Lithuania | Digital Music Observatory

CCS Ecosystems: Evidence-Driven CCI Policy & The Central & Eastern European Music Industry Report

Wed, 29 Jan 2020 16:00:00 +0100

CEEMID & Consolidated Independent presented and discussed with stakeholders the Central & Eastern European Music Industry Report 2020 as a case-study on national and comparative evidence-based policymaking in the cultural and creative sector on the CCS Ecosystems: FLIPPING THE ODDS Conference – a two-day high-level stakeholder event jointly organized by Geothe-Institute and the DG Education and Culture of the European Commission with the Creative FLIP project.

Daniel’s presentation was focused around the question on invisibility of the CCI sector in the economic, education and labour policymaking, and the low level of data use in fact-based cultural policy design, and the following policy design problems. Our CEE Music Industry Report 2020 created with the help and support of Consolidated Independent was used as a use case for the problems.

This blog post is an edited version of Daniel’s presentation and the subsequent panel discussion with the stakeholders and organizers.

The CEE Report builds on the results of the first Hungarian, Slovak, Croatian and Czech music industry reports are compared with Armenian, Austrian, Bulgarian, Lithuanian, Serbian and Slovenian data and findings.

Invisibility

The measurement problems and the ‘invisibility’ of creative and cultural industries is a consequence of the fact that these industries are predominantly comprised of microenterprises and individual, freelancing entrepreneurs. Even larger entities, such as collective management organizations can be classified as small enterprises. In the EU, small- and medium enterprises, and especially microenterprises usually have reduced reporting duties to the statistical authorities and tax authorities (which is the most important secondary source of government statistics in anonymized, aggregated form.) This means that the supply side is not visible for policymakers. The recommendation is to conduct sample-based surveys among these microenterprises, but very few member states do that.

Another problem is that on the demand side, not all member states create statistics. ESSNet-Culture created recommendations how to measure cultural access and participation, which is a broader term than cultural consumption, as it includes non-market forms, for example, liturgical music, amateur acting, and so on. The European Commission sometimes makes excellent, but not detailed CAP surveys, which are the most important sources of Eurostat’s relevant pan-European statistics.

CEEMID has been making such surveys, both on the supply side (in music and film) and in the audience side (in music, film, theatre, opera, and artistic activities) in several member states, and has plenty of experience with using the EU-mandated CAP surveys of 2007 and 2013. The CEE report relies on the latter date set in first part of the audience analysis. Our work was already presented in 2015 as a best use case in Creating better national cultural statistics with Eurobarometer datasets and ESSNet-Culture technical recommendations at GESIS, which maintains the Eurobarometer archives, on the Eurobarometer Symposium Four Decades of Surveying Europe – Perspectives on Academic Research with the European Commission’s Eurobarometer Surveys

For the EU the lowest hanging fruit would be to critically assess the past surveys, including the partial CAP survey made in 2017 for the cultural heritage part of culture, and the national surveys conducted by CEEMID and its partners, and to mandate an annual or biannual CAP survey within the Eurobarometer series, probably as a specially sampled “Special Eurobarometer”. This would very significantly reduce the costs compared to a country-to-country basis, and probably could be shared by other institutions, for example, with the European Audiovisual Observatory. This alone would greatly increase the demand / consumption side information on the services of creative and cultural enterprises.

In the panel discussion Consolidated Independent highlighted the problem of leaving sample-based statistics making to the industry itself, which leads to myopical incentives to create ‘policy-based evidence’ that is cherry picked by industry trade associations to fit their often not very well thought out policy agenda. In our view, the most important role of a future European Music Observatory would be to set standards to data collection and integration. The music industry is one of the most data-rich industries globally, but the publicly available, verified, trustworthy information is scarce both for policy-making and for business planning among microenterprises who have know specialized research know-how. Our already existing, representative national surveys should and could be extended to the whole Europe with the quality control and visibility offered by such an Observatory.

Industry organization

A very significant challenge with evidence-based policymaking, or, in fact, with any policy making is that the extremely fragmented nature of the industry makes national and EU-level consultations very difficult. Most of the workforce is neither a classical employer nor employee but works as a freelancer or a micro-entrepreneur. Their views are very rarely represented by trade unions or employee associations or chambers of commerce. Despite all efforts on EU level to make the social dialogue more representative for atypical and flexible work forms, the problems and the views of the creative and cultural sectors are largely unrepresented in policy debate.

A prime example of this problem is the very heavy over-taxation of the music industry that we have shown in the Hungarian and Slovak national music industry reports, and in other documents in Croatia. The problem is not only characteristic for the music industry, but generally all CCIs because they share similar economic properties: no real chance to use tax breaks, high level of labour input and high level of value added. While policy makers and granting authorities spend much time on trying to improve the financing of this sector, in fact, reducing over-taxation would make a much more imminent impact on the liquidity, profitability and growth opportunities of the sector.

However, in the making of economic and tax policies, the fragmented creative and cultural industries hardly can represent their special situation.

Policy issues

Apart from taxation issues, which significantly reduce the liquidity, profitability and growth opportunities of these sectors in many EU countries, particularly in the CEE, where corporate taxes are low but value-added taxes are high, there are other important policy problem that reduce the long-term growth capacity of the sector.

The very small enterprise size leads to missing strategic human resources (HR) and research and development (R&D) functions in almost all enterprises – including simple market research activities. Companies with 1-2 employees do not have specialized management and support functions, and thus they have a very strong handicap in HR and R&D.

A good example of this problem is the motion picture and TV industry. These industries were comprised of medium-sized enterprises in the 1980s with significant in-house education functions. The current structure of these industries, however, resembles music, with almost all enterprises staying below the 5-person threshold. In our experience, based on development needs assessments in the Hungarian motion picture and the Czech music industry, this creates an acute skills and labor shortage. Missing skills cannot be well replaced by recruitment, or with strategic HR development via life-long learning.

Similarly to very reduced opportunities to participate in, and create life-long learning schemes, there are very little chances to engage in market research and R&D. While the music industry, for example, is one of the most data-driven industries in the world, the microenterprise size does not allow that these enterprises commission market research or hire data scientists. This leads to very asymmetrical relationships with the main distributors of music and media content on platforms that are owned by global data companies.

Recommendations

Daniel made a few concrete recommendations in the panel.

Creating the European Music Observatory, and the creation of similar industry initiatives, and commissioning collaborative (multi-stakeholder) market research, as CEEMID works in many countries, can only replace the missing market research function in the extremely fragmented industries, such as motion picture production, the music industry, but to a certain degree architecture and design.
A low-hanging fruit would be a critical assessment of the previous Pan-European CAP surveys and the comparable national CAP surveys conducted by CEEMID and its partners following the ESSNet Culture recommendations and the inclusion of the CAP surveys in an annual or bi-annual form in the Eurobarometer (Special) series. A Special Eurobarometer may be more suitable because usually a non-proportional weighting of the sample gives the best value for money in these surveys.
Critically reviewing the participation of micro-enterprises in the current forms of social dialogue and looking for formal or informal ways to increase participation in policy making can gradually lead to more creative-friendly economic regulation and tax policies. The Hungarian Music Industry Report 2015 and the Slovak Music Industry Report 2019 contains very interesting case studies for this problem that we briefly summarize in the CEE Music Industry Report 2020.
Critically reviewing the few examples from mainly Nordic member states where collective agreements and other collaborative institutions allow microenterprises and freelancers to participate in life-long learning problems can help designing policies that will gradually reduce the huge skill gap of the CCIs in management know-how, data know-how, or renew their technical skills necessary in the production of their services and content. Our work with the Hungarian National Film Fund and surveys among more than a thousand film makers can give much insight into this problem.

Further links

Our research findings were earlier presented and discussed in Vienna, Prague, Budapest and Bratislava with stakeholders.

You can follow Creative FLIP project on Twitter.

Central & Eastern European Music Industry Report 2020

Wed, 29 Jan 2020 16:00:00 +0100

The predecessor of Reprex’s Demo Music Observatory, CEEMID together with the independent music distributor Consolidated Independent presented and discussed with stakeholders the Central & Eastern European Music Industry Report 2020 as a case-study on national and comparative evidence-based policymaking in the cultural and creative sector on the CCS Ecosystems: FLIPPING THE ODDS Conference – a two-day high-level stakeholder event jointly organized by Geothe-Institute and the DG Education and Culture of the European Commission with the Creative FLIP project.

Our research findings were earlier presented and discussed in Vienna, Prague, Budapest and Bratislava with stakeholders.

You can find the earlier presentations in the blog section of the website.

Executive Summary

The first Central European Music Industry Report is the result of a co-operation that started among stakeholders in three EU countries five years ago to measure the economic value added of music – the basis of a modern royalty pricing system. This gave birth to CEEMID, originally the Central & Eastern European Music Industry Databases, a data integration programme that now in 2020, covers all of Europe. CEEMID fulfils similar roles to the planned European Music Observatory and supports all pillars of the future pan-European system.

The comparison of Western and Eastern music audiences reveals key demographic differences that make the unchanged adoption of business practices from mature markets in the region questionable. Chapter 2 of this report will show these differences and their consequences on music markets, in terms of visiting and acquisition likelihood, frequency, seasonality and purchasing capacity. This is an example of how CEEMID fulfils the role of Pillar 3 (music, society and citizenship) in the planned European Music Observatory.

Chapter 3 contrasts market demand with the supply strategies of musicians. CEEMID has been surveying music professionals, including artists, technicians and managers about their working conditions, market conditions and plans for five years across a growing number of countries. In 2019 we invited 100 national and regional stakeholders to distribute our surveys. In some countries, our surveys already have several years of historic data, making the resulting musician database probably the largest ever source of data about how music is produced and how musicians live. We are constantly looking for partners to roll out this survey to new countries in new languages.

The CEE region has comparative advantages in big music events like festivals, and it has become one of the most important hubs for cultural tourism in the world. We explain this phenomenon in Chapter 4 by showing the differences in demand composition, demography and supply of venues in the second chapter. The lack of a modern and dense network of permanent music venues gave rise to magnificent music festivals in the CEE. Open’er, Sziget and Exit are among the biggest and best festivals in the world, closely followed by several smaller festivals in all countries. The share of festivals in the live music market is many times higher than in Western Europe and they provide vital export revenues to the local music economies. However, they play a limited role in finding new audiences for local artists, as they are increasingly programming for Western audiences by providing shows of international hits. They can only very partially fill in the gaps left by the small venue problem that hit the emerging markets harder than the UK or Australia, where policy action had been already taken to reverse the decline of the availability of smaller live music venues.

On the recording side, our analysis shows that modern digital services are growing at a faster rate than in mature markets. Because of lower repertoire competition, streaming quantities are similar for a typical Austrian, Czech, Hungarian, Polish or Slovak track than in the mature markets. However, revenue growth is limited because of the interplay of several analysed factors. Our analysis of the live and recorded music markets shows that CEEMID fulfils the roles of the Pillar 1 (music economy) of the planned European Music Observatory.

Most recorded music sales revenue in the region comes from streaming platforms, just like in the mature markets. Successful sales strategies require a solid knowledge of the global marketplace and the ability to understand and train sales algorithms. Micro-enterprises, such as independent labels, have very limited ability to cope with these functions, given that they do not have market research or R&D functions. CEEMID and Consolidated Independent have started initiating open, national R&D consortia to create the necessary concentration in data assets, analytical capacity and budgets to close this gap. As a first step, CEEMID and Consolidated Independent have created a large, independent music dataset based on hundreds of millions of royalty statement entries to create our market indexes, styled after stock market and bond market indexes. Streaming opportunities are fast changing as roll-out of streaming services is happening at a different rate in various territories; subscription charges and the exchange rate to the producer’s currency vary and repertoire competition emerges in the market. Our volume and revenue indexes in Chapter 5.3 are aimed at creating sales algorithms that optimize sales volumes and expected revenues. We believe that this analysis also reveals that CEEMID partially fulfils the roles of Pillar 2 (music diversity and circulation) and feeds important data into Pillar 4 (innovation).

The region has far bigger untapped potential than most music business executives believe. Households in the region spend a significantly lower share of their recreational budget on music than their Western, Southern or Nordic peers. The region has a lot of untapped cultural purchasing power because servicing is particularly challenging in both the live and recorded sides of the business.

This upside potential cannot be tapped without better pricing. Royalty levels are often very low in the region. Due to many combined effects analysed in this short report, the gap between royalties earned in the CEE and Western Europe is several times bigger than the difference in GDP or national average wage. These gaps are partly caused by special interests preventing collective management from charging appropriate tariffs for restaurants, media companies or electronic appliance importers and manufacturers, and partly by unfavourable taxation of cultural products and services.

CEEMID was designed to create economic evidence on royalty pricing, private copying compensation and the creation of economic value added in the industry. In the first Hungarian Music Industry Report of ProArt and in the first Slovak Music Industry Report we have shown that economic and taxation policies of the CEE countries aimed to support car and electronics manufacturing create a distorted, unfavourable economic regime for creative industries. We want to help local stakeholders with economic evidence to correct these discriminatory policies during the overhaul of the EU VAT system. We have been helping various national organizations with economic evidence, presented in the light of latest EU jurisprudence, to improve their pricing activities. Our thousands of indicators were also used in ex ante evaluations of granting schemes.

In 2020, all EU member states will change their copyright administration legislation because of the national implementations of the 2019/790 Digital Single Market directive. CEEMID provides evidence in several countries about the size and impact mechanism of the value transfer, and generally the widespread use of the copyright exemption for private copying. We believe that the thousands of pan-European music industry indicators that we have aggregated over the five years will play a vital role in these regulatory processes.

CEEMID fulfils its roles with a very thorough exploitation of the EU’s 17-years-old Open Data regime with the re-use of public sector information, and a very careful mapping of the music industry. These maps help us conduct annual surveys among musicians and the audience, and they help us connect (always with pre-approval and with a user mandate) to industry databases. We do not only cover the EU countries, but increasingly (potential) candidate countries and neighbourhood countries.

In our vision, this data collection and integration, i.e. Pillars 1-3 should be available for all music stakeholders, should remain public and publicly funded. The last Pillar of the observatory, innovation, is where private entities should compete. The founders of CEEMID and Consolidated Independent believe that this report demonstrates the business and policy benefits of such a system with the analysis of the Central & Eastern European music markets. We believe that this way CEEMID is in a position to serve most of the planned functions of the envisioned European Music Observatory, and we are looking for ways to make either our thousands of indicators, or our data collection and integration software open source and available for all stakeholders in the EU and its neighbours. CEEMID was born out of necessity to level out the different levels of public research and statistical coverage of the EU member states. In our view, private entities in the future should focus their investments in Pillar 4 of the planned observatory, i.e. competing in innovation with creating new models, algorithms and services based on data that is available throughout the European Union without giving further advantage to the already mature markets.