Statistics released by the Recording Industry of South Africa (RiSA) for 2007 reveal a dynamic South African music industry â€' but one that is facing a number of serious challenges if it is to avoid the major declines that have affected record companies in developed economies around the world.
“We saw a slight year-on-year growth in the value of physical sales in 2007. That contrasts with almost all other markets around the world which continued to experience sharp falls in physical sales” explains RiSA chairman, Ivor Haarburger. “Growth was especially visible in the international CD and local and international DVD markets,”
“But as relieved as we are at this growth, it needs to be offset against the rising costs faced by operators in the industry as well as multiple threats facing our industry. These include the growing rate of physical and digital piracy”.
RiSA's figures show that the physical industry as a whole grew by 2.4 percent. “We are not yet able to quantify sales of track downloads, ringtones and other digital products, ” Haarburger explained, “but there was clearly solid growth in that area, although off a still small base”
Total industry physical sales rose from R996-million in 2006 to R1020-million in 2007. Unlike the previous year, sales of South African repertoire took a blow, falling from R456-million in 2006 to R442-million in 2007 â€' a drop of 2,9 percent (although still a significant jump from R384-million in 2005).
It was in the international repertoire CD market and the South African and international DVD market that strong growth came. The latter saw a growth in value from R540-million in 2006 to R578-million last year while DVDs grew from one million units to 1,2 million in the international market and 1,1 million to 1,2 million in the South African DVD market over the past year.
The lion's share of the South African repertoire market is taken by EMI with 22,4% followed by Select with 13,5 %, Gallo with 12,2 % and Sony BMG with 10.0%. Gospel, urban/afro Pop and Afrikaans remain the dominant genres in this sector. If Gallo is counted as an independent, the total sale of South African repertoire produced by independents (60,3%) exceeded total sale of SA repertoire produced by majors (39,7%). If it is treated as a major, the four majors (Sony BMG, EMI, Universal and Warner Music Gallo Africa) produced 51,9% of South African repertoire sales while independents produced 48,1% in 2007.
On the international front Sony BMG again led the pack in 2007 with a market share of 29,1 % followed by Universal with 28,3 %, Warner Gallo with 17,9% and EMI with 17,1%.
Sony BMG also held on to the number one market share spot overall, with 20,8% compared to Universal's 19,4%, EMI's 19,2% and Warner Gallo's 15,5%.
For all the buoyancy the industry data reflects, 2007 saw many challenges facing South African record companies. Operating costs â€' including studio recordings and video production; media, marketing and advertising costs; manufacturing costs and overheads - rose by between 7 and 10 percent. The wholesale price also fell during 2007 across several formats. The costs of deploying RiSA's national anti-piracy enforcement unit also continued to increase in the face of what Haarburger describes as” relentless activity by organized crime syndicates who know that many consumers look upon music piracy as a victimless crime.”
“What all this means is that we are becoming increasingly dependent on opening up new revenue streams to sustain our businesses,” Haarburger says.
The latter include leveraging digital incomes across the South African, African and international markets, especially in the mobile sector - and ensuring that broadcasters and other users of music pay the producers and performers of music as outlined in the Needletime legislation. Mounting campaigns to ensure music consumers pay for the music they consume â€' particular in the digital domain â€' is another strong challenge facing the industry.
Says Haarburger, “It is imperative that we take action that ensures our survival as a dynamic industry that provides all South Africans with the widest possible range of recordings of music that appeals to their many different tastes and choices. Our members provide massive amounts of content for the South African TV and radio broadcasting industries. This makes the (rapid) implementation of Needletime our most fundamentally important challenge.”
Among the content supplied to the South African TV and radio broadcasting industries are 3,000 hours of terrestrial TV programming plus a further 25,000 hours to South African-based subscription TV broadcasters as well as 200,000 hours of radio programming â€' which equates to 50 billion hours of entertainment for South African consumers on radio in 2007. “The radio industry is built on the back of what we pay to produce” says Haarburger.
RiSA itself has also experienced growth in 2007. The industry body representing South African record companies grew in membership from 440 to 807, marking the biggest jump in RiSA's history. “This is a very exciting aspect of our industry” says Haarburger.
“Almost all these new members are small black owned businesses that have been able to enter the recording industry due to the competitiveness of the supply chain on which they depend â€' studios, manufacturing, warehousing and distribution. But they are also able to depend on RiSA to provide them with a range of important services â€' not least our national anti-piracy unit, but also the collective licensing of videos to broadcasters and the fabulous marketing platform that the annual South African Music Awards offer all local record companies”
“We are looking ahead to 2008 with renewed vigour,” says Haarburger. “With the South African Music Awards just around the corner and the great product that is coming out of studios this year, we are confident that this sector of the market will gain in strength during 2008.”
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