Unsong hero of the economy

SBHD: While a DTI report has highlighted music’s strong contribution to UK foreign earnings, it remains to be seen whether British TV can emulate this success.

Interesting that a Department of Trade & Industry minister has been billed to launch a report by British Invisibles (BI) tomorrow (Thursday) entitled Overseas Earnings of the Music Industry. Ian Taylor will doubtless strike the rather incongruous note of a headmaster opening the school rock concert as he draws attention to an industry whose foreign earnings have now outstripped those of British machine tools and rank alongside those of the steel industry.

Which all goes to show that industry can be fun, and that there’s a lot of hard work behind the scenes to make pop music pay for all of us.

I don’t suggest that Taylor will say anything quite as nerdy as the headmaster in the wired-up gymnasium. But I do think the BI report throws up some significant challenges to those of us who still believe that the way Britain makes money out of rock `n’ roll is to tax performers into exile or to give Richard Branson more routes into Heathrow.

The report also, incidentally, makes some comparisons with other service industries in the media, shooting down some preconceptions of a different kind, to which I will return in a moment.

But first the music industry. There has long been anecdotal evidence of what the British music industry generates in foreign earnings. I remember John Lennon saying what he did for Harold Wilson’s balance of payments and getting an MBE for his pains. But what this report has done is establish some hard empirical evidence of the contribution British artists make to their home economy (wherever they choose to go subsequently).

The key fact – the one that Taylor’s civil servants will ram home in their briefings – is that gross overseas receipts for the British music industry (not just records, but performance income, instrument sales and so on) topped ú1bn in 1993.

Imports were about ú587m, leaving a trade surplus of ú571m. Export figures are therefore effectively double imports.

The UK apparently has a number of niche industries that mirror this sort of performance, one thinks of the whisky industry, but only a handful of those with exports of more than ú1bn achieve a similar ratio.

BI reports this, with a straight face, as “an impressive performance”, though in this context perhaps it should be called a great gig or wicked set (of figures).

For the record, the actual invisibles Рconcert fees, royalties and the like Рtotalled ̼800m, producing a surplus of nearly ̼500m. The visibles Рsales of CDs, records and cassettes and instruments Рaccounted for ̼360m, a surplus of just over ̼80m.

A couple of points before moving on to the media comparisons I promised. The first is that this report is praise indeed, since it comes with the endorsement of BI. Naturally, BI is concerned with promoting any area of the British economy that trades in invisible earnings, but it is principally involved with financial and business services, with principal subscribers coming in the shape of the Bank of England and the Corporation of London.

In short, one of the areas closest to BI’s heart is the City. I would dearly love to know how the City and music industry’s invisibles earnings ratios compare. Perhaps we can be told.

Furthermore, the music industry has achieved precisely what British privatised utilities seek to achieve: the selling of expertise and equipment in foreign markets not regulated by Britain.

I wrote enough here last week about the way we should seek to regulate the boardrooms of privatised utilities. But, in passing, I would also like to know whether, as a nation, we would stop harping on about what top executives in utilities earn if we saw them turning in the same sort of foreign earnings performance as the record companies.

So, to the comparisons with other service industries of a cultural or media nature. Buried towards the back of the BI report is a comparison, during 1993, of the music industry’s performance in overseas earnings with those of the film and television industries.

The British film industry is forever having people standing up on its behalf to berate politicians for insufficient support – the implication being that it is struggling – while the television market is supposedly one of our sunrise industries (at least in export terms).

The results of BI’s research in this respect makes interesting reading. While both the film and TV sectors enjoy reasonable gross invisible earnings from the sale of products overseas, and substantial inward investment of overseas companies (in the case of film), the net position is altogether less favourable than music’s. Film generates a surplus of less than half the music industry’s, at ú208m, and TV actually turning in a net deficit of ú115m.

British TV’s gross foreign earnings of ú113m (against payments of ú228m) are a fraction of what TV companies earn in the domestic market – but that really is not the point.

What is important is that British TV companies appear to be dragging their heels in the international race. It hardly needs me to point out that the future of programming provision lies in cross-border markets – serviced by satellite internationally and cable domestically.

One would hope that the Carltons and Granadas of this parish are pushing out the export borders of their markets. However, there is precious little evidence, on the basis of BI’s figures for 1993, that the industry as a whole is cracking the international game. That is bad enough, but if the international game is being left to the likes of BSkyB or Telewest (part-owned by Rupert Murdoch’s News Corp and US West respectively), then the initiative has already largely been wrested from organically grown UK TV.

A further strategic conclusion to this is that when it comes to the world marketing of new multimedia formats – the whole business of movies, pop soundtracks, advertising and video on the next generations of CD-ROM and the like – the music industry is well networked to lead the way globally, as distinct from the British providers of TV and film. So, come on, British TV, show us what you’ve got. v

George Pitcher is joint managing director of media consultancy Luther Pendragon.