It's official. This year is the worst for Spain's music industry in history. Labels and agents are going out of business, thousands of jobs and millions of euros are being lost, and what's worse, the next Alejandro Sanz or Placido Domingo could be throwing in the towel forever.
It was expected, of course. Most industries in Spain are suffering amid the country's worst economic crisis now threatening to drag the world's recovery into recession.
There is little cash, no sign of economic growth, no credit, and pessimism all around. Europe has approved up to a 100 billion euro to rescue the country's once might financial sector. People are wondering what currency to convert their savings to and how to open bank accounts in Switzerland, an unthinkable scenario just a year ago.
Spain's economy will shrink at least 1.5 percent and 2012, and still some more in 2013. Unemployment is expected to top 25 percent, while a rising public deficit has forced the government into the worst spending cuts anyone can remember.
But if Spain's economy is bleeding, its music industry is hemorrhaging. Music sales have plummeted 80 percent over the last decade, especially since the economic crisis began in 2008. Meanwhile, concert receipts, which until the crisis partially offset falling records sales, are having their worst year in history, with estimates anticipating at least an 85 percent tumble in 2012 from 2009.
"There is no sector hurting so much in this crisis as the music industry. We are facing our worst year in half a century, a complete catastrophe," says Emilio Santamaria, president of ARTE, an umbrella group representing 80 percent of the concert industry in Spain. "Dozens of companies have already folded, but it's just getting worse."
The main culprit is the economic crisis as public spending has ground to a halt, namely through subsidized concerts. Online piracy also has for years eaten away at record sales. The music industry simply grew complacent while Spaniards consolidated a freebie music culture.
"The public grew used to not paying for concerts and downloading their music for free," Mr. Santamaria says. "We fell for the trap of building our industry around subsidized money. Now there is no money and it's impossible for the industry to survive like this."
"Nobody thought the day would come where the state would no longer be the music industry's biggest client," Mr. Santamaria says. "It's July, and we're starting the high season, and in 2012 we're facing 85 percent less concerts in Spain than in 2009 during the same period."
The collapse of the concert business, coupled with the years of falling record sales, is seriously threatening the industry. Spaniards buy an average of less than half an album annually, according to a recent research report on the contribution of the wider culture industry to Spain's economy from Fundación Ideas, a think tank. That compares to three or four albums in the rest of Europe and the United States.
Even the big names like Alejandro Sanz are struggling, but the real victims are the upcoming talents who can't sign deals in a diminished industry.
"Nobody is investing. I've turned down more artists this year than in my entire career. I used to sponsor six new talents annually, but now I'm sticking to only two established groups, and I'm taking a bigger share from concerts and merchandising. Otherwise, I would be next," says Gerardo Cartón, director in Spain of the Belgian-based label Pias, and also spokesman of UFI, an umbrella group of small and medium size record labels.
"The crisis is the biggest culprit, but online piracy is also responsible," Mr. Cartón says.
Quantifying the exact consequences is hard as consolidated figures are not available, but the music industry's dire shape can be extrapolated from fragmented reports.
The two biggest segments are record sales and concerts. Since 2000, concerts revenue has offset falling record sales, not only in the number of shows, but more importantly in profit margins as prices increased. But since the crisis began, both segments have been battered.
Music record sales in all its formats have fallen gradually since 2000, mirroring a global trend. By 2008 they reached 254 million euros, tumbling further to 148 million euro in 2011, according to Promusicae, the record industry's main lobby group. While the fall was alarming, the industry morphed in the process to increase revenue from concerts to make up for record sales.
"People have to understand they will pay for music one way or another. The music industry needs to profit somehow. If we can't sell records, we sell concerts and just increase the ticket prices," Mr. Santamaria said.
Nearly 75 percent of the shows in Spain until 2010 took place in public concert halls. Concert incomes have collapsed, mostly as a result of lost public subsidies, but also from decreased ticket sales even in the most popular shows, in line with falling spending in Spain, especially among people under 35 years old.
Concert income doubled from 2005 to a high of 310 million euros in 2008, but it started falling and by 2010 it had fallen to 225 million euro, according to the Spanish government. In 2011, receipts tumbled further, in tandem with public spending.
On top of that, classical music concerts financed mostly through sponsorships are also disappearing. Banks, which used to finance much of the cultural agenda, are penniless. Even Madrid's and Barcelona's main opera houses have both implemented harsh cuts, reducing shows, closing down for months at a time and cutting staff.
Private concerts and festivals have not suffered as much thanks to foreign fans who increasingly account for tickets sales. However, their income still fell at least 12 percent from 2010 to 2011, according to APE, the umbrella group of private concerts promoters.
The consequences in terms of employment are believed to be dire. While there is no consolidated figure, at least 25,000 people are directly and indirectly employed by the music industry, an extrapolation from Fundación Ideas' report.
How many jobs have been lost so far is impossible to tell, according to Santamaria. But it's clear that statistics apart, t thousands have lost their job during the crisis, and what's more, thousands more will in 2012 and 2013.
Plummeting profit for labels inevitably will undermine Spain's music industry historic ability to produce profit-making names like Alejandro Sanz, or David Bisbal, or Russian Red, Mr. Santamaria and Cartón agree.
The only way out, the music industry says, is for Spain to move away from its "freebie" music culture, both in terms online piracy and concerts and to increase revenue. Otherwise, it's simply unprofitable to invest in new talents, or even to book big ticket names.