Kiwi music hits mainstream

Fat Freddy's Drop relies on word of mouth for sales.

First the good news: the New Zealand music scene is booming. Local artists sold about 500,000 records in 2005 - nearly a quarter of all the albums sold here last year.

Artists such as Scribe, Savage, Brooke Fraser and Bic Runga have moved Kiwi music from student radio and dingy inner-city pubs to the heart of the mainstream media.

Last year's biggest-selling local act - the hip Wellington reggae band Fat Freddy's Drop - is getting airplay on middle-of-the-road radio stations such as Classic Hits and notching up a good chunk of its quadruple platinum sales through The Warehouse.

Campbell Smith, chief executive of the recording industry association, RIANZ, said that kind of mainstream acceptance of local music was unimaginable 10 years ago. Through the 1980s and first half of the 1990s most local critically acclaimed music was considered too weird for radio.

Bands such as The Chills and their stablemates on the Flying Nun label attracted rave reviews in the United States and Europe but largely failed to make a dent on the local sales charts.

"We uncover it and we nourish it more now," says Smith. "It is viable, but it is still difficult."

That's the bad news - in financial terms the local music industry is still a minnow. And when you do the maths, the numbers paint a harsh picture.

The average CD retails for $32 (give or take a markdown at The Warehouse and a markup at a specialist record store) and so 500,000 records equates to just $16 million - and that is a retail figure.

Traditionally, the record shops will take about one-third of that price of a CD. The record company takes something like 40 per cent - a lot of which will be spent on manufacturing, marketing and distribution.

That leaves 15 to 25 per cent for the artists. Not a bad share, but the band is generally expected to pay back the recording costs of the album - which are advanced by the record company.

A few days in the studio can quickly add up to several thousand dollars so it is not uncommon for bands to end up losing money on the deal.

Another 8 per cent of the revenue will go back to the composer as a royalty - adding to the artists' share if they have written their own material.

"There's a lot of people sharing in that pie," says Smith. "And remember with most, often that's not just one person. Like with Fat Freddy's there is seven or eight of them so it's got to go a few ways between those guys."

True - but the Fat Freddy's crew are among the few groups that probably made a decent living last year.

Their album accounted for more than 10 per cent of total music sales (about 60,000). On top of that, the band had the business nous to create their own record company. They are reaping all of their own profits and are only outsourcing their distribution to a small independent company.

The marketing costs were negligible because the band simply didn't bother doing any marketing - their success has been driven largely by word of mouth.

Sony BMG boss Michael Bradshaw said it might sound like a dream model for all young bands but it was not one a whole industry could be based on.

He said there was a view out there that when the main labels were not around, the independents would pick up the slack.

That was not going to work - not if bands wanted to start selling internationally.

"I've been involved with marketing our records internationally for many years and we're talking millions of dollars and I really don't see where that money is going to come from unless we're here," Bradshaw said.

Four multinational record labels have a presence here: Universal, Warner Music, Sony BMG and EMI.

All four carry some local acts either through direct deals or through licensing and distribution deals with independent labels.

Sony BMG handles big sellers such as Bic Runga and Dave Dobbyn as well as having licensing deals to look after alternative acts - rockers Gramsci and reggae group Rhombus, for example.

Bradshaw said about 30 per cent of the artists that Sony BMG marketed were local.

"The local acts are part of the soul of an international record company," he says. "Otherwise, we are just distributors of other people's IP [intellectual property]. So from a personal point of view and creatively, it's the most exciting part of what we do."

The goal is always to create an environment where local artists can achieve international success.

"As much as we are excited about it and sell a lot of local music, it's difficult to do that profitably here because the absolute numbers are so low," Bradshaw says.

"So we do need to get solid sales of [US band] the Foo Fighters, or whoever it might be, to make the money to re-invest in local music."

Smith agrees. For the music industry to move to the next rung on the economic ladder, it needs to become a successful exporter.

"Most artists who are serious about this as a career will be looking for success offshore. The nature of what you're doing in making and performing music is that you want as many people as possible to hear it."

Smith says the industry is looking more and more towards exporting.

"We're getting more organised ... being smart and well prepared and not just trying to rely on the quality of the music," he says.

"The fact that a band like Fat Freddy's can do it all themselves and sell well locally and internationally says a lot about our industry.

"We are prepared to embrace different ways of doing things." Most artists will still eventually move on to a big label or they will do a licensing deal or distribution deal with one. But Smith says there are many different ways that the deals can work.


Worldwide
* 620 million albums were sold worldwide in 2005 - down 7.2 per cent from 2004.
* 352.7 million digital tracks were legally downloaded worldwide - a 150 per cent jump from the previous year.
New Zealand
* Just over 2 million albums were sold last year.
* Nearly 500,000 of those were by local artists.