Reinventing the Record Label for the Digital World | BPI Chairman Tony Wadsworth AGM Speech, 7 July 2009

Ladies and gentlemen, may I warmly welcome you to the BPI’s 2009 Annual General Meeting.  Thank you to all of you who have taken the time out of your busy working days to be with us this afternoon.  And may I in particular thank Lucian Grainge who we are delighted to have with us as our keynote speaker.  We all greatly look forward to hearing what you have to say.

I hope that those of you who were able to attend the Annual Conference for Members this morning found it an informative and useful session.  Julian tells me it was.

As you have just seen from the opening video, it has been a busy year.  A lot has been achieved and there is much to look forward to for the next twelve months.

The last couple of years have been stellar years for international achievements by UK artists.  UK acts make up 10% of the American chart. This is the highest share for several years.

British acts swept the board at the Grammys with multiple wins from Coldplay, Adele, Duffy, Peter Gabriel, Estelle, Radiohead and Robert Plant.  Coldplay’s ‘Viva La Vida’ was the best selling album in the world.  Duffy was the best selling debut artist globally and, together with Amy Winehouse and Leona Lewis, was in the global top ten.  If producing music was an Olympic sport, then these artists would be right up there on the podium with our Beijing gold medallists like Chris Hoy and Rebecca Adlington.

But one thing is missing from our video. Something I have read about many times in the news media recently – the death of the record label. We hear it all the time:  the internet has killed the recording industry, record companies have missed the boat, artists don’t need labels any more, and artists will sign with tour promoters to release their music.  In the words of R.E.M. - it’s the end of the world as we know it.

Well, that’s not what I see.

I see record labels being enormously adaptable, creative and robust.
Two years ago saw the 30th anniversary of the Cherry Red label – still going strong today. And last year was Rough Trade’s 30th birthday, a label that’s had its fair share of business challenges, but through them all the creative vision has been clear and the label still thrives today on the cutting edge of the UK music scene.  This year saw the 50th anniversary of Island Records, a label which was born in Jamaica and which grew up in the UK releasing some of this country’s finest music throughout the 70’s, 80’s and 90’s, and yet still today is the home of this country’s unique global talent, Amy Winehouse.

Labels don’t stand still.  They move with the times.  They reflect our times.  With hindsight, the industry could have dealt differently with the onset of file sharing over 10 years ago.  Perhaps we were too defensive, too suspicious, over protective of an established business model.
But that was then – I don’t see that now. What I do see is other media affected by the digital revolution – TV, movies, the press – all trying to get to grips with the challenge of adapting their business models to the digital age.  I can’t see any of them doing it any better or more painlessly than the music industry.  In fact, the music industry is now leading the way in shifting our business into a sustainable digital model. Let’s not be under any illusions. We still have a way to go, but the transition is happening.

The emergence this year of many new digital services – some traditional paid for, some ad funded, some free at the point of use to consumers, and now internet service providers partnering with labels on new business models – all show how the music world is really getting to grips with the reality of the digital economy and making it work for artists and labels.  The pace of change is quickening.  We are moving from the sedate progress of a test match to a game of 20:20.  Everything happens more quickly, everything has more impact and there is an excitement in the air.

In this economic environment, the pace of digital growth is even more impressive – digital moved from an 8% share in 2007 to 12% in 2008.
The move forward in digital album sales is likely to show an 8% share of albums moving to at least 15% this year. 

As I have said before, we are moving from a transaction business to a usage model.   We have seen a fall in CD sales of around 13% in the year – a trend which has been well documented.

But what is less well known, indeed what I can announce to you today, is that income from digital licensing grew by more than 300% last year. And total income from non usage and licensing grew to £195m, a rise of 7%.

We know that a return to growth in our sector will come from digital and from wider licensing of our music. In the depths of a global recession, to achieve a year on year increase of 7% in licensing, and 65 % in digital album volume, is very encouraging.

 To echo John Reid’s comment in the video, we are on the cusp of something new and exciting and dramatic.

This momentum has been spearheaded by record labels supported by the BPI. The BPI didn’t win any popularity contests when it tried to get ISPs to acknowledge a shared responsibility in tackling illegal file sharing – the powerful PR and lobbyists of the telecoms industry tried to portray us as luddites, restricting the freedoms of consumers.
In fact, they were more concerned about our restricting their freedom to build multi-billion pound businesses on the back of free creative content.

At the ISPA conference, Geoff Taylor, the BPI CEO, was named their villain of the year.  Well done, Geoff!

This year we got them to sign a Memorandum Of Understanding dealing with file sharing, and later we convinced the government that the responsibility of ISPs in protecting creative content should be enshrined in legislation.   This is progress.  Not as fast as we would all like, but progress nevertheless.

As the key investor in new music, the record label, hand in hand with the artists themselves, drives the wider industry forward.  Recent statistics showing the increase in live performance income for composers and artists can easily be misinterpreted that live is in some way transplanting recorded music. 

No artist ever played stadiums or arenas, or headlined a festival, without at some point in their career enjoying a series of hit records. Recorded music is the engine room of the wider industry.

Don’t get me wrong.  When I say that record labels aren’t dead, I’m not trying to advocate some cosy preservation of the status quo in our industry.  Labels will look very different in 10 years time from how they look today.  They look very different now to even 5 years ago.  And I don’t just mean there are less people working in them – I mean that they are taking on new challenges, doing things in new ways and reinventing the record label for the digital world. 

It is essential that labels recognise their important place in the wider industry, but we should not try to exist in isolation of the wider industry. That is why I advocated that the BPI should be founder members of the new industry organisation, UK Music.
 
As part of that organisation we benefit from a closer dialogue with other industry sectors, and that can only be for the good. Yes, we have differences of opinion and things can get pretty heated at times.  UK Music enables us to air our differences in private, before coming out with an agreed line on key industry issues.  It also helps us understand how we are viewed by the rest of the industry and to see how THEY would like us to change in order to work better with them.  I look forward to further constructive dialogue with the artists’ groups, the Musicians Union and the Featured Artist Coalition.  The relationship between artists and labels is the key to success for both sectors and for the industry as a whole.

The relationship needs trust and transparency, and we shouldn’t be afraid of that.  So, the idea that record labels will somehow die out just doesn’t make sense.

Not with the rapid way you are reshaping your businesses.

Not with the clear growth in digital income and new business areas.

Not with the continued high level of investment into creativity that you risk on a daily basis.

Not with the sort of global success enjoyed by the UK recently in breaking new artists.

And certainly not with a strong industry association like the bpi that isn’t afraid to stand up for record labels, big and small, as we get to grips with some of the most exciting technological developments in entertainment that we have ever seen.

Ladies and gentlemen, thanks for listening.