By
Emmanuel Legrand
For
the French music industry, 2014 started with something
unusual: Revenues from the sales of recorded music posted for the first time in years a
slight increase. After a decade of decline, music
industry executives had the feeling that a regain in CD sales and the
strength of the digital market had finally helped the industry turn a
corner.
At €603.2 million, sales of recorded
music went up 2.3% in 2013 compared to the previous year, according
to figures presented at the Midem show in Cannes on Feb. 2 by French
trade body SNEP.
Digital
sales posted a limited growth at €125.8m
(+0.6%) and now represent 26% of total revenues with streaming
accounting for about 43% of this amount. Sales of physical products
went up for the first time since 2002 (+1% at €367.4m).
SNEP's
figures incorporate the proceeds of neighboring rights on sound
recordings as well as revenues from physical and digital sales,
representing respectively 18%, 61% and 21% of total revenues.
This
rebound owes a lot to one artist, Stromae, whose second album “Racine
carrée” sold
over one million units in France in 2013 (1,159,320
to be specific, according to monitoring company Gfk),
a feat that had not been achieved since 2004, when the soundtrack to
the movie “Les Choristes” passed the million mark.
The
score achieved by the Belgian artist is even more remarkable when
considered that the second best-selling album of 2013 is Daft Punk's
“Random Access Memories” sold half his amount. Overall, 17 of the
20 best selling albums were by French-speaking artists. Bruno Mars was
one of the few international acts on the list.
Return to growth
French
music industry executives welcomed the return to growth, but warn that
the current market situation is far from being ideal, with consumers
switching their digital consumption from downloads to streaming,
which impacts revenues, and the state of France's music retail
remains preoccupying.
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| SNEP's Leblanc |
“The
digital market is growing – not as much as we'd like, but it does
grow,” says Guillaume
Leblanc, Director General of French record labels' body SNEP, which
regroups the majors and indie labels.
However, the slight rebound of the French market was taken with
caution by Jerome Roger, Director General of indie labels'
association UPFI, which regroups over 400 labels. “There might have
been growth, but it does not paint the whole picture,” says Roger.
“Physical and streaming are growing and downloads are slowing down,
but behind the success of Stromae and Daft Punk, for a lot of
so-called 'middle class' artists – either new talent or in
development – the volume of sales has gone down significantly and
digital does not compensate.”
For
Roger, indies are caught in what he calls a “scissors' effect”,
with revenues down when, at the same time, marketing costs have not
dropped. “The capacity [of indie labels] to break even on artist –
even established artists – is harder to reach than ever,” he
says, warning that the next two years will be the most challenging
for indies.
“In
the the mid-term I am quite optimistic that streaming will be the
dominant model, says Roger. “The challenge will be to resist during
the next two years. While we hope that the market and generate
revenues that will be significant to rebuild growth, we are forced to
turn to the government and ask that they put systems in place to
support indies. Maybe it's time to rethink about the CNM?”
 |
| UPFI's Roger |
CNM
– this acronym stands for Centre National de la Musique. It was the
previous government, under the impetus of President Nicolas Sarkozy,
that had set up a wide ranging industry consultation which led to the
proposal of creating of what would have been a National Centre for
Music (CNM), similar in its scope and function as the CNC for the
film industry.
The
CNM would have combined various existing structures operating in the
music field (FCM, Fonds de Soutien, Bureau Export, Francophonie
Diffusion, Irma), and provided significant financial support to
labels, publishers, concert promoters and also coordinate France's
international export efforts. The annual budget of the CNM was
expected to be in the region of €130m, mostly financed through
various mechanisms and from a transfer of budget from the CNC.
But
the election of President Francois Hollande, and the appointment of
Aurélie Filippetti as Minister of Culture, overseeing the music
sector, had some serious impact on the industry and projects like the
CNM. A few weeks after her appointment, Filippetti announced that she
was dropping the project, creating havoc among the industry.
“The
CNM would have been a tool to help structure the music sector and
help the mutation to digital,” explains Gilles
Castagnac, Managing Director of IRMA, a music information and
resources centre. “What was proposed remain valid and many are
still calling for such a project to exist. In France, the other two
major creative sectors – books and cinema – benefit from such a
tool
which combines competences and financing.”
Castagnac
adds that because is was a project conceived in a period of crisis,
the CNM was especially customised to focus on innovation. “What we
are missing are tools to do prospective and prepare the future,” he
says, taking the example of metadata related to music, a key to the
digital economy, which could have been given a major boost through
the CNM.
Public policies
The
CNM case exemplifies France's long tradition of having its government
involved in all things related to culture and arts. The general
philosophy, which has been prevalent regardless of the political
leaning of governments over the past 30 years was that there a
“cultural exception” with creative works – such as films,
books, music – and they cannot be treated like any other goods. In
the music field, the sector has been looking less for subsidies than
regulation and copyright protection.
Meanwhile,
Filippetti appointed TV personality Pierre Lescure (tipped to become
the next president of the Cannes Film Festival) to conduct a mission
– yet another – with a vast consultation of stakeholders, and
draft a report on
cultural policy in the digital era
that would offer solutions, especially with regards to digital
challenges. The Lescure report, presented mid-2013, made a series of
80 proposals for the industry, even though few of them have so far
been implemented.
The
findings of the 711-page report were in general well received by the
industry, although Lescure did not advocate the pursuit of the CNM.
However, most players in the industry welcomed the fact that Lescure
agreed that there was a need to continue with a “graduated
response” system, albeit slightly loosened. SACEM said it was
“pleased
that the report demonstrates an underlying concern for the protection
of artists’ remuneration. It also applauds the report’s positive
attitude towards the cultural industry and its acknowledgment of the
close affinity between music and digital sectors.”
Some
of the key proposals from Lescure include: Introducing a tax on
internet-connected devices such as smartphones
and tablet computers that would be used to help finance the creative
sector; Promoting up-to-date regulation on digital culture and
fighting piracy especially through the transfer of competences of
Hadopi to media regulator CSA; Broadening fans’ legal access to
cultural works. “We
had some reservations on the conclusions of the report,” says
SNEP's Leblanc, “but now we need to turn it into operational
terms.”
The
report also addressed the issue of combatting piracy in the digital
age. Many in the industry lamented that French public had been a very
early adopter of broadband and also of file-sharing, leading to the
passing of a legislation meant to limit the scope of file exchanges.
The legislation introduced a “graduated response” regulation,
known as Hadopi. “Piracy acts as unfair competition to legal
offers,” claims SNEP's Leblanc, himself a former aide to member of
Parliament Frank Riester, who was instrumental in getting the Hadopi
bill passed by Parliament.
This
controversial bill was proposed and adopted by the then Sarkozy
administration, and many in the business credit Hadopi as a turning
point by focusing on the consequences of file-sharing through
educational campaigns. Lescure himself said in his report that Hadopi
had a significant and positive educational role. In 2012, after the
election of President Francois Hollande, the fate of Hadopi seemed in
doubt, but as of early 2014, Hadopi is still operating and there are
hints that the government would like its functions – albeit toned
down – taken over by broadcasting authority the CSA.
“Our
main priority is to ensure that regulation on digital stays pertinent
and improves,” says Leblanc. “We are not in the 'for or against
Hadopi' – incidentally, Lescure said that graduated response works,
and the system has been introduced in several other countries. This
validates the need to fight against illegal peer to peer file
sharing. But we need to make sure that there is a graduated response
system and that copyright can continue to be protected and unfair
competition limited.”
Digital champions
 |
| Transparency's Bert |
Another
interesting proposal from the Lescure report was the suggestions that
improvement needs to be done in the field of digital rights
management, and the development of trusted
third parties to do the job.
One such company is Transparency,
a company based in Paris and founded in 2010 by Jean-Francois Bert
who has been building a digital infrastructure and a team whose
purpose is to monitor the use of content online and provide data to
rights owners. Transparency's service is now used by authors' society
SACEM to certify the reporting logs from video platform Dailymotion.
“We
provide a back-office B2B service,” explains Bert. “Our job is to
connect the users of repertoire and rights holders. We work with
collective rights management organisations but not exclusively. We do
not collect rights, we manage data linked to rights. All this is
meant to help rights management and provide a more accurate picture.
The data we provide is used by SACEM to distribute rights from the
use of videos on DailyMotion.”
Bert
is a good example of the entrepreneurial spirit in the music and
digital field in France. Having worked on the side of rights owners,
he felt there was a gap in the market when it came to managing the
huge amount of data generated by the digital use of content. “I did
not know much about data but when I saw what data was collected from
DM and YouTube, I realised there was a huge gap and I thought that
rights management had to adapt to the digital world,” says Bert. “I
developed the concept, looked for techs, and invested my own money.”
Transparency,
which is currently monitoring YouTube usages in five countries and is
hoping to convince other rights societies of the value of his
service,
is not the only French company active in the digital field.
Others include streaming service Deezer, now present in over 180
countries, Believe Digital, now Europe's leading digital distribution
company and France's largest independent company, Idol-Independent
Distribution On Line,
another digital distributor set up in 2006, Daily Motion, a video
streaming site, My Major Company, a record label using crowd-sourcing
to finance projects, or Qobuz, a downloading and streaming platform
which specialises in high quality music files offering music
consumers sound similar to that of the CDs.
“The
music market is by definition an international market, and some of
the players need to have an international strategy,” says SNEP's
Leblanc. “France has international champions like Deezer, Believe,
or Daily Motion.”
Axel
Dauchez, CEO of Deezer since 2010, has applied a full-speed strategy
to the company, in order to compete on equal footing with the likes
of Spotify. The company benefited from a partnership with phone
operator Orange, which boosted it reach among consumers. In 2012,
London-based company Access Industries, owned by Len Blavatnik, took
a substantial share in Deezer, investing $130m in the process.
SNEP's
Leblanc acknowledges that Deezer, with 80% of streaming market in
France, is a key player, but he regrets that it relies too much on
bundles with mobile phone operators. “What matters is the
conversion rate [of users of the free service into paid
subscribers],” he says, adding that streaming services should make
more efforts to provide simple offers and develop schemes that would
increase the conversion rate.
Adds
Leblanc, “While we witness the growth of streaming – both through
subscription and free models – downloading is slowing down in
France, like in the US. At the moment, 50% of digital revenues come
from downloading but streaming has potential to grow.
Streaming is a mass market proposition, so there is a need for scale,
like in Sweden, and if we had one French consumer out of ten
subscribing [to s streaming service], we'd be in a different space.
But we definitely see streaming as part of the future.”
Sound machine
One
who is convinced of the digital future of music is Yves Riesel, whose
company The Quobuz Music Group regroups indie label Abeille, active
mainly in classical and jazz, and Quobuz, a streaming and download
digital platform focusing on high-end top quality music files.
Launched in 2008, it is currently available in nine European
countries, Qobuz offers a catalogue of 15 millions tracks, including
from such seminal labels as Germany's ECM, and has captured about 50%
on the online classical market in France.
 |
| Qobuz's Riesel |
“[ECM
founder] Manfred Eicher is obsessive about the quality of the sound
and we provide an answer,” enthuses Riesel. “From the outset, we
were focusing on the quality of the sound. I think that in the
future, we will see general services that will be like commodities,
and an upmarket and segmented market, with the likes of Qobuz.
Alongside the Spotifys and the Deezers, who are going to be like the
hyper markets of music, there will be room for specialised platforms
like Qobuz.”
Riesel
says the service is reaching profitability in France and in heavy
investment mode for its international development. He eyes the German
market through the audiophile angle. “The German market is very
attentive to the quality of sound,” says Riesel. “There are some
fantastic retailers selling amazing sound systems. Qobuz really fits
in this environment.”
Through
his label Abeille, Riesel is also exposed to the changes in the
French market. He confirms that 2013 saw a renewed growth through
physical sales. “We seem to be coming out of the tunnel as a
market, but revenues are under pressure,” says Riesel, who laments
the poor state of France's retail
network that has been badly hit by the decline in physical music
sales leading to the demise of key players such as Virgin Megastore,
the problems faced by Harmonia Mundi (a network of independent stores
operated by the eponymous record label) which had to scale down its
operations, and the takeover of Saturn, a hardware retailer who also
had a small record/DVD section in its stores.
Meanwhile,
luxury goods and retail group PPR was considering selling FNAC, which
operates the largest network stores selling “cultural” goods
(music, books, DVDs, video games and hi-fi) in France, leading to a
period of uncertainty for the retailer. “Sales picked up at FNAC by
the end of the year,” says Riesel.
“France's
music retail sector was never as strong as Germany's or the UK's,”
explains Olivier Montfort, former CEO of Sony Music France and EMI
France, who was also one of the founders of the Virgin Megastore in
France, alongside Patrick Zelnik. “But the past few years have been
very tough.”
For
Montfort, there are different reasons explaining the demise of the
various retail chains. Some have been mismanaged for a some time,
others did not invest enough in creating a good experience for
consumers, others had grown too fast, or did not have the right
locations. Virgin's flagship store on the Champs-Elysées in Paris
close down in June 2013, alongside other stores across France,
leaving some 950 employees without a job, and many distributors with
unpaid bills.
“Virgin
was a story of a death foretold. There were signs that things were
wrong,” says Montfort. “It is never a good thing for the business
when stores close but stores that are not working properly and do not
pay their suppliers also create problems.”
As
opposed to Germany where the various players are scattered throughout
the country, one of the characteristics of the French market is that
everything is taking place in Paris. “France is a hyper-centralised
country compared to Germany, which is closer to the US market with
regions and their local media and distribution channels,” explains
Montfort. “In France, all the main media are in Paris, and even the
purchasing policy of retailers is centralised in Paris. There is very
little action outside Paris.”
Overall,
the French market can be tough but can also deliver the goods for
local and international projects. As music publisher Petra Gehrmann
from Métisse Music puts it, “The French
market is in crisis like all music markets, but on the positive side,
I love working with artists here, who have a great spirit, who are
open minded. France is a real international music platform, with
musicians from all around the world. The business is a bit more
difficult, but it is still a good place for business.”
[This piece was part of a series on the French Music Market. Other stories include:
