The Music Sector

Preface 26 April 2014

This is a third article adding perspective to our project to research the contribution of the music sector in both a commercial sense and to the long-term culture future of this nation. It takes a different tack from the other previous articles (2008) which have been setting the scene of the project: The Music Sector Defined and Estimating the Value of the Music Sector, because it was written three years later. Together, however, the three articles provide good background for what we are trying to do with the project. HHG

Introduction

The Music in Australia Knowledge Base goes beyond the conventionally defined music industry, which basically puts the recording industry at the centre. The knowledge base puts creators (composers, songwriters and performers) in the central position and incorporates a wide range of infrastructure and activities which were left out of the framework surrounding the recording industry.

Hans Hoegh-Guldberg and Richard Letts developed the original music sector model in a 2005 report for the Statistics Working Group of the Cultural Ministers’ Council. Indeed, though the sector was only named as such in 2005, they were responsible for its genesis as early as 1987 in an Australia Council report discussed in Estimating the Value of the Music Sector.

The idea of a comprehensive music sector has gained widespread currency since its introduction. It is explicit in the title of the 2011-2012 Music Sector Plan by the Music Board of the Australia Council.The Music Board plan contains a detailed graph which reveals more similarities than differences. We acknowledge it in the discussion of Chart 2 below. It has helped to inform our update of the knowledge base definition in this article.

A Complex Sector

Before tackling the structure of the music sector to estimate its economic or social value, or for other reasons, we need to understand how complex it is. Conventional industry analysis and evaluation (including the recording industry) has been financial in nature – tracing a linear progression through the various processes with an emphasis on industry profitability. Such evaluations feed into the build-up of financial music industry statistics but are not useful in understanding how the music sector interacts.

Chart 1 puts creation at the centre, identified as composition and songwriting, and live and recorded musical performance (shown in green). Secondly, the music sector model incorporates vitally important infrastructure provided by a broad range of support activities including education and training, funding, copyright, legal support, and the informative activities of music libraries and the media. The whole network of production of and trading in music products and services is also part of the supporting infrastructure (blue), including an international dimension of products and ideas. Thirdly (shown in brown), innovation and recent ideas and activities generally are essential in the music sector — from technological change; from research not only in the art music area but in support of all music genres; and from emerging musical activities fuelling the innovative character of the sector. They are exemplified by “green music” and “music health”. While they may be relatively minor influences in the current context, they illustrate the changing dynamics of the sector.

The innovative influences marked in brown do not only arise outside the rest of the music sector. Much new technology develops within existing musical activities. Green music and music health, while representing change, couldn’t have occurred without the existing music sector.

The interactions shown in Chart 1 between what may be called the three “streams” of the music sector (defined in the legend below the chart) can only be illustrative – complexities and interactions will vary with the focus. Basic to the music sector concept, however, is the role of creation centred on composers and performing artists. The function of infrastructure is to support. Technological progress and other innovative influences help define and develop musical creation, again through complex interaction which cannot be adequately defined by a graph.

The three components of musical creativity (composers and songwriters, and live and recorded performance involving musicians and others) are intimately connected as indicated by the double-headed arrows marked in green between the three green “boxes”. These arrows link live performances back to the songwriters and composers. They also provide links to the recorded or mediated use of music, whether for recordings, or in film production, broadcasting, advertising, and other uses including recent ones such as mobile telephony and online technology.

The music sector model in Chart 1 cannot and does not represent the full detail. It leaves out numerous links within the creative areas because the components are not individually shown. Recorded performance contains elements such as online production, recording studios, production of compact discs and DVDs, documentary and feature film production, advertising, and so on. All these are interlinked adding to the complexity.

Similarly, depicting technological change would require the addition of numerous little brown arrows inside most or all of the green and blue boxes since technology is an integral force in all these activities and not just an external influence.¹ These internal links can only be demonstrated through special insights which are difficult to bring into an introductory description without a risk of losing the forest for the trees. One of the aims of this knowledge base is to provide further insights into such interrelationships.

Chart 1 shows that while the basic force is creation, adequate infrastructure is crucially important. The infrastructure includes the role of education and training, public and private funding and other support like the provision of copyright collecting services, legal services and the role of music organisations at all levels from peak bodies like the MCA to unions and industry associations, state musicians’ associations and groups based on particular musical genres, to mention only a few of a rich lode of organisations acting in support of the music sector.

The fact that the individual categories incorporate such diverse components means that the complexity of the sector as depicted in Chart 1 is underestimated at least to the extent that the interactions within each category are not shown. This also applies to the third general infrastructure category which covers everything from production (record studios and companies, film producers, advertising companies and so on) to wholesale and retail distribution, whether involving managers and agents or special bodies like music publishers, or associated with venues from pubs and clubs to festivals and concert halls, or retailed through shops and supermarkets or online. Again, the internal interactions are numerous, adding to the complexity of the sector.

There is also a special need to consider consumers of music product from the demand rather than the supply side – audiences at popular concerts ranging from pubs and clubs to entertainment centres, and those attending concerts and choirs, listeners to recorded music of all kinds, and other perhaps less obvious expressions. An article is planned for the knowledge base (and we welcome contributions on the subject).

In conclusion, one essential key to understanding the music sector is to recognise its complexity. This is reinforced by its innovative side, through a huge role for technology both online and in physical applications, through the role of research, library services, and music criticism, and through relatively new areas such as “green music” and what has been termed “music health”, covering the promotion of participative musical activities as well as clinical intervention through music therapy (music health contains complexities on which an analytic article for the knowledge base would be most welcome). Other new areas are likely to add to the dynamics of the music sector in future.

Value flows

The basic feature of the Music Board and other models of the music sector discussed in the introductory section is that both put creation at the centre, rather than a particular activity such as the recording industry. Both concepts also point towards how the sector contributes to the Australian economy and social and cultural life. The Music Board notes “the intangible value of the music sector” as a key feature. The economic importance of the sector is seen as a succession of “key stages in the value chain” from creators through presenters and publishers and the distribution process through to the multitude of ways in which the music product can be consumed.

Our perception of the sector in the Hoegh-Guldberg and Letts 2005 report to the Cultural Ministers’ Council also started with a succession of “value chains”, but more recently economists and other social scientists (including this writer) have extended their attention towards the social, cultural and environmental well-being of communities and citizens. Some of this derives from mounting concern over accelerating climate change – which British economist Nicholas Stern in his major 2006 review named the greatest market failure ever in the sense that a small number of large corporations have been allowed to pollute the atmosphere without penalty, to the detriment of the entire present and future humankind.

Beyond this, however, there is mounting criticism of the elevation of economic growth (GDP) at the expense of community health, welfare, happiness and comfort – in short, well-being. Indices of well-being have been shown to decline in the face of a growing GDP. In 2009, French president Nicolas Sarkozy, unsatisfied with the present state of statistical information about the economy and the society, commissioned Nobel Prize-winning economists Joseph Stiglitz and Amartya Sen to conduct a review which revealed eight main areas where well-being played second fiddle to economic growth. These areas were: material living standards; health; education; personal activities including work; political voice and governance; social connections and relationships; the present and future environment; and economic and physical insecurity. “All these dimensions shape people’s well-being, and yet many of them are missed by conventional income measures,” the report states on page 14.

Somewhat disconcertingly, little was said about the role of cultural activities and the arts, including music. While it was recognised (page 145) that an “approach based on subjective self-reporting has broad appeal due to the strong presumption in many streams of ancient and modern culture worldwide that making people “happy” and “satisfied” with their lives is a universal goal of human existence”, culture and the arts were not regarded to be on a par with, or significantly contributing to, the eight areas mentioned above. There are at most early signs that this may be changing, as “several methods have made subjective well-being amenable to systematic quantification” – an “approach [that] makes it possible to reflect the diversity of people’s views about what is important in their lives.”

We regard this as an essential element of the music sector’s role, and consequently see two types of results emerging in the valuation area, whereas the analysis to date has been largely in macroeconomic terms. Readers are invited to contribute to a deeper understanding of how music contributes ‘’socioculturally’’ and “socioeconomically” to the well-being of Australia’s communities.

Defining Outcomes: Economic Contribution Versus Well-being

As discussed in connection with Chart 1, the music sector may be envisaged to consist of three streams: creativity, infrastructure support, and innovation and new ideas. Each contributes in principle to both an economic product and to social, cultural and environmental well-being. Both attempt to define the “music content” of the three activity streams, but the concepts are very different. Chart 2 represents an attempt to show how this “music content” might be analysed and valued. The seemingly linear approach is not at odds with the fact that the music sector has a complex structure (as illustrated by Chart 1). Here we “simply” add up the total music content in economic or sociocultural terms which results from the complex entity that is the music sector. In economic terms, music content adds to what may be popularly known as “music GDP” but is actually the gross value-added (GVA) from all musical activities (technically, GDP is total GVA plus net indirect taxes which include the distorting influence of the goods and services tax (GST) introduced in 2000).

Well-being (welfare, comfort, sense of community, happiness) is related to what the Music Board’s 2011-12 sector plan calls the intangible value of the music sector – including the contribution to social and cultural well-being in Chart 2 which is the outcome of a vibrant, diverse and widely shared musical culture. The 2011-12 plan identifies it as the role of Australia’s cultural and artistic capital including its influence on our national identity and musical literacy, performances, compositions and recordings. This helps identify government policies and initiatives including financial support, strategic development, and policies ranging from copyright and education to the role of national broadcasting, local content regulations, trade promotion and regulation.

The Music Board’s plan is seen through the lens of the Australia Council as the primary public arts funding authority in the nation. But most musical activity receives no public funding, notably almost the entire popular music field. The “intangibles” may differ here, but the contribution to social and cultural well-being is no less valid, whatever type of music sector activity is considered. Some musical genres, like jazz in America, have their roots in the poorest population elements. The difference between direct income creation and the well-being derived from the sheer creativity of music-making is a potentially fertile area of research, starting with defining the differences in initially qualitative terms. Contributions are invited on how to tackle these issues.

Quantitative estimation of the role of music in furthering well-being is at most in its infancy, though current economic thinking indicates that there is a groundswell of general research into well-being. The music sector, of course, is notorious for its lack of statistics even in the economic area – indeed this was the reason for the commissioning of the 2005 report by Hoegh-Guldberg and Letts.

It is a main objective of the MCA through this knowledge base to further both quantitative statistics and qualitative understanding of the sector, with the assistance, we hope, of many other contributors.

The three streams

As we have noted, graphs that look like linear flow charts risk being accused of ignoring the detailed interrelations between particular areas, but we have already discussed in connection with Chart 1 how complex they are. In Chart 2, the apparent flows relate simply to their contribution to the total music sector value, whether the objective is to measure it in economic terms or in terms of well-being. In the complex real world, as we have seen, none of the nine “boxes” on the graph would be unaffected by the activities of any other “box” – whether through influencing or being influenced, or both.

In Chart 2, the only hint of these interrelationships is in the headings of each stream: music creation and presentation, supporting infrastructure, and what we have called innovation and emerging trends. The three streams are connected by lines or arrows as a reminder of these complexities.

Stream 1: Creative musical activities

This stream represents the basic driving forces in the Australian music sector. Composers, songwriters and musicians, bands, ensembles, choirs and orchestras are the creators of live and recorded performance, the latter using media such as DVDs or other recordings, online products, film, television, and advertising.

Stream 2: Infrastructure support

In a modern developed society, large and varied infrastructure arrangements are required, without which creators could not exist in an economically and socially viable fashion. Even garages and sheds provide infrastructure when a band of teenagers set out to play their music, and the quality of their sound will vary with their musical training, and how this was acquired.

The graph lists three categories, which are generally very large:

• School, tertiary and private music education, and other training listed in the Music Board plan as ranging from youth orchestras and choirs to mentorships and international study, community music practice, conferences and workshops. There are more parallels in the generally unfunded commercial music area. Furthermore, training also includes musicians acquiring basic business and technical skills to manage their affairs, which again is particularly important in a commercial context.

• Production facilities include recording studios and companies, television studios, film producers, broadcasting stations, and advertising agencies. Agents and managers play an essential role, as do the availability of venues from pubs and clubs to festivals and concert halls. The category also comprises the entire distribution and sales system from wholesalers to physical and online retailers, and sales through venues and festivals. (As noted above, this analysis focuses on supply; a forthcoming article will provide a separate analysis of the demand for or consumption of music product, and we welcome contributions from other people.)

• The third category provides a variety of essential supporting infrastructure including copyright-related collecting societies and legal services, and public and private funding authorities. Furthermore, the sector depends on a broad spectrum of professional support associations, which in the Music Board plan’s formulation comprises advocacy and representative organisations ranging from national bodies like the MCA, to which we would add state and local music associations, organisations representing particular genres or activities, and unions. Other institutions providing infrastructure support include libraries (primarily at national and state level but also including collections like those at the Australian Music Centre) and media (broadcast, print and online, including music critique and publications such as MCA’s Music Forum).

Stream 3: Innovative trends and activities

The three categories in this stream try to capture the essential innovative quality of the music sector. First, it is to a high extent influenced by new technology, both online (developing at a galloping pace) and physical (including acoustics, building design, and lighting and other presentation devices under constant development, most spectacularly but not solely for popular music shows). Much of this is associated with existing activities and should not be seen as an external influence.

The second category of innovative activities include research carried out in universities and conveyed through special journals, such as MCA’s Journal of Music Research Online. Other infrastructure categories also provide innovative research through their music-related activities, including copyright-related organisations, music libraries, and media.

The third category includes relatively new activities such as “music and health”, which represents evolving innovative knowledge, whether related to promotion of music participation which appears to be a current growth field, or as clinical intervention through music therapy. Another new area which is likely to grow in importance is the advocacy for “green music” – that is, the growing awareness of the ecological footprint of musical activities, and what can be done to minimise it.

Innovative influences, as stated repeatedly, do not as a rule originate from outside the existing music sector. They are likely to represent initiatives taken within it. But whatever the origin, innovation is an essential influence on the future direction of how the music sector is developing.

Conclusion

The music sector is evolving in a national and international setting that is itself undergoing profound change. The structure as defined in this article may change quite rapidly, and the description itself is undoubtedly open to other analytic approaches. We invite constructive comments and contributions to help keeping up with the change.

Author

Hans Hoegh-Guldberg (MCA Knowledge Base editor), with acknowledgments to Richard Letts for comments on a version of the article first submitted 30.6.2011. Most recent revisions 22.8.2011.