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CMU Review Of The Year 2009: The music business
By CMU Editorial | Published on Monday 21 December 2009
CMU Business Editor Chris Cooke looks back at the key trends and developments in the music industry in 2009.
1. THREE-STRIKES
In early 2008 the UK government indicated that if internet service providers would not play a more proactive role in tackling online piracy, they’d introduce new laws to force them to act. Most probably by making them to operate what became known as the ‘three-strikes’ system – two warning letters to illegal file-sharers and then net suspension. But by the start of 2009, despite a general lack of action from the ISPs, ministers didn’t seem too keen to pass those promised laws. Even though similar rules were being introduced in France and New Zealand, the government’s big ‘Digital Britain’ report in June suggested ‘three-strikes’ should only be considered a few years down the line.
But then, in August, something changed. Some said a lunch engagement between Lord Peter Mandelson and record/movie industry mogul David Geffen did it. Either way, when the Digital Economy Bill, the legislative follow up to DigiBrit, reached the House Of Lords last month, ‘three-strikes’ was in there. It’s still not clear how it will work. The big issue in France and New Zealand is how those accused of file-sharing can appeal before having their net connections cut. That issue hasn’t been entirely addressed here, either. And might never be. Some reckon the DEB will not get through parliament before next year’s General Election.
2. TENENBAUM & THOMAS
Before ‘three-strikes’, the record industry’s strategy for ending file-sharing was, of course, suing the kids who did it. It was meant as a deterrent. It didn’t work. So much so that at the end of 2008 even the Recording Industry Association Of America – this strategy’s biggest advocate – announced it would stop the lawsuits. Except, for some reason, the ones still outstanding. The most high profile of which were those of Jammie Thomas and Joel Tenenbaum, both of whom had decided to fight the RIAA in court (the former had already done so once before).
The law was on the trade body’s side, but neither defendant was likely to actually pay any damages awarded (neither was rich), and their high profile court cases would just further damage the record industry’s rep. The RIAA duly won the cases; despite a lot of promises from Tenenbaum’s Harvard prof of a lawyer, his defence was rubbish. But the defendants predictably announced they couldn’t pay the mega-bucks damages, and the record industry’s rep was, indeed, further damaged.
3. COPYRIGHT EXTENSION
In 2009, continued squabbling between EMI and Beatles company Apple Corps meant that the Fab Four’s music, while being re-released in remastered form on CD, and appearing in a version of the ‘Rock Band’ video game, and on a USB stick, was still not available from any legitimate download store. On 1 Jan 2013, the sound recording copyright in ‘Love Me Do’ will expire and enter the public domain. EMI and Apple Corps really ought to get a move on. Or they could try to get the sound recording copyright term extended. Perhaps to 95 years, like in America.
And the wider record industry, led by the BPI, collecting society PPL and the Musician’s Union, had another good try at doing just that this year. Despite the UK government previously being against extension, when the issue came up for debate in Europe at the start of 2009, ministers said they now agreed with it in principle. However, they didn’t agree with the industry’s exact proposal of how it would be achieved. That, and all out opposition from some other European countries, meant copyright extension ended up on the back burner once again as the year progressed. Yeah, Beatles people, better get ‘Love Me Do’ on iTunes while you still own it.
4. LIVEMASTER
In February, live music conglom Live Nation and ticketing and artist management giant Ticketmaster announced their intent to merge. Ironically, the announcement came just weeks after Live Nation had begun the process of taking its ticketing in-house, having previously used the services of Ticketmaster. That fact proved problematic as UK competition regulators considered the merger proposals. The German company Live Nation had asked to handle its in-house ticketing division in Europe – CTS Eventim – assumed the merger would mean they’d lose that work and kicked up a fuss. UK officials are yet to decide whether the merger is inline with British competition laws, though their provisional report in October wasn’t in love with the proposals.
Meanwhile in the US, where competition regulators are also considering the deal, the two companies found themselves countering all sorts of bad press. In particular, continued public concern over the growth of online ticket touting turned to TicketsNow, the ticket resale website owned by Ticketmaster. People didn’t like the fact the unofficial resale service was promoted via Ticketmaster’s official ticketing website. Lawsuits and political intervention followed. None of which helped the PR effort to convince US officials to OK the merger. Nevertheless, the two firms remain optimistic.
5. 696 AND THE LICENSING ACT REVIEW
Opposition had been growing to the Metropolitan Police’s 696 form in 2008, though it was this year that its opponents got a formal platform, as the government reviewed the impact of its 2003 Licensing Act. 696 was (and is) a piece of Met bureaucracy used to get information about future live music events. Opponents didn’t like it because it asked for lots of personal information about performers, and, some said, had leading questions about musical genre that could be used for racial profiling, and therefore lead to prejudiced assumptions being made about an event being planned.
The form is linked to the 2003 Act because, many argued, that legislation had given too much power to local authorities over live music licensing. As a result, London boroughs had made 696 compulsory for licensing applications. UK Music’s Feargal Sharkey led the opposition to 696 (and other bureaucracy introduced by the Act) when the whole thing was reviewed by parliament’s Culture Select Committee. He wanted 696 abolished. In May, the Select Committee agreed with him. Though, alas, the government did not. The Met subsequently revised the form anyway and announced their focus moving forward would be on easy-target urban-music clubs. So, opposition is less vocal than it was.
6. THE MARIAH MAG
Well, we couldn’t get through a whole review of the year without saying ‘three hundred and sixty’, could we? Actually, talk of the ‘360 degree record deals’ we’ve been hearing about for a couple of years now was less prominent in 2009. Record companies were still busy diversifying into areas of the music business other than selling sound recordings, and were quietly doing deals with artists that gave them rights to revenues other than record sales, we just didn’t talk about it so much. Perhaps because the artist management community are still nervous about record companies getting control over too many aspects of any one artist’s career, even if the up-front money is good.
Probably the most obvious manifestation of record companies diversifying (other than Sony and Universal launching its own ad-funded music video website Vevo, and Warner taking on the ad-sales for its own YouTube channels), was the new album from Mariah Carey. It came complete with a special Mariah edition of Elle magazine, ads in which, we were told, had basically paid for the production of the album. Brands sponsoring artists is nothing new, but record companies (Universal in this case) going after a brand’s dollar, and getting it by selling ads on a glorified CD sleeve, is. Mariah’s claims that she was reinventing the music business probably overstated the significance of the project, but it was still a landmark moment for the record industry.
7. FAN-FUNDING
But why would artists give up more revenue streams to the evil old record companies in the digital age? Surely the point of the internet era is that the old corporates are no longer needed; artists can do it all themselves, and retain all their copyrights and profits in the process. Some artist managers would probably agree. Now albums can, in theory, be produced, marketed and distributed on a shoe-string, why do a record deal at all? Except that even doing things on a shoe-string requires some money, and probably five figures worth of it. Where to get it from? Well, the management community, who began reinventing its trade body the MMF this year, have been increasingly looking into other sources of start up cash that don’t rely on the traditional record and music publishing companies.
One alterative much discussed in recent years is fan-funding. Get fans to stump up-front the money they’d spend on your record anyway, in return for other goodies. It’s a concept still in its infancy, but it gained some momentum this year, as Patrick Wolf and Electric Eel Shock released their first fan-funded albums, and more established artists started successfully raising funds from fans. Still, the biggest story in fan-funding, the announcement that Public Enemy would fund an album this way, ended on a negative note – so far they’ve only raised 28% of their target sum. Nevertheless, I reckon fan-funding will continue to grow in 2010, people just need to work out how and when it can work.
8. MUSIC RETAIL HIGHS AND LOWS
Following the collapse of independent distribution big boy Pinnacle, music-and-sweet seller Woolworths, and their supermarket-providing CD distributor eUK, all in the closing weeks of 2008, you might have thought this year couldn’t have been worse for music retail. Though given Zavvi went into administration just before Christmas last year, you’d probably have guessed 2009 was set to be another difficult year for music on the high street. Things actually went relatively quiet for a while, though an attempt to relaunch six Zavvi stores under the Head brand soon faltered, and as the year closed, CD and book seller Borders began a closing down sale.
The exception to all this, though, was HMV, who had a rather good year. Though given nearly all their competitors had bitten the dust, it would have been rather amiss of them not to see some uplift in sales. Nevertheless, HMV impressed City types with more than just increased revenues, interest also grew in their clever diversification strategy. They launched high street cinemas through a partnership with Curzon, bought half of high profile MP3 sellers 7Digital and entered the live sector via a JV with the MAMA Group. The master’s dog did well this year.
9. THE CONTINUED RISE OF MAMA
Which brings us to MAMA. We’ve written quite a lot in recent years about how the live sector has boomed while the record industry slumped. We’ve also written about the shift of power towards the artist management community. So it’s perhaps not a surprise that one of the big success stories of the music business in 2009 was the MAMA Group, whose primary (though not only) operations are in live music and artist management.
The London-based company saw its profits rise ten-fold this year, resulting in an optimistic (and knocked back) takeover bid. Among MAMA’s big announcements were the JV with HMV, which saw some of the group’s bigger venues shifted over to a new company, owned 50/50 by the two firms, and operating under the iconic Mean Fiddler name MAMA had acquired in 2007. On the management side a new venture with Brian Message’s ATC Management and Terry McBride’s Nettwerk, while as yet unproven, might just change the way the whole music industry works. I’d keep an eye on MAMA throughout 2010.
10. YET MORE EMI RUMOURS
Also trying to reinvent the music industry in recent years was Terra Firma’s Guy Hands, the curly-haired City geezer who bought EMI in 2007. While all of the major record companies struggled this year, as the ongoing CD sales slump mixed with the wider economic downturn, it was EMI that continued to dominate the business headlines. Although a big Beatles reissue programme brought in some money, and the firm’s ‘music services’ division (that’s distribution etc) seemed to be having some success, most reports about the major were of the negative kind.
After orchestrating the biggest roster and headcount cull in the record industry’s history, Hands seemed to wash his hands of EMI this year, making increasingly candid statements about what a bad idea it had been to buy the company, and, as 2009 closed, suing the bank who financed the acquisition, partly because they refused to write off a sweet billion of the music firm’s debts. All of which led to a renewal of the good old EMI/Warner merger rumours; so much so, that when Warner boss Edgar Bronfman Jr decided to move to London some people suggested he did so to engineer an EMI takeover. Such talk is highly speculative, though with enough substance that I’m going to predict an EMI/Warner will exist by this time next year. See you back here in twelve months to see if I was right.
