Why it doesn't pay to be a musician.

Back before the summer... well, my holiday at least... I watched the debate on Internet Filesharing on Al Jazeera between Christian Engström (Piratpartiets MEP) and Richard Gibbs, an American composer supporting artists rights.

Watching the debate about the impact of filesharing on the music industry I was struck that really the whole subject is missing the point. Filesharing isn't why it's hard for artists to make a living...

I was reminded of it again tonight reading the comments on the Guardian article linked in my last piece. Someone there opined that we will look back on the last 50 years as the golden age for popular music. And the thing is, they could be right.....

There are some fundamental facts about recorded music that mean that it will be increasingly hard to make a living out of recordings.... which boil down to that old favourite, supply and demand.

There are today millions of recorded tunes. Each year there are tens of thousands of new ones. The costs of creating a recording are dropping. The rate of new recordings are increasing. Recordings don't go away.

What does this mean? Supply is BIG.... and growing. The number of artists competing for income grows and grows - and even if an artist retires their recordings are still there competing for the customer's attention. Consumers on the other hand don't have endless pockets - there's only so much they are going to spend on recorded music.

And you want to release a record and make it big? That's really not a healthy market to be trying to take your share of..... not least since oversupply will inevitably lead to lower prices.

Now... if you sell cars you get rid of last years' model when you start selling your new one. As we see though that doesn't really happen in the music business. Not any more at least. Record labels have had a grip on distribution and production and previously have been able to restrict the artists reaching the market by not making new pressings of their back catalogs. This makes a natural restriction on the range of artists in the market at any time. But that has all changed. Digital techniques mean back catalogs are now just as accessible and marketable as the latest artists.

Ten years ago an artist's recordings competed with all the other music that was in current release. Today you have to compete with every record that has ever been released. Doesn't that sound like things are much tougher than they used to be? For the artists...

How do things look over at the record company?

Well.... if we look at all that music you can reckon that `BIG slice of consumer spending is going to go on old recordings... simply because there are so many of them. So, if you are sitting on a big back catalog this is great news... a bigger catalog translates to a bigger market share and more revenues. No new recording costs and very little investment needed in promotion and marketing.. Is it a surprise that they have lobbied so hard for copyright extensions?

Making back catalogs available does though have consequences even if you run a recording company. If releasing older tracks takes a bigger share of the market - which seems intuitive, but I've not yet tried checking in the figures - then new recordings are fighting for a smaller share of the pie. Returns for record companies are lower and risks are higher - and that too is not good news for artists looking to hook a contract (if you need to these days?).

So.... don't give up the day job.

Milking the American filmgoer

In the Movie Picture Association of Americas "MPAA Theatrical market statistics" they make the statement
"Cinema ticket prices track consumer price index".

They then show statistics that show that in eight out of the last ten years cinema ticket prices rose by more than inflation. Taken over those last ten years they in fact rose by a total of 16,3% above the consumer pric index.
So yes... last year they rose by just 0,6% above inflation.. but seen as a whole that's hardly something to boast about.

Cinema attendances are static.. but revenues continue to rise by the simple fact that they keep putting the price up...

Piss-ups and breweries?! Film economics

The MPAA home page is full of interesting reading.....

"The average motion picture cost the MPAA member companies $96.2 million to make and market in 2005. Six out of ten movies never recoup their original investment."

That's an average of $60M 'negative cost' (I assume that's production) and $36M in marketing. (That's a lot of marketing!). Six out of ten is p*** poor.

There were 1,4billion theatre attendances in 2008 in the US - with over 500 new productions that's a little under 5 attendances per person -maybe a bit more if you exclude babes and the infirm.

"The US Motion Picture Industry employs over 750,000 people" or... "2,5million people"
...if you include 1,5 million handling things like dry cleaning and car rentals.

The average wage in the core production industry is 76% above the national average wage. Broadening this to include TV and film distribution the average is still 26% above the national average (telling us amongst other things that these latter groups earn less than the average wage).

The US industry is made up of 115 000 businesses. Over 80% employ less than 10 people. ... which means lot's of overhead cost on dealmaking, contracting, administration etc, etc, etc

So... to conclude...

• The majority of films run at a loss. Studios can't tell a good film from a bad one, or have no idea how to manage production costs to a budget.
• Core production teams get paid richly paid for delivering loss making films.
• Lots of other underpaid people rely on their loss making 'genius'.
• Over ten new films a week says there's lot's of competition
• Individual viewers only see around 1-2% of the films released.
• The industry is inefficiently structured - lot's of small firms happily paying each other over the odds to deliver the latest creative masterpiece...

And that's all without asking how much the stars took as their cut of proceedings???

Of course film makers do make money... Box office takings continue to rise, and a good film can takes between $100M and $500M - before it goes to DVD. But even so - with over 500 films in production in any year that's over 300 films a year that just don't cut the mustard - that's $18Bn in working capital tied up in projects that won't deliver a profit - even without looking at marketing costs (another $10Bn).

So here's some tips...

• Big budget films don't necessarily make good cinema - plan for a lower break even cost... it's creativity not money that makes good films.
• Scale makes for more efficient businesses - consolidate and amalgamate.
• There are lot's of suppliers to choose from... get them to compete on price (duh!)
• ...or outsource to Bollywood
• There are too many films in production... make fewer films and get better returns on those you do make...
• Get a better deal on scripts, music and other copyrights and IPRs
• Pay realistic wages.. fewer films means you can pick and choose.
• And give a fair deal for the lower paid!