Good News – Music not “Risky Business”!

On October 11, 2011
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© Geffen 

Upon arriving at the Music Week website, I was greeted with a bit of a shock: “New report debunks idea that music is risky investment”. 

The music industry is built on shifting foundations which are constantly in question. The cash flow, the balance of creativity and profitability, the ever-changing technology, the fall of sales but the rise of consumption, the copyright confusions – the list goes on. Many of these elements are highly unpredictable, and we as members of this industry are always wary of the pitfalls that lie ahead. When I first started in this industry, a friend told me, “You WILL get screwed over. Maybe just once, but when it happens your ideas will change and you will get it!” It sounds harsh, but after not receiving money for work or suddenly having jobs cancelled, I got what he meant. There is so much risk taking in this business that when things look bleak, the guy watching the bottom line inevitably takes stock, perhaps making someone else lose out. 

So why do I start with a depressing tale at the beginning of what should be a reassuring article – “Music is not a risky investment”? I guess the question is “for whom”? 

Robert Ashton of Music Week begins his article with a seemingly honest (although grammatically incorrect) statement about a recent report from Demo. The report, called “Risky Business”, highlights the commonly held notion that the creative industries are a dangerous investment for financial institutions. Many businesses in today’s weakened economy face an ongoing struggle to secure investment loans and credit, but the report goes further, saying that banks are not willing to give loans to a “hit-based industry” (Demo, p.39). Essentially, start-up businesses with no revenue flow will get nothing to build something that “might” generate revenue upon a creative success. I recall Wikström (p.23) saying how much “luck” and “gut feeling” are responsible for success in the industry, but this in NOT what a bank wants to rely on when giving out loans (although some say it’s what it relies on when investing in international stock exchanges and risking the country’s economy, but that’s for another day).

Demo’s report details the risky “myth” surrounding the creative industry. After compiling data such as “Company deaths/growths” sector by sector and also within the creative sector, they believe that companies within the creative sector are no more risky than any other business. The patterns of growth and decline over the past ten years are similar to the other sectors, so why isn’t the risk assessment similar? Ashton rushes to highlight the difficulty of “measure[ing] creative worth”, but that is not the only reason why business struggle to secure investment. Without an active revenue stream, a business cannot begin to tap into a market, presuming money will come along with a bit of luck. Creative businesses often rely on the talent or skills of their directors: “In other sectors, in the worst case scenario they can chuck out the boss and run the business themselves to extract the value. If a creative business owner says ‘sod this, I’m off’, the bank is shattered” (Demo, p. 39).

As well as trying to ask for ANOTHER definition of the creative sector (something we’ve all read about by now) and recommendations for dealing with copyright, the report offers detailed suggestions for changing this simplistic view that creativity is risky. Ashton lists the three of the sixteen recommendations that he deems the most important, but he leaves out:

  • a need to include aggregate dated from the creative sector when considering the economy based upon growth or decline in other sectors
  • improving the visibility of the creative industry to investors and showing appreciation for its success
  • a new principle regarding ownership of intellectual property, especially in public broadcast
  • working with the HRMC to clarify rules surrounding earnings from royalties
  • the Government’s handling of copyright

… and quite a few more. All important, and I do suggest browsing the report to find more of your own.  

As Ashton didn’t feel like placing a conclusion in his article, I will try by going back to my original thoughts. Although the creative sector as a whole may not seem so risky when comparing it to other sectors, it’s only when you look at the niche fields within the sectors that you see where the risk still lies. For those of us in the music industry, risk lies in almost every role – marketing, recording, performing, promoting, etc. The risk comes from either a personal or small business investment that needs to be recouped rather quickly for the business to survive. When that investment looks unlikely to return, you risk losing everything. Anything which encourages investment can potentially make our lives easier. The industry itself may not seem risky to Demo, but we need to act like wary business owners, as we still run the risks everyday. 

 

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