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Market report: Italy

by Emiliano Audisio
18 April 2017
Market report: Italy
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Italian music market has started raising again in 2015. Record industry, digital, live music, licensing and synchronization rights, here’s what you need to know to start exploring the Italian music industry. 

According to the latest Global Music Report 2016 by the International Federation of the Phonographic Industry (IFPI), of which the Italian Music Industry Federation (FIMI) is a member, after almost twenty years of steady decline, in 2015 the global recording industry has grown for the first time by 3.2 percent, up to a total of 14.2 billion euros.

Good news for the record industry

The positive trend seems to have continued in 2016. Globally, according to the latest available data, the Italian music market is ninth in terms of turnover, with 238.9 million euros (physical revenues + digital revenues + performance rights + synchronisation revenues), behind South Korea and ahead of Brazil. A definitely positive result in general terms, but looking at the European context and not considering England (third place globally, with a turnover of around 1.2 billion euros), still far behind its biggest competitors France (fifth place, around 782 million euros) and Germany (fourth place, around 1.18 billion euros).

Within this framework, Italy seems to follow the general trend: despite a decline in the general turnover (globally, an income loss of about 4.75 billion euros between 2005 and 2015), the bleeding seems to have stopped and profits seem to be growing again. However, if in addition to the turnover for the music industry, we want to consider the entire spin-off impact of the Italian music industry on the national economy – by including the teaching, creation, production, dissemination and distribution of music –, the overall business volume grows significantly, attaining a value of 4.3 billion euros and employing around 161,000 people (source: Italia Creativa).

The digital market

On a deeper level, in the last year, the Italian recording industry reported a 21 percent sales profit increase with an end result of 148 million euros. The digital segment, in addition to marking significant growth and actually representing 41 percent of the market, is driven in particular by streaming services, with subscription services (Spotify, TIMmusic, Deezer, Apple Music, etc.) growing by 63 percent and generating more than 26 million euros, compared to a little more than 14 million euros (+38 percent compared to 2015) by free services (YouTube, mostly).

With 19 million euros in total incomes, Italian download revenues also followed the negative trend, with a loss of five percent over the last year. Thanks to more effective integration between promotional campaigns and social media by majors and independent label marketing offices, however, physical sales bucked the trend of the previous years, with 17 percent growth and revenues exceeding 88 million euros. Finally, the positive trend of vinyl continues to grow, occupying eighth place in the global rankings with a turnover of more than six million euros in 2015. Special reference needs to be made to the role of music piracy, which, although decreasing compared to the past (according to the FIMI survey, the percentage of Italian users who used illegal services between July 2010 and July 2015 has decreased from 27 to 19 percent), still continues to cause major damage to the music industry. According to the latest report of the European Union Office for Intellectual Property (EUIPO) in Italy, in 2014, music piracy caused losses totalling 7.8 million euros: 3 million euros relating to lost sales of physical media and 4.7 million euros related to digital.

A look at the rankings

Furthermore, the Italian music market in 2015 confirmed its world record regarding the percentage of the national repertoire penetration in the albums market segment. Effectively, among the top ten albums of 2015, nine releases are by Italian artists and the top three positions give a realistic representation of the national music market: at the top we find Jovanotti, the pop artist whom everyone loves, from grandfather to grandchild, and who has been on the scene for over 25 years; behind him is anguished singer-songwriter Tiziano Ferro with his “best of”, one of the best-selling albums in Italy for the second year in a row; and in third place, The Kolors, the winning band of the TV talent show Amici di Maria De Filippi, proving that talent shows for teens still move a significant market share.

 

From the 2015 rankings, two other important considerations emerge: the decline of rap (Guè Pequeno in 41st place; Marracash, 45th; Fabri Fibra, 49th), a music genre that probably finds its audience more on streaming platforms than on CDs, and the poor impact, in terms of physical copies sold, of independent music.Hopefully, the 2016 rankings will bring at least a couple of breaths of fresh air: the light upswing of rap (Salmo, Marracash & Guè Pequeno, Gemitaiz, Sfera Ebbasta and Emis Killa all released a new album during 2016 and received positive feedback in terms of reviews, media and audience) and the penetration of the Top 50 by artists from the independent scene, whose singles received radio airplay on important Italian networks (‘Oroscopo‘ by Calcutta, ‘Completamente‘ by The Giornalisti). Among the albums that probably won’t make the 2016 top-selling charts, but which are in my opinion some of the most interesting releases of last year, I would certainly recommend La fine dei vent’anni by Motta, whose work won the prestigious Club Tenco Award for the Best Debut of 2016, and the smart electro pop of L’ultima festa by Cosmo.

 

Rapper Gemitaiz

When it comes to digital singles rankings, although Italian music returned to the top in 2015 with the stereotypical pop song ‘Roma Bangkok‘ by Baby K. featuring Giusy Ferreri, the big international hits seem to benefit from the use of streaming services, occupying eight of the top ten positions in the rankings.

Again, though the 2016 rankings seem to confirm the 2015 trend, I am still hoping for some new elements: the presence of Ghali – an Italian-born son of Tunisian immigrants who lives in Milan and whose rap single ‘Ninna Nanna‘ was certified gold by FIMI in only two weeks, giving him the chance to perform at Club2Club 2016, the most prestigious festival of electronic music and new sounds in Italy – and The Giornalisti – a Roman band whose mix of pop and naive romanticism conquered radio airplay on some of the main networks (RTL 102.5, Radio DeeJay).

Regardless of my hopes for digital singles – and looking at the last official data –, independent radio and radio networks seem to replicate the singles digital market rather than the album market. In fact, according to the data collected by Radiomonitor Ltd., the top eight songs in the top ten in 2016 are again by international artists, while 85 percent of the radio airplay songs are produced by the three major labels: Universal (market share: 36.4 percent), Sony (29.3 percent) and Warner (22.2 percent). Sugar Music is the independent record company with the highest market share, accounting for 6.22 percent, followed by Energy Production (2.3 percent) and Time Records (2.07 percent). This data makes it clear that this kind of business model of the overall radio system (big networks and independent radio) rewards the production of the major music companies in spite of independent labels, even though the latter represent about 25 percent of the physical market.

What about live music?

In the last few years, live music in Italy recorded a clear positive trend, highlighted by the significant increase both in terms of revenues and audience. In particular, pop music concerts have driven the entire live music industry. According to the Italia Creativa Report – the first analytical study on the industry of culture and Italian creativity, commissioned by MIBACT (the Italian Ministry of Cultural Heritage and Activities and Tourism), SIAE (Italian Society of Authors and Publishers) and all the main professional organizations in the creative sectors, published by Ernst & Young in early January 2016 –, with 1.44 billion euros, revenues from concerts, dance activities and musical performances represent almost 50 percent of the value of the entire spin-off impact of the Italian music industry. In particular, thanks to the 6.1 million spectators in 2014 (up 5.1 percent from 2013), pop music concerts earned around 229 million euros (up 30 percent compared to 2012). Of these, 42 percent come from northwestern Italy, generating incomes of approximately 96 million euros.

So, the live performances with the highest incomes are the ones in stadiums and large arenas, with the big names of the national and international music scene. To prove it, the ranking of the ten most successful concerts of 2014 and 2015 sees the (usual) Italian pop stars, such as Ligabue, Vasco Rossi, Jovanotti and Tiziano Ferro, interchanging in the top positions with a few international stars, such as Rolling Stones, AC/DC and Bruce Springsteen. It therefore seems clear that the offer of pop music concerts in our country is strongly linked to a national context, with Italian singers occupying an average eight out of the top ten positions in the final ranking.

As regards the live club sector, according to the latest survey by KeepOn Live, an independent organization that monitors 279 clubs across Italy, in the2014-2016 period, indoor exhibition spaces with a resident stage have increased, while their size and capacity have decreased. During the last year, the average size decreased from 210 square meters to 195 (-7.1 percent), while the average capacity decreased from 300 to 240 people (-20 percent). Size reductions are certainly also due to the ongoing crisis of the big clubs, with medium and small clubs are more economically sustainable. Despite the increase in the number of venues, the amount of weekly concerts remains virtually unchanged, with only a slight increase compared to the 2014/2015 period: from 600 to 605 shows per week. However, compared to last year, the average number of artists that performed in the clubs monitored by KeepOn had increased by 28.8 percent, from 980 to 1,378. In other words, there is growing demand for shows on the artists’ side, while the supply of stages remains steady. The number of supports band involved in a single concert tends to increase, thereby leading to a reduction in the average per capita income of the individual artists.

The general scenario is thus still divided into two separate and poorly integrated parts: the world of the big indoor arenas and festivals that attracts national and international stars, and the world of small clubs that instead collects and amplifies the voices of independent and emerging artists.

 

Licensing and synchronization rights at a glance

Finally, let’s have a look at licensing and synchronization rights (revenue from the use of music in advertising, film, games, radio, television and in premises), an increasingly important segment of the creative industry economy even in Italy. In 2015, SCF Italia, the Italian music industry consortium that collects the revenues for the use of music in radio, TV, webcasting and public events, saw a 40 percent increase in turnover, with 53.2 million euros. Also, the revenues allocated to copyright holders, such as producers, record labels and artists, increased to over 40 million euros during the last year (+20 percent compared to 2014).

That said, the real battle for synchronization and licensing rights is fought on a political level: the struggle in Europe and the USA to reduce the “value gap”, identified by labels and artists (for once, both in surprising harmony) as the major obstacle to the sustainable growth of their revenues. In fact, IFPI – together with artists, labels, publishers and copyright collectives around the world – is complaining about outdated laws that allow certain operators, chiefly YouTube and Spotify, to pay really low amounts for music licensing, even though music distribution represents a fundamental part of their business. In particular, Content ID, the tool which should enable the identification of protected content uploaded on the repository, is under fire.

According to record companies Content ID does not allow the identification of the majority of the music uploaded, resulting in no remuneration of copyright holders and allowing services such as YouTube and Spotify to accumulate incomes that subsequently aren’t handed over to artists. YouTube, however, has promptly replied to these accusations by saying that digital services cannot be considered the enemy of the musicians. “In the last 12 months, YouTube has paid out 1 billion dollars (949 million euros) in ad revenue to the music industry, demonstrating that multiple experiences and models are succeeding alongside each other,” stated Robert Kyncl, YouTube’s Chief Business Officer. The stated aim of IFPI and its allies is to reduce the “value gap” through intense lobbying, especially in the US and Europe – an operation that is beginning to bear fruit. In fact, on December 2015, in the paper Towards a Modern, More European Copyright Framework, the European Commission stated that it “plans to make its first proposal on how to deal with the ‘value gap’ in 2016”. A law proposal is currently under discussion, but considering the complexity of the problem and the number of interest groups involved, the path to a fair and shared law reform seems quite long.

In conclusion, a quick look at music consumption in Italy, especially among teenagers (16-24): according to the latest 2016 report commissioned by IFPI, smartphones are the most used device for music listening and sharing, while for nine out of ten users (95 percent), YouTube is the most used service for online music consumption. Speaking about the consumers of the future, these numbers represent yet another factor in the struggle regarding the “value gap” issue.

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