Music Industry Insights with Chris Cook

Introduction
I'm Chris Cook, the MD and business editor of Complete Music Update. We provide services to the music industry, best known for our news and information services. We have a daily bulletin called the CMU Daily, which is free, so everyone watching should sign up!

The State of Recorded Music

It's certainly true to say that recorded music is bringing in less money than it did in the 1990s, the heyday of the CD. Depending on how you do the math, recorded music worldwide brings in probably about half of what it did in the 1990s, possibly up to two-thirds in terms of revenue.

Recorded Music Revenue Trends

• Historical Decline (2000-2010):

  • Recorded music revenues went down every year.
  • Major issues included:
    • Online piracy.
    • Supermarkets forcing profit margins down.
    • The proliferation of music TV reducing the incentive to pay for music.

• Current Status (2010-Present):

  • Worldwide revenues have been more or less flat.
  • CD sales continue to decline.
  • Vinyl is up, though still a small part of the market.
  • Downloads are significantly declining.
  • Growth Areas:
    • Streaming, particularly subscription services, rather than free services.

Revenue vs. Profit

• We're discussing revenue, not profit.
  • For record companies, revenues may be flat, but digital is more profitable than physical.
  • There are still significant costs associated with recording, distributing, and marketing new albums.
  • However, distribution through streaming platforms is cheaper than selling CDs in shops.

Beyond Recorded Music

We are only talking about the recorded music sector. The music industry is much broader, encompassing:

• Copyright in Songs:
  • Publishing income linked to recordings and other sources.
• Live Music:
  • Experienced growth during the decade of recorded music decline.
• Merchandise and Brand Partnerships:
  • Diversifying income sources for artists.

Opportunities for Artists

As an artist, it remains incredibly challenging to achieve commercial success, particularly for new artists. You are likely to make less from recordings than successful artists did 20 years ago. However, other revenue streams are on the rise, providing ample opportunities.

Evolving Record Deals

The main challenge for the music industry isn't just the decline in recorded music revenues over the last 15 years.

• The Shift:

  • Record labels traditionally invested entirely in one revenue stream.
  • Now, they often seek a cut of other revenue streams such as merchandise or brand partnerships.

• 360-Degree Deals:

  • Many of these deals are traditional record deals with additional clauses for merch and other revenue sources.

• Future Opportunities:

  • Labels could reinvent the way they collaborate with artists and managers.
  • A focus on direct-to-fan strategies could create a sustainable business model.
  • Evolution is at the beginning stage, and innovative management-led initiatives are likely to emerge.

The Future of Music Consumption

• Streaming Growth:

  • Streaming is expected to continue growing.

• Messaging Apps:

  • There is a potential trend toward consuming content through messaging apps, with Asian markets leading the way.
  • Artists face new challenges in building fan bases on platforms like WhatsApp.

• Virtual Reality:

  • While often met with skepticism, there are indications it may find its footing in the market.
  • CMU is observing developments in this space with cautious interest.

Conclusion

In summary, while the recorded music industry faces challenges and declines in certain areas, there are still opportunities for artists willing to innovate and adapt. The evolution of industry dynamics, consumption platforms, and revenue streams provides a landscape ripe for exploration and growth. I remain optimistic about the future of direct-to-fan relationships and the ongoing evolution of label deals.