Riding Ups And Downs Down Under: As ARIA Awards Approach, Australia Sees Cause For Optimism

Published in Billboard Magazine

 

The music market in Australia, like its counterparts elsewhere, has had its share of ups and downs in recent years. In 2011, however, it’s been mostly up.

A new wave of home-grown acts are making their mark, live music remains strong as ever, and digital music sales are booming. Physical sales are in decline. But they’re not crashing, leading executives note.

“It’s a buoyant market,” Universal Music Australasia president George Ash says. “There’s a real wave of creativity coming through the industry at the moment. There’s a lot of opportunity from artist creativity to services in the digital world. It’s entrepreneurial and, best of all, creative.”

That creativity will be on display at the Australian Recording Industry Assn.’s (ARIA) annual awards taking place Nov. 27 in Sydney. Three acts–Goyte, Boy & Bear and Drapht–lead the field with seven nominations each. Indigenous artist Geoffrey Gurrumul Yunupingu and rock act Eskimo Joe earned six nods. Birds of Tokyo picked up five nominations, while pop singer Guy Sebastian and late rocker Billy Thorpe earned four nods each.

Certainly the music industry should feel more upbeat at this year’s awards.

The Australian market slipped off a cliff in 2010, registering a decline in value of 13.9% to $384 million Australian ($390 million). It was a sobering result considering the Australian record business had returned to growth in 2009. Although ARIA no longer publishes midyear market figures, sources suggest the market has returned to growth in 2011. But it’s still below the 2009 figure.

Piracy continues to be a thorn in the industry’s side. However, there’s a sense that the government, Internet service providers (ISPs) and content owners are reaching common ground.

“The biggest challenge remains making significant breakthroughs on controling unauthorized downloads and to continue to develop existing and new legitimate services,” says Denis Handlin, chairman/CEO of Sony Music Australia & New Zealand and president of Sony Music Southeast Asia & Korea.

Handlin, who also serves as chairman of ARIA, points to discussions held between the content industries and the ISPs, convened by Australia’s attorney general.

The attorney general’s office in October also announced an inquiry into “safe harbor” practices that, Handlin says, “provide a very positive outlook for a system that will minimize illegal use and encourage more legitimate services.”

Piracy clearly hasn’t gone away, but the “P” word seems to be disappearing from the vernacular Down Under and the industry is pushing ahead with its Music Matters education campaign that launched in August to promote the value of music.

Australia’s record business never took the approach of suing file sharers, and the industry has watched from the sidelines as film trade association AFACT has taken legal action against iiNet to hold the ISP accountable for copyright infringements. AFACT’s ongoing case has largely faltered, and a High Court showdown is due the first week of December. If AFACT wins, it may pave the way for further action against ISPs. But that’s a big “if.”

Regardless, Australia’s ripening digital marketplace is entering an unprecedented phase of activity. Spotify is hiring staff ahead of its Australian launch, while market-leading brick-and-mortar retailer JB Hi-Fi should make a big splash with its anticipated Now subscription platform and download service. The retailer, which has 200-plus locations, reckons that Now will boast between 6 million and 8 million licensed tracks when it arrives before year’s end.

The action doesn’t stop there. BlackBerry launched its BBM music service in early November. And Universal Music and Sony Music’s Australian companies have formed a joint venture called Digital Music Distribution, which supplies music services including the music radio programming on the Foxtel pay-TV platform.

“Australia is probably a bit behind Europe and North America when it comes to streaming models, but what we lack in market penetration we make up for in proliferation,” says John Watson, president of Eleven: A Music Company and John Watson Management. “Things are certainly in a state of flux right now. The good news is that the business is now totally listening to the needs of consumers. The days of the music industry acting like King Canute and trying to hold back the tide are thankfully behind us now.”

Digital music services are jostling for a sizable business. In the year ending June 30, the digital market grew by 32%, according to Billboard sources. Digital revenue Down Under now accounts for 40% of all sales, up from 27% in 2010. Soon, the market will be evenly split between physical and digital sales.

Australia’s digital revolution is set against the backdrop of the Labor government’s National Broadband Network. It’s an ambitious national rollout of high-speed cables, intended to connect nearly everyone in this vast and sparsely populated country of 22 million.

By 2020, the ambition of the NBN is to place Australia among the world’s leading digital economies. In five years, users connected to the network may be able to download at speeds of 10 gbps. The NBN, however, has become a political football, with the opposition Liberal Party seizing on its $36 billion Australian ($37 billion) price tag coming amid a shaky global economic environment. What the Australian digital market will look like in 12 months’ time is anyone’s guess.

At physical retail, JB Hi-Fi continues to lead the way with an estimated 40% of the CD albums market. The No. 1 digital music service is iTunes, handling more than 70% of digital download sales. In the coming months, however, JB aims to chip away at iTunes’ commanding lead.

The challenges facing music publishers in Australia are the same felt by every music business around the world. “Digital is still growing very strongly, which we’re happy about. But if income from distribution of digital product can’t plug the gap, what other revenue sources can?” asks Brett Cottle, CEO of the Australasian Performing Right Assn. and the Australasian Mechanical Copyright Owners Society. “Publishers are facing that same decline in their revenue. And they’re having to deal with a hell of a lot more data and micro-payments.”

Universal Music in Australia is the recorded-music market-leader with a share of about 40%, ahead of second-place Sony Music, and the local companies of Warner Music and EMI. Australia’s independent music scene is a vital one. According to independent labels group AIR, indie acts accounted for 43 out of 125 nominations for this year’s ARIA Awards.

AIR conducted market-share studies in August and found the results favorable. “We realized that our combined members were consistently achieving 25%-35% market share in Australia. That’s a massive chunk of our industry,” AIR GM Nick O’Byrne says. “We also estimate that more than 85% of the different titles commercially released in Australia are indie.”

According to ARIA sales data, indie company Inertia managed 11.5% of market share by distributor in one week during August, an “amazing” result, O’Byrne notes.

On the downside, the Australian industry lost two key music TV platforms when free-to-air Network 10 cut the long-running “Video Hits” weekend show in August, and the publicly funded Australian Broadcasting Corp. this month shed its quiz show “Spicks & Specks.”

“It’s sad,” says Paul Piticco, director of Dew Process and Secret Service Artist Management. “Many people are now connecting the Internet to their TV, where you can essentially program your own music channel.”

It’s a case of losing two music TV shows, and gaining one. Sources say NBC’s music talent show “The Voice” will come to these shores in 2012.

Innovation isn’t exclusively at the technological level. A new breed of artist is coming up and shifting big volumes on some titles. On the albums front, 2011 has undoubtedly been Adele’s year. The British songstress replicated her success in Europe and the United States with some Australian chart feats of her own. Adele’s eight-times platinum-certified (560,000 units) album 21 (Remote Control/Inertia) topped the ARIA albums chart for 23 weeks, a feat eclipsed by only three other sets–Dire Straits’ Brothers in Arms, Delta Goodrem’s Innocent Eyes and Jack Farnham’s Whispering Jack–since the ARIA charts launched in 1983.

Adele’s smash singles “Rolling in the Deep” and “Someone Like You” are both certified five-times platinum (350,000 units). The year’s biggest tracks in Australia were released by U.S. dance act LMFAO and Melbourne-based Gotye. LMFAO’s “Party Rock Anthem” sat at No. 1 for 10 successive weeks and is eight-times platinum (560,000), while Gotye’s “Somebody That I Used to Know” (featuring Kimbra) spent eight consecutive weeks at No. 1 and is certified six-times platinum.

Universal Music Group International COO Max Hole tips Gotye and fellow Australian artist DJ Havana Brown to go on and enjoy international careers.

“I’ve often thought I don’t understand why Australia doesn’t score more consistently than it already does,” Hole says. “Distance is definitely one factor-unless you can come up with a magic song that short-cuts everything. Gotye may well have that magic song.”

Along with ARIA nominees Drapht and Boy & Bear, the year also saw breakthroughs by newcomers like the Jezabels, Stonefield and Cloud Control.

“There is so much great talent out there,” says EMI Music Australia chairman Mark Poston, whose local roster includes Empire of the Sun, Birds of Tokyo and Angus & Julia Stone. “You just need to work smarter and harder [in Australia] to make a sales connection and build fan bases, and to build careers.”