A new report shows how much record companies are "investing in music"

Record companies, large and small, invest around US$5 billion a year in music talent, support a global roster of thousands of artists and typically spend US$1 million to break successful pop acts in major markets.

The figures are published in a new report issued today highlighting the work of major and independent record companies as the principal investors in artists' careers. Advances, recording, marketing and promotional costs are the biggest items of record company spending on artists, commonly totalling six figure sums.

There are more than 4,000 artists on major record companies' rosters combined, and many thousands more on independent labels. There is continuous re-investment of revenues derived from successful acts into new talent. It is estimated that one in four artists on record companies' rosters were signed in the last 12 months.

Record companies are the largest investors in music talent, ploughing around 30% of their sales revenues - around US$5 billion worldwide - into developing and marketing artists. This includes an estimated 16% of sales revenues that is spent on artist and repertoire work (A&R), a proportion that significantly exceeds the proportionate research and development (R&D) expenditure of virtually all other industries. In addition, labels pay significant sums in royalties to featured performers.

Recorded music has a massive economic "ripple effect", helping generate a broader music sector, including live music, radio, publishing and audio equipment, estimated to be worth US$160 billion annually. IFPI estimates that more than two million people are employed globally in this broader music economy.
"Investing in Music" report

Investing in Music is published today by IFPI, representing the recording industry worldwide, in collaboration with WIN, the international network of independent record labels. The report provides new figures and outlines the special skills and services companies provide in developing and promoting artists.

Alison Wenham, Chair of AIM/WIN, says: "The direct route afforded by the internet is open to all. However, mixing the talents of business and creativity is often a minefield, with creativity often compromised by the challenges of running a business, which requires totally different skills. Artists generally prefer to leave the complex administration of a rights based business to someone else."

The report uses data from IFPI's member record companies and case studies from around the world, including David Guetta, Kasabian, Little Boots, Jason Mraz, Belanova, Mousse T and Stephane Pompougnac. Highlights include:

* A&R combines internet technology and traditional scouting skills, playing a critical role in bringing artists to a wide audience. Labels help their artists cut through the digital noise, with more than 2.5 million hip hop and 1.8 million rock acts registered on MySpace alone.
* Record labels invest increasingly through "broad rights" deals across different activities of an artist's work, including live and merchandising and branding. Multi-album deals are often important in allowing a return on this substantial investment. In many cases, artists and record labels enjoy long term partnerships.
* The work in the studio to record the album and select the singles remains a very significant investment and area of collaboration.
* The marketing skills and resources of record companies, from video production to online promotion, are essential in bringing artists to a mass audience. An international marketing "war machine" helps artists develop into global stars.
* Despite the success of the live music sector in recent years, recorded music remains the foundation for a successful artist career.

 

To download the report, please click here