Policy, market and transaction analysis across central and southeast Europe

2

Mapping of the Croatian industry

The governmental economic statistics of the UN and EU member states were designed in the 20th century to represent manufacturing and agricultural production. Creative industries are very difficult to find in these statistical systems, so we have to create a data map. Especially live music is difficult to find, because in most statistical system it is combined with all performing arts, including theatres. Fig: ESSnet-Culture Technical Recommendations, p48, music industry emphasised.

3

Mapping of the Croatian industry

Creative and cultural industries are made of a network of micro enterprises and freelancers, often working in different roles. The data of the Croatian music industry is to be fined in a many boxes. We follow the US and EU classification of the three income streams, from creative works (music and lyrics, staged for live performances and recorded for sales, broadcast and streaming.

Music publishers Uses:#printed sheet music Uses:#film rights#advertisement #film rights #film rights#theatre rights #advertisement #advertisement

Booking agencies #software #theatre rights #theatre rights#sound recordings #software #software

Music sheets #sound recordings #sound recordings

Manufacturing

Radio & TV Background m Wholesale

Promoters of cultural venue operatorsIndependent and integrated concert promoter and publishers

Club venues WebshopStreaming Record shops

Broadcast and public

performance…

… Record buying

audience

Home copying audience

Classical music audience

Audience of production music, such as advertisement, soundtracks, software games.

Music students, (hobby) musicians. Digital audience

Consumption, audience, market transactions, non-market transactions (private copying, piracy)

Other Creative Industry uses

Entertaining music audience: concerts and festivals

Sale of audio devices

Advertising industry, audiovisual industry, software games, theatres.Festivals Concert halls

Independent concert promoters

Cultural and music education public performance and broadcasting via CMOs Home copying

and PCR

Musical instrument manufacturing and retailAudio- and stage technology

Rehearsal studios ZAPRAF performers' CMO

SOZA authors'right CMO HDS ZAMP HUZIP producers' CMO

Concert Promoters Aggregators

Production, creation of

artistic originals, events.

Live entertainment stream Author's stream Sound recording stream

Management, non-artistic

value added, dissemination

and trade, collective rights management.

Management, tour management, assisting personell

Mechanical reproductionBackground industry and services

#size of the repertoire exploited on Slovak stages #total Slovak repertoire #total Slovak repertoire

Self-publishedBands Ensembles, choirs Record labels

#no of concerts, no of concert venues used per year #no. musical works and lyrics per yer #no. of sound recordings made in Slovakia#music festivals, music festival capacities in Slovakia #exploited Slovak repertoire #no of songs exploited in Slovakia (active repertoire)

Performing musicians Music composers and authors Performing musiciansMusicians who play on live states Authors who create music and lyrics Session musician

4

The music ecosystem

The music industry is colorful. Artists are supported by managers and technicians. Creative workers often do administrative or physical work. In order to understand the full value created and the full employment affect of music we need to a way with our survey to managers and technicians. Most artists perform 1-3 other music related jobs to make a difficult but independent, creative living.

0 5 10 15 20 25 30 35 40 45

Series1; 48%

40%

25%22%

16%

13% 13%

10%8%

6%

6%

6% 5%3%

2%1%

5

Three income streams

At first sight, the income structure of Croatian artists is similar to their colleagues’ in the UK. However, we were able to invite only established, professional artists into our survey. We must make a bigger effort to find part-time, upcoming and underground acts to remain compatible with these countries.

51%

63%

57%

48%

33%

28%

25%

41%

12%

6%

7%

6%

4%

11%

5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

UK

HU

SK

HR

Live music Authors' Revenue Recording Revenue Other

6

Institutions and atypical employers

52%

65%

63%

49%

32%

7%

9%

13%

30%

19%

34%

11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

UK

HU

SK

HR

Individual revenue Music and Record Publishing Collective Rights Management Other

The relatively high level of royalties is probably due to the fact that less part-time and young artists participated so far in our survey. However, it is clear that the collective rights management is very important in Croatia. Probably CMOs can take on some roles played by publishers, but the very different type of business development and income that music publishers can bring to the market is missing from all over the region.

7

Methodology

https://www.academia.edu/18155317/Creating_better_national_cultural_statistics_with_Eurobarometer_datasets_and_ESSNet-Culture_technical_recommendations

8

Key insights #1 – creative industries

1. The importance of creative industries, especially the music industry is often lost to economic policy makers, because the economic output and related tax income and the contribution to employment is not directly accessible for them. It is hidden in many boxes and behind atypical work arrangement. Colleagues in the film or advertising business have similar problems.

We need to create detailed data maps and share data among collective management organization such as HDS ZAMP, HUZIP, HDU, ZAPRAF and HGU and business entities such as music and record publishers, concert and festival promoters, concert halls and arenas in order to understand and present music industry problems.

The CEEMID collective database allows organization to share market research resources and via a trusted third party share confidential data sources. Please join the CEEMID initiative! Our surveys are long, a bit boring, but it is essential to create the data map and fill in the missing gaps. Please distribute our survey and fill it in!

9

Live music: employer for the young

The music industry is the biggest creative employer in Europe. It creates about 2 million jobs, most of them for young people who are critically affected by unemployment. Music is the most important input of the radio industry, and it also creates jobs in advertising, the film industry, TV broadcasting and theatres. Data: EY, GESAC, Candole Partners. Further reference in study.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

10

Employment beyond the artists

Staging a live event requires technicians for sound, light and stage setting or building. A transporter is almost always needed. Ticketing and merchandise sales also require at least one help. Even amateur musicians employ about four people for such roles. Full-time musicians are supported by on average by 8 people on a concert. Venues often employ many people. A well equipped music club has about 20-40 people on duty during a live event. Arena shows employ about 100-200 people and festivals with their temporary installations often far more.

11

Problems: #1 seasonality

Seasonality is a huge problem for venue operators, cultural facilities and music professionals, because in many months there is no work available. Festivals and cultural tourism can play a great role in making work less seasonal. Potential incentives should be discussed.

12

Problems: #2 value added taxes

Western European countries apply lower VAT rates on live music due to its very high labor component. The tax rates on music events is very high in Croatia, which curbs domestic demand and makes cultural tourism less competitive for the country. Data: Live Nation Central & Eastern Europe. * Austria before VAT level rise.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Taxes

Royalty

Artist fee

13

Problems: #3 young audience

The Central European audience is very young, but not because more young people visit concerts but because middle-aged people stop visiting at a very early age. Croatia has a relatively favorable audience composition, especially in Zagreb. Understanding audience needs and demand drivers is key to increase the most important revenue source of the industry. Data: CEEMID

14

Problems: #4 small venues

15

Key insights #2 – the live music industry

2. Musicians typically perform 27 shows in a year. Performing artists, technicians, transporters, tour managers usually require 50-150 events to earn a decent living. The income from music events is risky and it requires a large working capital. Better managing seasonality, making small venues more competitive and understand demand is critical.

We need data from ticket vendors, event portals, concert and festival promoters to validate these results and compare them to Hungary, Slovakia, Austria, Germany and the UK. In Slovakia and Hungary we understand why people do not visit concerts. It has financial, cultural and even logistic components.

Performing artists, their management , most concert promoters and venue operators do not have the necessary expertise and resources to conduct market research, analyze data and conduct an effective PR and advocacy function. In Scandinavia and Germany industry associations pool resources. This is the aim of the national reports and CEEMID, too.

16

Recorded music

In Central Europe, collective right management societies play a very important role in maintaining the recorded repertoire. In 2014, about 40% of the industry income came from collective management of radio and television broadcasts, public performance in the HORECA sector and certain digital streams.

But digital distribution will bring unseen competitions among Croatian and international acts. Data: IFPI, compilations for CEEMID.

0 5 10 15

UK

Sweden

Germany

Austria

France

Netherlands

Czech Republic

Poland

Slovakia

Hungary

Croatia

Physical

Digital

Performance

Synch

0% 20% 40% 60% 80% 100%

UK

Sweden

Germany

Austria

France

Netherlands

Czech Republic

Poland

Slovakia

Hungary

Croatia

Physical

Digital

Performance

Synch

17

Problems: #1 investments & cost recovery

Artists are investing into recordings, because recorded music has a bigger audience than live music. Recorded music is the main form of music discovery, it is impossible to get on the ever costlier stages without a good recorded performance. Yet recording budgets are not recovered. Very little means remain for market research and promotion, which is very dangerous in the currently increasing competition. Data: preliminary survey results in Croatia.

18

Problems: #2 increasing competition and lack of data

In Central Europe, collective right management societies and performer’s unions play an important role, because most of the artists’ revenue comes from fragmented sources. In the UK, music and record publishers play this role. Data: EchoNest, CEEMID.

EU ranking population % plays instrument EU ranking population % plays instrument

Echo

Nes

t Hot

ness

rank

ing

Echo

Nes

t Disc

over

y ra

nkin

g

19

Problems: #3 digital distribution strategy

Digital streams came a bit late to Croatia, but they will soon change the market. Each stream has a different distribution and promotion strategy, so income from YouTube, Spotify, Deezer, Bandcamp and SoundCloud requires a differentiated strategy, both at the level of CMOs, record labels and artists. Again, survey data are crucial to understand this extremely important topic.

Data: preliminary survey results in Croatia, market estimate calculated for Artisjus (2015), actual digital distribution data of a successful independent catalog in 2014, courtesy of WMMD.

Croatia (survey)

Physical

Digital download

YouTube

Spotify

Deezer

Bandcamp

Soundcloud

Other stream

Hungary estimate

Physical

Digital download

YouTube

Spotify

Deezer

Bandcamp

Soundcloud

Other stream

Local stream

Hungary case study

Physical

Digital download

YouTube

Spotify

Deezer

Bandcamp

Soundcloud

Other stream

Local stream

20

Key insights #3 – the recording industry

3. Understanding digital distribution and creating data-driven, intelligent national repertoire promotion strategy is essential in the increasing competition generated by YouTube, Spotify, Deezer, Bandcamp and SoundCloud. In order to maintain the market share of Croatian music, a new public broadcasting vision is needed.

We need more respondents in our survey to have a better understanding of the particular market situation in Croatia. Especially important to have a view on self-published artists whose data is only partly compiled by HDU and IFPI. It is impossible to obtain data from the global companies so local data collection is essential for survival.

In the era of radio and television, access to broadcast channels was share and the national repertoire protected, partly by public broadcasters such as Hrvatska radiotelevizija. In the increased competition from global digital distribution schemes, even national repertoires are too small for effective distribution strategy, and a regional strategy is needed.

21

“Anketa je odlična i siguran sam da će pokazati pravo ( jadno) stanje i status

hrvatskih muzičara i svih koji su na bilo koji način involvirani u taj posao.”

“Nisu svi glazbenici autori, tj zive i od reprodukcije pa mi s cini da se tu mogao

urediti odnos izvodjenja glazbe i autorskog izvodjenja ili stvaranja. Inace zanimljiva

anketa. Hvala vam.”

“Drago mi je da je netko pripremio

ovu anketu”

“Odlična i potrebna anketa, ali samo glazbeno tržište je u

rasulu. ““Čestitke na inicijativi.”

“Nije loše, uvijek može i

bolje.”

“Puno i previše pitanja.. neka su slična.”

“Anketa sa sasvim ok.”

Your opinion counts

“Nadam se da će nešto pomoći u ostvarenju boljih uvjeta za sve koje svoju egzistenciju ostvaruju unutar

hrvatske glazbene industrije”

“nemam sve podatke odmah pri ruci, ovo je

dobrim djelom točno.”

“Kao član banda koji radi alternativnu glazbu, smatram da se i dalje takvi

bandovi nalaze na margini u ukupnoj slici hrvatske glazbene industrije. “

“Moj status je nezaposlen, a ustvari radim preko ugovora o

djelu u hotelskim kućama , uglavnom, cca 300 nastupa

godišnje. Kako regulirati status glazbenika i plaćati naknadu za

mirovinsko osiguranje...”

22

Daniel Antal, CFA is senior consultant. Daniel has worked as an economic regulator, promoted policy and investor interests in Hungary and Southeast Europe in the past 15 years. He serves customers in Budapest and the Benelux region. He is specialized in the regulated price setting (royalty tariffs) and business development in regulated environments. Within Candole he is specialized on creative industries, especially live and recorded music, film production and distribution, radio and television, online media and publishing.

Daniel holds an MSc Economic Regulation and Competition Policy from the City University London, and has finished the Chartered Financial Analyst program in 2014. He is currently enrolled in the John Hopkins University Data Science distant learning program.

daniel.antal@candole.com or nl.linkedin.com/antaldaniel