Invisible exports and the creative industries

Invisible exports Visibles: tangible goods sold overseas Invisibles: anything else that brings money into the country services earnings on overseas investments transfers of funds between governments Export of goods £188bn services £67bn (2000) UK has second highest value of invisibles after USA

Export earnings from services DTI (1992) 32% 19% 6% 7% 3% 4% 29%

The Creative Industries The creative industries in the UK generate revenues of around Ł112.5 billion (more than farming or mining) employ some 1.3 million people. Exports Ł10.3 billion over 5% of GDP. In , output grew by 16%, compared to under 6% for the economy as a whole.

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

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%pa but now stagnating

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 Increased success of domestic repetoire in many markets Average 66% sales are home-produced artists CDs now 92% of all sales - era of format-change fuelled growth is over 50% of UK sales are to under 30s but older market spend is growing.

THE SUPPLY CHAIN STRUCTURE OF THE RECORDING INDUSTRY 1

THE SUPPLY CHAIN STRUCTURE OF THE RECORDING INDUSTRY 2

Competitive forces (‘Porter’s 5’) Domination of 5 majors Multiples Supermarkets mail-order/on-line Piracy Parallel imports DADs, Mini-Disc MP3 post-Napster High cost/risk of developing new talent

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 –Or another oligopolistic stitch-up? Pressplay, MusicNet Observer 28/10/01 ‘Net music strikes a bum note’

Technology –reduced barriers to entry? –DJs the new rock gods Market appeal –very short PLC –lifestyle or fashion statements –niches to mainstream MoS v EMI