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