Scale and Structure of the Music Sector and the Need for Better Data

Introduction

What is offered here is some basic information about the scale and structure of the sector. Such is the breadth of the sector, and its fragmentation, that not only one hand doesn’t know what the other is doing, in some cases it doesn’t even know there is another hand.

I hope the information here is helpful. For myself, I know some parts better than others and would welcome your corrections or brief additions. The description of the area you inhabit is not meant for you but the descriptions of areas that you don’t know at all may give a little bit of an orientation.

This chart by Hans Hoegh-Guldberg is one possible graphic representation of the sector. The very structure of the knowledge base of which this paper is part is another representation, especially what you find by going through the ‘creation’ and ‘support’ sections. You also can find a long description of the study on a statistical framework for the music sector through the MCA research section of the MCA website.¹

Scale

There are no official statistics covering the entire sector. Economist Hans Hoegh-Guldberg has calculated a music GDP by extrapolation from the only known comprehensive study, which he himself did for the Australia Council’s Music Board in 1985. Obviously, with a 23 year lapse in time this draws a long bow but you can read his reasoning on the Knowledge Base, here. He estimates the value at around $7 billion, which puts the music sector in favourable comparison with a number of other, one might have expected, more economically important sectors:

• Forestry and fishing $2.5 billion
• Electricity $13.9 billion
• Gas $1.4 billion
• Water supply, sewerage and draining services $6.3 billion
• Manufacturing: textiles, footware, clothing and leather $2.7 billion
• Wood and paper products $7.1 billion
• Printing, publishing and recorded media $11.3 billion
• Non-metallic mineral products $5.5 billion
• Total cultural and recreational services $14.3 billion

There are about 60,000 registered music businesses, three quarters of which are sole traders; there are 4,700,000 businesses in total in Australia. (Most statistics in this paper come from the Australian Bureau of Statistics (ABS)). In statistical studies, the recording industry is usually and mistakenly taken to be the entire sector. In 2007, its wholesale sales value was $462m, including both physical and digital sales.² Royalty revenues recorded through the royalty collecting societies in 2006 were about $170m. Music export royalties were $52m; they and imports vary from year to year but usually are about 20% of music imports. Exports of music goods (instruments, recordings) were $182m, and are usually also around 20% of imports.

You can find some more detailed statistics on the knowledge base. See also the section on statistics at the end of this paper.

Education

For more information, see the MCA knowledge base in the Support section starting with Ian Harvey’s briefing paper Music Education for this summit.

Early Childhood

There is no requirement that early childhood teachers or carers have any relevant musical knowledge in order to graduate from pre-service courses, nor that employers require it. So delivery is random.

School Music Education

There are about 10,000 primary and secondary schools (Stevens Report, commissioned by the MCA in 2001).³

Most students receive their education through the public school systems run by the states and territories. There are also Catholic school systems organised on a state/territory basis, and independent schools which make up a category rather than a system.

Some big generalisations:

We estimate that 23% of state school students have access to a competent music education, and 88% of independent school students. Catholic schools overall are probably similar to state schools.

Most secondary schools offer music classes taught by music specialists.

Most primary schools have delegated music teaching to generalist classroom teachers who are vastly unprepared for the task. Their music training will take between zero% and around 5% of the total hours in the teaching training course, coming out to around 22 hours average, as preparation to teach music for six or seven years. Queensland has specialist primary music teachers.

Some states offer some free or subsidised instrument lessons, most do not.

School curricula used to be classical music orientated. In the public schools, this probably survives only in a small percentage of schools serving students whose families may have a classical music background. It is strong in the independent schools, however the curriculum has diversified generally. It has shifted decisively towards student interests in popular music in most public schools.

Tertiary Music Education

Approximately 30 universities offer music instruction, some only as part of school teacher training. For the most part these are public institutions but there are a small number of degree-granting private institutions such as Australian Institute of Music, Melba Conservatorium, Bond University, Catholic University. Curricula traditionally were in classical music but there has been considerable diversification over the past couple of decades, with schools like Southern Cross University specialising in contemporary music while others like the major conservatoriums retain at least an emphasis in classical music. All independent public conservatoria were forced to amalgamate with universities by Education Minister John Dawkins under the Hawke government (1989).

Formal music education to diploma level is also available through Technical and Further Education (TAFE) and Vocational Education and Training (VET) courses and some private colleges dealing with music technology. We don’t have statistics on these. Basic instruction for musicians on such things as small business practices or marketing are mostly available at this level, or through workshops offered by industry associations.

Community Education

Instrumental instruction is mainly offered by private studio teachers. There are state music teachers’ associations and associations for voice and for single instruments such as flute.

NSW has 17 “regional conservatoriums” that are community owned but receive modest funding from the Education Department. They are not degree-granting.

There is a scattering of organisations and programs teaching contemporary music performance to the general population or to disadvantaged groups. As examples, you can find some of these among the finalists for the MCA Music in Communities Awards.⁴

Professional development workshops are mainly offered by the professional associations. The state music industry associations that are joined under the Australian Music Industry Network umbrella offer workshops in the business side of being a musician in contemporary music genres. There are concerns within the industry that these opportunities need to be taken further, for instance through internships with companies or mentorships with effective individuals. In the preparation a few years ago of the MCA Australian Guide to Careers in Music,⁵ the author encountered among many, including some company executives, a dismissive attitude to education as preparation for work in their area. Was this blind ockerism or a dissatisfaction with the relevance of existing courses? Could be either, one suspects.

Counterpart courses on the classical side are fairly rare although many conservatoriums give some small instruction. Music education associations like the Australian Society for Music Education (ASME), the Association of Music Educators (aMuse), the music teachers’ associations give PD workshops for teachers. Such workshops may not be supported or provided by the school systems, nor recognition nor reward given to the teachers.

Community

Music carried on at community or amateur level is very diverse and there is no overall organisation or networking except to an extent in Victoria, through Community Music Victoria. We can make some generalisations by genre.

Traditionally, community music activity was based around brass bands, choirs, orchestras and music theatre groups. It is my guess that brass bands are declining in number; some have become concert bands with more complex instrumentation. Traditionally, choirs performed classical music and the church was a stronghold. Church choirs have been disappearing for some decades although popular singing styles have probably gained strength in churches generally and in evangelical churches in particular. Quantity of activity aside, probably at the peak level the quality of classical choirs is at its best in decades. There has been a considerable diversification of choral repertoire in the direction of popular music, and a growth of a cappella singing groups including barbershop and its female counterpart (often called Sweet Adelines after the American association) 20 years ago, there was a fear that choral music was dying in Australia. One suspects that it has regained its feet and is expanding.

Youth orchestras play an important role in the classical music supply chain, at the top level providing an important link in delivering trained musicians to professional orchestras. Although the number of orchestras in schools has declined, at the community level youth orchestras seem to be doing well. Community orchestras persist; I do not know the trend but it probably very much depends upon the quality of leadership. Similarly I do not know the trend in community musical theatre activity but suspect that it has diminished over recent decades.

Ethnic music is probably sustained in ethnic communities but there are no data known to me. There is a fair amount of activity using hip hop as rescue for disadvantaged kids or kids in trouble. Some of this is directed to Indigenous youth. Probably it is happening with other contemporary genres too but hip hop comes a lot to our attention. As always, there are lots of kids putting together garage bands. Programs like Weekend Warriors bring lapsed musicians back to music when they are in the 30s, 40s and beyond.

Some community music activities are encouraged by local councils through cultural development officers and events managers. There is quite a large number and variety of community music festivals. And there are many community organisations that offer music instruction.

Creation

Composers and songwriters mainly earn income from commissions and royalties on performances, recordings, broadcast and other use of their works. A few have managers. In the contemporary (popular) music area and jazz, songwriters/composers are also performers and write for their own performances. In other areas such as classical music and to some extent film music, composers write music for performance by others. Some assign copyright in their works to publishers who attempt to increase copyright earnings and share earnings with the creators. Composers/publishers assign the task of collecting royalties to the Australasian Performing Right Association, APRA. Increasingly, creators use the internet to distribute their work and to some extent this removes the publisher and APRA from the supply chain.

Live Performance

Live performance happens in a great variety of situations, ranging obviously from the formal concert hall to pubs to festivals to theatres. It is difficult to summarise this in a thumbnail sketch.

At one end of one spectrum are orchestras, opera companies, music theatre companies. The performers are employees and there are award conditions. Work is continuous or seasonal rather than casual, except for the guest principal artists. The scale of the presentation requires large audiences and for orchestras and opera companies, a house of 1500 capacity is rather small; they are based in the large cities to give sufficient audience base. Touring is cumbersome and expensive, must be subsidised and is therefore limited to larger centres. Musical theatre is not subsidised unless presented by opera companies, usually as an exercise in internal cross-subsidy. Musical theatre has high initial production costs that can be recovered only through long seasons, and considerable ongoing costs because in most cases of a relatively large number of performers compared with regular theatre. It has cut pit costs through use of technology to reduce player numbers.

At the other end of the spectrum are groups performing in contemporary genres. The groups are small and the work is usually one gig at a time on a casual basis although of course gigs are lined up into the future, giving a semblance of employment. But hardly anyone has employee status. Touring for successful or ambitious groups is a way of life. Performances are in pubs, clubs, restaurants, festivals and for very successful groups, in arenas and stadiums. Venue capacity varies from a couple of dozen to tens of thousands, so the contemporary sector embraces a number of quite different presentation scenarios and economies. The concert industry, whether for orchestras in concert halls or rock groups in arenas, works quite differently from the pub and club scene.

Presentation of various genres tends to be organised on a vertical basis. A genre can have typical live performance venues, perhaps a particular group of educational institutions, particular artist managers and agents, dominate particular festivals (blues/roots, jazz, world music etc), be recorded by some labels and not others, have its own radio stations.

Among those with a stake in live performance are the musicians, their managers and agents. (Managers handle all of the performer’s business affairs, agents, who may work for the performer or for the hirer, are mainly concerned with finding gigs or musicians for them (bookers)); however, there terms are not used cleanly – some people calling themselves managers are really only agents, some people calling themselves agents do more than just find gigs.) There are venue proprietors, production people – crewing, sound and lighting, staging – tour organisers, marketers, people who handle merchandising (T-shirts, CDs etc), ticket agencies, unions, legal advisors.

There are statistics on some aspects of live performance on the knowledge base.

Recording

The industry globally is dominated by four transnational corporations, known as the majors, who are also dominant in the Australian market with about 70-75% of sales. In better times, the majors bought up the larger “independent” companies (“indies”) so that the industry was comprised of the large majors, the small indies, and not much in between. Now, some larger independents are emerging. The industry also includes recording studios, which make the master recordings for subsequent replication, record distributors, which promote and deliver physical recordings to retailers, and of course the retailers. It links into AMCOS and PPCA, the relevant royalty collection societies, and provides succour for artist managers, entertainment lawyers and so on.

There were about 1100 media, manufacturing and publishing businesses, 1300 record retailers, 1250 recording studios in 2004. Total income of these businesses was a little over $2 billion.

There has been, incidentally, a concentration of retailers just as there has been a merging of majors. Also, there is increased activity from large general retailers such as K-Mart, selling the most popular discs at discounted prices and so exacerbating difficulties for small retailers, already hurt by the impact of the internet.

Sales of physical recordings are in decline with revenues only partially replaced by sales through online services. Total sales, wholesale value, were at a peak of $647m in 2001, decreasing 35% to $422m in 2007. Digital sales were $10m in 2005, $28m in 2006, and $40m in 2007. So the increase in the second year, in both percentage and absolute terms, was less than in the first year. Compared to the patterns of adoption of earlier new formats such as the CD, this is a very early levelling off in growth, possibly suggesting that the current strategies for gaining income from downloading may not solve the industry’s problems.

In the current flux, the independent sector is growing, with both existing companies and new entrants perhaps able to adapt more flexibly to new circumstances – and having less to lose in the contraction of the old. This may lead to a more evenly distributed recording sector. But meanwhile, no-one really can foretell the shape of the sector even in the mid-term.

In 2007, 64% of the Australian tracks released were in rock/pop/dance genres and another 11% in country/folk, 5% in classical, with the remainder scattered around a number of genres (AMPCOM report⁶). Out of the total 104,082 tracks released on the Australian market, 17,434, 16.8%, were Australian. There has been an upward trend in the number of Australian tracks reaching the top 100. There is a growing market for music videos as a separate revenue stream that includes income from licensing to online providers. Mobile phone ringtones have been a surprisingly strong income source although some see it as having peaked; sales declined a little from 2006 to 2007.

The Australian Record Industry Association (ARIA) has an operation called Music Industry Piracy Investigations (MIPI) which prosecutes individuals and organisations that use copyright recordings without paying royalties. There are those who agree with this approach, believing that this is the way to punish bad offenders, to raise consciousness of the moral issue and discourage offending. Others see this as making enemies in many cases with music’s strongest audience and customers. The anti-piracy activities of the RIAA, the US counterpart to ARIA, have included many prosecutions of ordinary individuals. ARIA has not taken that line.

Even five years ago, for an artist to have a CD released, even in the most modest circumstances, was a career milestone. Now DIY offers very low cost of entry into CD production and easy access to the internet allows DIY distribution. The great problem at all levels is, as they say, “monetising” the passionate interest in and free downloading of music on the internet. Meanwhile, whereas until very recently, CD sales were the main source of income for successful groups, and tours were undertaken mainly to support recordings, now the focus has shifted to touring and merchandise sales as the earners with the recording as support.

There is a great interest in the industry and in government in building music exports. The peak music royalty income from overseas was $74m in 2001. In the last four years, the average was $46m. When the total is so small, the presence or absence of one major international success makes an enormous difference proportionally and probably accounted for the 2001 figure. Peak imports were $266m in 2002 and in the last four years averaged $222m. (Figures from the ABS.) So imports (payments of royalties to foreigners) have also fallen, in line with the decline in the industry generally. Generally royalty exports are around a fifth of imports. We could expect some interesting changes for 2008, given the appreciation of the AU$ against the US$. [Recently quite strongly reversed. ED 17.9.08.]

There seems to be a move imminent by government to assist in building royalty exports. The current decline in sale of physical recordings is an impediment to success, and while there is an increase in online sales, they so far represent only about 10% of total sales and it is not at all certain that the current increase will be sustained. There is not yet an assured successful model for online sales and an Australian export drive might need to include an effort to find a solution to this problem that is such a preoccupation of the industry globally.

While the attention is usually on export income from royalties, the exports of musical goods are worth four times as much. In 2007, exports of instruments and recordings was worth $182m and imports were worth $1,171m FOB. Is there potential for export growth here?

There are two industry associations and some basic information is available about them on the knowledge base. ARIA, the senior of the two associations has a board of seven of which four positions are assigned to representatives of the four majors; its total membership is about 100 labels all but four of which are by extrapolation independents. AIR, the association for independents, has over 650 members. AIR is very strongly focused on Australian music.

Broadcasting

Information on Australian content requirements can be found in Australian Content Requirements for Broadcasters.

There are three broadcasting sectors: commercial, public and community. Commercial radio (AM and FM and moving to digital) and television (also moving to digital) are funded by advertising, public by the government and some earnings, and community by audience subscriptions and limited advertising. Add cable television. There is now also broadcast streaming over the internet, which means the sources so far as the consumer is concerned are global.

Commercial broadcasting is driven by the profit motive and profit results from advertising revenue which in turn results from audience reach and size. Commercial broadcasters therefore seek the maximum possible audience and therefore broadcast the genres with a large following. Since it is not fruitful for everyone to seek to share the same audience, there is some differentiation of stations by genre identifications, but nevertheless the commercial stations cover a rather narrow range of genres. It should be noted nevertheless that some stations or networks have been active in support of Australian music, for instance by showcasing new artists.

The neglected genres are to a greater or lesser extent picked up by the public and community stations. ABC has five radio networks of which two are specialist music networks, one based around classical music, totally absent from commercial radio, and the other around contemporary repertoire overlapping with the repertoire of the commercial sector. SBS radio is largely assigned to various cultural and language groups and musical content appears to be their prerogative and dominated by recordings from the old countries. Community radio is very diverse, serving many niche audiences whether geographic, cultural or stylistic. It also gives many young artists their first break.

Internet

It is predicted by some that music radio will give way to online music on demand or a streaming variant which delivers according to the individual listener’s taste and prior listening choices.

Composers and musicians – and stakeholder companies in various roles – can distribute music via the internet from their own websites, via social networks like YouTube, or using the services of aggregators who pull together and market some particular group of artists or repertoire. These can be tiny operations or giant operations. They can distribute direct to consumers or to online ‘etailers’ or to retailers who offer downloadable music through kiosks. There are a number of companies that sell their services to ‘independent’ musicians who have not made exclusive contracts with a record company.

Digital distribution sales are growing rapidly but so far not enough to compensate for loss of sales of physical product. Whether physical product will be totally displaced is a matter for conjecture but it seems logical to suppose that it will. Global value of digital sales doubled in 2006 and represented about 10% of total sales. They are downloaded to computers, portable players, mobile phones. The traditional market has held up longer in Australia; digital sales accounted for just under 10% of the total a year later in 2007 but presumably we are simply lagging rather than striking an independent course. (See also the section on Recording above.)

The internet significantly changes Australia’s situation with regard to music exports. Some are very critical of a lack of initiative and innovation in exploiting the new possibilities. Such possibilities can be explored at this summit, probably especially by the New Music Industry group (which was one of four break-out groups at the summit, the others being education, community and the group for which the current paper and several others on the knowledge base were written: legislation, regulation and infrastructure. ED).

The internet also brings new opportunities for musical development in Australian centres outside the large cities.

A Fragmented Sector

Much of what can be said here about the cohesion or otherwise of the music sector is impressionistic. It is commonly said about the “commercial” section of the sector that it is fragmented, but this is just as true for the non-profit section and between the two sections. Within the commercial section, it has been observed that, as compared with some other countries, this fragmentation manifests itself as a low level of day-to-day cooperation even within particular types of activity.

The Contemporary Music Working Group (CMWG) notes that the fragmentation ‘can lead to a brake on collaboration and long term investment in that economies of scale cannot be captured. Fragmentation leads to information gaps due to difficulties in coordination, and makes it difficult for firms to capture the full benefits of investment in shared infrastructures and capabilities.’

There are of course a large number of associations for interest groups within the sector (see Music Organisations), and these bring some connectedness, but they do not necessarily impact strongly upon daily transactions and nor do they necessarily interact with each other.

I recall the first meeting of the Music Council of Australia, which has a membership structure intended to bring together representatives from across the entire sector. Delegates were sitting across the table from others from areas with which they previously never had contact: the rock band manager and the early childhood music specialist, the community music development coordinator and the opera manager, the music examinations guy and the folk musician, and so on. What could we possibly have to say to each other? Over the years, the agenda has developed; one observes that people have found ways to talk and there is plenty to say – although the very structure of this summit shows something of the large divisions that are inevitable when dealing with such a complex area.

So there are two aspects to this fragmentation: the lack of useful contact between various interest areas and a low level of collaboration on a daily basis within areas.

Statistical and Other Structural Information

Statistics

As mentioned in the beginning of this paper, MCA prepared a statistical framework for the music sector, instigated by the Contemporary Music Working Group and commissioned by the Cultural Ministers’ Council, the conference of state and federal arts ministers.¹ See also the list of research reports on the Music Council of Australia website.⁷

The report sets out a comprehensive model against which gaps in the current provision can be identified. The current provision is mostly gap.

The main source of statistical information is the Commonwealth’s Australian Bureau of Statistics (ABS). The ABS maintains a section called the National Centre for Culture and Recreation Statistics (NCCRS). It seems to devote most of its resources to sport; one report is titled A Sporting Nation, which may be an indicator. It does produce some special reports on cultural activities. Otherwise information about the music sector is drawn by the ABS from larger studies such as the national census, international trade figures and so on.

Presumably behind the commissioning of the statistical framework there was some thought of actually collecting statistics to fill it. The framework report recommended a phased inception over five years and then regular updating on a rolling schedule. However, the Cultural Ministers’ Council has almost no money at its disposal and the only action to date was a considerable payment to the ABS to collect its available music statistics into a sort of compendium.¹ We can only conjecture as to why a special payment was needed for the ABS to assemble its own statistics.

Much of this compendium was drawn from a special music industry study by the ABS published in 1998 for which it received special funds. It says that it cannot repeat the exercise without more special funds. Consequently, there has been no subsequent study and many of the key available statistics are ten or more years old. It might be noted that that study was by no means comprehensive.

As mentioned in the beginning of this paper, the most comprehensive study of the music sector was conducted by Hans Hoegh-Guldberg in 1985, commissioned by the Music Board of the Australia Council. It is titled The Australian Music Industry and is probably available from the Australia Council and state libraries. There have been some special studies in the following decade, e.g. by KPMG, but they dealt only with the recording industry and they too are of course seriously old.

A few of the music sector organisations collect their own statistics, notably ARIA (record sales),⁸ APRA (composer royalties) and AMPAL (publishers). The Australian Music Association (AMA) accesses Department of Trade statistics on imports of musical instruments and equipment and publishes them. When statistics depend upon reporting by companies, there is a possibility of inaccuracies. Companies may decline to provide statistics or may not give accurate information. Some companies may not be affiliated to the collecting organisations and therefore are excluded from the process.

The MCA Knowledge Base has the ambition to collect all available statistics into one place. It has made some good progress with an exposition and also analysis under Hans Hoegh-Guldberg’s editorship. You will find that many of the statistics headings lead to empty categories. Some are empty because MCA has such minuscule resources to apply to the work but more are empty because there is no information with which to fill them.

The gaps could be filled with funding by the industry, or by government. The work could be done by private tender, which probably would be cheaper, or by the ABS, which has statutory power to require responses.

Which statistics? The MCA’s default position is that all the statistics in the framework should be collected to provide a comprehensive picture of music’s contribution to the economy (‘Music GDP’). Others believe that only the statistics for which there is a clear and present purpose should be collected. On the face of it, the resources will not be available for a comprehensive collection and so priority categories should be identified by the sector according to perceived needs and utility.

What are those priorities? They certainly include education, breakdown of some statistics by genres (e.g. exports), touring – domestic and international, music activity in inbound tourism, e-commerce in music, investment.

One which might be mentioned became apparent when the MCA commissioned the Stevens Report National Report on Trends in School Music Education Provision in Australia, Trends in the Provision of Music Education in Schools. Key statistics on music education in schools are simply not collected by some education systems and so there is no basis for accountability for provision or outcomes. (Why collect the statistics when you have nothing to be proud of?!) The Victorian Department, for instance, says decisions about music education provision are delegated to individual schools so it has no information nor, apparently, interest. This has not prevented some private studies such as that by Anne Lierse⁹ that show that the situation overall is appalling. Is there a mechanism by which the Commonwealth can require or encourage collection of these statistics?

Other Structural Information

The MCA Music in Australia Knowledge Base has the objective of setting out the structure of the music sector. In each of its categories, the key article is intended to provide a map of that particular area of activity, an orientation to how it works. This may then be followed by papers about issues for that area. At the time of writing, there are some 110 papers on the knowledge base.

As an elaboration of this exercise, MCA has launched a mapping project in which it has invited representatives of music sub-sectors to contribute SWOT analyses of their areas. (Strengths, Weaknesses, Opportunities, Threats.) Twenty-two have been put on the knowledge base. An analysis is being conducted by Robyn Holmes (Curator of Music at the Australian National Library) to discover common issues, differences, points of articulation, developmental possibilities. The tables may or may not in each case be the result of rigorous process and may or may not intend to fully reveal the situation of the sub-sector, but nevertheless they give very interesting insights into the views of the people on the ground that otherwise would not be available.

These SWOT tables will be added to the Knowledge Base as a bridge between the mapping articles and the issues papers. MCA will also publish on the knowledge base the overall analysis.

It is expected that this will be a valuable planning and advocacy resource for the entire sector. It could also form a potential basis for scenario planning, which would develop a planning framework based on two, three or four equally plausible and equally probable stories about the future. See further Hans Hoegh-Guldberg’s note for the music summit on medium- and long-term planning Medium and Long-Term Planning in the Music Sector.

Summit participants were invited to contribute to the Knowledge Base or propose other possible contributors. These invitations remain current.

Issues Involving Statistics

Which categories of statistics should be given priority for collection?

How can the National Centre for Culture and Recreation Statistics be brought to a decision to divide its resources more equitably between culture and sport?

How can the quality of data collected by industry organisations be improved – i.e. how can more companies be encouraged to provide more accurate and comprehensive information?

How can more resources be found for the collection of statistics and to support the statistical work of the MCA Knowledge Base?

Author

Richard Letts. Part of briefing paper for MCA summit, Australian Musical Futures: Towards 2020, Sydney 5 September 2008.