2. International Music Markets

3. DCMS Creative Industries Report

4. Strong intellectual component earnings from royalties and rights Factors needed for success (DCMS) Education for creative and business skills intellectual property rights protected against piracy removing trade barriers private and public investment –role of state subsidies in export success eg Les Miserables

5. The Music Industry Market Attractiveness Size UK revenues £4.6bn pa inc £1.3bn export earnings UK has 7.6% of world retail sales - 3rd after US & Japan biggest growth in E Europe, L America, Asia Growth 10% p a 1987-1996 but now stagnant since (RIA site)RIA site)

6. Demand Factors In 1998 UK made 22% of top 100 European hit singles and of 31% of hit albums. (US had 21% and 28%) Performance in the US market has been relatively poor recently due to the strength of local musical product eg country music or rap-influenced metal. James Blunt! Increased success of domestic repetoire in many markets Average 66% sales are home-produced artists CDs now 92% of all sales Global digital music sales triple to US$1.1 billion in 2005 as new market takes shape IFPI websiteGlobal digital music sales triple to US$1.1 billion in 2005 as new market takes shape

7. THE SUPPLY CHAIN STRUCTURE OF THE RECORDING INDUSTRY 1

8. THE SUPPLY CHAIN STRUCTURE OF THE RECORDING INDUSTRY 2

9. Competitive forces (‘Porter’s 5’) Domination of 4 majors Supermarkets mail-order I Tunes Piracy Parallel imports Downloads P2P sharing High cost/risk of developing new talent

10. Major Players Sony/BMG merger Universal Music Group tie up with Disney Buena Venture Warner EMI All seeking to rationalise in stagnant, declining market

11. EMI is the world’s largest independent music company, operating directly in 50 countries and with licensees in a further 20 and employing over 6,600 people. Revenues in 2004 were nearly £2 billion, generating operating profit of over £225 million. Strategy: deliver music to consumers in any form, at any time and in any place. 2005 digital revenues just under five per cent of EMI Group’s total revenues, with that figure expected to reach 25 per cent in five years. EMI Music represents more than 1,000 recording artists worldwide, The Beatles, the Rolling Stones, Pink Floyd and Mstislav Rostropovich; global superstars like Norah Jones, Robbie Williams, Gorillaz and Coldplay; Joss Stone, Keith Urban and Yellowcard; plus some of the world’s finest classical artists including Nigel Kennedy, Simon Rattle, Itzhak Perlman and Angela Gheorghiu. EMI Music’s record labels include Angel, Astralwerks, Blue Note, Capitol, Capitol Nashville, EMI, EMI Classics, EMI CMG, EMI Televisa Music, Mute, Narada, Parlophone and Virgin. With around 6,000 employees worldwide, EMI Music’s turnover last year was over £1.6 billion, earning profits of £125 million. With offices all around the world, EMI Music Publishing has about 630 staff and last financial year generated around £400 million in turnover and profits of about £100 million. last financial year

12. Factors needed for success Investment in A&R (13% of revenue) –major pop album costs £1m inc promotion –a few hits subsidise losses on most releases –too many safe ‘format bands’? Product portfolio/Back catalogue –over-reliance on ageing cash cows? Control of channels –e for emancipation? Napster, Kazaa –Can the industry gain control of downloads Observer 28/10/01 ‘Net music strikes a bum note’

13. US trends Digital now 5% of sales value 170% growth pa. I Tunes 1bn sales since 2003 Distribution –32% music stores –54% supermarkets and other retailers –6% internet –5% at concerts –see RIA website for detailed stats (eg rock/hip- hop etc)

14. New markets: China Sales $211.8 million in 2004, a 6.8 % increase on 2003 (cf US $ 11bn) artists are being popularised through non-traditional means, with ring tones proving to be a very significant feature of the business model. There are now 100 million middle classes in China, and growing daily. The climate of opportunity changes almost daily..in favour of a more positive environment for western music UK government Trade agency and music industry mount joint trade mission (see BUBBLE sector studies forum)

15. Technology –reduced barriers to entry? Arctic Monkeys Market appeal –very short PLC –lifestyle or fashion statements –niches to mainstream The rise and fall of Dance brands http://www.ministryofsound.co.uk/