Never mind the revenues, profit is the real key to the music biz revival

BPI

Another week, another set of figures for the music business. Last week, they came from the BPI, showing that UK recorded music revenues were up 3.1% in 2018, and have risen by a not-too-shabby 21.8% since 2015.

Now true, the rate of annual growth is slowing, an inevitable consequence of the shift from higher-cost physical products to streaming. Plus the figures still lag behind the growth in music consumption (5.7% last year, blah blah value gap etc) and still leaves the industry total of £865.5 million well below its 2001 peak of £1.2 billion.

But, there’s a reason why ‘revenue is vanity, profit is sanity’ is an industry maxim. Because what no industry-wide stats will ever show you is the transformation in how record companies conduct their business since those days. And a quick glance at Music Week's reporting of recent figures from the three major labels, Universal Music, Sony Music and Warner Music, will show you that, financially, they're all doing very nicely right now, thank you.

Streaming has changed many things for the music industry, not all of them for the better. But it has turned the majority of music business earnings into a low-overhead concern. With no physical products to manufacture or distribute, the big catalogues can tick over very nicely without major investment.

Furthermore, while we’re seeing the return of the made-up-sounding job title to the biz as labels staff up, most record companies are still run on the lean-and-mean model established during the years of decline.

Even in the eternally hit-and-miss world of A&R, the risk has been reduced, with artists doing more groundwork themselves before they sign, data informing decisions and labels taking fewer expensive punts (although deal prices are on the up again).

But while the majors may well be more profitable than they were even at the biz’s peak, what they haven’t quite worked out is what to do with that money. Should they bet big on A&R to try and solve the breaking artist crisis, or double down on pushing those low maintenance catalogue streams? Should they widen their remit and invest in other businesses, or stick to what they know best?

What they almost certainly won’t do, unlike in the boom years, is blow it all on a big party. But even so, however you slice the figures, these are the good times. Let’s try and enjoy them.

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