livemusic

One of the pioneers in the field of popular music studies, Dr. Dave Laing (from the University of Liverpool) presents valuable work on assessing the  economic value of live music globally, collating data from international sources to present an overview and a sense of how the live sector compares with recording industry:

Out of the three primary sectors of the music industry, two offer more or less official statistics about their annual performance. For the record company sector, a series of national trade organisations publish unit and value sales data, while IFPI (the International Federation of the Phonographic Industry) uses these to create global figures – which have been on the downward path for a decade. For the music publishing sector, national authors’ collection societies (sometimes known as copyright agencies) provide details of their revenues and costs. At the international level, these are aggregated by CISAC (international confederation of authors and composers societies).

When we come to the other sector, live music, there are no comparable comprehensive statistics, no comparable international trade associations and few comparable national ones.

Nevertheless, some data exists and this paper surveys some recent efforts to state the financial size and economic value of the live music industry in several countries and globally. It presents the most recent basic data from Australia, Germany, Italy, Great Britain and North America (i.e. Canada plus the United States), plus my own estimate of the turnover of the global industry. The first table shows the national data – the size of the live music market, the year surveyed, the percentage changes compared with the previous year, and the source of the research.

TABLE 1   : NATIONAL DATA ON THE LIVE MUSIC INDUSTRY

source year Value ( m.) Value ($ m) % change
Australia LPA/E&Y 2010 A$1,187 1,176.7 +20
France CNV 2011 € 671    886.6 +7
Germany GfK/BDV 2009 €2,270 2,999.4 -12
Italy IULM 2009 €781 1,031.9 +3
UK PRS 2010 £1,480 2,175.6 -7
US/Canada Pollstar 2011 $2,870 2,870 +4

The research has a wide range of sources. In Australia, the data was collected by an industry body – the Live Performance Association (LPA) and analysed by one of the ‘Big Four’ accountancy firms, Ernst & Young. In France, the source was the Centre National de la Chanson, des Variétés et du Jazz (CNV), one of the numerous corporatist organisations there, which collects a 3.5% levy on concert ticket prices and distributes it as a subsidy for small venues and tours. Germany’s data is collected by market researchers GfK for the BDV, the trade organisation of promoters and agents. In Italy, the work was done by a Milan university on behalf of the authors’ collection society and other industry bodies. In Britain, the research department of authors’ society PRS produced the data. In North America, the trade magazine Pollstar collected the data.

The various figures included in the Table will be discussed in the next section of the paper, but before that it is worth noting that four of the six percentage changes over the previous year shown are positive, supporting the view that in contrast to the continuing decline in the turnover of the recorded music business, the live sector has been resilient in recent years.

DEFINITIONS OF LIVE MUSIC
Each of the national financial totals is qualified by the definition of ‘live music’ in use by each researcher and the extent to which they include income sources in addition to the primary or face value of ticket sales.

The French statistics are limited to the pop and jazz sectors since the ticket levy is also restricted to these genres, and the North America data published by Pollstar covers only the Top 200 tours (and excludes festivals and clubs), which is the largest part of the live music business in terms of revenues from sales of tickets. The French authors’ society SACEM produced a report last year that showed that the top 20 national tours in France generated 25% of SACEM’s royalties from the sector as a whole – and therefore a similar proportion of ticket sales revenue.

Other national research includes some or all of classical music concerts, opera, and stage musicals. The data for Australia and Italy provide further detail, in the form of comparative financial numbers for different genres. The Australian figures show that pop concert revenues are about 55% of the total, while in Italy pop events had 34%. In both Italy and Australia classical music accounts for about a quarter of ticket sales by value.

Table 2 shows which genres are included in the various national data sets.

TABLE 2  BREAKDOWN BY GENRE OF ‘PRIMARY TICKET SALES’

A F G I UK NA
Pop tours and concerts x x x x x x
Pop festivals x x x x x
Classical concerts x x x x
opera x x x
Stage musicals x x x x
Free events x x x


COMPONENTS OF THE LIVE INDUSTRY’S TURNOVER

With the exception of Australia and the UK, the statistics already quoted cover only the retail value of primary ticket sales. This however, is only one segment, although the largest, of the revenues received by the live music industry. The next section discusses each of the five segments that go to make up the industry’s turnover.

Primary Ticket Sales
First, of course, is the face value of tickets sold for events. This is the only category common to all the national data. In the statistics, some researchers provide an average price per ticket sold, e.g. in North America, it fell by 2% in 2010 while in Australia it rose by 12% in 2008. Last year, the value of ticket sales of Live Nation Entertainment, one of only two global companies in the industry, fell by 7%, although the Pollstar data for North America, LNE’s largest market shows growth of 4%.

Ticketing fees
In recent years, ‘ticketing’ has become a specialist sector of the industry, as companies such as Ticketmaster (now part of Live Nation) are granted exclusive rights by promoters and add a service charge fee to the ticket price set by the promoter. An analysis of ticket pricing by Live Nation in 2010 showed that on average ticketing fees accounted for 26% of the retail price excluding tax. Put another way, the ticketing fee was on average one-third of the price of the ticket itself.

Secondary ticket sales
The next category denotes additional or ‘secondary’ spending by consumers when tickets are re-sold. Much has been written about the pros and cons of this activity, including the recent article by Martin Cloonan on this site. Here, it should be noted that this has become a thriving sub-industry through such online companies as StubHub and Viagogo. The estimate of the relative value of secondary sales in the UK is £192 million, equivalent to 23% of primary spending on tickets.

Sponsorship
In addition to the direct consumer to business transactions of ticket purchase, there are several other sources of revenue. Corporate sponsorship and public subsidy form an important component of the live music economy. Commercial sponsors may provide funds to specific tours, or buy what are called ‘naming rights’ to venues. For the biggest tours and the biggest stadia, these may run into millions of dollars. One published figure is the £4.5m a year paid by the O2 telecoms company for naming rights to the Academy chain of rock clubs in the UK. The term ‘public subsidy’ denotes grants by the various levels of government from national ministries of culture (or in Europe, certain departments of the European Commission), through regional to local councils or legislatures. In recent years, such subsidy has spread outwards in Europe from classical music to various types of festival, though more usually jazz or world music rather than rock and pop.

Detailed figures for sponsorship are extremely difficult to find, but as some kind of guide, the US-based company IEG reckoned that commercial sponsorship of music in the US in 2008 amounted to just over $1 billion. For 2010, the UK figure was £33 million.

Media licensing
This category refers to the fees paid by broadcasters and webcasters for the right to simulcast a concert or festival, or to record it for later broadcast. In Britain, it has become a regular feature of the budget of major festivals to sell broadcast rights to either the BBC or Channel 4 television. The BBC, for example, provides blanket coverage (typically 70 hours) of the Glastonbury festival.

Ancillary spending at venues
This category includes such items as the sales of merchandise such as programmes, t-shirts and CDs as well as food and drink bought by audience members. There are also parking fees at stadia with car parks.

The merchandise sector of the music industry is relatively important, as is shown by the fact that several major record companies and concert promoters have their own merchandise divisions, to which artists may licence the right to create ‘official’ products. Occasionally figures of average audience spending on shirts, programmes etc. are made public: on a major tour by a so-called heritage act, these may be as high as a figure equal to 20% of ticket sales. In Germany, each attendee spent on average €4.30 on merchandise in addition to the average ticket price of €34. In their report on the Australian industry in 2008, Ernst & Young aggregated merchandise with sponsorship and catering as ‘other’ funding. For large pop performances, this category was worth an average of $A 501,000 compared with box office income of $A 746,000. Overall, E&Y found that these other sources added almost 80% to the ticket sales that were the sole source of revenues included in LPA’s own survey. A recent report by E&Y on 30,000 small venues in Australia with live music (bars, restaurants, etc.) found that only 16% of consumer spend was on tickets to hear music.

The ancillary items mentioned here may seem to take us away from the music industry as strictly defined, but it is worth noting that not only do many large venues and festivals appoint official suppliers (in the drinks business, cola and beer companies compete to buy exclusive ‘pourage’ rights) but income from parking charges is a vital part of the revenues of a company such as Live Nation, which both manages venues and promotes concert tours.

A recent innovation is the sale to concert-goers of a recording of the event itself. In some cases, this recording is made available as a physical CD minutes after the end of the event. Alternatively, concert-goers can pay to have a download version a day or two after the performance.

Using these categories of industry revenue segments, Table 3 is a rough estimate of the live industry’s global income from popular music performances in 2010, in US dollars.

TABLE 3 GLOBAL TURNOVER OF THE LIVE MUSIC INDUSTRY 2010 ($ billion)

% of total % change
Ticket sales 10.0 40 -8
Ticketing fees 4.1 16 -5
Venue ancillary 4.1 16 -8
Sponsorship 3.3 13 -3
Re-sold tickets 1.4   7 +20
Media licensing 2.1   8 -5
TOTAL 25.0 100 -6


LIVE v RECORDED

One frequently raised question in recent years is that of the relative size of the live music and recorded music businesses. Which has the highest turnover?

Both the Italian and British research can be used to make a direct comparison. In Italy, live music was reported to be worth €781 million and recorded music, €419 million. The UK research states that ‘business to consumer’ totals were £1.24 billion (recorded music) and £1.48 billion (live music). In its own comparative study, published in 2010, IFPI, perhaps predictably, found that global ‘recorded music retail sales’ at $25.8 billion, remained greater than the value of the live sector, which it estimated to be $21.6 billion. And even with my higher estimate of $25 million for live music, spending on recorded music remained slightly higher in 2010. The first indications of the market last year (such as Pollstar’s 4% increase in North American ticket sales) suggest that the live business worldwide may have returned to growth and may have definitively overtaken the record industry in revenue terms.

Source: Live Music Exchange