SAMRO Board - South African Music Export Strategy

1 South African Music Export Strategy (2)

South African Music Export Strategy

Contact: David Alexander

Tel: 011 438 7000

Mobile: 0836009488

Email: [email protected]


1. Introduction

This music export strategy has been drafted by SAMEX as part of broader development efforts in the

South African music sector. Since the 1998 Cultural Industries Growth Strategy Report (CIGS) music

has been identified as a significant factor of growth and development in the country. This strategy

aims to use the foundation of various efforts to support music exports as a solid base for an

expanded strategy that engages with national priorities as outlined in the Medium Term Strategic

Framework, the National Export Strategy and the Industrial Policy Framework and Industrial Policy

Action Plan. The latter highlight the importance of:

“Improving our non-traditional export performance - particularly in more sophisticated, value

added products - is an important objective for industrial policy.1”

In particular, the music sector presents significant opportunities to contribute to the Medium Term

Strategic Framework for 2009 – 2014. These specifically include contributing to the growth of the

economy by improving the ability of the sector to compete regionally and internationally along with

other creative industries. In addition, the music sector is comprised largely of small businesses

creating significant opportunities for Broad-Based Black Economic Empowerment and involvement

of young people thus creating opportunities to support small young black businesses.

2. Overview of the Music Industry

2.1 Global Trade

A report entitled The Creative Economy released by UNCTAD in 2008 documents the phenomenal growth of the global market for traded goods and services of the creative industries, of which music is a key component. The highlights the fact that the value of world exports of creative industry goods and services reached $424.4billion in 2005, accounting for 3.4 per cent of world trade as compared with $227.4 billion in 1996. Between 2000 and 2005 global trade in these good and services grew by an annual rate of 8.7% in both the goods and service categories although services represent a much smaller proportion of global trade2. The research goes on to note that while developed countries, and particularly the United States and European Union dominate world trade, developing countries, which include South Africa, have increased their share of trade year after year. In 1996, exports from these economies accounted for 29% of global trade in creative industries goods and services, increasing to 41% in 2005. This growth is primarily due to the extraordinary growth experience in Chinese exports of goods and services.

1 National Industrial Policy Framework, page 41 2 OECD Report 2008


Source: UNCTAD (2008)

Music is traded as both a “good” and a “service” comprising the following major categories of economic activity:

Recorded music

Live music

Music rights administration

Sponsorship

Merchandise With regard to music as a cultural good and as a service, there has been consistent growth over time, as indicated in the figure below:

Source: UNCTAD (2008)


2.2 South African Music Sector The global music market is worth $36.9 billion in 2007 with total sales of 3.5 billion units. South Africa is ranked the 25th largest music market in the world. The global market was dominated by 5 large multi-national record companies, AOL Time Warner, Vivendi-Universal, Sony, BMG and EMI. Since the merger of Sony and BMG there are four majors and speculation amongst industry players at the world’s largest music market MIDEM, is that there will soon be three majors3. In 2008, the South African recording industry generated locally just short of R900 million4 which is down from the 2 previous years where the figure approximated R1 billion. 55% of that was from International albums released locally and therefore a large portion of that is remitted as royalties to international companies and artists. Broadcast and performance rights amounted to R206 million, mechanical rights R30 million and estimated needletime rights approximately R25 million. While the live music aspects remain difficult to quantify, it is estimated that it contributed R1,5 billion to overall industry value of R 2,8 billion.

2.3 SWOT Analysis of the SA Music Industry

Stre

ngt

hs

Moshito as a development and trade facilitation mechanism

Music infrastructure and capacity in the country?

Cultural Diversity and International appetite for our Music

General strong rights administration regimes

Industry support for structures such as SAMEX

Relationship with Government and related agencies that are working with the sector in key initiatives e.g. Moshito and SAMEX

Wea

knes

ses

The small size of the domestic market

Difficulties in attracting investment

The costs of promotion in large music buying territories given logistics and exchange rates

The costs and restrictions of doing business and touring in foreign territories e.g. visas, work permits

Government policy and export incentives that is not tailored to the needs of creative industries

Lack of professional live music circuit

Lack of bandwith and access to the internet

Op

po

rtu

nit

ies

The rise of digital music with track downloads in the US outselling CDs by a ratio of 2.5 to 1

Continued growth in usage and ownership of various forms of digital audio platforms, including online radio, iPod/MP3 players, and podcasting

High penetration of mobile telephones in the population

iPod/portable MP3 player ownership and iPod use continues to grow consistently

Continued growth in global trade in cultural goods and services

Exporting of services and goods within Africa and the creation of South-South relations

Competitiveness in Global Events hosting

Thre

ats

Piracy

Total album sales dropped to 428.4 million, 14% fewer than in 2007, and have fallen 45% since 2000

Global Recession

3 SAMEX business plan 4 Info from RISA


2.3 Benchmark Export Economies

In developing the strategy, reference has been made to a range of successful music export

economies with clear strategic and/or institutional frameworks in place to support trade in the

sector. The table below highlights the results of the benchmarking5.

Australia Canada Finland Jamaica

Purpose To support the development of Australian music and assist the music industry overseas

Provide assistance towards the growth & development of the Canadian independent recording industry

Initiates, assists & facilitates the promotion, marketing & sales of Finish popular music abroad

Subsidise artists airfare for Jamaica’s participation at showcases at music trade fairs

Revenue Federal government through Australia Council for the Arts

Voluntary contribution from radio broadcasters

Canadian Department of Heritage -

Council Music Fund

Membership funds

State subsidy via Ministry of Trade and Industry

Project Funding from a variety of ministries

Government funded

Activities Provides export marketing advances & promotion expenses

Loans for development of international markets

Marketing of artists at international music events

Development of website for Australian music

Business & market development strategies

Co-ordination with industry bodies

Young & emerging artists initiatives

Supports songwriters and Artists in production, creation of videos & International tour support

Promotes member company products

Collects & distributes export-related information Facilitates participation in international trade fairs

Collects & disseminates information

Develops funding & support structures

Initiates & produces Finnish music export projects

Subsidized rate for music companies to participating in national pavilions at trade fairs

Annual music directory

Produces compilation CD sampler MIDEM and other trade shows

Special vehicle company (TEB) facilitates distribution of press kits to potential buyers for artists unable to attend

Organizing sponsorship support for workshops and seminars

In each case, specific and tailor-made services exist with a focus on information, trade facilitation

and support for internationally oriented marketing opportunities both locally and abroad.

5 SAMEX Business Plan 2008


3. National Export Strategy and System in SA

The South African National Export Strategy outlines the following core objectives:

Build export awareness and create an export culture.

To increase exports in targeted priority markets and the number of exporters, with specific focus on SME and BEE enterprises.

Improve export participation in geographically marginalised and economically depressed areas within South Africa.

Ensure policy coherence government and build consensus amongst external stakeholders.

Provide clients with a clear understanding of the strategic interventions and priorities with export promotion and development.

Provide clients with a clear understanding of the service offerings available to exporters and prospective exporters.

The critical interventions include:

The formation of export council and the identification of a range of prioritised sectors with Customised Sector Programmes (CSPs) informing development.

A dedicated and well resourced export promotion unit.

The development of a National Trade Information System. The services offered by the Department of Trade and Industry are outlined as follows:

Source: The DTI (www.thedti.gov.za)

4. Export Strategy for South African Music

http://www.thedti.gov.za/


4.1 Vision To create the opportunities for economic growth through a vibrant export culture in music that promotes innovation, creativity, access, wealth generation, equity and development.

4.2 Objectives

The objectives of the strategy are to:

Provide support services to exporting businesses.

Generate data and disseminate information to exporters regarding market trends and opportunities.

Assist businesses gain exposure to new markets and formulation of business relationships that may lead to short and long-term opportunities for SA music businesses.

Develop a consistent South African presence at key music focused events, festivals and trade shows.

Assist businesses in exploiting opportunities in related sectors, e.g. tourism.

Lobby on the sector's behalf to reduce international trade barriers and enhance trade.

Provide opportunities to grow small and micro black owned music enterprises

To contribute to the youth economic empowerment strategy through programmes that supports this strategy and partnering with appropriate stakeholders to do so.

4.3 Strategic Approach

The strategy is based on the following core approach:


In identifying these strategic interventions, the strategy notes the importance of development in the

context of South Africa’s history and development trajectory. As such, it is essential to view the

strategy as part of broader development initiatives in the sector. Looking at each music enterprise

with a view to identifying those that are export ready, this strategy and its development partners will

ensure success by:

Focusing in exporting and export ready businesses.

Identify specific markets for development and targeting.

Engaging in consistent market development exercises linked to all aspects of trade and

cultural promotion currently undertaken by government.

4.4 Interventions

4.4.1 Attaining National Goals and Objectives

Rationale: The music sector presents significant opportunities to contribute to the Medium

Term Strategic Framework for 2009 – 2014. These specifically include contributing to

the growth of the economy by improving the ability of the sector to compete

regionally and internationally along with other creative industries. In addition, the

music sector is comprised largely of small businesses creating significant

opportunities for Broad-Based Black Economic Empowerment and involvement of

young people.


Objective Measures Targets6 Initiatives

Improving the BBBE profile of the sector

Increased number of BBBEE firms benefiting from export opportunities

10% increase per annum. Targeted programmes in support of BBBEE

Development of a music industry charter

Creating opportunities for youth owned enterprises

Increased number of youth-owned firms benefitting from export opportunities

20% increase per annum Development of a music industry charter

Improving trade with SADC and Africa

Increased in trade with SADC and rest of Africa

5% increase per annum Formalisation of relations with BEMA & development of continental export programme

Development of Moshito into a Pan African music market

Engagement in trade facilitation with countries

Promotion of music services such as music videos and rights administration on the continent.

4.4.2 Improving Competitiveness

Rationale: With the notable exception of regular attendance at international trade shows such

as MIDEM and WOMEX the general export approach has been characterised by a

high degree of ad hoc interventions and very little integration between cultural and

trade agendas.

Objective Measures Targets Initiatives

Integrating cultural & trade activities

Trade activities included cultural engagement agendas

20% of identified cultural engagements have a trade programme attached

Development of an annual programme of trade & cultural engagements

Building the capacity of foreign and trade offices to support music export activities

Regular & consistent attendance at major music markets

Increased trade in music goods in identified markets

5% increase per annum

MIDEM pavilion

WOMEX Pavilion

SXSW Pavilion

Development of annual music touring programmes in major music markets

Increase sales of music in identified markets Live event ticket sales

10% increase in music sales in identified areas

Increase in radio play in identified areas

Identification of possible tour programme

Creation of partnerships with locations, funders & sponsors.

6 Please note that these targets are conservative estimates off an unknown baseline. The KPMG benchmarking

study currently underway will facilitate more accurate targeting in future from a recent statistical baseline.



Launch of touring programmes

Improving exports to key music markets

Increase sales of music in identified markets

10% increase in music sales in identified areas

Increase in radio play in identified areas

Export programme for key music markets including USA, Japan and Australia

Expanding promotion platforms for SA music

Downloads / hit on the website/channel


Development of live events streaming channel on the internet via YouTube or similar platform

Building Moshito into a Pan African music market

Increased trade at Moshito


Improving trade platforms at Moshito

Support for African participants at Moshito

Stronger linkages to tourism and cultural activities

Promotion of SA music services

Increased trade in services


Development of service export strategy

Identification of key markets

With regard to the music video services , the development of a specific category for incentivising these activities in the current film rebate

4.4.3 Building Exporters

Rationale: Export ready companies are essential to meeting the demand that increased

competitiveness will create and in meeting national strategic objectives. The focus

of these efforts will be on independent music labels and artists who have

demonstrable will and capacity to engage in export markets.


Improving trade & market information

Regular trade and market research reports drafted and disseminated

Annual trade report

Annual market updates in key territories

Ensuring that NATIS collects goods and service data

Market research in identified markets

Consumer research in key markets

Supporting emerging exporters

Number of emerging exporters entering into export markets

5% per annum Development of specific platform at Moshito

Promotion of emerging exporters in cultural and trade programmes

Development of specific promotional channel on YouTube or similar platform


4.4.4 Building Institutional Mechanisms

Rationale: All successful music exporting markets studied have clear export support

programmes and institutional infrastructure to support these. In some cases these

are programmatic in nature as part of broader export support institutions and in

others specific export development agencies are established. In South Africa, the

NES allows for the establishment of Export Councils which are an internationally

recognised mechanism for export promotion.

In SAMEX, an organisational framework exists for the development of a targeted and

tailor-made entity to support music exports. SAMEX will develop this framework in

partnership with Moshito and other appropriate stakeholders such as the

Department of Arts and Culture, the Department of Trade and Industry as well as

international partnership such as Embassies, international music markets, and other

trade organisations (BEMA, European Music Office, and Export Offices from various

countries). The capacity, expertise and institutional knowledge of these stakeholders

are a vital component of the success of this export strategy. These partnerships

allow SAMEX to remain as a neutral platform. International best practice suggests

that the lack of coordination between agencies and ministries is a key impediment

to the success of a music export strategy. Institutional strengthening and technical

assistance between these partners will ensure both a quality service to the music

industry as well as improved exporting results from the sector.


Creating a strategic framework for music development and exports

The existence of an approved CSP

CSP drafted and approved by 31 March 2010

Drafting and approval of a CSP

Transforming SAMEX into a fully fledged export council

Funded and registered organisation

Approved by 31 March 2010

Approval of SAMEX business plan

Development of 5 year funding model in collaboration with major sponsors

Launch of SAMEX as an Export Council

Developing fully fledged partnerships with local and international stakeholders

Memorandum of Agreement for Partnership with respective stakeholders

Memorandum of Agreements approved and signed by June 2010 with MOSHITO, DTI, DAC, BEMA, EUROPEAN MUSIC OFFICE, SPECIFIC EMBASSIES and EXPORT OFFICES

Drafting and approval of specific MOUs

Develop specific programmes for partnership collaboration

Hold regular (quarterly, half-yearly or yearly) joint sessions with partners as provided in the MOUs


4.5 Target Markets & Market Platforms

Region Country Sector Market Product /service offered

Instruments required

Publicity

North America US Music South by South West (SXSW)

Festival

EMIA Brochures

Business cards

South America Brazil Music Porto Musicale February 2010

Festival

Conference

EMIA Brochures

Business cards

Australia Australia Music Big Sound Brisbane Sept 7 to 11

Festival

Music Expo

EMIA Brochures

Business Cards

Sample CDs

Africa Tanzania, Zanzibar

Music ZIFF Festival “Festival of the Dhow” 27th June to 4th July 2009

Festival

Conference

Music Expo

Mini Pavilion

EMIA assistance to participate

Directories

Brochures

Business cards

South Africa

Music Moshito September 2009

Conference

Music Expo

Inward buying mission

Directories

Brochures

Business cards

Europe France, Cannes, Reed

Music MIDEM 24th to 27th January 2010

Tradeshow

Conference/ Workshops

Awards Ceremonies

National Pavilion


Directories

Brochures

Business cards

Germany Music POPKOMM 16-18 September

Exhibition

Festival

Conference

Mini Pavilion


Directories

Brochures

Business cards

Womex WOMEX 28th to 31st October 2009

Trade Fair/Exhibition stands

Conference

Showcase

Awards Ceremony

Mini Pavilion


Directories

Brochures

Business cards


5. Budget

Pleas see attached spreadsheet of the 3 year budget per intervention. The summarised version is

below:

Indicative Implementation Budget

Intervention 1 Sub Total 2 800 000 4 450 000 6 000 000




Total Budget 17 535 000 23 410 000 31 105 000


6. Implementation chart

July - Sept

Oct - Dec

Jan - March

April - June

July - Sept

Oct - Dec

Jan - March

April - June

July - Sept

Oct - Dec

Jan - March

2009-2010 2010-2011 2011-2012

Interventions 2 3 4 1 2 3 4 1 2 3 4

Targeted programmes in support of BEE

- Needs analysis of identified BEE exporters

- Programme design & development

- Pilot programme initiation

- Evaluation & programme design

- Roll out of programme

Development of a music industry charter

- Initiation of consultations with key players

- Drafting of charter

- Presentation for ratification at Moshito

Formalisation of relations with BEMA

- Development of Memorandum of Understanding

- Signing of Memorandum

- Development & implementation of 3 year programme

Development of continental export programme

- Identification of major markets

- Identification of export facilitators and partners

- Launch of export strategy at ZIFF

Development of Moshito into a Pan-African Music market


- Identification of participants

- Direct marketing to identified participants

- Facilitation of attendance at Moshito

- Development of country platforms at Moshito


Engagement in trade facilitation in countries

- Initiation of engagements with identified partners

- Development of formal ties with key partners

Promotion of music services


- Development of marketing platforms

- Development of export strategy at ZIFF

Participation at ZIFF


- Facilitation of EMIA access

- Development of programme

- Attendance at event

Development of annual programme of trade & cultural engagements

- Identification of potential engagements

- Liaison with DAC & other stakeholders

- Development & launch of annual programme

- Development & initiation of fundraising strategy

- Participation in key events identified

Building capacity of foreign and trade offices

- Identification of critical offices

- Engagement with DAC & Foreign Affairs

- Engagement during major festivals and events

- Development of capacity building programme

- Implementation of programme

Midem





WOMEX






SXSW





Porto Musicale





Big Sound





POPKOMM





Development of 3 year tour programme

- Identification of potential engagements aligned to annual programme

- Facilitation of partnerships in support of tour programme

- Launch of annual programme at Moshito

- Implementation & review of programme

Export programme for key music markets

- Based on market research development of targeted programmes

- Launch of export programmes at Moshito

- Implementation of programme at key events & through facilitation

Website development & Live events streaming

- Development of concept & detailed proposal

- Costing of proposal

- Identification of content & engagement with content holders

- Launch of website

- Ongoing maintenance


Improving trade platforms at Moshito

- Benchmarking against other major music expos

- Developing support measures for African participants

- Initiation of inward buying missions

- Improved marketing of the event

Stronger links to tourism & cultural activities

- Hosting of summit to discuss music, tourism & export

- Identification of critical partners

- Development of programme linked to tourism activities

Development of a service export strategy

- Based on market research identification of key markets

- Initiation of discussion with DT regarding Incentivising music video services

- Identification of key partners

- Launch of service export strategy

Building exporters

- Identification of existing and emerging exporters

- Conducting of needs analysis linked to KPMG benchmark

- Development of customised export support programme

- Piloting of programme

- Review of pilot programme

- Roll out of programme

- Development of an emerging exporters platform at Moshito

Engaging with NATIS programme

- Initiation of discussion with DTI regarding NATIS programme

- Inclusion of music products in data collection & reporting

Consumer & Market research in identified markets

- Identification of priority markets

- Development of terms of reference

- Initiation of research

- Publication of research findings

Drafting of CSP

- Engagements with DTI regarding the CSP process & support


- CSP development

- Submission of CSP to DTI for approval

- Launch of CSP

Approval of SAMEX building plan

- Alignment of SAMEX Plan to CSP

- Development of 5 year business model

- Submission to DTI for approval

- Launch of SAMEX as an export council at Moshito

Demotes a major event

Documents

SAMRO Board - South African Music Export Strategy