The United Kingdom may only have a population of 60 million, but when it comes to generating music artists that resonate around the globe the U.K. consistently punches well above its weight. According to labels trade body the BPI, U.K. artists accounted for almost 13% of global recorded music sales in 2011, accounting for one in eight of all artist albums sold internationally, while Adele’s all-conquering “21” ensured that a British act claimed the global best-selling album for the fourth time in five years. In financial terms, BPI says that sales of British music abroad reached £1.9 billion in retail value in 2011.
2012 figures are not released yet, but with Mumford & Sons, One Direction, The Wanted, Muse, Ed Sheeran, Ellie Goulding and Coldplay all scoring big-selling albums in the past twelve months, U.K. artists are certain to, once again, make up a high proportion of last year’s global music sales. Speaking exclusively to Billboard.biz, BPI chief executive Geoff Taylor outlines the key issues that the U.K. – and the global – music business faces going forward: the need for stronger government legislation and why, despite falling sales, “the future looks extremely bright.”
Billboard.biz: What are BPI’s major aims and focus for the year ahead?
Geoff Taylor: Firstly, help consumers transfer to digital services, help further promote the market.
The second point is better communicating how the industry has changed and in particular the potential for growth in the industry as a result of digital. If you look at the success of One Direction and Mumford and Sons in the U.S., that’s a very good example of how we are now able to use social media and digital marketing to grow fan bases (internationally) and are not so dependent on gatekeepers like radio.
The third [aim] is mobile. We think that 4G is a tremendous opportunity and very important milestone in the development of the business. We are working very hard though the BPI Innovation Panel to get as many operators signed up with music companies and have music services imbedded into their 4G tariff.
One of BPI’s main concerns is ensuring that the U.K. has a strong legislative framework that protects and supports the music industry. What are the most urgent measures needed to in this regard?
We fear government is somewhat taking the success of British music for granted. Digital music is an area where there is exceptional potential for growth. We’ve gone from streaming being something hardly anyone had heard of two or three years ago to there being 3.7 billion audio streams in the U.K. last year. Meanwhile, digital album sales continue to grow, so there is tremendous growth in this business and growth both in the U.K. market and in exports.
We need to get government to support that growth through their policy measures and that means three main things: To make sure that term extension is implemented in a way that actually works for the business; that copyright policy is pushed in a direction that supports creative companies rather than the U.K. government looking to water down copyright to benefit technology companies; thirdly, helping us grow the legal digital marketplace by helping to [stop] the illegal side of the market. That means supporting our calls for search engines to rank illegal sites below legal sites. It means getting on with Digital Economy Act implementation and making it easier for us to get blocking orders for the illegal sites.
It’s close to three years since the Digital Economy Act was passed into law, but we have yet to see its implementation on the ground.
We are pressing government very hard to get on with the process of implementation. Clearly it shouldn’t be taking more than four years for the act to go from its passage to implementation. We feel very strongly that government needs to cut through the bureaucracy and move on with that as quickly as possible.
In a concerted bid to attract investment from tech companies, the U.K. government has granted tax breaks to the tech, gaming and television industries. Is the BPI lobbying for similar concessions for music companies?
Certainly we have been talking to the Treasury about the possibility of tax relief on marginal A&R investment. We believe that a policy which encourages labels to invest in A&R above historic levels would be a good innovation. We’re particularly concerned to help indie labels here and looking at what is done in other territories to try and figure out the most effective form of support that could be given to [grow] investment by indie labels.
In last year’s BPI AGM you criticized Google for promoting illegal music sites over licensed services in its search engine results. What progress has been made on that front?
Firstly, we have massively increased the number of notices that we send to Google and are now removing extraordinary amounts of [unlicensed] content from Google search results. We are sending something like 46,000 take down notices to Google every day and I’m aiming that we should send over 20 million takedown notices to Google this year.
The second aspect is that Google promised it would take into account those millions of notices and where [unlicensed] sites repeatedly figure, they would be pushed down the rankings. We are seeing a small impact from the change, but it is quite marginal, so we are talking to Google about what they need to do to have a much greater impact. Clearly, insufficient weight is being given to that factor within [Google’s search] algorithm, because we are still seeing illegal sites which have received hundreds of thousands or millions of notices still coming at the top of search results. That is clearly wrong.
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.