Thomas Rome was a sound recording pioneer in Australia. He made the earliest known Australian sound recording and a lecture held at the National Film & Sound Archive this week saluted his work. Thomas Rome failed in his bid to build a successful business out of audio recording. This year’s NFSA lecturer, Michael Smellie had a few harsh words to say to the government and the music industry, and proposed ideas to improve the Australian music business so that it does not suffer the same fate as Thomas Rome’s failed recording venture more than 100 years ago.

Here is some of what the highly successful record industry executive had to say at the lecture:

The Australian Recorded Music Industry began in its modern form in the post WW2 era.
During this period a number of the “major” foreign recording companies set up
operations in Australia, focused on manufacturing vinyl products and implementing sales
and distribution networks. Their prime motivation was to profit from hooking Australians
on the then exploding popularity of American Rock ‘n Roll. Not surprisingly, there are
few great and successful Australian recordings from this era.

This began to change however, in the late 50s and early 60s with the recordings of artists
such as Johnny O Keefe and Col Joye enjoying critical and popular success. As a result,
the business began to redefine itself to not only sell imported music but also to record and
sell Australian recordings. This heralded a golden period of about 25 years for Australian
music; continuing through the 60’s with artists such as The Easybeats and Normie Rowe
and the 70’s with Daddy Cool and Skyhooks. The 80’s added another dimension as we
looked outward and impacted the World with artists such as Little River Band, INXS and
Midnight Oil.

The Australian Recorded Music revenues then were growing at better than
8% annually. Australian music was popular globally, a source of national pride and
economic benefit. An industry in a major growth phase, which (according to
AUSMUSIC), at the time employed 80,000 people or 0.7% of our national workforce
and contributed just under $2 billion to the economy or about 0.5% of our GDP.

However, as we entered the 90’s the situation began to change. Our previous 20 or so
years of uninterrupted Revenue growth saw a fall in ‘97 and the decade’s total growth
slowed to 5%. Our home grown artistic success also appeared slowed, with the only
notable exception being Savage Garden.

Not to panic yet though, at the beginning of the new millennium, there was still much to
be optimistic about. The new “digital” age had begun and we Australian’s were certainly
an innovative bunch and not that far from having been at the peak of our game. In fact,
though, the situation continued to deteriorate. Revenues this decade have fallen at 5% per
annum, with last years fall at 10%. Also, during this period, we have not had any artists
achieve the level of international success and influence previously seen.

As to the
opportunities presented by the new digital era, we have, to date, missed the boat. In 2007,
according to IFPI, 8% of Australia’s recorded music revenue came from digital
applications; compared to a worldwide average of 15%; and 24% in the USA and 11% in
Canada for example. This reflects our poor performance in digital applications employed
be it from the perspective of a consumer, producer, performer or distributor. This is the report card in 2008, of a formerly proud (maybe even arrogant and boastful)
recorded music industry.

Lack of Overseas Success?

A factor on the minds of all those involved in the industry is the need for overseas
success for our artists and recordings. Writers and artists almost always want their music
and messages to get out to the broadest possible audiences. It is a matter of national pride
to see our artists conquer US, European or even Asian markets. Our international
performance as I have mentioned earlier is on the decline. Any analysis will show how
other “international artists” markets such as Canada and Ireland continue to outperform
us. Yet rather than study, learn and adopt best practice, I usually only hear excuses as to
why Australia is different. I am sure we would not accept this in Rugby, Golf or any
other sport. We should not accept it in the music industry.

Exposure and success overseas is also often a vital pre-requisite to the economic viability
of recordings and also artist’s careers. Without overseas income some artists cannot earn
a decent living.

Our stable of experienced artist
managers who can operate effectively and knowledgably at an international level is
woefully thin. The shortcomings of Australian artist managers is one of the most common
criticisms I have heard in both my time in Australia and also when working overseas.
This has absolutely hindered the international careers of many Australian artists.

We must break out of this vortex and create a positive and self sustaining upwards
momentum with both financial and knowledge benefits.

Failure of Creativity?

Is there a failure today in creativity in our music communities? In our online globalized world, the barriers to entry into the business
are greatly reduced. If our music and musicians are creative enough they WILL have the
opportunity to be discovered much more easily than in years past. Yet this does not seem
to be happening.

The factors behind this apparent failure are complex and probably include social issues
well beyond my presentation tonight. I do think though that part of the issue involves
education and lack of any real emphasis or value placed on teaching creative subjects
such as music.

Failure in the Capital Market?

The fortune of the major recorded music companies has been on the
wane for some time. There are, no doubt, many who see this as a good thing for the
artists. They would be happy to see the formerly mighty record companies on their knees.
The problem with this is, that they have been the major suppliers of investment to fund
the growth and development of the industry.

As their financial well being has
deteriorated, so has their level of investment and indeed their capacity to invest.

What are the reasons for this?

Firstly, investment in new and developing artists is a very risky business and
purely financial investors are usually too risk averse.

Secondly, evaluation of new artists is a very specialized field and artistic
performance can be very unreliable. This probably means that a “portfolio”
approach is needed in putting an investment strategy together and this is difficult
to sell to the investing public.

Thirdly, there is little understanding in Australia investment community of how to
evaluate and monetize copyrights and the potential world wide cash flows.

Lack of Digital Initiatives

The new century has heralded changes to the music industry structure and practices on
an unprecedented scale. The world digital music market this year will be over $US5b,
already nearly 10 times larger than the domestic market. The significant barriers to entry
that existed have largely fallen away. Not so long ago, there were limited media outlets
for exposure; only so may slots on the MMM playlist or only so many new videos added
to MTV rotation. Not so long ago only the major record companies had access to get
records on the racks at Virgin or Meyer stores. Not so long ago it cost many hundreds of
thousands of $s to record, release and market an album – .the only economically viable
format at the time. The expanding digital environment has permanently and
fundamentally changed industry dynamics.

Today, we already have virtually unlimited
media outlets, with internet radio and the numerous community online sites. Today, we
have an increasing array of avenues to sell music through various mobile and online
retailers. Today, artists can conveniently sell direct to their fans. Today, we only need to
spend tens of thousands maybe even less than a thousand $s to record and market a track.

Sad to report though, that I am not aware of any – not one digital initiative in the music
space (I exclude Kazaa, so guess I should say legitimate!) that has originated in Australia.
As demonstrated, we are trailing many other countries in the digital music market. I have
also mentioned, the almost boundless opportunities here for us to be innovative. The
opportunity for Australia to be an influence on, rather than to be influenced by, the
changing industry structure.

We can look to be innovators either:

in the digital delivery and sales of music; looking at packaging, pricing or access
to music.

or we can look to innovate in the marketing and promotion of music;

After all, we have been innovators in the past. Australians have played leading roles in
introducing music videos, TV marketed hit compilations and Fairlight computers to the
industry. Parenthetically, I would remind you that music is leading the way in the
consumption of digital media. There is no doubt that the Film and Television industries
are following a simipiar path. Any innovation and knowledge gained in music will
almost certainly be leveragable not only in Australia but also across multiple media.

Leadership

My over riding observation about the Australian music industry, is the appalling lack of
leadership.

It must surely be self evident that if the music industry is socially and
economically important to us, yet, faced with a crisis; it is has been largely ineffective in
galvanizing public and/or political support or action. The conclusion can only be that
there is a leadership failure.

Smellie’s solutions for the Australian Music Industry include a “genuine” peak body, a “whole of industry” approach, a “Digital Incubator/Accelerator,” and an “Australian Music Day.”

To listen to the full speech, and read more about Thomas Rome, go to the National Film & Sound Archive’s page at the link below.