Biz Q&A: BPI Chief Geoff Taylor On Google's Search Problem, HMV's Future, Moribund Digital Economy Act

Do you subscribe to the common-held idea that record companies have become more risk adverse as a result of declining revenues and, if so, what are the long-term implications?
I don't think they have become more risk adverse in terms of signing talent. I think they are intelligently using social media and other online indicators in their A&R decisions to try and make sure that the artists they sign are acting entrepreneurially to try and develop their careers. I think if you look at the talent that has come through over the past two or three years there is still a lot of unique and original voices coming out of the U.K. [British labels] continue to invest 20% or more of our turnover in A&R and that is fundamentally important. But if the top line is that revenues are allowed to continue to shrink because we are not given the kind of environment by government that allows us to grow our digital revenues fast enough, then inevitably there will be a knock-on effect in absolute levels of investment.

The U.K. retail sector has been particularly hard hit of late, as recently illustrated by HMV entering administration. What can be done to help ensure that brick and mortar music retailers such as HMV survive? 
We're working very hard together with AIM [Association of Independent Music] in talks with the administrator of HMV. Secondly, we are talking to [U.K. collection society] PRS for Music about the way that publishers approach mechanical royalties on stock for which labels are not being paid, or only being paid a fraction of its value. It's important that the publishing community help labels ensure that HMV has a viable future and that as much of HMV can emerge as a viable ongoing concern as possible.

How important for the U.K. and wider music industry is the continued presence of brick and mortar music retailers?
It's tremendously important. A significant portion of HMV sales are impulse buys as a result of browsing in-store and it's not clear that we would retain those sales in an online environment. We think that physical retail is still a viable business. HMV's problem was largely the debt that it was carrying. A large percentage of HMV stores are profitable, so we very much hope that it can be restructured in a way that keeps HMV an important part of music retail for the foreseeable future and are doing everything that we can to help with that process.

Despite sustained growth in digital, combined digital and physical album sales in the U.K. fell 11.2% in 2012. Do you foresee a point in the near future when digital sales will offset the fall in physical and arrest the year-on-year slide? 
Very much so. There are many growth areas such for labels, such as TV income, sync rights income, public performance and broadcast income. It certainly isn't right to just look at the unit sales figures and think that they accurately reflect the position of labels. Labels have worked very hard to transform their businesses and have very strong growing revenue streams. While there is still a hump to get over in terms of transition from physical to digital, the future looks extremely bright.

When do you predict the break-even stage will arrive?
It would be foolish to say that it will be this year or next year because the time the speed at which this evolution takes place is difficult to predict. However, within two or three years we will certainly be at a point, in my view, in which we are a growing business and have strong growth for a sustained period of time.