Acting CEO of PRS for Music, has talked about ‘tough times ahead’, and advertising revenues are reportedly down double digits in many B2B sectors such as commercial television. That said, the intrinsic value of music itself may be playing a role in helping the industry weather the storm, as all major summer festivals have sold out and recorded music sales have shown some impressive resilience given the conditions. In terms of putting your money where your mouth (or mouse) is, two trends are worth a punt for 2009 though: firstly, B2B’s share of the overall pie will grow, and secondly that the wealth gap between hits (often heritage acts) and niches will widen. Ultimately what this all means is that portfolio theory matters more now than ever before or as Jeremy Fabinyi would argue, finding new places and new ways to collect royalties has never been so important. – Adding up the music industry for 2008

5 Responses to “In an Age of Piracy, The Music Industry is Thriving”

  1. A bit short-sighted. If p2p is the new radio, I look forward to getting some performance rights. That’s not going to happen though, is it?

    I can’t talk for the industry, being just a small cog. But I can’t get excited by p2p for a number of reasons. One of them being that it takes things right out of my hands. I currently recommend musicians to provide giveaways as samples. But why would I get excited by letting someone else do that, as they get the traffic and advertising revenue and also get to know where the music is going? So I end up paying someone to find out who’s interested? Um.

    Adapting to the times means recognising that sales of recorded music will continue to shrink. Why, then, give licences to services that don’t want to pay for streaming or pay just a tiny fraction of radio? Are they the new radio or not? It doesn’t make sense to me. It would be interesting to hear how a label using Spotify sees this one paying off somewhere along the line – Last.fm is not exactly a money-spinner.

    Ultimately, as I don’t run a label I’m not the best person to talk about these things. But I can’t help asking the questions.

    Concerning the UK figures, the fact that someone is making a fortune selling Celine Dion tickets does not necessarily help the record industry. He’s not going to pass out Christmas bonuses to all the labels and publishers in the UK because they are supposed to be part of the same industry, is he? The Stones sell out every tour but hardly dent the charts with the new recordings. Weird, but true.

  2. PS: I’ve just been listening to your music. I used to hang out with Front 242 years ago.

  3. Ok, a clarification is in order. The entry is not meant to be a song for the glory for P2P, but yet another rebuke for the industry claims that p2p is OMG KILLING MUSIC and every downloaded album is one less album bought, etc etc.

    When I say that P2P is the new radio, I mean it from the point of view of the consumers. For people it’s a way to listen to music for free and get to know new artists. An important point: this doesn’t mean that having P2P fill this role is desirable at all. The current situation is not ideal, not by far. What it does tell me is that there is a certain demand that is not being met by the legitimate sources – and as always in every field, such demands are being met with illegal means.

    Obviously the artist should have quite a say on how his music is being distributed, but unfortunately that situation is nowadays quite a mess. The stubborness of the record industry and their reluctance to adapt to the times has created a generation of music consumers, for whom P2P networks are the norm for getting music: without crippling DRM, without delay and for free.

    Currently the only legal service out there that is even close to that is Spotify. User can get the access to the music he likes without hassle and there is at least SOME revenue via subscription fees and advertising, unlike with piracy, where it’s nil. In fact it’s easier than pirating music. Now then, I’m not saying Spotify, last.fm and similar as they are now are the gift from heaven, but they are a good start in starting to fix a situation that’s gone completely fubar.

    Another sad fact is that now that copying and distributing music is trivial for everybody with a computer, an artist or a label can’t keep such tight reins on the material as earlier. It just won’t work in a situation, where there is no practical monopoly for creating copies and thus maintaining artificial scarcity of the product. Unfortunately right now it looks like the only chance is to jump on the streaming service etc bandwagon and get at least SOME revenue from people checking out your music, instead of piracy where the direct revenue is nil. The indirect… Well, after I started downloading music in the end of the 90′s, my consumption of legal music grew tenfold – literally. I probably wouldn’t listen to ambient as a genre at all without P2P. Where the hell do you just happen to hear stuff like that? Yeah, there was one radio program in here, which was on air after midnight…

    The control over every album copy and every second of airplay is lost and realistically it can not be regained. The only way to fix this is to make legal options as easy as pirating and to find new ways to make money out of music.

  4. Hi again. Personally, I think we should licence YouTube and perhaps even Google itself. So they can play music as much as they want for a flat fee.

    However, I still recommend artists to try and control the freebies out there by directing people to the artists sites (by embedding the URL in videos, for example). So the relationship has to be complementary, working alongside each other.

  5. Hear hear on the YouTube thing. The silliest bad will generator right now is taking down peoples’ amateur videos because of the background music.

    The idea of having to attribute the music is actually very good. YouTube is pretty efficient in taking down copyrighted music right now, so it shouldn’t be that hard to add a link to the artist’s site instead. A small banner with “The music in this video is from X, check out the new album” with a link to the artist’s site would be great promotion – instead of “Your skate video / mom’s birthday video taken down by the request of a corporate dick.” ;)

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