Contact: David Alexander Tel: 011 438 7000 Mobile: 0836009488 Email: info@samex.org.za 2 South African Music Export Strategy (2)
1. Introduction
This music export strategy has been drafted by SAMEX as part of broader development efforts in the South African music sector. Since the 1998 Cultural Industries Growth Strategy Report (CIGS) music has been identified as a significant factor of growth and development in the country. This strategy aims to use the foundation of various efforts to support music exports as a solid base for an expanded strategy that engages with national priorities as outlined in the Medium Term Strategic Framework, the National Export Strategy and the Industrial Policy Framework and Industrial Policy Action Plan. The latter highlight the importance of: Improving our non-traditional export performance - particularly in more sophisticated, value added products - is an important objective for industrial policy. 1
In particular, the music sector presents significant opportunities to contribute to the Medium Term Strategic Framework for 2009 2014. These specifically include contributing to the growth of the economy by improving the ability of the sector to compete regionally and internationally along with other creative industries. In addition, the music sector is comprised largely of small businesses creating significant opportunities for Broad-Based Black Economic Empowerment and involvement of young people thus creating opportunities to support small young black businesses. 2. Overview of the Music Industry
2.1 Global Trade
A report entitled The Creative Economy released by UNCTAD in 2008 documents the phenomenal growth of the global market for traded goods and services of the creative industries, of which music is a key component. The highlights the fact that the value of world exports of creative industry goods and services reached $424.4billion in 2005, accounting for 3.4 per cent of world trade as compared with $227.4 billion in 1996. Between 2000 and 2005 global trade in these good and services grew by an annual rate of 8.7% in both the goods and service categories although services represent a much smaller proportion of global trade 2 .
The research goes on to note that while developed countries, and particularly the United States and European Union dominate world trade, developing countries, which include South Africa, have increased their share of trade year after year. In 1996, exports from these economies accounted for 29% of global trade in creative industries goods and services, increasing to 41% in 2005. This growth is primarily due to the extraordinary growth experience in Chinese exports of goods and services.
1 National Industrial Policy Framework, page 41 2 OECD Report 2008 3 South African Music Export Strategy (2)
Source: UNCTAD (2008)
Music is traded as both a good and a service comprising the following major categories of economic activity:
Recorded music Live music Music rights administration Sponsorship Merchandise
With regard to music as a cultural good and as a service, there has been consistent growth over time, as indicated in the figure below:
Source: UNCTAD (2008)
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2.2 South African Music Sector
The global music market is worth $36.9 billion in 2007 with total sales of 3.5 billion units. South Africa is ranked the 25 th largest music market in the world. The global market was dominated by 5 large multi-national record companies, AOL Time Warner, Vivendi-Universal, Sony, BMG and EMI. Since the merger of Sony and BMG there are four majors and speculation amongst industry players at the worlds largest music market MIDEM, is that there will soon be three majors 3 .
In 2008, the South African recording industry generated locally just short of R900 million4 which is down from the 2 previous years where the figure approximated R1 billion. 55% of that was from International albums released locally and therefore a large portion of that is remitted as royalties to international companies and artists. Broadcast and performance rights amounted to R206 million, mechanical rights R30 million and estimated needletime rights approximately R25 million. While the live music aspects remain difficult to quantify, it is estimated that it contributed R1,5 billion to overall industry value of R 2,8 billion.
2.3 SWOT Analysis of the SA Music Industry
S t r e n g t h s
Moshito as a development and trade facilitation mechanism Music infrastructure and capacity in the country? Cultural Diversity and International appetite for our Music General strong rights administration regimes Industry support for structures such as SAMEX Relationship with Government and related agencies that are working with the sector in key initiatives e.g. Moshito and SAMEX
W e a k n e s s e s
The small size of the domestic market Difficulties in attracting investment The costs of promotion in large music buying territories given logistics and exchange rates The costs and restrictions of doing business and touring in foreign territories e.g. visas, work permits Government policy and export incentives that is not tailored to the needs of creative industries Lack of professional live music circuit Lack of bandwith and access to the internet O p p o r t u n i t i e s
The rise of digital music with track downloads in the US outselling CDs by a ratio of 2.5 to 1 Continued growth in usage and ownership of various forms of digital audio platforms, including online radio, iPod/MP3 players, and podcasting High penetration of mobile telephones in the population iPod/portable MP3 player ownership and iPod use continues to grow consistently Continued growth in global trade in cultural goods and services Exporting of services and goods within Africa and the creation of South-South relations Competitiveness in Global Events hosting T h r e a t s
Piracy Total album sales dropped to 428.4 million, 14% fewer than in 2007, and have fallen 45% since 2000 Global Recession
3 SAMEX business plan 4 Info from RISA 5 South African Music Export Strategy (2)
2.3 Benchmark Export Economies
In developing the strategy, reference has been made to a range of successful music export economies with clear strategic and/or institutional frameworks in place to support trade in the sector. The table below highlights the results of the benchmarking 5 . Australia Canada Finland Jamaica Purpose To support the development of Australian music and assist the music industry overseas Provide assistance towards the growth & development of the Canadian independent recording industry
Initiates, assists & facilitates the promotion, marketing & sales of Finish popular music abroad
Subsidise artists airfare for Jamaicas participation at showcases at music trade fairs
Revenue Federal government through Australia Council for the Arts
Voluntary contribution from radio broadcasters Canadian Department of Heritage - Council Music Fund Membership funds State subsidy via Ministry of Trade and Industry Project Funding from a variety of ministries Government funded
Activities Provides export marketing advances & promotion expenses Loans for development of international markets Marketing of artists at international music events Development of website for Australian music Business & market development strategies Co-ordination with industry bodies Young & emerging artists initiatives
Supports songwriters and Artists in production, creation of videos & International tour support
Promotes member company products Collects & distributes export- related information Facilitates participation in international trade fairs Collects & disseminates information Develops funding & support structures Initiates & produces Finnish music export projects Subsidized rate for music companies to participating in national pavilions at trade fairs Annual music directory Produces compilation CD sampler MIDEM and other trade shows Special vehicle company (TEB) facilitates distribution of press kits to potential buyers for artists unable to attend Organizing sponsorship support for workshops and seminars
In each case, specific and tailor-made services exist with a focus on information, trade facilitation and support for internationally oriented marketing opportunities both locally and abroad.
5 SAMEX Business Plan 2008 6 South African Music Export Strategy (2)
3. National Export Strategy and System in SA
The South African National Export Strategy outlines the following core objectives: Build export awareness and create an export culture. To increase exports in targeted priority markets and the number of exporters, with specific focus on SME and BEE enterprises. Improve export participation in geographically marginalised and economically depressed areas within South Africa. Ensure policy coherence government and build consensus amongst external stakeholders. Provide clients with a clear understanding of the strategic interventions and priorities with export promotion and development. Provide clients with a clear understanding of the service offerings available to exporters and prospective exporters.
The critical interventions include:
The formation of export council and the identification of a range of prioritised sectors with Customised Sector Programmes (CSPs) informing development. A dedicated and well resourced export promotion unit. The development of a National Trade Information System. The services offered by the Department of Trade and Industry are outlined as follows:
Source: The DTI (www.thedti.gov.za) 4. Export Strategy for South African Music
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4.1 Vision
To create the opportunities for economic growth through a vibrant export culture in music that promotes innovation, creativity, access, wealth generation, equity and development. 4.2 Objectives
The objectives of the strategy are to: Provide support services to exporting businesses. Generate data and disseminate information to exporters regarding market trends and opportunities. Assist businesses gain exposure to new markets and formulation of business relationships that may lead to short and long-term opportunities for SA music businesses. Develop a consistent South African presence at key music focused events, festivals and trade shows. Assist businesses in exploiting opportunities in related sectors, e.g. tourism. Lobby on the sector's behalf to reduce international trade barriers and enhance trade. Provide opportunities to grow small and micro black owned music enterprises To contribute to the youth economic empowerment strategy through programmes that supports this strategy and partnering with appropriate stakeholders to do so.
4.3 Strategic Approach
The strategy is based on the following core approach:
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In identifying these strategic interventions, the strategy notes the importance of development in the context of South Africas history and development trajectory. As such, it is essential to view the strategy as part of broader development initiatives in the sector. Looking at each music enterprise with a view to identifying those that are export ready, this strategy and its development partners will ensure success by: Focusing in exporting and export ready businesses. Identify specific markets for development and targeting. Engaging in consistent market development exercises linked to all aspects of trade and cultural promotion currently undertaken by government.
4.4 Interventions
4.4.1 Attaining National Goals and Objectives
Rationale: The music sector presents significant opportunities to contribute to the Medium Term Strategic Framework for 2009 2014. These specifically include contributing to the growth of the economy by improving the ability of the sector to compete regionally and internationally along with other creative industries. In addition, the music sector is comprised largely of small businesses creating significant opportunities for Broad-Based Black Economic Empowerment and involvement of young people. 9 South African Music Export Strategy (2)
Objective Measures Targets 6 Initiatives Improving the BBBE profile of the sector Increased number of BBBEE firms benefiting from export opportunities 10% increase per annum. Targeted programmes in support of BBBEE Development of a music industry charter Creating opportunities for youth owned enterprises Increased number of youth-owned firms benefitting from export opportunities 20% increase per annum Development of a music industry charter Improving trade with SADC and Africa Increased in trade with SADC and rest of Africa 5% increase per annum Formalisation of relations with BEMA & development of continental export programme Development of Moshito into a Pan African music market Engagement in trade facilitation with countries Promotion of music services such as music videos and rights administration on the continent.
4.4.2 Improving Competitiveness
Rationale: With the notable exception of regular attendance at international trade shows such as MIDEM and WOMEX the general export approach has been characterised by a high degree of ad hoc interventions and very little integration between cultural and trade agendas. Objective Measures Targets Initiatives Integrating cultural & trade activities Trade activities included cultural engagement agendas 20% of identified cultural engagements have a trade programme attached Development of an annual programme of trade & cultural engagements Building the capacity of foreign and trade offices to support music export activities Regular & consistent attendance at major music markets Increased trade in music goods in identified markets 5% increase per annum MIDEM pavilion WOMEX Pavilion SXSW Pavilion
Development of annual music touring programmes in major music markets Increase sales of music in identified markets Live event ticket sales 10% increase in music sales in identified areas Increase in radio play in identified areas Identification of possible tour programme Creation of partnerships with locations, funders & sponsors.
6 Please note that these targets are conservative estimates off an unknown baseline. The KPMG benchmarking study currently underway will facilitate more accurate targeting in future from a recent statistical baseline. 10 South African Music Export Strategy (2)
Objective Measures Targets Initiatives Launch of touring programmes Improving exports to key music markets Increase sales of music in identified markets
10% increase in music sales in identified areas Increase in radio play in identified areas Export programme for key music markets including USA, Japan and Australia Expanding promotion platforms for SA music Downloads / hit on the website/channel 20% increase per annum Development of live events streaming channel on the internet via YouTube or similar platform Building Moshito into a Pan African music market Increased trade at Moshito
5% increase per annum Improving trade platforms at Moshito Support for African participants at Moshito Stronger linkages to tourism and cultural activities Promotion of SA music services Increased trade in services 5% increase per annum Development of service export strategy Identification of key markets With regard to the music video services , the development of a specific category for incentivising these activities in the current film rebate
4.4.3 Building Exporters
Rationale: Export ready companies are essential to meeting the demand that increased competitiveness will create and in meeting national strategic objectives. The focus of these efforts will be on independent music labels and artists who have demonstrable will and capacity to engage in export markets. Objective Measures Targets Initiatives Improving trade & market information Regular trade and market research reports drafted and disseminated Annual trade report Annual market updates in key territories Ensuring that NATIS collects goods and service data Market research in identified markets Consumer research in key markets Supporting emerging exporters Number of emerging exporters entering into export markets 5% per annum Development of specific platform at Moshito Promotion of emerging exporters in cultural and trade programmes Development of specific promotional channel on YouTube or similar platform
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4.4.4 Building Institutional Mechanisms
Rationale: All successful music exporting markets studied have clear export support programmes and institutional infrastructure to support these. In some cases these are programmatic in nature as part of broader export support institutions and in others specific export development agencies are established. In South Africa, the NES allows for the establishment of Export Councils which are an internationally recognised mechanism for export promotion. In SAMEX, an organisational framework exists for the development of a targeted and tailor-made entity to support music exports. SAMEX will develop this framework in partnership with Moshito and other appropriate stakeholders such as the Department of Arts and Culture, the Department of Trade and Industry as well as international partnership such as Embassies, international music markets, and other trade organisations (BEMA, European Music Office, and Export Offices from various countries). The capacity, expertise and institutional knowledge of these stakeholders are a vital component of the success of this export strategy. These partnerships allow SAMEX to remain as a neutral platform. International best practice suggests that the lack of coordination between agencies and ministries is a key impediment to the success of a music export strategy. Institutional strengthening and technical assistance between these partners will ensure both a quality service to the music industry as well as improved exporting results from the sector. Objective Measures Targets Initiatives Creating a strategic framework for music development and exports The existence of an approved CSP CSP drafted and approved by 31 March 2010 Drafting and approval of a CSP Transforming SAMEX into a fully fledged export council Funded and registered organisation Approved by 31 March 2010 Approval of SAMEX business plan Development of 5 year funding model in collaboration with major sponsors Launch of SAMEX as an Export Council Developing fully fledged partnerships with local and international stakeholders Memorandum of Agreement for Partnership with respective stakeholders Memorandum of Agreements approved and signed by June 2010 with MOSHITO, DTI, DAC, BEMA, EUROPEAN MUSIC OFFICE, SPECIFIC EMBASSIES and EXPORT OFFICES Drafting and approval of specific MOUs Develop specific programmes for partnership collaboration Hold regular (quarterly, half- yearly or yearly) joint sessions with partners as provided in the MOUs
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4.5 Target Markets & Market Platforms
Region Country Sector Market Product /service offered Instruments required Publicity North America US Music South by South West (SXSW) Festival
EMIA Brochures Business cards South America Brazil Music Porto Musicale February 2010 Festival Conference
EMIA Brochures Business cards Australia Australia Music Big Sound Brisbane Sept 7 to 11 Festival Music Expo EMIA Brochures Business Cards Sample CDs Africa Tanzania, Zanzibar Music ZIFF Festival Festival of the Dhow 27th June to 4th July 2009
Festival Conference Music Expo
Mini Pavilion EMIA assistance to participate Directories Brochures Business cards South Africa Music Moshito September 2009 Conference Music Expo
Inward buying mission Directories Brochures Business cards
Europe France, Cannes, Reed
Music MIDEM 24th to 27th January 2010 Tradeshow Conference/ Workshops Awards Ceremonies National Pavilion EMIA assistance to participate Directories Brochures Business cards Germany Music POPKOMM 16-18 September Exhibition Festival Conference
Mini Pavilion EMIA assistance to participate Directories Brochures Business cards Womex WOMEX 28th to 31st October 2009
Mini Pavilion EMIA assistance to participate Directories Brochures Business cards 13 South African Music Export Strategy (2)
5. Budget
Pleas see attached spreadsheet of the 3 year budget per intervention. The summarised version is below: Indicative Implementation Budget Intervention 1 Sub Total 2 800 000 4 450 000 6 000 000 Intervention 2 Sub Total 9 850 000 12 510 000 17 070 000 Intervention 3 Sub Total 2 900 000 4 250 000 5 600 000 Intervention 4 Sub Total 1 985 000 2 200 000 2 435 000 Total Budget 17 535 000 23 410 000 31 105 000
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6. Implementation chart
July - Sept Oct - Dec Jan - March April - June July - Sept Oct - Dec Jan - March April - June July - Sept Oct - Dec Jan - March 2009-2010 2010-2011 2011-2012 Interventions 2 3 4 1 2 3 4 1 2 3 4 Targeted programmes in support of BEE - Needs analysis of identified BEE exporters - Programme design & development - Pilot programme initiation - Evaluation & programme design - Roll out of programme Development of a music industry charter - Initiation of consultations with key players - Drafting of charter - Presentation for ratification at Moshito Formalisation of relations with BEMA - Development of Memorandum of Understanding - Signing of Memorandum - Development & implementation of 3 year programme Development of continental export programme - Identification of major markets - Identification of export facilitators and partners - Launch of export strategy at ZIFF Development of Moshito into a Pan-African Music market - Identification of major markets - Identification of participants - Direct marketing to identified participants - Facilitation of attendance at Moshito - Development of country platforms at Moshito 15 South African Music Export Strategy (2)
Engagement in trade facilitation in countries - Initiation of engagements with identified partners - Development of formal ties with key partners Promotion of music services - Identification of major markets - Development of marketing platforms - Development of export strategy at ZIFF Participation at ZIFF - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event
Development of annual programme of trade & cultural engagements - Identification of potential engagements - Liaison with DAC & other stakeholders - Development & launch of annual programme - Development & initiation of fundraising strategy - Participation in key events identified Building capacity of foreign and trade offices - Identification of critical offices - Engagement with DAC & Foreign Affairs - Engagement during major festivals and events - Development of capacity building programme - Implementation of programme Midem - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event WOMEX - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event 16 South African Music Export Strategy (2)
SXSW - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event Porto Musicale - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event Big Sound - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event POPKOMM - Identification of participants - Facilitation of EMIA access - Development of programme - Attendance at event Development of 3 year tour programme - Identification of potential engagements aligned to annual programme - Facilitation of partnerships in support of tour programme - Launch of annual programme at Moshito - Implementation & review of programme Export programme for key music markets - Based on market research development of targeted programmes - Launch of export programmes at Moshito - Implementation of programme at key events & through facilitation Website development & Live events streaming - Development of concept & detailed proposal - Costing of proposal - Identification of content & engagement with content holders - Launch of website - Ongoing maintenance 17 South African Music Export Strategy (2)
Improving trade platforms at Moshito - Benchmarking against other major music expos - Developing support measures for African participants - Initiation of inward buying missions - Improved marketing of the event Stronger links to tourism & cultural activities - Hosting of summit to discuss music, tourism & export - Identification of critical partners - Development of programme linked to tourism activities Development of a service export strategy - Based on market research identification of key markets - Initiation of discussion with DT regarding Incentivising music video services - Identification of key partners - Launch of service export strategy
Building exporters - Identification of existing and emerging exporters - Conducting of needs analysis linked to KPMG benchmark - Development of customised export support programme - Piloting of programme - Review of pilot programme - Roll out of programme - Development of an emerging exporters platform at Moshito Engaging with NATIS programme - Initiation of discussion with DTI regarding NATIS programme - Inclusion of music products in data collection & reporting Consumer & Market research in identified markets - Identification of priority markets - Development of terms of reference - Initiation of research - Publication of research findings
Drafting of CSP - Engagements with DTI regarding the CSP process & support 18 South African Music Export Strategy (2)
- CSP development - Submission of CSP to DTI for approval - Launch of CSP Approval of SAMEX building plan - Alignment of SAMEX Plan to CSP - Development of 5 year business model - Submission to DTI for approval - Launch of SAMEX as an export council at Moshito Demotes a major event