THE SPANISH RECORDING INDUSTRY WILL SEE THE RECOVERY BEGUN IN RECENT YEARS CUT SHORT

01-04-2020

Promusicae requests the Government to take urgent and specific measures for the sector

The crisis caused by the coronavirus pandemic will take an amount of at least 100 million euros in direct losses in the case of the Spanish recording industry, according to an internal report prepared this week by Promusicae, the association that brings together more than 95% of the sector in Spain. This direct economic disaster will be even greater if there is a more than predictable economic recession during the months following the end of the health pandemic and could mean losses of more than a third of the sector's turnover in 2020.

Promusicae, which today announced the 2019 results for the sale and consumption of recorded music in Spain, has sent the conclusions of this analysis to the Ministry of Culture and Sport and is calling on the Executive to set up a compensation fund to cover the losses incurred, as well as various fiscal incentives, soft loans and music promotion campaigns to cushion the hard blow that the virus has also dealt to the recording industry.

An important industry for the Spanish economy

The music industry in Spain closed 2019 with a total turnover of 296.4 million Euros in sales of recorded music, which meant an increase of 22.5% over the previous year, thus continuing the recovery of the sector that began in 2014.

The digital market now accounts for 75.3% of consumption in Spain, representing the sum of 223.3 million. Revenues from the use of streaming platforms account for 95.4% of the digital total (213 million). A large part of this success is due to paid subscriptions on audio streaming platforms, which now have over 3 million subscribers, and which have grown by 34.9% compared to the previous year and account for 53.7% of total music sales, but neither are the revenues from ad-supported audio streams, which are growing by 27.9%, and those from ad-supported video streams, on platforms such as YouTube (21% more than the previous year), lag behind.

Far from being affected by the digital boom, during the last financial year the physical market grew by 7.2% and represented a revenue of 73.1 million of the total. The maintenance of CD sales as the preferred medium is noteworthy, but the new rise of vinyl is surprising. One out of every four physical records sold in Spain is at 33 RPM. 

Despite not yet having reached 50% of the sector's turnover in 2001, these results come after long years of rebuilding the market for an industry that had also been hit very hard by piracy and meant rebuilding muscle in the Spanish economy as a whole. However, the joy has been short lived as we have seen everything achieved falter in the face of the expectation of facing a new crisis. A new disconcerting situation for the sector that needs immediate action, if we do not want to lose at once 6 years, or more, of recovery.

The negative impact of the coronavirus on music

"The coronavirus crisis has negatively impacted our business and will abruptly slow us down. As the figures we are publishing today show, 2019 has been a favourable year for music sales, and especially for music in Spanish, something that had generated enormous optimism in our sector, but unfortunately it has been short lived. All the sources of income for record producers are going to be seriously damaged because of the current situation.

The damage will be particularly severe in the case of the sale of physical recordings (CDs and vinyl records), which are directly affected by the closure of music stores, at a time that is favourable to new releases, where it is estimated that half of the turnover will be lost, some 40 million euros for the year as a whole", stated Antonio Guisasola, President of Promusicae. He continued, "Losses on streaming platforms will be at least 50 million; in the case of subscriptions, the expected drop will suddenly break the strong growth trend of recent years".

Contrary to what might be thought at first glance, the confinement has not triggered streaming revenues. According to information provided by the market research company Gfk, in the first week of the State of Alarm there was an 11% drop in streaming music consumption, a phenomenon that has already been observed in Italy and other countries in a situation of confinement.

The impact on other revenue streams, such as synchronizations (use of music in advertising or audiovisual creations), revenues from concerts, sponsorships or licenses, sale of merchandising, or those related to the tours of their artists could represent several million euros more in the bill, while due to the closure of clubs, bars, pubs, hotels or shops with the State of Alarm and the decline in advertising revenues, intellectual property rights for public communication could suffer a drop of 12 million euros.

Mitigating measures and promotional campaigns

The recorded music industry has submitted to the government a number of proposals - urgent in the short term and more extensive in the medium and long term - to soften the impact of this crisis. Producers are calling for a State compensation fund to cover the companies in the sector for losses caused by the closure of music shops and the cancellation or postponement of record productions and releases. In addition, a 15 million Euros credit line through the Official Credit Institute (ICO), with no interest and a two-year grace period, for music stores and small and medium enterprises in the sector. A reduction in corporate tax for at least the next two years is also suggested, as well as rental assistance for stores and SMEs that have suffered a loss of income of more than 50 percent.

From a more proactive perspective, it is proposed to create a campaign to promote music, which is showing its most supportive side due to the infinite number of spontaneous demonstrations that have emerged since the first day of confinement, in order to recover the habit of paying to enjoy it. This campaign could include a "cultural bonus" financed by the State, in the manner of the Italian case, with which young people can invest in cultural goods, the music recorded among them.

With a longer scope, Promusicae will propose to the Executive that music production be encouraged with grants, as is the case in other sectors. This public aid should cover both production and promotional activities. Likewise, it is suggested to implement lines of aid for the internationalisation of Spanish artists through promotional tours.

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