State of Play: An Economist's Overview of the Music Industry

Will Page is an influential music industry economist. As head of economics for the UK's PRS for Music collection agency, he's principally concerned with representing and researching on behalf of UK artists. At the start of a new decade, he gives his take on the forces at play.

Feature by Will Page | 01 Jan 2010

The economic sketch

We at PRS for Music estimate the total value of the UK music industry in 2008 to be £3.6bn (it takes half a year to break down the numbers). This is calculated by analysing sales figures, royalty revenue collections, the live sector and also for the first time the advertising and sponsorship aspect of the music industry. At the top level revenues were up 4.7% on 2007 with a lot of the growth coming from the live sector (13% up) and royalty collections (from PRS for Music and PPL), up around 10%.

This is all good news, but it is worth noting that the growth in the live sector is largely down to the heritage acts getting back on tour and filling those large stadiums and arenas. Recorded music which includes CDs and music DVDs continued to see a drop as people shift away from buying this format and illegal P2P services continue to eat into revenues and also undermine investment in new talent.

What will be different for musicians in the 2010s as opposed to the 2000s?

I think the bottom line is this: there will be more options and more experimentation in the 2010s, which means the end of the short sighted generalisations that have plagued the debate about the music industry ever since digital got started. It also means more chance to learn from other people’s experiments, which reduces risk, and has a nice self-reinforcing property. Genuine innovation will pay, but assuming one band’s innovative idea can be replicated across a whole industry won't work.

What distinguishes the UK's place in the international music market?

The UK still has a burgeoning music scene and is one of the few net exporters of music in the world (the others being the USA and Sweden). What is heartening for those starting out is that the legal digital market in the UK is strong, and it is growing. What’s really fascinating is that the UK has sustained a relatively healthy physical market, whilst growing a significant digital market as well. In America, there is a different story, where they have given up physical ‘dollars’ for digital ‘dimes’. Our physical revenues per capita are almost twice that of America, and our digital market is not far behind. So, when Americans boast about one-in-five albums purchased were digital, that stat tells you more about the state of the physical market than it does digital.

And Scotland?

Given how London-centric the UK music industry is, Scotland’s geographic position presents some challenges as well as opportunities. I always like to draw on the Canadian example of how the government invests in the arts – if you’re a talented Canadian musician, they’ll do everything they can to keep you in Canada. However, if you’re a talented Canadian filmmaker, they’ll do everything they can to get you to Hollywood. That’s a puzzling challenge – for Scottish musicians and industry professionals, where’s the best place to locate yourself – Scotland or London? [Scotland! - ed.]

The opportunities are chiefly through branding. Ronnie Gurr has done an incredible amount of work on international showcases, where bands go abroad to perform to industry executives under a Scottish banner, which might make them stand out from an increasingly large crowd. Similarly, there is a slipstream effect as bands who have made it, like Franz Ferdinand, have ploughed a lot of their success back into the local scene to help develop new acts. Glasgow continuously punches above its weight in terms of new bands – I’ve heard several A&R execs in America state that it’s the only ‘other’ city they visit when they’re in Europe – that tells you a lot! Finally, close-knit community makes it easy to start events that bring professionals and musicians to Scotland.

If you’re in Scotland a good place to start would be to check out Scottish music scene social ‘Born to be Wide’ at Edinburgh's Voodoo Rooms, which hosts regular seminars featuring key players from the industry.

What should artists be looking to do to build their careers in the next decade?

The best way to build a career in the next decade is the same as it was in the last – be good, and work hard.

Looking forwards

Trying to work out what 2010 has in store is no easy task, but one thing’s for sure -  the music industry will continue to enter even deeper uncharted waters, with many surprises in the process. For evidence, both VEVO and MySpace Music are already launching, and will have a huge impact on the future direction of the industry.

For rights holders, the biggest challenge will be the re-emergence of the ‘lockers’ debate, where entire catalogues are stored in the computing ‘cloud’. This might allow users to stream from sites like Spotify on aeroplanes or underground. For me, this is akin to taking digital music online 'off line', and raises big questions about what is 'it' we’re actually licensing - a performance or a reproduction.

For bands and fans, I feel that 2010 will offer more choice than ever before, but also more apps for discovering and sharing that choice. My big prediction is that will become THE buzz site for 2010. Why? Because it is so well placed to scale, and it's creating a network where the money is really at - live music. Songkick trawls your iTunes catalogue to work out your music tastes, uses your geographic data to inform you of gigs in your area, and provides credible recomendations from fans whilst also sourcing and selling you tickets. End result: more people are going to live gigs, and more of those people have great experiences at those gigs - it's growing a market, even further! Whilst the song will remain the same in 2010, the new year will be when applications really come of age.

A case study of what can be done: Hey Negrita

Hey Negrita are one of the most impressive bands I’ve come across in 2009, in terms of both music and business. On music, they perform a blend of Americana rock, country and bluegrass. The band has genuine musicianship – Matt Ord is one of the finest guitarists you’ll see today. On business, they have no publisher, no record company and no manager – it’s a one man show with singer songwriter Felix Bechtolsheimer taking care of all the business. He’s done well too – he self financed their latest album for £10,500 with only £500 spent on recording costs and £10,000 spent on marketing – in many other cases it’s the other way around. Think about that – marketing makes you money, recording loses you money: there’s a resource allocation lesson to learn there.

Secondly, and thanks to the PRS Foundation, he took the band to SXSW and then made an award-winning documentary about the experiences of several UK Americana bands that have done better in America than over here. Titled We Dreamed America it helped launch the careers of Kitty, Daisy & Lewis, who got the Coldplay US support slot thanks to the video and no thanks to their booking agent (they didn't have one!).

But above all else, Hey Negrita realise that there is value in the collective – having a collection of bands based in the UK who are all performing this very interesting slant on Americana music. Even the Financial Times dedicated half a page to Hey Negrita and their new approach to music. Felix was quoted as saying 'whenever I meet promoters and agents, they always receive CDs and press packs of other bands'. The touring, documentary making and press strategy is geared towards the common good of the collective, not the self interest of one band. It’s back to basics and common sense, but it also works – and that’s important.