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Record labels defy recession to invest £2.8bn in new music

Tom Pakinkis
IFPI

Record companies invested $4.5 billion (approx £2.8bn) in A&R and marketing during 2011, despite the global economic downturn. 

The figure, which represented 26% of all industry revenues, comes in a new IFPI report on the changing economic of the music business.

The investigation concludes that revenue invested solely into A&R in 2011 stood at $2.7 billion, only marginally down on 2008 (US$2.8 billion), despite an overall decline of 16% in the trade value of the industry globally over the same period. 

Revenues invested in A&R have increased from 15% to 16% of industry turnover between 2008 and 2011.

A&R spend has been maintained by labels, despite decline in overall revenue over recent years, with the IFPI concluding that record companies therefore remain the primary investors in artists. 

The report also enforced the relevance of the record deal, with two new surveys taken in the UK and Germany this year showing that 70% of unsigned acts still aspiring to sign such a deal. Marketing lead the perceived benefits of record company support.

The industry’s marketing spend, however, is estimated to have declined from $2,4bn in 2008 to $1.7bn in 2011. The fall is attributed to more focused promotional campaigns, the use of new digital media channels and the impact of piracy, which has squeezed budgets.

The report also says that the live sector has not replaced recorded music as the driver of the industry and that the costs of breaking an artist remain substantial at up to $1.4 million. 

Meanwhile, domestic repertoire accounts for the majority of the Top 100 physical format album sales in all the industry’s major markets: USA (62%), Japan (77%), Germany (55%), UK (53%) and France (54%). 

Industry executives believe the industry will widen its revenue base in the future, expanding beyond the 10 countries where it currently makes 80 per cent of its revenues into new markets such as Brazil, China, India and Russia.

The report comes in association with WIN, which represents independent labels internationally.

Investing in Music highlights a simple truth – that behind the highly visible world of artists who touch people’s lives there is a less visible industry of enormous diversity, creativity and economic value,” said IFPI CEO Frances Moore. 

“This report shows the role record companies, major and independent, play around the world in discovering, nurturing and promoting artistic talent.” 

Alison Wenham, chair of WIN, added: “Today, the relationship between the artists performing music and the investors supporting them has subtly changed and is continuing to evolve.

“The traditional model of significant advances and marketing support from larger record companies to artists remains widely in place, but there is now a greater emphasis on partnership, shared skills and shared revenues.”

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Tags: Labels, IFPI, marketing, A&R, report

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