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CMNS 230 Sound Recording


									CMNS 230 Sound Recording

     A unique medium, integral to all cultures
     Attali Noise:
        In music, we catch glimpse of imminent changes in
         the organisation of labour and creativity
            Why it is avant garde:
                  generational
                  smaller scale, artisanal roots are never far away
                  Drives adoption/invention of new media technology
             Why it is fundamental
                  Acts as industry input to all media when incorporated
                   as performance
                  Ancillary role pushes sales: now the most lucrative
                   add on

                                   CMNS 230                                1
Canadian Music

 A   “success” as a cultural industry
   Why:
       Domestic   share relatively high
       A list Canadian artists making it with
        international labels
       High level of cultural support: higher in

                       CMNS 230                     2
History of the Medium
     Straw:
         It is in the realm of music where we catch an early
          glimpse of the paradoxical and contradictory ways in
          which new technologies, shifting markets and
          changing consumption habits are transforming a
          cultural industry
         Music industry crises of the last century or so, always
          blamed on new technologies: radio, shellac, vinyl,
          CDs. MP3s DVDs,Internet/bluetooth
              Cycle busts: 40s, 70s, 90s

              But critics point to problems in creative supply &

                changing habits

                           CMNS 230                                 3
History 2
    One of the oldest: Edison: 1877
    By the 40s: segmented by genre
    50s and 60s: Hollywood Rock and Roll
    60s British Invasion
    70s Soundtrack/ Albums and North American
    80s MTV and Specialty music
    But decade history obscures shorter 5 year
     market cycles: speeding up

                       CMNS 230                   4
Canadian Music History

    Memory Lane: CBC’s top 50 tracks
    Before the 50s: Doo Wop Four Lads
                    Jazz: Moe Kaufman, Oscar Peterson
                    Country: Hank Snow
    50s-70s- Rock: the Band
              Ronnie Hawkins
    70s Golden Era Canadian Rock
       April Wine, chilliwack, Crowbar

       Bruce Allen, agent for BTO

       Emergence of Rush

                          CMNS 230                       5
Canadian History Continued

      Late 70s Punk
         Rough Trade, Teenage Head

         Offset by Murray McLaughlin, McGarrigles, Mitchell

      80s Pop Rock
         Bryan Adams, Tom Cochran, Jane Siberry, Corey Hart

      Late 80s
         Blue Rodeo, Jeff Healey, Colin James

      90s
         Barenaked Ladies, Tragically Hip, Morissette, KD Lang

      2000
         Canadian Women take over the World

             Twain, Dion, McLaughlin, Furtado

                                 CMNS 230                         6
The Canadian Brand
    Wikipedia

    “ the Barenaked Ladies cleared the way… by
     the late 90s a whole new Canadian Pop
     landscape emerged defined by a national
     pride and self confident distinctiveness never
     seen before “

                         CMNS 230                     7
The Canadian Brand
    BUT
        Bryan Adams excoriated the Can Con quota
        Guess Who originally called the Expressions to break
         into radio play disguised as a British mersey beat band
        Hid Canadian Origins: Songs American Woman, these
         eyes North American anthems
    Versus
        Tragically Hip: can make platinum on Canadian release
         alone: Unlike Nickelback, not broken into US market

                               CMNS 230                            8
An Ode to Music

    Salient
        Still more than 15 hours a week on average
    HIP
        Disproportionately a youth medium which drives now 34% of
         the market ( from 45% in 90s)
    Intertextual
        An input in many other cultural industries
    Defining
        Establishes identity of a period
        Wide impact on popular culture…only now becoming
    Destabilizing
        Carries within it the seeds of ‘rebellion/innovation’

                                  CMNS 230                           9
Characteristics of the Industry

     Less Capital Intensive
         Thus more participation rates in the industry around the world
     Most musicians and talent in small enterprises
     More GLOCAL
         Local audience preference: 68% global share for indigenous
         This means MNCs form local affiiliates: record locally, have
          roster of local artists and acquire local companies
     Less vertical integration
         ( except in Quebec)

                                  CMNS 230                                 10
Sizing the Global Industry

  Global Sales estimated at between 32
   and 37 billion
  Grey Market would represent another
   third ( +12 b)
  Top markets; US is first, UK is third
  Canada represents 2% of global sales--
   Ranked 6th

                   CMNS 230                 11
Sizing the Canadian Industry
 Overall: about a Billion dollars
    CIRPA data show 54 units sold, with CDs at 49
    Total value $608 million of product
    2600 employed in sector: many more musicians and
      of those, 80% never sign
    Thus a very small part of the cultural GDP of $15
    A very small part of the labour force
    BUT: slightly higher multiplier effect ( 2.2)
      source: Nordicity 2004 study
                         CMNS 230                       12
Sources of Revenue

 Micro revenues per download
 Artists Collect Direct from Label or
   Consumer or through Royalty Collectives

                   CMNS 230              13
Trade Profile

 In 2000, Statistics Canada finds sound
   recording ranks second in export of
   goods after books ( with $543 million in
   foreign sales)
 In services, another 200+ million ranking

                    CMNS 230                  14
The Value Chain for the Sound Recording

     Stage                   Stakeholders
                              Composer/lyricist
     Composition
                              Music Publisher

                                  Artist/Band
     Sound Recording             Artist Management
                                  Recording Studio
                                  Producer and Engineer

                                  Manufacturer
                                  Graphics
     Manufacturing
                              Distributor
                              Retailer
                              On-line distributor
     Distribution                     Source: Ference-Weicker &

                        CMNS 230                                    15
Thesis: Disintermediation

     Cut out middle man:
         Labels, wholesalers, retailers
         Show value chain before and after
         Case: Puretracks and I-tunes for direct legal downloads

                                   CMNS 230                         16
Music Segments

  Recording
  Publishing( controls copyright)
  Live performance

                    CMNS 230         17
Associated Synergy

    Reliant on Print to Chart
        CM, CMN, Chart, Exclaim, RPM( under)
    Reliant on Radio to promote
        CFNY: Casbys. Late emergence black
         radio/hindi etc.
  Rock Video Channels: Much Music
  Music Variety/ shows: Canadian Idol

                        CMNS 230                18
Sectors of the Industry
   Includes singers, musicians, songwriters, managers,
     lyricists, performance and tour
 Artists and Repertoire
   Indie producers, agents managers, demo tape
     location and assessment
   Recording Companies, Studios, do the engineering,
    sound mixing, publicity, advertising,design,

                        CMNS 230                         19
Sectors Cont’d
   Rack jobbers
   One stop
   Direct consumer sales
   Online retailers
   Direct Downloads
   Specialty like HMV, A&B Sound ( a shrinking
    share 33%)

                       CMNS 230                  20
Corporate Profile
 4 major companies combined control 75% of
   market ( Source: Reuters, Sept 2, 2006)
   Warner Music
   Sony Bertelsmann
 Now 400 indie Canadian companies/labels
   Churn high: 16% or so since, Like film, companies
    start up for projects
   Real core of Canadian independent industry is 37

                         CMNS 230                      21
Rate of Production/Releases

 Annually, about 165 French albums
 About 1,888 English

                   CMNS 230          22
Canadian Market Share

 Nielsen Soundscan
   Of Units: 25%*
   Of Titles: 21%

   Note; Nordicity Report disputes this estimate
    as high
        Soundscans own data for Canadian
    Independent labels places share at 18%
    and even this may be overstated (page 28)

                      CMNS 230                     23
By Certified Traffic ( 2004)

 CRIA ( the Canadian wing of FIPA)
   Gold ( 50,00 units)= 40
   Platinum ( 100,000)= 35
   Diamond( I million)=1
   Represents: 59 artists and 76 releases.

                      CMNS 230               24
What the Companies Do

 Artists and Repertoire
 Sales and Distribution
 Advertise and Martket
 Artists Development

                    CMNS 230   25
A Typical Album

 Costs about a million to produce
 Lifecycle of release becoming more like a
   movie: in first weekend
 Artist Royalties typically enter at around 5-
   9% of sales; move to 15 and for A list
   artists may go as high as 25%

                     CMNS 230                    26
Dominick, 2006 Costs and
Profits of a Typical CD
         Manuf……… 1.25
         Package  1.30
         Ad/Prom   2.00
         ARTIST R  1.60
         Freight  0.09
         Trust    0.65
     Profit (Manuf)         2.94
     Distributors            1.50
     Retail/Exp& Profit       5.00
     Total                  16.98
             See profile pp. 193-194. The Dynamics of Mass

                            CMNS 230                         27
World Genres

  In US: rock pop and country took 61% of
   sales in 1993
  Dropped to 44% in 2002
  Rap and Hip Hop rose from 9 to 14%
  World Music, techno rising

                   CMNS 230                  28
The Business

               CMNS 230   29
The Big Picture
    The creation of distinctively Canadian cultural works fulfills a key
     element of the Department's strategic priority: to build Confident
     and Competitive Voice at Home and Abroad.
    Canadian performing artists have had growing success at home
     and abroad.
    Twenty-three percent of records sold in Canada are by
     Canadians, and Canada's top 21 artists have sold more than $12
     billion worth of records around the world, making Canada the
     second largest source of music talent.
    Such success did not happen overnight; it is the result of sound
     policy decisions and timely investments through targeted
     programs. Continued stable investment in sound recording
     through the Canada Music Fund is essential to continued growth
     and success. ( Department of Canadian Heritage, 2004/2005
     Budget estimates).

                                  CMNS 230                                  30
Profile of Current Industry

  Canadian artists' share of the top 200 best selling
   albums in Canada has increased from 15.1% in
   2001 to 27.2% in 2003.
     If Canadian drama were as popular as Canadian
      music and literature, up to 8 of the Top 20 shows
      on Canadian television would be Canadian shows,
      as opposed to the current 1 in 20.( Stursberg
      speech 2005)
  90% of Canadians consider Canadian music is just
   as good as other countries
  50% of the nominees for Geminis benefited from
   the CMF ( Canadian Music Fund)
  In 2004, 1500 new Canadian recordings

                         CMNS 230                         31
Profile Cont’d

   Royalties paid to Canadian songwriters for
    performance of their works abroad reached $47 million
    in 2003 ( up 7%)
      Source: Departmental Performance Report,2003-
        2004. Department of Canadian Heritage.
      In fact, 2002 and 2003 are the first years in SOCAN's
        history that royalties revenues from international
        sources have exceeded royalties paid out to foreign
        songwriters, composers and publishers.
   Majority of sales are generated from releases of foreign
    artists (84% of releases in 2000)
   And market share of Canadian artists is sharply
    cyclical: in 2003, top 50 albums included 4 of top 10
    (Avril,Shania and Celine with a compilation) plus 10

                            CMNS 230                       32
Methodological Problem:
Determining Share
    By artist ( Straw)
    By label
    By sales
    By downloads
    By sales and downloads
    By survey data on favorite artist

                        CMNS 230         33
Big Five Now Four =75% Global Sales

      Vivendi/Universal Music 25.9%
      Sony Music 14.1%

      Warner Music 11.9%
      EMI 12%
      BMG    11.1%

      All Indies: 25%****
           * note EU blocked merger of EMI and Warner/Bertelsmann
           Source: IFPI cited in Ference Weicker
      But, in Canada, indies account for 10-12% of the Canadian retail
       music market, thus half of the global share for indies… ie indies
       less developed in Canada

                                     CMNS 230                              34
Other Fast Music Facts

     The US is the largest producer and market for sound
      recordings (1/3 of sales)
     Sound recording outnumbers revs from music
      publishing 5 to 1 ( $32b versus 6)

                            CMNS 230                        35
Music Around the World

  Mid 80s to late 90s an unmitigated boom
   IFPI: 1999 saw $39 billion US in revs
     Why: shift to CD; broadening distribution
      channels, growth to emerging markets
  A correction in 2000 ( many reasons)
  British Study found 80-90% micro business
   ( employing less than 9)

                     CMNS 230                 36
The Music Business Models
    A. The Big Label
        What: signs artists, produces masters, builds libraries and
         promote their music through films, mags and a number of
         sister media in conglomerates.
       High margin ( in 80s 30%... Now „realigning; to 10 or so)
       Price fixing?
            Universal drops its prices.

    B. Brokers
       Distribute indie masters
    C. Self Publishers
       Market on the Internet ( source: Straw)
    D. Compilers
       EG: dance music teams

                                 CMNS 230                              37
What Differs in the Models

    Extent to which firm will be involved with talent,
     production, distribution or marketing
    As tastes become increasingly specialised, they have
     encouraged a wider range of structures
    Straw argues the old artist and repertoire functions of
     the labels no longer needed in this business
     environment ( point to compilations)

                             CMNS 230                          38
The Shift in Distribution

     From specialty stores to Wal Mart and Future
      Shop…(Starbucks, Canadian Tire, Eddie Bauer)
     Latter top 20 only or special compilations
     Makes it harder for new artists to break in
     Retailers are trying to shift risk onto distributors…incur
      ad costs, provide just in time delivery

                               CMNS 230                            39
Canadian Music Industries

     From 2000 to 2003 inclusive, CRIA tracks a downturn ( some 3-
      6% per year)
     Definitive source of stats: Nielsen Soundscan ( see Straw)
     Canadian downturn echoes US, and also marks fewer
     Lifecycles of albums now looking more like movies: sales in the
      first weekend of release are important predictors.
     Question: is downturn attibuted to P2P

     2001– demise of last Canadian trade mag the Record
     Bankruptcy of Song Corporation, and Attic Records
     Bankrupcy of Sam the Record Man ( distributors: Virgin /foreign
     Why downturn? Business analysts attributed it to failure of
      Canada to adapt to urban genres: music stores shifting to DVDs
      and other products
                                 CMNS 230                               40
The Canadian Indie Labels

     Quebec Audiogram( fully integrated house) survived
      where Song failed
     See Insert

                            CMNS 230                       41

     CRIA ( claims to represent 95% of sound recordings
      manufactured in Canada)
     SoCan Foundation ( supprts education, residencies,
      competitions, foreign tours)
     Factor ( Musicaction) ( a private non profit organisation to assist
      artists and songwriters in having their material produced, videos
      created,tour internationally. Also support labels,
      distributors,producers, engineers and directors– all those facets
      which grow the industry.
     Videofact( offers non recoupable grants for production of
      Canadian music videos ( grew out of Much)
     Radio Starmaker Fund ( CAB since 2000) backs those with
      proven track record who want to get to the next level

                                   CMNS 230                                 42
Marketing Structure

     CBC New Music P2P websites for new artists
     Much Music
     Alt music on radio/indie channels
     Juno and other regional awards
     No industry trade mag () Straw: weakens data
      base monitoring industry
         See: Have not been the Same, Making Music (
          historical compilations)
     Gian Gomeshi ( CBC): top 50 Canadian
      albums of all time…on line ballots

                            CMNS 230                    43
Strengths of the Sector

    Strong Demand
      Growth exceeds rest of economy
      Robust Canadian share

      Global stars

      Isolated label winners: Nettwerk and
       innovation with new business model
      Like Britain, healthy signs of rise of musical

                         CMNS 230                       44

  Traditional business model does not work
  Very weak financial performance: low margins
   for Canadian independents
  Loss of revenues means reducing risk:
   downsizine, signing fewer new artists
  Will Straw:
        The problem for English Canadian Music Cos is
         that successful integration can no longer be
         accomplished through joining together music only

                            CMNS 230                        45

  Fragmentation of market
  Hyper inflation of promotion costs
  Flight of artists ( Twain: Switzerland,
  Weak access to capital for Canadian

                     CMNS 230                46

  New niches: ethnic, older audiences
  Diversifying revenue streams: Canadian
   firms now 33% of their revenues from
   non recording market sources
  Make strategic alliances up or
  Is the new business model integrated
   DVD production: Vancouver may be

                   CMNS 230                 47
    Digital Retailing
       Micropayments through individual downloads
       Forrester predicts this will grow to one third of the US market,
         20% of European market
       Canadian experment: Puretracks ( Bell Investment) versus I
         tunes which has 70% share
    Copyright from New Media
       Videogames, Internet Radio
    Integrated DVD audio-visual production
       Nordicity found this at 6% of income and rising in 2004
       Signs; MySpace is moving into digital movie business, as of
         September 2006 signed 3 million indie bands they claim for a
         distribution fee and allows bands to set their own price

                                  CMNS 230                                 48
The Policy/ Regulatory Structure

    Before 1970 none
    1970 Introduce Can Con Quota on Radio at 30%
        First beneficiaries Anne Murray‟s Snow Bird and Guess Who
    1971 Introduce Junos
    1986 Sound Recording Development Program

    Copyright (1998)
        Neighbouring Rights: radio cos must pay artists and
         companies not only songwriters and publishers
    2001 Set up Industry Council and Fold SRDP
     into the Canadian Music Fund

                                CMNS 230                             49
Canadian Content Quota

  One of the first in the world
  Set at 30%
  To qualify: MAPL

                        CMNS 230   50
Canadian Music Fund

      Goal to ensure that Canadian music artists and
       entrepreneurs have the skills, know how and tools
       to succeed in a global and digital environment
      To enhance Canadians‟ access to a diverse range
       of Canadian music choices
      To increase opportunities available for Canadian
       Music Artists and cultural entrepreneurs to make a
       significant and lasting contribution to Canadian
       cultural expression

                           CMNS 230                         51
The Canadian Music Fund (about C$30 million per annum)

     Creators Assistance Program………about $1m
     Canadian Musical Diversity Program….$1.5 m with
      Canada Council
     New Musical Works Program ( with Factor)…10.5 m
     Music Entrepreneur Program ( with Telefilm) 9 m
     Support to Sector Associations Program (500,000)
     Collective Initiatives Program (with Factor) 1.8 m
     Canadian Music Memories Program (200,000)
     Policy Monitoring Program (1m)

                            CMNS 230                       52
The BC Report

    See: An Industry in Transition: the Sound Recording
     Industry in BC ( January 2004) a Report Prepared for
     the Ministry of Community, Aboriginal and Women‟s
     Services, Canadian Heritage and Western
     Diversification by Ference Weicker and Company
        41 cos
        34 m in revenues in 2000
        Employ 2000
        Retail $150 m annually
        Music publishing revenues: aobut 20m
        Live performances 90 m
        34% of BC radio revs in programming
        Input in film production ( 1.2b annually)

                                  CMNS 230                  53
Recs for BC Policy

     1. Build Export Capacity of BC artists and companies.
          Help audience intelligence building, finance trade exhibitions MIDEM etc.
           TRADEROUTES, and money on foreign marketing
     2. Improve the live peformance environment
          Venues and link to tourism and trade
          Promote in public places: ferries, transit, airpoprts, malls, and establish a BC
           tour circuit
     3. Target Tax Incentives
          Tax credit for sound recording like BC Film Tax Credit
          Revise PST on rentals to level playing field with Ontario and LA
     4. Support the Development of MUSIC BC
          Need to bring the players together in a strong industry association with a
           common goal of building the industry
              BC Arts Council
            ( Ontario has a 20% tax credit)

                                              CMNS 230                                        54
BC Winners

    Daavid Foster: multiple Grammy Award winning producer,
     performer and label exec
    Sarah McLachlan
    Bruce Allen
    Michael Buble, Diana Krall, Nickelback, Nelly Furtado, Swollen
    Strong Managers: Nettwerk Management
    Etc. Mint Records, 604 Records, Maximum Jazz,Troubadour,
     Battle Axe
    Export of Bhangra…Surrey
    Biggest constraint seen as access to financing ( Ference
     Weicker); lack of profile in BC, lack of a star system

                                CMNS 230                              55
Peer to Peer (P2P)

                     CMNS 230   56
P2P ‘culture’ of file sharing

     Trade and download
     Chat
        Merit around preferences, ideas, trends

        Signs of self selected communities of taste

         MARKETING (Garofalo, 2003 in Laba).

                          CMNS 230                     57
The Gray/Play/Free Cultural Economy

  IFPI found that illegal sales outstrip legal in 21
  Between 99 and 2002… about $1.8 billion
   illegal to $3 bn legal…ie. About 40%

                        CMNS 230                        58
The Numbers Game

    Has there been harm to revenues or Not?
    CRIA, RIAA say yes…and at the individual level, firms are taking
     hits… eg. EMI
    But Overholzer and Strumpf study… says not…
    They interpolate Neilson Soundscan and downloads…
    Found little, possibly negative effect…
    Other surveys found peole still purchased CDS
    Actual Revenues and Profits have recently undergone a recovery
    But, no denying a 20% downturn in the 3 years 2000-2003
         A number of bankruptcies
         Mergers & retrenchment
         Consumer distrust: price fixing
         In Canada, where margins precarious, downloads a bigger hit: but
          Nordicity study does not find same defensiveness as majors

                                    CMNS 230                                 59
The Struggle for a New Business Model

   Move to per unit download costs.( sub services)
      Must: reduce price, provide product bonuses,
       educate and undertake legal action
      CANNOT ignore global decline of 17% between 98
       and 2002 to 32b US; 21% in terms of units
    Weicker study predicted „no obvious carrier technology
    that is projected to drive sales over the next years‟
      Multiple platforms( Xbox etc can play CDs)

   Convergence, film, music, ads, interactive content

                           CMNS 230                      60
Future Business Model

    Aside from on line distribution: major potential
     distribution technologies:
       Electronic distribution to retailer

       Digital audio broadcasts


       "The success digital music distribution will
        ultimately depend on the depth of content, flexibility
        of content rights and reasonableness of pricing.
        Service must be outstanding if the industry hopes
        to convince people to pay," said Mr Bosiljevac.
         ( Australian Music Recording Society, 2004)

                             CMNS 230                            61

  Podcasting: The Subhumans
            Fidgital
  Relaunch for Fall 2005

                  CMNS 230     62
CBC New Music
    Radio 3's podcast is truly unique: it's full of amazing,
     100% Canadian music from new and emerging artists.
     It's great news for music fans and it's even better news
     for independent Canadian musicians. We are
     extremely excited about the potential for exposing
     Canadian artists to a wider international audience with
     this new technology."

     To access the podcasts, just insert the following URL
     in your podcasting client:

                            CMNS 230                         63
Podcast Cont‟d
  Are You An Independent Musician Who Wants to Get Involved In Radio
   3 Podcasts?
  If you're already a member of NewMusicCanada, log on to your member
   page and agree to our new podcasting waiver. When you first signed up
   with NMC there was no such thing as podcasting, and therefore, no
   mention of it in the original waiver you agreed to. In order for us to
   include your music in this exciting new programming initiative and keep
   everyone protected, we've created an addendum to the NMC waiver
   which grants us permission to include your tracks. If you're not yet a
   member of NewMusicCanada, head over to and sign up!
  If you have any comments, questions, or concerns regarding our move
   into podcasting, please don't hesitate to drop us an email or contact CBC
   Audience Relations.
  Thanks for your support of Canadian music and hope you enjoy the new

                                   CMNS 230                                64
Sources on Canada

    `
    Wikipedia: Music of Canada
    Encyclopedia of Music in Canada
    Canada Music Centre
    Canadian Recording Industry Association ( CRIA)_
    Canadian Independent Recording Producers‟ Association
     ( CIRPA)
    Nielsen Soundscan

                               CMNS 230                            65

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