牛津经济研究院-德国音乐产业：对艺术家的投资与支付（英）

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TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

THEGERMANMUSICINDUSTRY:

INVESTMENTSAND

PAYMENTSTOARTISTS

ASTUDYFORTHEGERMANMUSICINDUSTRY

ASSOCIATION(BVMI)

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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ABOUTOXFORDECONOMICS

OxfordEconomicswasfoundedin1981asajointventurewithOxfordUniversity'sBusinessCollege

andhasestablisheditselfasoneoftheworld'sleadingindependentglobalconsultancies.Ourreports,forecastsandanalyticaltoolscoverover200countries,100industriesand8,000citiesandregions.

Ourworld-classglobaleconomicandindustrymodelsandanalyticaltoolsenableustoforecastexternalmarkettrendsandassesstheireconomicandsocialimpact.

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OxfordEconomicsactsasakeyadvisortodecision-makersincorporations,financialinstitutionsandgovernments.Ourclientsincludeover2,000internationalorganisationsworldwide,includingleadingmultinationalcorporationsandfinancialinstitutions,governmentagenciesandtradeassociations,aswellasprestigiousuniversities,consultancies,andthinktanks.

March2024

AlldatainthetablesandchartsarethecopyrightedpropertyofOxfordEconomicsunlessotherwiseindicatedinsourcesand/orfootnotes.

ThisstudywascommissionedbytheGermanMusicIndustryAssociation(BVMI)andmaynotbepublishedordistributedwithoutpriorwrittenpermission.

ThemodellingandresultspresentedherearebasedondatafromthirdpartiesonwhichOxford

Economicsreliedinpreparingthestudyandforecasts.Anysubsequentrevisionsorupdatestothesedatawillaffecttheassessmentsandforecastspresented.

TheauthorsofthestudyareDr.YannGirard,Dr.JanSun,andJonasSchwarze.

Forfurtherinformationonthisstudy,pleasecontact:

Dr.YannGirard:

ygirard@

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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TABLEOFCONTENTS

1.INTRODUCTION 7

1.1THESTATUSQUOOFTHEGERMANMUSICINDUSTRY 7

1.2MUSICLABELS—ACREATIVEPARTNERATTHESIDEOFARTISTS 8

1.3AIMANDCLASSIFICATIONOFTHESTUDY 9

2.INVESTMENTSBYTHEGERMANMUSICINDUSTRY 12

2.1DEVELOPMENTOFTOTALINVESTMENTSINTHEGERMANMUSICINDUSTRY 12

2.2THEDEVELOPMENTOFTHEVARIOUSTYPESOFINVESTMENTINDETAIL 14

3.PAYMENTSBYMUSICLABELSTOARTISTS 17

3.1PAYMENTSTOARTISTSBYMUSICLABELS 17

3.2THEDEVELOPMENTOFTHEVARIOUSPAYMENTMETHODSINDETAIL 18

4.CONCLUSION 20

5.LITERATURE 21

6.APPENDIX 22

6.1DATAQUERYANDEXTRAPOLATION 22

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GLOSSARY

Overarchingconceptsinthemusicindustry:

Artists&Repertoire(A&R):A&Rservicesrelatetothediscovery,engagement,anddevelopmentofartistsandtherecordingoftheirmusic(e.g.,financingandprovidingartisticandcreativesupportforsoundandvideorecordings).

Marketing&Promotion(M&P):TheaimofM&Pservicesistomarketandpromotetheartiststheysupport,forexamplebyfinancingandimplementingdigitalmarketing,advertising,publicrelations,andproductmanagement.

Advances:Apaymentmadebymusiclabelstoartiststocovercreativecostsformusicproduction(ifnotcoveredbythemusiclabel)ortosecureartistincome,regardlessofthesuccessofasong/album.Advancesareamortisedbythemusiclabelsbyoffsettingthemagainstfutureroyaltypayments.Theycanthereforeonlyberecoupediftheproductissuccessful.

Royalties:Representpaymentsmadebyamusiclabeltoartistsforthesaleorexploitationofacopyrightedwork.Royaltiesaregenerallypaidonlyaftertheadvanceshavebeenamortised(i.e.,artistsarenotpaidagainuntilenoughrevenuehasbeengeneratedtocovertheadvances).

Definitionofthevariablesexaminedinthestudy:

ThedefinitionsoftheInternationalFederationofthePhonographicIndustry(IFPI)areusedinordertoensurethemostconsistentviewpossibleataninternationallevel:

Totalinvestments:DefinedasthesumofinvestmentsinA&RandinvestmentsinM&Pandthuscoverthemainareasofactivityofthemusiclabels.

Totalinvestments=InvestmentsinA&R+InvestmentsinM&P

InvestmentsinA&R:ConsistofclassicinvestmentsinA&R(e.g.,investmentsforthediscoveryanddevelopmentofartistsorformusicrecordings),personnelexpensesforemployeesintheA&Rarea,andadvances.

InvestmentsinA&R=TraditionalinvestmentsinA&R+PersonnelexpensesinA&R+Advances

InvestmentsinM&P,includinginternalagency&digitalservices:ConsistofclassicinvestmentsinM&P(e.g.,investmentsformarketingcampaignsoradvertising)andpersonnelexpensesforemployeesintheM&Parea(thusinvestmentsforinternalagency&digitalservicesarealsoincluded).

InvestmentsinM&P=TraditionalinvestmentsinM&P+PersonnelexpensesinM&P

Investmentrate:Theinvestmentrateiscalculatedastheproportionofindustryrevenuethathasbeenreinvested,i.e.,:

Investmentrate=Totalinvestment/Industryrevenue

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Research&Development(R&D):TheresearchanddevelopmentofmusiclabelsissynonymouswiththeirinvestmentsinA&R,astheserepresentinvestmentsinthefuture"products"andartistsofthemusicindustry.

Research&Development=InvestmentsinA&R

R&Dintensity:R&DintensityistheproportionofindustryrevenuereinvestedinA&R,i.e.,theratioofinvestmentinA&Rtoindustryrevenue:

R&Dintensity=InvestmentinA&R/Industryrevenue

Paymentstoartists(frommusiclabels):Paymentstoartistsconsistofroyaltiespaidbymusiclabelsandadvancespaid.

Paymentstoartists(frommusiclabels)=Royaltypayments+Advances

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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17%

IncreaseintotalincomeoftheGermanmusiclabels

between2010and2022

33%

ofthetotalrevenueoftheGermanmusiclabels

areannuallyonaveragereinvested

SUMMARY

BACKGROUNDINFORMATIONANDAIMOFTHESTUDY

TheGermanmusicindustryhasundergonesignificantchange

overthelasttwodecades.Advancingdigitalisationandthe

associatedtransformationprocessfromphysicaltodigital

productshasnotonlychangedhowconsumerslistento

music,butalsothetasksofcompanieswithinthemusic

industry,especiallymusiclabels.Inadditiontonew

opportunities,digitalisationhasalsobroughtnewchallenges

formusiclabels,whichinitiallyledtoadeclineinsalesfor

manyyears.Itisonlyinthelastfouryearsthattherevenueof

Germanmusiclabelshasrisencontinuouslyagain,sothatin

2020therevenuelevelof2010wasreachedagainforthefirsttime.In2022,industryrevenueamountedtoEUR1.15billionandwasaround17%abovethe2010level.

Asthemediamainlycommunicatestherevenuesofmusiclabels,therehassofarbeenalackofinformationontheextenttowhichartistshavealsobenefitedfromtheeconomicrecoveryofmusiclabels.ThisstudythereforeanalysestheextenttowhichGermanmusiclabelshavereinvestedtheirincreasedrevenuesofrecentyearsinthedevelopmentofnewtalentandexistingartistsandpassedthemontotheirartistsintheformofpayments.Tothisend,welookatthefollowingdevelopmentsinthisstudy:

•InvestmentsinArtists&RepertoireandMarketing&Promotion

•Paymentstoartistsbymusiclabels

Forthecalculation,asurveyoninvestmentandpaymentbehaviourwasconductedwiththelargestmusiclabelsinGermany.TheinvestmentandpaymentstatisticssurveyedwerethenextrapolatedtotherestofthemarketonthebasisoftheofficialmarketcoverageoftheBVMImarketstatistics.Themusiclabelssurveyedcoveredaround66%ofthemarketin2022.Theresultsofthisstudythereforereflectaround65%-70%ofGermanmusiclabelsintheperiodunderreview(2010-2022)andaremainlyrepresentativeformusiclabelswithcomparableinvestmentandpaymentdynamics.

THEINCREASEINEXPENDITUREONARTISTS&REPERTOIREINPARTICULARLEDTOARISEIN

INVESTMENTS

GermanmusiclabelsinvestedaroundEUR342millionin

2022.Thiscorrespondstoanincreaseintotalinvestmentof

28.2%since2010andisthereforehigherthanthe17%

growthinindustryrevenueoverthesameperiod.Overall,

Germanmusiclabelsinvestanaverageof33.3%oftheir

revenues(notprofits)annuallyinthedevelopmentand

discoveryofnewartists(=InvestmentsinArtists&

Repertoire(A&R))aswellastheirmarketingandthe

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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132%

Increaseinpaymentstoartists

bymusiclabelsbetween2010and2022

43%

ofindustryrevenuebetween2019and2022was

passedonto artiststhroughdirectpayments

distributionoftheirmusic(=InvestmentsinMarketing&Promotion,includinginternalagency&digitalservices(M&P)).

ThemainreasonfortheincreaseintotalinvestmentisrisinginvestmentinA&R,whichhasmorethandoubledsince2010.InvestmentinA&Rcanalsobeunderstoodasthemusicindustry'sresearchanddevelopment(R&D)expenditure,asthisisaninvestmentinitsfuture"products."TheGermanmusicindustry'sR&Dintensityin2022isrelativelyhighat13.2%.Bycomparison,theresearch-intensivepharmaceuticalandelectricalindustrieseachhadanR&Dintensityofjustunder10%in2022(Michelsen&Junker,2023).Themusicindustrythereforeinvestsaboveaverageinthefuturecomparedtootherindustries.Artistsbenefitfromthis,ascost-intensiveproductionandrecordingcostsareincreasinglycoveredbymusiclabels.

WhileinvestmentsinA&Rhaveincreased,investmentsinM&Phavefallenslightlyby6%overallsince2010buthaverisenagaininthelasttwoyears.Themainreasonforthisisthereallocationofexternalmarketingcosts(e.g.,TVadvertising)tointernalcostssuchastheexpansionofinternalstructuresandexpertise(e.g.,personnelintheareasofdataanalytics,socialmedia,andsearchengineoptimisation)aswellasincreased,moreeffective,andlistener-orientedonlinemarketing.

ARTISTSBENEFITFROMHIGHERPAYMENTSFROMTHEMUSICLABELS—ESPECIALLYTHROUGHINCREASEDADVANCES

Inadditiontohigherinvestments,theincreaseinrevenuealsoledtorisingpaymentstoartists.Whileindustryrevenuesincreasedby17%between2010and2022,paymentstoartistsmorethandoubledinthesameperiod(anincreaseof132%).Itisworthnotingthatadvancesinparticularhavemorethantripledsince2010(+273%).Althoughadvancesrepresentamortisablepaymentsfrommusiclabelstoartists,theyarepaidregardlessofthesuccessoftheworkproduced.Asaresult,theyalwaysrepresentaninvestmentriskforthemusiclabels.Themusiclabels

thereforeincreasinglybeartheentrepreneurialriskforthesuccessofmusicalworks.Inadditiontotheadvances,theroyaltiespaidbythemusiclabelstotheartistshavealsodoubled.

Takentogether,artistshavethusparticipatedinaround43%

ofindustryrevenueinthelastthreeyearsthroughadvances

orroyaltypayments.Incomparison:between2010and2013,

thissharewasonlyslightlyover20%.Despitetheincreasing

importanceofadvances,royaltiesremainthemostimportant

paymentcomponentfrommusiclabelstoartists,accounting

foraround75%.Theremaining25%isaccountedforby

advancespaidbymusiclabelstoartists.1

1Thedatarepresentanaverageofallexistingcontracttypes.

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1.INTRODUCTION

1.1THESTATUSQUOOFTHEGERMANMUSICINDUSTRY

ThemusicindustryinGermanyplaysacentralroleinthecreativeandculturalcontext.Itpromotesartisticdiversity,enablestheindividualdevelopmentofartists,andcontributestoculturalexchangeonanationalandinternationallevel.Atthesametime,themusicindustryisalsoanimportantpartoftheGermaneconomy,creatingjobsandgeneratingincomethroughthesaleofmusicandfanmerchandiseaswellastheorganisationofconcerts(Girardetal.,2020).Inparticular,thepromotionanddevelopmentofnewtalentandthesupportofestablishedartistsarekeytomaintainingthediversityandqualityoftheGermanmusicscene.

Musiclabelsthereforeplayacrucialroleinthemusicindustry,especiallyforvaluecreationinthesub-sectorofrecordedmusic(i.e.,intheproduction,reproduction,anddistributionofphysicalanddigitalmusicformats)andthusinthecentralareaforthedevelopmentofnewmusic(Seufertetal.,2015).2Theyprovideartistswiththenecessaryinfrastructureandresourcestoproduce,publish,andmarketmusic(foramoredetaileddescriptionofthecooperationbetweenmusiclabelsandartists,seechapter

1.2)

.

Overthepast20years,digitalisationandtheassociatedshiftindemandfromphysicaltodigitalmusicformatshashadasignificantimpactontheactivitiesofthemusicindustry,especiallymusiclabels.Digitalisationhasnotonlyopenedupopportunitiesformusiclabelsthroughnewdistributionandbusinessmodels(e.g.,viadigitalplatformsandstreamingservices),buthasalsopresentedtheindustrywithnewchallenges.Ontheonehand,digitalisationrequiresthecontinuous(further)developmentofcopyright,licensing,andremunerationmodelsforartistsaswellastheintegrationofdisruptivetechnologiesintobusinessactivities(e.g,.artificialintelligence).Achallengecombinedwithnewopportunitiestomaketraditionalbusinessmodelsfitforthefuture.Ontheotherhand,illegalandcommercially-operatedplatformsfordownloadingmusicaswellasstreamingmanipulationandstreamingfraudpresentthemusicindustrywithdifficulttasks.Althoughnewofferings(suchasonlinestreaming)wereabletomitigatethisdevelopment,theillegaldistributionofmusicisstillakeychallengeforthemusicindustryanditsmusiclabelstoday.

Thisdynamicdevelopmentisalsoreflectedintherevenuesofthemusiclabels(see

Figure1)

.3Between2010and2018,musiclabelrevenuesfellbyaround18%toEUR815million.Thisrepresentsalmostahalvingofthemarketsinceitspeakinthelate1990s.From2018to2022,revenuesrosesteadilyagainwithanaverageannualgrowthrateof9.2%,reachingthe2010levelagainin2020.In2022,GermanmusiclabelsgeneratedrevenuesofEUR1.15billion.4

2Musiclabelsarealsoactiveinmanyotherareasofthemusicindustry,suchasmusicpublishingorartistmanagement(Girardetal.,2020).

3Thelabelrevenuesconsideredherearemadeupofsalesofphysical(e.g.,CDs,vinylLPs)anddigitalproducts(e.g.,musicdownloads)aswellaslicensingincome(e.g.,fromstreamingdeals)(BVMI,2023).

4Inthisstudy,onlynominalvaluesareconsidered,whicharenotadjustedforinflation.Ifreal,i.e.,inflation-adjustedvaluesareconsidered,musicindustryrevenueshavenotyetreachedthehistoricalvaluesofpre-digitalisation.

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FIG.1:DEVELOPMENTOFTHEMUSICINDUSTRYREVENUESINGERMANY

Source:OwnrepresentationbasedondatafromtheBundesverbandMusikindustriee.V.

Note:Thevaluesshownherearenominalvaluesthathavenotbeenadjustedforinflation.Theyarealsoindustryrevenuesatproducerprices.Incontrast,themusicindustryrevenuesinthepublication"MusikindustrieinZahlen"publishedbytheBundesverbandMusikindustriee.V.areend-consumerprices(includingVAT).

1.2MUSICLABELS—ACREATIVEPARTNERATTHESIDEOFARTISTS

Animportantquestionthatarisesinthiscontextiswhetherartistshavealsobenefittedfromtheeconomicrecoveryofmusiclabels.Thefirststepistounderstandwhatrolemusiclabelsplayforartistsandwhichagreementsinfluencecollaborationanddirectpaymentstoartists.

Thecoretaskofmusiclabelsistodiscovernewtalent,signthem,andpromotetheirdevelopment.Thisbusinessareaisgenerallyreferredtoas"Artists&Repertoire(A&R)."Inadditiontonewtalent,theA&Rdepartmentalsosupportsexistingartistsintheircareerdevelopment.Thisincludesshapingthemusiccontentandstyle,aswellasprovidingsupportwithmusicandvideoproductionandtourplanning.Thesecondmainareaofactivityformusiclabelsisthemarketingandpromotionoftheartiststheysupport,alsoknownas"Marketing&Promotion(M&P)."TheM&Pdepartmentisresponsiblefortheproductmanagementandmarketingofanartist'smusic.Forexample,ithandlesdigitalmarketing,publicrelations,andpromotionviaradioandtelevision.Furthermore,M&Pdepartmentssupporttheirartists,forexamplewitheffectivedataanalysisofconsumers’listeninghabitsinordertoidentifynewtrendsandbuildthelargestpossiblefanbase.Asaresultofdigitalisation,amoredemandinglegalenvironmentandtheglobalisationofthemusicmarket,cooperationbetweenlabelsandartistshasintensifiedagaininrecentyears(see

Figure2)

.

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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Welfare

programs

e.g.,legal

assistance

Brand

opportunities

e.g.,

synchronisation,

branddeals

Howdomusic

labelssupport

theirartists?

Business

affairs

e.g.,content

protection,licence

accounting

Globalinter-

connectivity

e.g.,buildinga

globalfanbase

A&R

development

e.g.,music&songdevelopment

Recording

e.g.,studioaccess,

production,

mixing

Creative

development

services

e.g.,styling,social

mediapresence,

content

production

Marketing

e.g.,digitaland

physical

campaigns

FIG.2:THECOLLABORATIONBETWEENMUSICLABELSANDARTISTS

Upfront

investment

e.g.,advance

payments,

financial

transparency

Promotion

e.g.,TV,radio,

socialmedia

Datainsights

z.g.,dataanalytics,automation

Global

distribution

e.g.,CDs,Vinyl,

merchandise

Source:OwnrepresentationbasedonIFPI(2023a)andBundesverbandMusikindustriee.V.(2023)

Thedegreeofcooperationbetweenmusiclabelsandartistsdependssignificantlyontheextentofthedesiredsupport.Ingeneral,themoreservices,e.g.,intheformofadvancesandA&Rinvestmentsaswellasinvestmentsinmarketingandpromotionfortheartist,thegreatertheparticipationofthemusiclabelsinthepotentialrevenueofasong(BVMI,2023).

1.3AIMANDCLASSIFICATIONOFTHESTUDY

ThisstudyexaminestheextenttowhichGermanmusiclabelsarereinvestingtheincreasedrevenuesofrecentyearsinthedevelopmentofnewtalentandexistingartistsandpassingthemontotheirartists

TheGermanMusicIndustry:InvestmentsandPaymentstoArtists

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intheformofpayments.Haveartistsbenefitedfromthisdevelopment?Ifso,howisthisreflectedinthelabels'investmentsandtowhatextentdoesthemusicindustrybenefitorlosefromthesedevelopments?Toanswerthesequestions,thefollowingsectiontakesacloserlookattheinvestmentsmadebymusiclabelsandtheirpaymentstoartistssince2010.5

Toensureconsistencywithinternationalresults,suchasglobalinvestmentandR&Dintensities,themethodologyoftheInternationalFederationofthePhonographicIndustry(IFPI)isused.Forthecalculation,asurveywasconductedontheinvestmentin,andpaymentdynamicstoartistsofthelargestmusiclabelsinGermany.ThesurveyeddatawerethenextrapolatedtotherestofthemarketusingtheofficialmarketcoverageoftheBVMImarketstatistics(see

Box1

andAppendix

6.1

foradescriptionofthemethodandthedatasurveyed).6ThismethodologymakesitpossibletoanalysethedevelopmentoftheentireGermanmusicindustryatindustry-levelbetween2010and2022.However,thismethodologyalsoassumesthatthemusiclabelsnotsurveyedhavecomparableinvestmentandpaymentdynamicstothemusiclabelssurveyed.Theresultsoftheextrapolationthereforereflectaround65%-70%ofthemarketshareinthe2010-2022studyperiod.

5Thisstudyonlyexaminesthetemporaldevelopmentofthemusiclabels'investmentsandtheirpaymentstoartistsandnotapossiblecausalrelationship(i.e,.itisnotpossibletosaywhetherthereisarealorcausaleffectofrevenuesoninvestmentsandpayments).

6TheBVMI'smarketstatisticsshowtheincomeofmusiccompaniesfromthesaleofphysicalanddigitalaudioandvideomedia(CDs,vinylrecords,DVDs,downloads,etc.),fromtheuseofpaidandad-financedmusicstreamingandotherincomefromdigitalbusinessareas.ThelicensingincomeofmusiccompaniesfromtheuseofmusicinTV,film,advertising,games,orradioisnotincluded.

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BOX1:NOTEONTHEINTERPRETATIONANDREPRESENTATIVENESSOFTHERESULTS

Asdescribedabove,theresultspresentedareanextrapolationoftheinvestmentandpaymentdynamicsofGermany'slargestmusiclabelstotheentiremusicindustryinGermany.Asthesurveyonlycoversthelargermusiclabelsandthusamarketshareof65%-70%,theinterpretationandrepresentativenessoftheresultsfortheentiremarketissubjecttouncertainty.

Theextrapolationmethodassumesthatmusiclabelsnotincludedinthesurveyhavesimilarinvestmentandpaymentdynamicstothemusiclabelssurveyed.Ifthisisnotthecaseandthepaymentsandinvestmentsoftheremainingmusiclabelsareloweronaverage—forexampleifsmallermusiclabelsinvestandpaylesstoartistsrelativetorevenues—thereportedtemporaldevelopmentsandratiostendtobeoverestimated.However,iftheremainingmusiclabelshavehigherpaymentandinvestmentdynamics—forexampletoexpandtheirmarketpositionortoretainartistsinthelongterm—thereportedtemporaldevelopmentsandquotasareunderestimated.Thedirectionofthedistortionisthereforeunclear.

Furthermore,theBVMI'sofficialmarketstatisticsforcalculatingtheofficialmarketsharesofmusiclabelsdonottakeallsalesintoaccount.Forexample,licencerevenuesofthemusiccompaniesfromtheuseofmusicinTV,film,advertising,games,orradioarenotincludedinthecalculationoftheofficialmarketshares.Heretoo,itisuncleartowhatextentthesemissingsalesinthecalculationofmarketsharesinfluencetheresults.

ItshouldbenotedthattheinterpretationoftheresultsfortheentireGermanmusicindustryissubjecttouncertainty.Theresultspresentedreflectaround65%-70%oftheoverallmarket.Therepresentativenessoftheresultsincreasesifthemusiclabelsnotsurveyedhavesimilarinvestmentandpaymentdynamics.

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2.INVESTMENTSBYTHEGERMAN

MUSICINDUSTRY

ThischapterexaminesthedevelopmentofinvestmentsmadebytheGermanmusicindustrybetween2010and2022.Section

2.1

examinesthedevelopmentofoverallinvestments.Inordertounderstandmorepreciselywhethertheinvestmentactivitiesofmusiclabelsinartistshavechangedovertimeandtowhatthisdevelopmentininvestmentcanbeattributed,Section

2.2

showsthedevelopmentofthevariousinvestmentcategoriesovertime.

2.1DEVELOPMENTOFTOTALINVESTMENTSINTHEGERMANMUSICINDUSTRY

Investmentsareacentraltaskofmusiclabelsintheircollaborationwithartists.Investmentsarethebasisfordiscoveringnewartistsandsupportingtheminthedevelopmentofnewmusic.Investmentsinthediscoveryandmarketingofartistsandtheirmusicareparticularlyimportantbecauserevenuecanoftenonlybegeneratedifthegeneralpublicisawareoftheirexistence.Artiststhereforeonlybenefitfromthehigherrevenuesofmusiclabelsifthesearealsoreinvestedintheminordertobringnewmusictothemarketanddistributeit.

Figure3

showsthedevelopmentoftotalinvestmentsandtheinvestmentrate—i.e.,theproportionofrevenuethatisreinvested—intheGermanmusicindustrybetween2010and2022.Overall,investmentsincreasedovertheentireperiod,fromanestimatedEUR267millionin2010toEUR342millionin2022.Thisrepresentsanincreaseofaround28.2%andanaverageannualgrowthrateof2.1%.Despitethenoticeabledeclineinindustryrevenuesbetween2010and2015,totalinvestmentbyGermanmusiclabelsincreasedslightlyoverthesameperiod.Inthefollowingyears,thelowrevenueintheyears2015to2018wasreflectedinratherstagnatinginvestments.Onlythestrongrevenuegrowthafter2019againhadapositiveimpactonmusiclabels'investmentactivity.

FIG.3:DEVELOPMENTOFTOTALINVESTMENTSINTHEGERMANMUSICINDUSTRY

Source:OwnextrapolationbasedondatafromtheBundesverbandMusikindustriee.V.andthecompanysurvey.

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Generallyspeaking,risingindustryrevenuesarelikelytohaveapositiveimpactonmusiclabels'investments.Thisrelationshipdoesnotnecessarilyonlyruninonedirection.Itismorelikelythatinvestmentsandrevenuesinfluenceeachother.Ontheonehand,anincreaseinindustryrevenuesislikelytoincreasetheabilityofmusiclabelstoinvest.Conversely,increasedinvestmentbymusiclabelswillenablethedevelopmentofmoreartistsandnewmusic.

Investmentsbymusiclabelshavenotonlyincreasedinabsoluteterms,butalsoinrelativeterms.Onaverage,musiclabelsreinvestedathirdoftheirincomefrommusicrecordingsinartistsbetween2010and2022,withanupwardtrendalsoevidenthereintheyearsbeforetheCovid-19pandemic.Inthelastthreeyears,theinvestmentratefellslightlydespiterisinginvestmentsduetothehighrelativegrowthinindustryrevenue.In2022,theinvestmentrateinGermanyamountedto29.5%andwasthereforecomparabletotheglobalaverageforthesameperiod,whichwas29.7%,accordingtothelatestIFPIestimate(2023b).

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2.2THEDEVELOPMENTOFTHEVARIOUSTYPESOFINVESTMENTINDETAIL

Themusiclabels'annualinvestmentscanbebrokendownintotwomaincomponents:(i)InvestmentsinA&Rand(ii)InvestmentsinM&P,includinginternalagency&digitalservices(referredtosimplyasinvestmentsinM&Pfromnowonforthesakeofclarity).