Record Labels Invested $4.5 Billion in A&R, Marketing in 2011: IFPI Report

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(from Billboard.com, November 12, 2012) A new Investing in Music report from the International Federation of the Phonographic Industry (IFPI) concludes that in 2011 record companies invested $4.5 billion in marketing and A&R. $2.7 was just in A&R alone. Being a “very high risk industry,” states Frances Moore, IFPI’S CEO, it cost up to $1.4 million to market a new act and only one out of five end up being successful.

The report was unveiled at IFPI’s headquarters in London. It claims that the international music industry’s commitment to creativity was illustrated by 5,000 artists who are currently signed to the major record labels and the “tens of thousands” on the independent labels.

Nearly 23% of record labels artists are newly signed. The breakdown of the $1.4 million cost for a new artist is $200,000 on the advance, between $200,000 and $300,000 on recording, the budget for two to three promotional music videos could cost between $50,000 and $300,000, $100,000 on support for touring, and up to $500,000 for marketing and promotion.

The report compared other industries research investments to help put the 16% of the revenues the music industry spends on A&R in perspective: the global pharmaceuticals and biotechnology sector invested 15.3% of its revenues on R&D; software and computer services spent 9.6%; technology hardware and equipment industries devoted 7.8% of their revenues.

Based on studies, more than 70% of unsigned artists said being signed to a label is essential for the marketing and promotion strategies.

The IFPI disclosed that global music revenues had declined 1% from January to October of this year.  The industry is confident that the decline in revenue is turning around compared to the 3% drop during the same period in 2011. Moore added, “We’re looking at improving revenues compared to last year, which was an improvement on the year before.”