There is a good reason why the global music industry continues to concentrate its efforts on the biggest markets.
The US, Japan, Germany, the UK and others provide the biggest captive music audience – and the biggest financial returns.
In recent years, Scandinavia and Latin America have become other understandable focal points: as streaming takes off, so these markets have been transformed, offering a tantalising glimpse into the future of music consumption.
Scan down the world’s biggest 20 record music markets and you won’t find the likes of Poland, Czech Republic, Croatia or Estonia.
But to dismiss these territories would be a huge mistake. Each is bucking trends across the business – and becoming vital vestiges for global music companies.
The recorded music market in Poland grew by 13.6% in value last year to US $79m, according to the IFPI.
Physical continues to dominate with an 80% share of income excluding sync and performance rights.
Indeed, physical sales grew in the country in 2014, up from US $51.9m to $56.2m year-on-year.
On physical sales alone, still the industry’s most lucrative format, Poland is the 15th biggest territory in the world.
But to paint it as a digital slowcoach wouldn’t be fair: digital income grew 32.1% in 2014 to $13.9m – $10.9m of which was contributed by streaming. Little over $2m came from downloads.
Below, Tony Duckworth (pictured), General Manager of [PIAS] Poland and Eastern Europe, highlights some of the key trends taking place in the region – and what they might mean for the future…
There is a cultural revolution going on
It’s quite amazing that, in terms of music sales, a territory like Poland has just seen two or three years of decline in the past 10 years.
That’s because of what’s been going on socially and economically – especially joining the European Union.
The way people spend their leisure time is changing, and that’s definitely having an effect on music sales, across digital, physical and tickets to gigs. More disposable income has led younger people to being more interested in fashion and culture have turned people onto music.
What’s great for a company like [PIAS] and other indies is that alternative music has become much more popular as a result. Six or seven years ago at a gig, you either looked like you were into heavy metal, or you just looked normal.
Now you see hipsters, you’ve got the Chet Faker beards – they’re everywhere. And that’s happening in Poland, Czech, Estonia and the other regions, certainly when you visit the capital cities.
That bears out with the bigger festivals: Open’er in Poland is alternative music, and it’s the same with Off Festival, as well as Sziget in Budapest… you can see them getting bigger and bigger and leaning more than ever towards alternative music.
The Czech Republic is thriving
The market in the Czech Republic is very exciting. Recorded music income was up almost 5% last year, according to the IFPI, to around $22m.
This happened despite physical sales falling to under $10m: retail-wise, the Czech market has actually taken a hammering in recent years.
There’s been one dominant chain there for years: Bontonland. It used to have 30-something stores, now it only has 17.
So physical has reduced, but for us at [PIAS], we’ve increased our sales – we’ve bucked the trend.
Ticket sales are thriving in Czech, which shows the market is there.
A lot of bands are going into Czech because it’s an easy hop from Germany.
For instance, [PIAS] has bands like Enter Shikari going into Czech selling 1,500 tickets, but from a physical CD point of view we’re doing a couple of hundred..
Digital is not as strong in Czech as other regions: it grew last year to $5.3m, but is still some way behind physical on $9.6m.
Digital is still struggling to take a hold in quite a few regions, really: Croatia, Slovenia, Hungary, Romania.
It’s increased a lot in Poland, but it’s still not a dominant force.
Watch out for Hungary
Outside of Poland and Czech, Hungary would probably be the most significant territory for [PIAS] in Eastern Europe.
It’s only the 39th biggest recorded music market in the world (with a total $17.2m value last year), but it’s gone through a lot of economical problems.
To an extent, now it’s on the mend. Population-wise it’s slightly bigger than Czech. I think it’s a market that can be exploited much more – it’s a market that hasn’t really been looked at it in much detail.
There are lots of positive signs: subscription ($1.25m) and ad supported streaming ($1.22m) both almost doubled in value last year, as the total market grew 7.8%.
Streaming is a hugely important promotional tool
Streaming might not be as important from a revenue source as it is in the UK, but from a promotion and marketing aspect it’s vital for [PIAS] in these regions.
There’s a big question over whether pre-release streaming works – the argument is that you’re giving your album away etc.
Well over here, it really works.
It’s a really strong driver for people to discover a record and push them into the stores the next week.
It’s still seen as something quite special in Eastern Europe.
Piracy is dead (almost)
The piracy issue in these territories is very interesting.
I remember when I arrived here 11 years ago: you could walk down the street and you’d be able to buy a bootleg DVD or CD on every corner.
There used to be a market in Warsaw in the old [football] stadium and you could buy pretty much anything – including guns!
You could turn up one week and say: ‘Do you have the new album by such-and-such?’
The guy would say no, but “come back next week and I’ll have it”. It was a major issue.
You look back at that period for a band like Faith No More and official [annual] sales were something like 4,000 units. There’s no way that was accurate; they were selling far more but most of them were bootlegs.
Interestingly, now, we don’t even think about piracy when we’re putting out a record. And really that’s down solely that you can stream for free.
If you look at Poland from a statistical point of view, streaming is always very high. Free Spotify and Deezer – and YouTube, of course – is how these young consumers listen to music now.
And there’s definitely a try-before-you-buy culture creeping in, which has to be good news for everyone.
This is a very loyal audience
Back when communism began to fall, the local radio stations in Poland began to play westernised music and for whatever reason that largely fell on heavy rock.
Those bands, like Marillion and Scorpions, still have great resonance amongst Polish people; perhaps because of such a strong emotional and cultural link to the recent past.
One of the acts that radio began to play work with [PIAS] – Dead Can Dance (pictured).
Their popularity has always been really high in this part of the world; they haven’t lost the fans that lived through that time, and they have passed down their fandom to the next generation too.
Digital trends in Eastern Europe: 5 to watch in 2015
Eastern Europe is a particularly interesting territory as there is significant competition to become the market leader for digital music services across all of its regions.
[PIAS] Commercial Operations Manager James Howdle (pictured) picks out the territory’s five most intriguing data points:
- For [PIAS], there are different market leaders in every main territory of Eastern Europe outside Russia: Poland (Spotify), Czech Republic (iTunes), Hungary (Deezer) and Slovakia (Deezer).
- Poland is by far the largest market in the region. For [PIAS], digital revenues grew by 88% last year – in comparison IFPI reported growth of 31% for digital music. To some extent this will be due to our increase in global repertoire in 2014;
- In 2013, no one DSP had more than 30% market share in Poland which is quite unusual compared with the larger markets in Europe like the UK, France or Germany. iTunes had a narrow lead over YouTube with Spotify in #3 and Deezer in #4. In 2014 Spotify leap-frogged YouTube into #1 spot and has continued to perform very well with a share of 45% so far in 2015 Q1.
- Russia is a much larger digital market than Poland, although it generates similar revenues for [PIAS]. Russia is dominated by iTunes as Spotify have not launched there yet and no other service has made a real impact so far. Google Play is the only real iTunes competitor as we stand.
- Deezer is slightly ahead of Spotify in Hungary for [PIAS], but appears to be losing ground. iTunes is still in the lead in Czech Republic, but Deezer looks set to overtake it this quarter.