The International Federation of the Phonographic Industry (IFPI) recently released its ‘Investing in Music’ report, which found that record companies’ total investment in A&R functions and marketing has topped $4.3 billion (U.S dollars) annually, and more than $20 billion over the past five years. Labels’ investment in A&R and marketing is at 27 percent of revenues, up from 26 percent in 2011.
The results of the study were revealed at ‘Friends of Music,’ an evening in Strasbourg, hosted by IFPI chairman Placido Domingo. The report featured data from labels and case studies from around the world, including studies on Ed Sheeran, 5 Seconds of Summer, Lorde, and others.
More than 7,500 artists were signed to major labels’ rosters in 2013, with tens of thousands more on independent labels. According to the study, one in five artists on labels’ rosters is a new signing.
Frances Moore, chief executive of IFPI, says: “Investing in Music highlights the multi-billion dollar investment in artists made every year by major and independent record labels. It is estimated that the investment in A&R and marketing over the last five years has totaled more than US$20 billion. That is an impressive measure of the qualities that define the music industry, and which give it its unique value.”
Other highlights of the report include:
- The costs of breaking an artist in a major market remain between US$500,000 and US$2 million. The cost typically breaks down as payment of an advance (US$50,000-350,000), recording costs (US$150,000-500,000), video production costs (US$50,000-300,000), tour support (US$50,000-US$150,000) and marketing and promotional costs (US$200,000-700,000).
- Record companies invest in local talent and break them to a global audience. The recording industry is global in scale and exports artists internationally; but it heavily invests in local repertoire. In 12 of its leading markets, local repertoire accounts for more than 70 per cent of the sales of the top 10 albums.
- Live performance has not replaced recordings as the driver of the music industry. While record companies invest US$2.5 billion in A&R, there is little evidence of such substantial investment in new music coming from any other source. All of the five top grossing live tours of 2013 were by artists who first released albums nine or more years previously, with one group having recordings going back 50 years.
- Unsigned artists want a record deal. Research conducted with the Unsigned Guide in the UK found 70 percent of unsigned acts wanted a recording contract. The top drivers for wanting a recording contract are marketing and promotional support (76%), tour support (58%) and getting upfront financial support in the form of an advance (45%).
Global A&R and Marketing Investment:
|A&R as % of revenues||15.6%|
|Marketing as % of revenues||11.4%|
|Total investment (A&R + marketing)||US$4.3bn|
|Total investment as % of revenues||27.0%|
|Total industry revenues||US$16.1bn|
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