The last few weeks have seen the music industry – and, indeed, the entire planet – plunged into turmoil. And with the UK on lockdown due to the Covid-19 pandemic, the future looks extremely challenging for many sectors, especially physical retail.
The remarkable speed of the change is thrown into stark relief by the Q1 figures from the BPI and the Official Charts Company, as exclusively revealed in this week’s issue of Music Week, available physically and digitally now.
They give a pre-coronavirus snapshot of a business in rude health, with overall consumption up 7.7%, only slightly down on Q1 2019’s 8.2% rise. Within that, streaming rose 21.2%, although there was another big drop in physical album sales, down 24.2% year-on-year.
The real question, however, is what the Q2 figures might look like, with Britain still on lockdown for the foreseeable future. So Music Week spoke to Geoff Taylor, chief executive of the BPI and BRIT Awards, about the old normal – and what the future might hold…
Obviously, it seems less relevant now, but what’s your view of the Q1 market?
“It’s healthy. We’ve still got streaming growing by more than 20% and that’s driving forward the market as a whole. It’s defied a lot of predictions, there have been quite a lot of doom-mongers saying for quite a while that we’re hitting the ceiling, and we’re not. There’s still plenty of demand, and there are new consumers coming into the streaming market. Amazon Music has done really well in broadening the base of people using music streaming and that’s encouraging. We’re seeing more older consumers coming into the market, which is also good. Those figures are pretty robust and given that there was a small impact from Covid-19 [in the last two weeks of the quarter], that’s a pretty good result for Q1. For Q2, we hope the streaming numbers will stay relatively robust but obviously we’d expect physical to be down.”
Physical had another significant decline in Q1 and now most record shops are closed, presumably it’s going to be a very tough Q2 for the sector?
“These are exceptional circumstances. All the stores being shut means we’re going to see much bigger drops than we’ve been used to seeing in physical. Vinyl has been a star performer for 10 years and it’s a shame if that gets hit. There is a lot of loyalty in the vinyl segment from fans, so I think they’ll come back, but we have to try and keep the stores open. If this situation is prolonged, any business is going to suffer but High Street retail is obviously under more immediate pressure and threat than anybody else. It’s great that the government announced various measures that help the retailers, the business rates holiday and the business interruption loan scheme will both be very helpful. But clearly it is a sector which already is contracting, so we think there’s a case for government to do more. Specifically we are writing to the Chancellor to request a temporary suspension of VAT on CDs. We believe that that could help both to release demand for physical product when the stores reopen, by allowing it to be less expensive, but also to allow sufficient margin for the retail sector to get back on its feet. In addition for what’s been announced for High Street retail by government, which is greatly appreciated, we think that there’s a conversation to be had with the Treasury about a specific measure of that nature that could help it to bounce back. Music is a cultural product in any event, like books, so we think there’s a strong argument for it.”
How about streaming during the crisis?
“In streaming terms, we will cope fine. So far, we’ve seen no great rise in premium audio streaming but we have seen a bit of an uptick in ad-funded. There are more people at home, some of whom don’t have music subscriptions and are starting to spend a bit more time streaming ad-supported music, but that’s only going to deliver limited value. Firstly, because of the value gap and the fact that ad-funded tiers typically don’t deliver a huge amount of revenue but, secondly, it’s because we may see that the online advertising market takes a bit of a hit and there may be less ad inventory to go round over this period. The volume of streams themselves don’t necessarily relate to revenue, but clearly in the longer term [streaming] will be affected by the economy just like everybody else. We’ve got to worry about discretionary spending. It’s pretty tough out there for labels, as well as all the other parts of the sector. There are a lot of things to worry about but, for a lot of the recorded music business, we are streaming-led, a digital business and digital supply chain, so we’re better placed to cope with it than some. It’s hard to see [Q2’s figures] being good news, but streaming will be pretty resilient overall. It’s more the value that we will lose from the physical market that’s my concern.”
What else can the BPI do to help the situation?
“A lot of people are talking about the need for us all to work together through this crisis. I firmly agree with that. The BPI is working hard to look at how it can support other parts of the sector. If we do that, this is a relatively short-term period without massive long-term structural effects on the sector. That must be our goal. We’re looking very hard at the recovery phase and we’re talking to government about how necessary it will be to be innovative to rebuild the economy and insure that music bounces back strongly. We’ve got plenty of ideas on how government can help with that and it needs to be a partnership. Presently, we’re really pleased to say that the DCMS is putting a huge amount of effort into working with us and planning, not only for the short term, but for the longer term. That gives me hope for the future.”
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