IFPI's Investing in Music 2014 Report: Annual A&R & Marketing Spend Tops $4.3 Billion

Lorde, 2014
Austin Hargrave

Lorde was photographed on October 8, 2014 at Milk Studios in Los Angeles.

It's become a much-heard and endlessly repeated complaint of the digital age that record labels no longer invest in artist development, but a new report from IFPI suggests that the opposite is in fact true.

Record companies' annual spending on A&R and marketing now tops $4.3 billion and totals more than $20 billion over the past five years, according to IFPI's Investing in Music report, which was unveiled at a Nov. 24 Friends of Music reception in Strasbourg, France, hosted by IFPI chairman Plácido Domingo.

The report, which was produced with independent-label collective WIN and includes case studies of Lorde, Ed Sheeran, MKTO, Pharrell Williams and 5 Seconds of Summer, goes on to state that record companies remain the primary investors in artists, investing 27 percent of their revenue in A&R and marketing, up from 26 percent in 2011.

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IFPI's research also reveals that more than 7,500 artists are currently signed to major labels' rosters, with tens of thousands more on independent labels. One in five artists on labels' rosters is a new signing, says IFPI, pointing out that global music industry investment in A&R (16 percent in total) exceeds what the computing, pharmaceutical and biology sectors invest in research and development.

The comparison is perhaps a little unfair, given that they are all vastly different industries with contrasting business models, but it does highlight the huge sums that continue to be spent each year on breaking new artists.

For example, the costs of breaking an act in a major market is between $500,000 and $2 million, IFPI states. A typical breakdown of costs is an advance of between $50,000 and $350,000. Recording spending averages between $150,000 and $500,000, with video production costing anything from $50,000 to $300,000. Tour support can drain the budget of an additional $50,000 to $150,000, while marketing and promotional costs are between $200,000 and $700,000.

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"Investing in Music highlights the multi-billion-dollar investment in artists made every year by major and independent record labels," said Frances Moore, IFPI chief executive, in a statement accompanying the report. "That is an impressive measure of the qualities that define the music industry, and which give it its unique value."

"Most artists who want to make a career from their music still seek a recording deal. They want to be introduced to the best producers, sound engineers and session musicians in the business. They need financial support and professional help to develop marketing and promotional campaigns," added WIN chair Alison Wenham.

"From my experience in the recording industry, I know very well what a big difference a record label can make to the success of an artist's career," Plácido Domingo states in the report.

"The investors in music are vital to the work of artists. They are the risk-takers who win if an artist is successful but lose if they are not; they provide the financial support in advance of recording that others are not prepared to give; they offer skills and understanding of how to reach the consumer in all the ways the digital age allows," he goes on to say, adding: "Investment in music cannot be taken for granted."