FAQ, Media, Music, What others are saying

The Golden Goose – Radio and the Music Industry

June 23rd, 2008

Posted By Clive

I don’t think many would question the value of Radio Airplay when trying to sell music and influence consumers about new artists. In fact I think some of the more cynical people may wrongly believe that the Radio Industry is paid to pay certain songs at certain times again and again. Of course the opposite is in fact true, this year the UK Commercial Industry will again be one of the Music Industry’s biggest customers by paying royalties in excess of £60m per annum. This figure accounts for just over 10% of the whole industry’s revenue and is collected quarterly by the owners of the recordings, PPL and the publishers of the work MCPS-PRS. This is a huge investment when you also consider that according to OFCOM’s recent report over 50% of music purchase is made by an introduction from radio airplay. If I have my sums correct that accounts for over £500m of additional annual revenue (BBC & Commercial combined )

The UK and the rest of mainland Europe roughly pay the same in each country, but the US pays significantly less, in fact almost 50% less, as a PPL levy does not currently exist. The US radio industry is now being lobbied about introducing a PPL fee to bring it in line with the rest of the Western World. Here is a report that their equivalent of the Radio Centre, the NAB, has published on the relationship between Sales & Airplay and it makes interesting reading.

A quick glance at iTunes shows what influence UK Radio has over Music Downloads, not many songs in there (with the possible exception of those hideous Jonas Brothers) that can’t claim massive radio exposure first.
iTunes screenshot
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So why the post?

Well the music Industry is having difficulties as the decline in CD sales is not being met by the increase in revenue in downloads. They are now turning to rights holders looking to increase the fees to use and promote their work. But why bite the hand that feeds when many Internet radio stations and web 2.0 companies still fail to pay anything at all. I know that the one of the first principals of sales is to up sell your biggest customer, but we are already one of their biggest users with for a relationship that works both ways?

I know the world is changing but Commercial Radio simply cannot afford to increase its cost of music licences and rights especially when it needs to invest more in Content & Marketing. My own view is that they would better served talking the Industry about helping solve the bigger problems of Piracy and a changing business model. The government, via COI, use radio to communicate effectively to shift attitudes on Drugs, Smoking and Five a Day why can’t we help tackle music piracy in the same creative way. As the for the business model, watch this space as I think we at Golden Square could spark some real interest with one of our new brand innovations.

Questions for you…

  • Does Commercial Radio still help sell music?
  • Should the Music Industry insist of increasing the fees in respect of rights?
  • How can we help them tackle Piracy?
  • What is the future of recorded music?

3 Comments

  1. John Martin,
    June 23rd, 2008 at 10:57 pm:

    The music industry is at a cross-roads (and has been for the past 4 years). Ever since the conception of internet, copyright holders have fought with copyright infringer’s to control their intellectual property. The internet has shown that the power of millions of users versus a handful of corporations (charging more money than an average consumer wants to pay for something) almost makes piracy an inevitability.

    Labels have to face the fact that piracy is hear to stay. Gone are the pre mid 90s hay day for music, where the main place people could get music was from shops that would sell physical products. The 90s saw the rise of the Compact Disc, the music industries killer format. Cheap to produce, small impact on shelf space and high profit margin. It was a perfect system. Then the internet came and ruined everything for the labels (not consumers).

    Anyway, the point I am laboriously trying to make is: the music industry needs to adapt to this new enironment. Here are a couple of examples of how recording artists are adapting to new internet enabled world:

    Nine Inch Nails: They’ve left their label and started releasing via the internet on their own website. The result? Upon releasing their latest album “The Slip”, for free, it topped the listener charts at last.fm:

    http://www.last.fm/music/+charts/?charttype=weekly&subtype=track&range=1209902400-1210507200

    Radiohead: Everyone knows about the “pay what you think it’s worth” “In Rainbows”. It’s rumoured to have sold 1.2 million copies at roughly £4 each.

    In order to beat piracy the music industry needs to offer something that piracy cannot.

    What that is? I dunno. Maybe free beer?

    Note: Most of my ideas have been “sourced” from:

    Free Culture by Lawrence Lessig
    http://books.google.co.uk/books?id=cxZp0sV3V80C
    Which has a brilliant chapter about the Manga industry in Japan and how it copes with piracy

    The Long Tail by Chris Anderson
    http://books.google.co.uk/books?id=cX4aAAAACAAJ


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  2. Adam Bowie,
    June 24th, 2008 at 10:23 am:

    It’s always felt to me that commercial radio in the UK pays pretty fairly for its music usage. There’s a quid pro quo: commercial radio couldn’t exist (for the most part) without music to play, and the artists benefit from that exposure. In the US, they undoubtedly “get away with it” a bit.

    A recent piece of Virgin Radio research shows that 76% of all listeners discover new music via FM/AM radio - by far and away the most popular place. If you want to discover niche music, you certainly can via the internet, but radio stations and have programmers and heads of music who effectively take the hard work out of searching through all the dross on MySpace to find the few nuggets.

    If radio didn’t play artists’ music, they’d sell much less. That may be a declining amount in an ever more competitive environment where the likes of Morrisons is this week selling new albums for six pounds - about the same as they cost when I was thirteen - but tough times or not, radio is invaluable. Why else do record companies employ pluggers to specifically try to get their wares played on radio stations, and deluge producers and programmers with piles of CDs?

    It does sometimes seem to me that the rights organisations take the easy path. I agree that they’re not doing nearly enough to chase down internet infringers - some of whom have traded for years without bothering about paying for the music. And they could probably also open up new revenue streams if they thought seriously about how music could be used in podcasts or other new media, in an affordable and equitable manner.

    At least labels and artists are beginning to think about how they might tackle some of these issues, from the Radiohead and Nine Inch Nails examples cited by John above, to Coldplay’s distribution of a recent single to promote their album. These are all major artists who can afford to make those choices, but even smaller breakthrough artists can learn and experiment in new models. Look at how someone like Jonathan Coulton has developed his career (http://en.wikipedia.org/wiki/Jonathan_Coulton).

    Once upon a time, getting a single into the charts meant earning a decent amount of money. Then singles became loss leaders for albums. Now singles are nearly dead, and albums seem to almost be loss leaders for live concerts - the main growth area in music.

    An artist today must nuture their fanbase (and their web presence for this is critical), and hope that they’ll want to come to live concerts. But to do that they need exposure, and that’s something radio remains unparalleled at.


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  3. Geoff,
    June 24th, 2008 at 12:10 pm:

    Music piracy isn’t going anywhere. The record companies have had their goldrush, and now need to adapt. They’ve had it too good for too long. A hundred years ago, songs were something that existed in the ether, they didn’t belong to anyone. That’s how the new generation see music, too.

    On the upside, your average 15 year old probably has twenty times more music on his/her hard drive than we ever had in our record collections at that age. And the more music that’s created and consumed, the better the culture.

    On the downside, the less people actually paying for music, the less money in the coffers of the music industry. Which is a problem, tempting though it is to bask in schadenfreude at the prospect of a load of overfed parasites finally getting their comeuppance. (A cruel and broad stereotype, I know. I’ve met many, many good people from the record business who care passionately about discovering and nurturing music. Yes, they’re outnumbered by cocaine-addle, dead eyed morons who get a bigger kick out of flashing their business card to pretty 19 year olds with angular haircuts than they do from, say, watching a band or listening to a demo. But the ratio isn’t as high as you’d think. )

    There is, of course, a thinking which says that in this brave new world, we don’t need the record companies to be the gatekeepers anymore, we could just venture out into the Wild West of MySpace, and find great new music for ourselves. Have you ever been to MySpace without a map? It’s horrible. There may well be an undiscovered talent of Bowie-like proportions lurking out there somewhere, but you’d have to wade through a lot of Suzy’s Magnetic Clunge, Colostomy and Necrosadistic Goat Torture to find him. (No offence to NGT. I’m a big fan.)

    We need the record companies to do what they’ve always done. Bring music to us in a nice, friendly, palatable, unthreatening way. There might be bands out their with more talent in their spare plectrum than Scouting For Girls will muster in their entire career, but unless they can show us the plan (what their marketing spend will be, which key poster sites they’ve secured, whether their TV ads will be airing during ‘Shane Ritchie’s Karaoke Massacre’, how often the single will be heard in the background of ‘Hollyoaks’, does Edith Bowman like it?) then we’re probably not interested.

    And if that’s not enough, how about organising a showcase? The radio industry will be there in droves, as long as you promise that the band doesn’t play for very long, the drink is free and plentiful, and by the way: The more exotic the venue, the more open to the idea of a playlist addition some of us are.

    ( I don’t mean us here at One Golden Square, obviously. Those suits in Tin Pan Alley can’t play us like fiddles, oh no. I mean the rest of the radio industry. Anyone who’s ever gotten James C talking about music, or heard Tim V DJ at a party will know that when you scratch beneath the surface, they’re music lovers down to the last nerve and fibre. )

    So what new business model for the music industry? Bundle-deals for musicians, which incorporate live gigs, merchandise, and publishing are an answer. Another is currently being mooted by the Left Party in Sweden. It’s not dissimilar to the radio royalties model.

    ISPs (Internet Service Providers) can “see” everything you download, legal or not. Instead of clamping down and policing this, (like Virgin Media), the idea is to add a music tax to your monthly broadband fee. It would most likely only be a few pence, and relative to the about of data you download.

    A royalties body would then collect and distribute this to record companies/publishers, based on shared information on what’s been downloaded from ISPs.

    The radio industry and the music industry have a symbiotic relationship. As Adam’s stats show, they need us to prominently display their product, and we rely on them to sift through the mountains of unreconstituted shit to find and package the stuff we can fill our shelves.


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