4 Market Building

We would like to see that the Czech music industry is growing out quickly from its infant stage. We would like to see music businesses focused on value growth and the professionalization of the currently part-time, only informally trained working force. Artists should be proud of their work and should not be shy to demand adequate payment for it. We would like to see a market development in place within the next few years that starts to give a more visible shape for the live and recording parts of the music industry and bring out the publishing sector from its current state.

Markets are institutions that take years, decades to build and nurture to help allocating good services and work. Cultural and creative industries are suffering from over-fragmentation. In the film industry and television, 30 years ago, people worked in large companies that had HR, market research, R&D and legal functions to support the work of artists, technicians and managers. Most people in the film and TV industry do not have this luxury any more, and people in popular music, jazz and folk usually never had them. Increasingly the art/classical music scene is subject to more and more fragmentation.

Musician Income Composition By Country

Figure 4.1: Musician Income Composition By Country

4.1 Program Considerations

The general career equation in the region is simple: artists who have at least 5 years of composing experience, a recent recording and they play at least 15 shows a year can become full-time musicians. However, if we compare the Czech and the Austrian answers, we can see striking differences.

Decision Tree: What is Needed in the CEE to Sustain a Full-Time Music Career

Figure 4.2: Decision Tree: What is Needed in the CEE to Sustain a Full-Time Music Career

In Austria, a musician has a 68% chance to make a full-time living as a musician with at least 16 shows a year and 7 years of recording experience, or 6 years of recording and composing experience. In Czechia, at least 46 shows or 13 years of composing experience is necessary to have similar chances for a full-time musician role. Compared to Hungary, a bit more composing experience is necessary.

Decision Tree: What is Needed in Czechia and Austria to Sustain a Full-Time Music Career

Figure 4.3: Decision Tree: What is Needed in Czechia and Austria to Sustain a Full-Time Music Career

The difference is explained by the following factors:

  • The expected income of Czech concerts is lower than in Austria, because both the ticket price is lower, and fewer people buy tickets;

  • Czech compositions earn less than Austrians from OSA, and almost none from publishers;

  • Czech recordings earn very little income in digital services or via Intergram, and record labels almost never can pay and advance for a recording;

  • The availability and size of grants is smaller in Czechia.

Our data shows that many market players are working only on a part-time basis and do not have formal training and necessary capital to invest into human skills and technology. All revenue streams are underperforming, record labels and especially publishers are very weak, and generally music professionals are in a worse economic condition than the Czech population.

Our research shows that the biggest disadvantage for musicians and almost completely lacking in publishing and record label representation and revenues. Only a very small faction of musicians are represented by professional publishers and labels, and the revenue streams and markets that are only accessible for publishers or labels are not available for them. The market value of most Czech concerts and recorded music is lays lower below the EU average than the value of most Czech industries. Both ticket sales and sales of recorded music are way behind the Czech households ability to spend on recreation and culture. In other words, the Czech music industry is not competitive even in comparison with other forms of culture and recreational activities.

It is true that in the 21st century, most musician income is expected from concerts. But the performing opportunities for musicians are decreasing with age, even if there is a positive influence from long performing histories. This may be partly caused by the fact that audiences like to see mainly artists from their age group, and concerts visits are declining with age.

Change Of Concert Opportunities by Age And Experience

Figure 4.4: Change Of Concert Opportunities by Age And Experience

The two charts show the effect of artist age and experience on stage. Artists’ annual performances are declining from about 50 shows in the age of 25 to about 40 in the age of 40. There is no significant difference in this regard among Czech and non-Czech artists. Years of performing experience have a positive effect, but mainly among part-time musicians and amateurs.

Change Of Concert Opportunities by Age And Experience in Czechia

Figure 4.5: Change Of Concert Opportunities by Age And Experience in Czechia

The only way to sustain a long musician career is to build up a portfolio of evergreen compositions and recordings that keep adding more and more revenues from the recorded performances as the artist is aging. Or to specialize on recording and composing, and focus on assignments from the advertising, video games, television and film industries.

Indeed, we see that full-time artists who remain in the business report higher and higher number of compositions. (We do not see a similar relationship with recordings, because currently recordings are necessary for both compositions and getting live performance opportunities.) The low value of royalties and the market problems of publishing still keep this revenue source at a rather low level.

The biggest problem of creating successful sales strategies in recordings is the lack of adequate data literacy, data pooling capacity and analytic capacity in Czechia. In the world, most recorded music is solved by algorithms, trained on vast datasets using AI and machine learning. Such analytics is increasingly used in radio programming and even in festival and tour design.

The problem of small nation repertoires like the Czech, Hungarian, Slovak repertoires, that the combined repertoire of all local labels is not sufficient to successfully train algorithms. This puts local stakeholders at a huge disadvantage: their own market is increasingly taken by foreign algorithms and robots, and they have no resources to protect their market and use the same technology to contest markets.

CEEMID and state51 started the creation of streaming market indexes, similarly to bond and stock exchange indexes, because streaming platform operators, such as Spotify, Deezer and Apple Music give very little marketing guidance for independent labels.

In the Central and Eastern European markets artists are disadvantaged by the smaller local population size, but the lower level of repertoire competition also benefits them. If a song starts its career in Austria or Hungary, it does not typically reach a much smaller audience than in Germany or the UK, but the revenue prospects are clearly different.

Typical Song Revenue Development in CZ, CEE and Mature Markets

Figure 4.6: Typical Song Revenue Development in CZ, CEE and Mature Markets

As we can see in the chart, the typical revenues were relatively flat in the past three years. While listening quantities were growing, so was the number of subscribers and range of exploited songs. In fact, as more diverse audiences entered the market, the market shares of the typical labels started to shrink. As a consequence, the typical artists did not see any significant revenue growth from the rising number of users.

In the world, most recorded music is soled by algorithms, trained on vast datasets using AI and machine learning. Such analytics are increasingly used in radio programming and even in festival and tour design.

The problem of small nation repertoires like the Czech, Hungarian, Slovak repertoires, that the combined repertoire of all local labels is not sufficient to successfully train algorithms. This puts local stakeholders at a huge disadvantage: their own market is increasingly taken by foreign algorithms and robots, and they have no resources to protect their market and use the same technology to contest markets. This is one of the most important reasons why SoundCzech teamed up with CEEMID and the state51 group to create a Research Consortium (see: Chapter 7 on the Market Research, Collaborative Research & Development.)

We see a lot of problems in all three income streams and in the case of grants, too. More competitive economies with stronger creative sectors, especially in Denmark, the Netherlands, Sweden, Finland solve such problems with strong cooperation and strong institutional social dialogue. The cooperation of micro-enterprises and freelancers is necessary to provide funds and professional HR for life-long learning and developing the human capital of creative workers. In the most advanced European countries, annual learning opportunities, sick leave and career orientation is available for freelancers, too. Furthermore, via their strong associations they represent the special regulatory, market-building, labor, pension issues of their members in social dialogue. Market-building activities cannot be successful without building strong institutions for join human resource development (see 6 Professionalisation & Collaborative Human Resource Management, joint market research and innovation (see 7 Market Research, Collaborative Research & Development)

In the Czech Republic, the national institution of social dialogue is the Rada hospodářské a sociální dohody - Council of Economic and Social Agreement. It is essential that the music industry takes a place on both the employer and the employee side of this institution - not necessarily to let its ideas heard in the Council, but because this is essential to participate in any forms of consultation with the government on Better regulation & taxes and probably on Better granting, too. Starting working groups may be the first step to this goal.

4.1.1 Impact On Artists, Professionals & Enterprises

Please give your personal example, if the change above would start, what positive impact you would expect to feel on your professional career or on your enterprise / organization?

Karolína Pavlova, music publisher, Publisher s.r.o: Most musicians do not have an idea about what we do. If ….. happened, I believe that we could really get into the international TV series business.

Jan Svoboda, festival promoter, Festivals s.r.o: The free festivals are really killing the value proposition of our business. I know that they cannot be banned, but I would like to see a bit more responsibility on their part. At the very least, they should feature a tent where the audience can buy tickets if they like the band, subscribe to playlists, or buy merchandise.

4.2 Tackling ‘Free’ Music

Free music uses should be adequately remunerated and eventually channeled towards paid uses. There is a general consensus that ‘free festivals’ organized and paid by municipalities contribute to the low valuation of Czech music.

4.2.1 Value Growth - Free Festivals

From ‘free’ festivals to ‘paid’ festivals (MB1-1). There is a general consensus that ‘free festivals’ organized and paid by municipalities contribute to the low valuation of Czech music. However, politicians often like the idea of free festivals, and artists, who are struggling to get paid gigs, often participate in these events that in the long run are destroying the value perception of music and undermining efforts to increase ticket sales revenue. A best practice guide should be developed by experimenting with novel forms of hybrid events, where the audience should pay some contribution, or should be encouraged to offer other forms of compensation, for example, buying tickets or offering voluntary compensation. Whenever possible, it should be encouraged that municipalities are aiming at low-price, affordable local events and not free events.

4.2.2 Understanding the value proposition of live music events

Similarly to the movie theaters, concert venues should be able to modernize and re-position their offering to new audiences in order to increase the value of concerts. The CAP survey is particularly good form to empirically segment the audiences and start to understand the value drivers and costs of various audiences. It should be noted that in the absence of many modern venues, countryside audiences often must spend more on travelling to music events than the cost of the event itself.

Because music enterprises are micro- or small enterprises, they do not have market research or R&D capabilities, and the joint research program includes within the CAP survey Chapter7.4.1 understanding the value proposition of live events. The joint research efforts should equip market participants and public concert venues with easy-to-follow guidance and collective actions that can re-position concerts as a high-value social activity.

4.2.3 Private Copying Remuneration, Blank Media Levies

Example of Unlicensed Music Market Share (randomized based on real CEE results)

Figure 4.7: Example of Unlicensed Music Market Share (randomized based on real CEE results)

Again, because even collective management societies are small enterprises with limited market research or R&D capabilities, and the joint research program includes in the chapter 7.4.1 Measuring the Use of Paid and Non-Paid Recorded Music. The joint research efforts should the very least equip OSA, Intergram and Dilia with the ability to measure home copying, and preferably with the know-how to calculate the economic value of home copying and the calculation of equitable remuneration of home copying as required by EU and Czech law.

4.2.4 Measuring the Effect of Value Growth Measures

  • PCR Revenue per Capita: this simple indicator is measured every 1-2 years by WIPO and de Thuiskopie, the Dutch collective management society and international competence center for private copying remuneration.

  • Number of free music events / number of paid music events: this indicator could be produced by OSA, which is licensing all music events in the country.

4.3 Increasing the Value of Live Music

Live music revenues should be increased by increasing the sale quantity (ticket sales) and the value (ticket price). Apart from the segment provided by international promoters with some international top artists, ticket prices are generally very low in Czechia. Combating free shows requires special attention (see Value Growth - Free Festivals)

Private Expenditure on Concert, Cinema and Theatre in Europe

Figure 4.8: Private Expenditure on Concert, Cinema and Theatre in Europe

4.3.1 Increasing Ticket Sales in Live Music

In the long run, we believe that the best program to increase ticket sales is the Chapter 3 Music Education Program.

However, ticket sales should be professionalized regardless of the music education efforts. Generally, tickets sales should aim to decrease the high seasonality of concert demand, and increase pre-sales, which is probably the best risk management tool for the extreme high-risk concert and festival promotion business.

Our data is currently based on the EU CAP survey and Google search intensity models. These provide a useful first step, but a join Czech CAP survey and the validation of big data models against actual Czech ticket sales would be necessary to increase the timeliness and precision of such market research data (see subchapter 7.4.3 Measuring Participation in Live Music). The EU-wide CAP research is only conducted about twice in a decade, and with the aim of policy harmonization. Especially the Hungarian CAP surveys provide useful reference values and methodology to understand demography, the costs and concerns of the Czech audiences.

4.3.2 Increasing the Value of Live Music

The current price level of concert tickets more or less reflects the differences in purchasing power in the regional countries. (Some quickly depreciating currencies may over or understate the value of the concert tickets in euro, depending on the seasonality of the local markets.) Concert ticket prices are very similar in Czechia and Slovakia, with a slight advantage to the Czech countryside and a slight advantage of ticket prices in Bratislava in comparison with Prague. This also reflects the local purchasing strength.

In the comparison we excluded free concerts and ticket prices above 40 euros.

Comparison of CEE Median Concert Ticket Prices

Figure 4.9: Comparison of CEE Median Concert Ticket Prices

There seems to be no simple solution to increasing the concert prices. On the sales side, the typical audience size in Czechia is relatively big, around 100 people, and the distribution of usual audience is wider than in the region. This means that Czech concerts yield typical around 800-900 euros, which is a higher value than in Austria and Slovenia, and in fact, apart from reported Lithuanian values, higher than the typical values of the region.

Reported Audience Sizes in CEE countries

Figure 4.10: Reported Audience Sizes in CEE countries

Participants in the workshop said that they believe that medium-sized venues are missing from the country, which may be the case, but currently the medium-sized concerts are also very rare - 90% of the concerts have less than 200 visitors. There are currently very few concerts that do not fit on a small venue (which is typically defined as venue with less than a capacity of 500.)

The Hungarian CAP survey measured the various travelling costs (in time and money) associated with concert visits in the countryside, and other aspects of non-visiting or not frequent visiting. This is the recommended next step, because there is no clear pathway to increase either ticket prices or audience sizes.

The joint market research and R&D effort subchapter 7.4.1 Understanding the value of music events should provide market participants with more insight on this field. This research should be conducted in the first 1-2 years, during the methodology development phase, and probably included in more in-depth CAP surveys every 5-10 years.

4.3.3 Measuring the Effect of Revenue Growth Actions

Because the cheapest way to collect market information, when such information is not already published in a correct format from a reliable data source, such as collective management or ministry comprehensive source, the best way to collect data is to ask the musicians, technicians, managers themselves. The CEEMID Music Professional Survey was introduced in Czechia as an experiment for the first time in 2019, but in Hungary, it has already a history of 6 years. This comparative survey is already offered in 12 languages and allows the cheap measurement of the fragmented live music scene.

  • Average ticket price in Prague & the Countryside: this is a standard CEEMID indicator that is measured in 10 countries in the annual CEEMID Music Professional Survey. (See: subchapter7.5 CEEMID Music Professional Surveys)

4.4 Increasing the Participation in Music

Participation in music is measured by cultural access and participation surveys, which is a standardized way to measure market-oriented (commercial concerts), non-market oriented (free and liturgical events) passive activities and active participation activities (professional and amateur singing, music playing).

The EU-wide CAP surveys usually measure only the top priority indicators, for example, the frequency of concert attendance in each EU country / region. The ESSNet Guide contains guidance on how to measure more in-depth indicators that remain comparable among countries that follow the guidelines. CEEMID has created so far 7 CEE CAP surveys that contain in-depth information about the live music participation, and the use of the CEEMID questions would immediately make Czech participation levels comparable and understandable. The use of other questions will allow to make judgement on relative levels after 2-3 repeated surveying.

4.5 Increasing the Participation in Live Music

In the long run, the best action to increase activity is 3.3 Music Education in Secondary Schools. Because visiting probability and visiting frequency is usually diminishing after 21-23 years of age, it is critically important to introduce all students to enjoyment of concerts, singing and playing music.

4.5.1 Increasing the Participation in Live Music

I think that this is an area where venue operators, NGOs could really start to show good examples with almost no investment and earn credits. Please suggest ideas and make pledges.

This program element overlaps with the @ref(#ME2-2) Music Education: Active Participation in Music program element, but has market building aspects, too. It is very important to cooperate with educators and make sure that all teenagers, even from disadvantaged families, do get access to live music events. Teenagers, and people in their early twenties often cannot afford to spend a lot on concerts, but if they do not learn to appreciate live music, they will never come back to the music clubs and festivals when they start earning normal salaries.

Concert and festival promoters should work with educators to promote music in these target groups as an investment, outside their usual concert promoting and sales initiatives.

4.5.2 Increasing Active Participation in Music

While active participation in the form of singing, playing and playing a musical instrument, or becoming a DJ can be best increased in secondary schools and in primary schools (see: 3.2 Music Education In Primary Schools, 3.3 Music Education in Secondary Schools), music education programs take a longer time to implement. Stakeholders should be encouraged to initiate further action that would encourage people to take out their unsused instruments, or start to learn music at any age.

I think that this is an area where venue operators, NGOs could really start to show good examples with almost no investment and earn credits. Please suggest ideas and make pledges.

As a market building activity, rehearsal studios, instrument manufacturers and merchants, and other stakeholders are encouraged to cooperate with educators to make sure that teenagers throughout the country, but at least in all municipalities which have secondary schools and secondary school dormitories offer opportunities to play contemporary music.

4.6 Increasing the Value of Recorded Music

The digital royalty gap between large regions of Europe

Figure 4.11: The digital royalty gap between large regions of Europe

  • The interest of the music industry and the radio and television industry should be aligned in terms of regulation and taxation, and there should be a joint program that would increase the value of their services and their ability to pay higher royalties via OSA and Intergram to the composers, producers and performers.

This effort goes hand in hand with the 8 Alliance With Creative Industries, because broadcasting, advertising, film production, and other creative professions suffer from the same economic policies, and at the same time they are the biggest business users of music. Their ability to pay royalties depends on the success of10 Better Regulation & Taxation Of Music, because their business is impacted by the same tax issues. Furthermore, their business models and ability to pay royalties were undermined by the value transfer to media platforms, and the successful adoption of the Digital Single Market Directive. They would also have a material interest in supporting the research elements related to the successful transposition of the 10.2 Digital Single Market Directive.

4.7 Increasing the Sale of Recorded Music at Home

  • A constructive dialog should start with the DSP providers of streaming services, because it is likely that both the price and the marketing efforts to roll out their services, for example, Spotify’s family plan, is mispriced. Some stakeholders believe that the current subscription price, which determines streaming royalties paid for composers, producers and performers is too low in Czechia.

4.8 Comprehensive guidebook of the Czech Music Industry

Mobile INternet Users Who Pay For Music And Film in Europe, percentage of active population

Figure 4.12: Mobile INternet Users Who Pay For Music And Film in Europe, percentage of active population

The aim of the first Hungarian music industry report (Dániel Antal 2015b) and the first Slovak Music Industry Report (Antal 2019) was to create a fully documented, common guidebook of the structure, players, and facts, problems and development goals of the national industry.

4.9 Overcoming fragmentation and building cooperation

  • We are aiming to build working groups that are open to all organizations, enterprises and professionals with the hope that they will lead to improved collaboration and lasting new institutions. Because most music stakeholders work alone or in tiny organizations, they are lacking HR services, market research, research and development, advocacy and legal services that professionals working in larger organizations take for granted. Learning to work to solve problems together can lead to easier work and more success.

We are planning six working groups to solve common problems, and a further three to start building common functional areas that are available for people working in industries that have larger organizations, such as banks, car manufacturers, government, etc.

  • Working Group on Music Education & Advocacy - There was a general consensus that this is the most important working group, and it should include very senior people from national stakeholders, furthermore professionals in music education.

  • Working Group on Market Building - mainly for publishers, labels, concert and festival promoters and their associations, very experienced professionals on these fields. Directors of collective management associations.

  • Working Group On Music Export & International Competition - This working group would require the active participation of SoundCzech, publishers, labels, tour managers, and talent managers with many years of experience in foreign sales. The working group should focus on repertoire competition and imports, and potentially with experience on audiovisual and radio quotas. It would be very good if the collective management societies were involved.

  • Working Group on Better Music Grants & Sponsoring - professionals and artists with at least 3-4 successful and not successful grant experience, grant managers, researchers and experts in the field of ex ante and ex post evaluations. It would be very good to involve the Music Fund and the OSA Foundation into this working group. Usually there are similar know-how available around the managers of national and regional operational programs of the EU. Foreign experts may be needed, as this is a very special topic.

  • Working Group on Creative Alliances - Very experienced labels, publishers, concert promoters, talent managers, festival promoters who have successfully managed ongoing partnerships. Editors of music programs on TV and radio. Managers, directors of film production companies, film producers, TV or radio stations, movies, houses of culture with an undoubted love and interest for music. Business consultants who have a working knowledge of media, broadcasting, film production and music industry enterprises.

…and working groups that can build future institutions to overcome the lacking HR, market research, R&D and legal affairs functions of business microenterprises.

  • Working Group on Music Business Professionalisation - mainly for training companies, employers, and very experienced professionals in artistic, technical or managerial roles, with at least 10-20 years of experience. International experience shows that training programs are most effective if employers are actively involved. This would be a suitable working group for experienced music entrepreneurs. Trade unions, performer associations would be more than welcome.

  • Working Group On Market Research and Joint Research and Development - This working group is critical, because the current work is started as a preparation for this, and SoundCzech has a deadline on 31 October 2019 to apply for a grant at TACR to follow the work. Endorsements and participation is very important - senior university researchers, founders, managing directors of established labels, publishers, collective management, national organizations. Joint membership with the other working programs is possible, because we want to give methodology to the work of all programs.

  • Working Group on Better Regulation of Music - This is working group requires specialist knowledge. Because most music enterprises and organizations are too small to have in-house attorneys and legal professionals, however has such knowledge should be invited, and probably in this working group foreign expertise would be required.

In this chapter we are recruiting people for the Working Group on Market Building.

4.10 Indicators to Measure Progress & Keep Direction in Market Building

4.10.1 Strategic indicators

  • Number of people visited a concert in the last 12 years - this is a standard CAP metric (see 7.4) and we have data only for 2007 and 2013.

  • Total public performance royalties [ This indicator will be reported only for neighboring rights, unless OSA reports the indicator for composers]

  • Total mechanical royalties [ Could be reported by OSA ]

  • Total private copying remuneration [This indicator will be reported here in the final version from (Thuiskopie and WIPO 2017) ]

4.10.2 Impact indicators

  • Ticket presales rate: tickets sold before the gig / festival day reduce the risk, increase planning, and usually show a higher level of business organization.

  • Based on your comments, further suggestions will be made.

4.10.3 Effect indicators

  • Average ticket price in Prague, the countryside. The current median (typical) values are 200 korunas in Prauge and 181.2 korunas in the countryside. The average values are 216 korunas in Prague and 181 korunas in the countryside.

  • The typical concert audience size is 100-200 visitor in Czechia, and on average (with few larger concerts it is approximately 350.)

  • Median streaming quantity [ This indicator will be reported here in the final version from CEEMID Music Professional Survey]

  • Median streaming value [ This indicator will be reported here in the final version from CEEMID Music Professional Survey]

4.11 Working Group on Market Building

Please give the following details if you would be ready to join this working group: Jan Svoboda, concert promoter, Concerts s.r.o, 17 years of concert promoting experience.

Mainly for publishers, labels, concert and festival promoters and their associations, very experiencedprofessionals on these fields. Directors of collective management associations.

References

Antal, Daniel. 2019. “Správa o slovenskom hudobnom priemysle.” https://doi.org/10.17605/OSF.IO/V3BE9.

Antal, Dániel. 2015b. “A Proart zeneipari jelentése. [the Music Industry Report of Proart].” ProArt Szövetség a Szerzői Jogokért Egyesület. http://zeneipar.info/letoltes/proart-zeneipari-jelentes-2015.pdf.

Thuiskopie, and WIPO. 2017. “International Survey on Private Copying. Law and Practice 2016.” World Intellectual Property Organization. http://www.wipo.int/edocs/pubdocs/en/wipo_pub_1037_2017.pdf.