Music industry shows content is king

Allister Heath
MOST industries have done well from the extraordinary change unleashed by the internet since the web went mainstream in 1994. Among the few exceptions have been content businesses, including the media and music industries, which have seen their old business models decimated by the technological revolution and which have struggled to build a viable alternative. So it is encouraging to note that after years of decline the music industry could finally be stabilising, with revenues only falling by 3 per cent last year to around $16bn, the least bad performance in years. Collapsing CD sales are now almost being compensated for by surging paid-for downloads, and no longer only thanks to iTunes.

Global digital revenues grew 8 per cent to $5.2bn, according to the IFPI, with single downloads up 11 per cent by volume and albums up 24 per cent.

The top selling single was Bruno Mars’ Just The Way You Are, at over 12.5m paid-for downloads; while prices are low, these are real numbers. The number of users paying to subscribe to a music service grew 65 per cent to 13.4m. In the US, digital channels now account for 52 per cent of revenues; globally, it is 32 per cent, surpassing the proportion reached by the film, newspaper and book industries.

The beleaguered music industry is not out of the woods yet; piracy remains a huge problem. But its ability to stabilise itself is good news for other creative industries. One way or the other, clever, lean, entrepreneurial companies will be able to monetise good content.

Of course, there was lots of bureaucratic, time-wasting nonsense in Vince Cable’s executive pay speech yesterday (see page opposite). Many of the pseudo-reforms announced won’t amount to much. But shareholders’ rights will be reinforced and it will be they, not bureaucrats, who will be in charge of corporate pay. This is good news; the substantive changes announced yesterday are pro-capitalist and give shareholders more clarity and power. Boards work for their owners and that is how it should be; reasserting and strengthening that link is the best way to prevent rewards for failure.

That is why it is a good thing that this announcement was a damp squib in the sense of being less controversial than expected: many of the silly or unworkable ideas (such as appointing “employees” to the board) have been ditched or diluted in such a way as to become meaningless. But the good reforms have remained. It makes sense to have claw-back clauses in contracts if it turns out that what seemed to be a good performance in fact wasn’t, as a result of a hidden scandal, for example. These are now already the norm in finance as part of deferred compensation schemes. It is great that notice periods of more than a year will have to be ratified by shareholders; again, this will reduce payoffs for failure and some of the extreme termination payments that have done so much damage to the City’s reputation.

I would have gone further: for example, shareholders could be responsible for directly appointing members of the remuneration committee. But – inflammatory rhetoric aside – at least Cable hasn’t really made any existing failings much worse (apart from a few minor and ultimately irrelevant nods to form-ticking and to fake diversity) and has actually proposed some real improvements. The devil will be in the detail but on balance these are a decent set of reforms.
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