A silent crash: music sales plummet 71 percent
New report reveals that the rise in digital consumption is not compensating for losses in sales of physical copies Subscription services are offering industry some faint hope
"Someone says our problem is the same as the one the ice-makers have when the snow appears. But it is nothing like that. We don't sell ice - we sell cold."
The president of the Promusicae association of Spanish record labels, Antonio Guisasola, was making this point at a presentation for the White paper for music in Spain 2013 in Madrid last week, in which he explained that the record industry was now as necessary as ever. It is prepared, he said, thanks to a "complete reconversion." "Now we don't sell records," he said. "We sell music in physical and digital formats, or with no format at all. Our industry is pioneering even though the reputation it carries is the opposite. Apart from videogames, which have an innate link to the internet, we are the cultural sector that generates the most digital income. Above cinema, magazines and books."
The 200-page White paper, compiled by Pompeu Fabra University in Barcelona, is the second of its kind and thoroughly analyzes changes in habits relating to the creation, distribution and consumption of recorded music that have been seen since the publication of the previous edition in 2005. "Many things have happened. This is a completely different world. The current situation was, unfortunately, completely unpredictable at that moment," Guisasola said.
According to the report, music accounts for 0.49 percent of GDP in the Spanish economy. "Not much? It depends what you compare it with. It is double the figure for wind energy," Guisasola said. Of course, to reach that figure you have to combine the 907 million euros of direct impact — from concerts, 58 percent of the total; music publishing and recorded music, 18 percent — with what is known as "induced impact," a hotchpotch that includes everything from truck drivers to broadband providers, and is valued at 4.151 billion euros.
Digital sales are slow because of the devastating effect of piracy"
But the overall picture is dramatic. Taking into account all income (physical and digital sales and royalties), Spain lies in seventh place in the European music market, behind the UK, Germany, France, Italy, the Netherlands and Sweden.
"Spain was always in the global top 10. Now it no longer is. It has gone below countries such as Sweden, which has almost 40 million fewer people," Guisasola said.
Since 2003 it is recorded music that has suffered the worst of it, declining 71.5 percent. In 2003 almost 494 million euros was spent on records. In 2012 it was little more than 141 million. The continuing fall is the trickle-down effect from the decline of CDs as the dominant format. According to the White paper, 36,817,000 compact discs were sold in Spain in 2006; in 2012 the number was 11,402,000. "Young people don't think about music on CDs," Guisasola said.
It is true that income from digital sales has increased considerably but, as he repeated time and time again, "they are growing slowly because of the devastating effect of piracy." Physical sales made up 66 percent of total sales in 2012, while digital reached 34 percent. By the first quarter of this year, that figure had risen to 46 percent.
The rise in digital sales is mainly the result of subscription services, such as Spotify, Deezer and the reborn Napster. Cellphone downloads have plummeted, while stores such as iTunes maintain a 30-percent market share. But the growth has slowed: 13 million euros in 2012, compared with 12.6 million in 2011, does not augur a promising future.
But the subscription services seem to be taking off, with a 38-percent share of the digital market. They have become the main source of income, which has almost doubled in just a year, going from 9.5 million euros in 2011 to 18.5 million in 2012.
And these services are offering the industry some hope. "The margin is smaller, but the volume is bigger, which makes up for it." It only remains to negotiate the sharing out of the profits with the platforms, something that is yet to be resolved.
Culture sector saw 2,000 firms close in 2012
The number of workers employed in Spain's culture industry declined from 481,700 in 2011 to 457,600 in 2012 — a loss of 24,100 employees — according to the Cultural Statistics Yearbook 2013, published by the Ministry for Education, Culture and Sport.
In the same period, the number of companies listing culture as their main economic activity dropped from 103,320 to 101,342 - 1,978 firms fewer - the report found.
Public financing and spending on culture also decreased between 2011 and 2012, going from 1.051 billion euros to 957 million. In the regions, the decline in cultural spending went from 1.769 billion euros in 2011 to 1.483 billion in 2012, while municipal governments have gone from spending 4.043 billion euros to 3.397 billion on culture.
Likewise, Spanish families have reduced the amount of money they spend on cultural pursuits, which dropped from 14.364 billion euros to 13.371 billion between 2011 and 2012. The average household spend on cultural goods and services is 738 euros a year, while the average spend per person is 288.70 euros. The most significant percentages are: audiovisual and internet equipment (44.7 percent); cultural services (31.3 percent); and books and periodical publications (16.5 percent). Average household spending was found to decrease in relation to declining town size and was highest in towns of 100,000 or more inhabitants. The regions of Aragon, the Balearic Islands, Catalonia, Madrid, Navarre and the Basque Country all had a higher-than-average spend on cultural goods and services.
The ministry says that the data collected in the report reflects "the value of culture as a source for generating wealth and economic development in Spanish society." It highlights the fact that the cultural sector now makes up 3.5 percent of GDP and generates 2.6 percent of Spain's total employment. In 2011 the culture sector's contribution to GDP was 2.7 percent, reaching 3.5 percent, says the yearbook, "if the group of economic activities linked to intellectual property are considered."
These results underline the "significant influence of cultural activities within the Spanish economy," argues the report, which highlights the culture sector's importance in comparison to that of other industries: agriculture, livestock and fishing (2.5 percent), the chemical industry (1.1 percent) and telecommunications (1.8 percent).
