With an eye toward nurturing new revenue streams and increasing their share of the global music market, representatives from 11 independent record labels headed to beautiful Brazil last week to meet with their South American counterparts. The trip was organized by A2IM, the American Association for Independent Music, and funded in part by a federal grant from the International Trade Administration. Delegates from labels including Naxos, Dead Oceans, Yep Roc and VP went looking for new partners in distribution, licensing, touring, performance rights and more.
“The U.S.’s share of the international music market was 34 percent in 2005. Last year it was 27 percent,” says A2IM president Rich Bengloff. “We have to look abroad or we’re not going to have a sustainable business model.”
The Brazil trip was the second under the ITA grant, a part of President Barack Obama’s National Export Initiative called the Market Development Cooperator Program, which will help fund A2IM trade missions through 2015. The first MDCP trip took several labels to MIDEM for the first time in January, and 16 A2IM labels traveled to Seoul, Shanghai and Hong Kong under a different grant last fall.
The Brazil delegation held marathon one-on-one meetings in Rio De Janeiro and Sao Paulo over four days, with a little R&R in between. Billboard.biz caught up with Bengloff after he’d returned stateside for a debrief.
Let’s start with a basic question: Why Brazil?
Well, it’s an emerging market. The term being bandied about now is BRICS: Brazil, Russia, India, China and South Africa. Those are the five markets that economists say you should get in on now because they’re the future of business. They have large populations and are in a position today where the economy is growing.
With Brazil, specifically, if you look at the most recent IFPI report, only three of the top 10 markets increased last year and Brazil was one of them. And it had the biggest increase -- almost 9 percent.
What do you think is driving that growth?
Well they’re getting piracy under control. And there are a lot of businesses, not just in entertainment or music, which are investing there. Muve Music just opened an office there.
Brazil has a per capita income of about $12,000 now, which is still much less than here, but it’s growing. As that number grows, there will be more money for entertainment consumption. Most of the majors already have offices in the top 20 or 30 countries. To compete, we have to get our nose in these places.
You brought representatives from 11 indie labels with you. How did you pick who would go?
We had applications from 16. I sorted through them and thought about who was most likely to be successful. Naxos, for example, releases instrumental music, so it makes sense that that would travel well.
There were fewer members on this trip than on our Asia trip because of budget, but it was a broader group. In Asia there isn’t really a market for American singer/songwriters, for example, but in Brazil you can do some of that. So it’s about genre as well as who the label is willing to send as a delegate. ZOHO Music is a one-man operation out of Tarrytown, New York, but [owner Jochen Becker]’s won a couple of Grammys and a couple of Latin Grammys and he puts out Latin music with a New York twist, as he describes it. So this was a perfect trip for him.
If you look at MIDEM as Music 101, then this is Music 201. If someone has never done exports ever, is a trip to Brazil what they should be doing first? Probably not. We would want them to do MIDEM first, and that’s coming back around next January.
What was the biggest challenge the group faced once you got down there?
I found in Asia, I found in MIDEM and I found in Brazil that the main challenge we have is language. Bruce McIntosh of Fania had lived in Brazil for four years and our hosts provided some translation, so we were prepared. But I’d say for the one-on-one meetings we had, 80 percent of the people we were meeting with did speak English well enough. And we had a translator translate our bios, which were provided to them beforehand.
Homework upfront is so important, because otherwise it just becomes speed dating, which is a waste of time. We don’t want to start off at 0 in these discussions, we want to start off at 5, so we did a lot of work in advance.
Language barriers aside, did you find that prospective partners were receptive? Was there mutual interest?
Yes. There’s business to be done. I’m confident that our repertoire will travel down there. We get embraced partly because we’re the Americans and we have the largest culture market in the world. It’s a lot easier for us than it would be for representatives from some other countries.
Who are the big players that you were most interested in building relationships with?
There are a lot of great people we met with, but the two big digital distributors, iMusica and Kappamakki Digital, are certainly very important to our members.
I’m curious how this trip compares with your previous trip to Asia. How were the experiences different and did one feel more promising than the other?
There were a few members who went on both trips and they thought this was the better trip. Everyone was very upbeat and optimistic about finding potential partners to do business with. And again, the majority of the people spoke English, which does help. But that’s not to say Asia went poorly, by any means. Seoul, in particular, was a great experience.
Ultimately, how will you measure whether these trips were successful?
It’s all about return on investment. This trip cost our members less than $3,000 with half of that funded by the government. So if they do $30,000 worth of business, that’s ten times their investment. If they do $120,000, that’s 40x. Those are pretty good returns.
I’ll be gathering information from the labels that went every three months. They all signed an agreement saying they will share their export information with us for the next three years on a quarterly basis. That data will be used to determine whether we get government funding in the future and also who we send on future trips. For Asia, the results from the first relevant quarter won’t be in until May 15th, but anecdotally I’m hearing from labels who say they’ve done very well. At the end of the day, this is about business for us, it’s not aesthetics.